MARKET WRAPS

Watch For:

U.K. GDP, industrial production, trade, business investment, NIESR's quarterly forecasts; Germany CPI, balance of payments; trading updates from Daimler Truck Holding, Cellnex Telecom, Naturgy Energy, DS Smith, ASML Holding, Koninklijke Vopak, Boskalis Westminster, Compagnie Financière Richemont

Opening Call:

Shares may be headed higher at Friday's open. Asian stock benchmarks rose; U.S. bond markets are closed for a holiday; the dollar strengthened slightly; oil and gold gained.

Equities:

Stock futures point to gains in Europe on Friday, following Wall Street's biggest rally since 2020 on Thursday.

U.S. stocks jumped to their biggest gains in over two years, after softer-than-expected inflation data reignited bets that the Federal Reserve would slow the pace of its interest-rate increases.

"If this downward trajectory for inflation holds, then you can make a strong case that the bottom is in place for US equities," Oanda said.

"Markets are starved for positive news, so they grasped at every ounce of inflation relief in the October CPI. Volume surged to a modern record for a CPI release," FHN Financial said.

"Never mind that compounding big increases with moderate increases is a losing proposition for the Fed. It's just full speed ahead for financial markets into the long weekend," it said.

However, Hani Redha, a portfolio manager at PineBridge Investments, cautioned investors, saying, "I can see a window where the market gets this kind of second false dawn, like we saw over the summer, where it gets excited about a peak Fed and peak inflation narrative."

Redha said he was still bracing for further declines in stock prices in the coming months because the tighter monetary policy will push the U.S. economy into a downturn.

Forex:

The U.S. dollar gained slightly early Friday, recovering from its dips triggered by yesterday's soft CPI data.

"King dollar has left the building" as this soft inflation report cements the Fed's downshift to a slower pace of tightening, Oanda said.

"The price reaction to this inflation report was a bit excessive but could be justified if the next couple of inflation reports are just as cool."

Bonds:

The U.S. bond market is closed Friday for Veterans Day.

Treasury yields plunged Thursday after cooler-than-anticipated October inflation data.

The drop in yields reflected huge demand for government bonds, leading to the biggest rally in 2- and 10-year Treasurys in at least 13 years, and came as traders prepared to head into Friday's Veterans Day holiday.

"It's hard to read too much into one print," Société Générale said.

"That said, this feels like a step in the right direction, but it's too early to call for a sustained rally in bonds."

After Thursday's CPI report, fed-funds futures traders priced in an 85% chance that the Fed will raise its benchmark interest rate by 50 basis points to a range of 4.25% to 4.50% on Dec. 14.

Energy:

Oil futures rose early Friday amid positive market sentiment.

Oil prices are getting a reprieve on USD weakness and a substantial repricing in U.S. recession risk as a soft landing looks far more credible, with an expected downshift in the Fed's aggressive rate-increase trajectory, SPI Asset Management said.

"At the same time there continues to be uncertainty about what's going to happen with China regarding its Covid zero policy," Phil Flynn, senior market analyst at The Price Futures Group, said.

"I think once we see any signs China is going to start to reopen its economy, [that] could dramatically change the dynamic and really push [oil] prices higher."

Metals:

Gold gained slightly in Asia, after gold futures settled at their highest price since late August overnight.

The cool U.S. inflation report has made markets confident that the Fed can slow to 50bp rate-increase pace and possibly be done with tightening after the March FOMC meeting, Oanda said.

Gold could have a steady path toward $1,800/oz level if USD weakness persists, Oanda added.

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Copper prices gained in Asia, in line with strong gains in most commodities, after the soft U.S. inflation data.

The rebound is further "boosted by reports coming out of a Politburo Standing Committee meeting that suggest Beijing would take more targeted [Covid] measures to avoid damage to the economy," ANZ Research said.

With demand outlook improving, investors may now turn more attention to the metal's ongoing supply tightness and more buying interest could emerge, ANZ said.

"Any creeping notion that a global recession may not occur, or an acceptance that life will go on even if a recession does occur, could push copper prices far higher given the existing tightness of the copper market and lack of inventories, "Matthew Fine, portfolio manager of the Third Avenue Value fund said.

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Chinese iron-ore futures rose, amid a risk-on mood that has also lifted other commodities.

The raw material has been on a rebounding trend since the end of October.

Fitch Solutions said that there are "limits to additional downside for iron ore as most of China's domestic mines are unprofitable below USD90/tonne."


TODAY'S TOP HEADLINES

Inflation Report Leaves Fed on Track for 0.5-Point Rate Rise in December

The October inflation report is likely to keep Federal Reserve officials on track to approve a half-percentage-point interest-rate increase next month, stepping down from the recent pace of unusually hefty rate rises.

The Labor Department reported Thursday that consumer prices rose at a slower pace in October than in recent months. Core prices, which exclude volatile food and energy items, rose 0.3% from September, the smallest monthly gain in one year, and by 6.3% on a year-over-year basis, down from 6.6%.


U.S. Downgrades Russia to Nonmarket Economy

WASHINGTON-The Commerce Department said Thursday it has reclassified Russia as a nonmarket country from a market economy, a move aimed at further reducing bilateral trade and isolating Russia amid its continued war in Ukraine.

The department said the decision follows significant increases in Moscow's intervention in economic activities since last year that have made its economy unpredictable and distorted, including in currency markets, labor relations and foreign investments.


South Korea to Sell Arms to U.S. for Ukrainian Forces Fighting Russia

South Korea will for the first time sell artillery shells destined for Ukrainian forces through a confidential arms deal between Seoul and Washington, a move that reflects a global scramble for munitions after months of war with Russia.

U.S. officials familiar with the deal said that the U.S. will purchase 100,000 rounds of 155mm artillery ammunition that will be delivered to Ukraine, enough to supply Ukraine's artillery units for at least several weeks of intensive combat.


TikTok, Struggling With Slowing Digital-Advertising Industry, Lowers Ad-Revenue Outlook

SINGAPORE-TikTok's slashing of its advertising-revenue outlook shows the fast-growing short-video app isn't immune to the ad weakness reported by other social-media companies.

TikTok has lowered its target for this year's advertising revenue to $10 billion from at least $12 billion, Chief Executive Shou Zi Chew told staff in an online meeting that took place in recent weeks, according to the employees who attended the meeting.


FTX Tapped Into Customer Accounts to Fund Risky Bets, Setting Up Its Downfall

Crypto exchange FTX lent billions of dollars worth of customer assets to fund risky bets by its affiliated trading firm, Alameda Research, setting the stage for the exchange's implosion, a person familiar with the matter said.

FTX Chief Executive Sam Bankman-Fried said in investor meetings this week that Alameda owes FTX about $10 billion, people familiar with the matter said. FTX extended loans to Alameda using money that customers had deposited on the exchange for trading purposes, a decision that Mr. Bankman-Fried described as a poor judgment call, one of the people said.


Write to singaporeeditors@dowjones.com


Expected Major Events for Friday

06:00/FIN: Sep Balance of Payments

07:00/ROM: Oct CPI

07:00/GER: Oct CPI

07:00/TUR: Sep Balance of Payments

07:00/UK: Sep Index of production

07:00/UK: Sep UK trade

07:00/UK: Sep Index of services

07:00/UK: 3Q Business investment in the UK: provisional results

07:00/UK: 3Q First quarterly estimate of GDP

07:00/UK: Sep Monthly GDP estimates

07:00/TUR: Sep Industrial Production Index

08:00/SVK: Sep Construction production

09:00/EU: Oct Long term interest rates statistics

11:00/POR: Oct CPI

12:30/UK: Oct NIESR Monthly GDP Tracker

15:59/UKR: Oct CPI

15:59/UKR: Oct PPI

16:59/GER: Sep Balance of Payments

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This article is a text version of a Wall Street Journal newsletter published earlier today.


(END) Dow Jones Newswires

11-11-22 0014ET