MARKET WRAPS
Watch For:
Factory Orders for October; ISM Report on Business Services PMI for November; Canada Building Permits for October
Opening Call:
Today's Headlines/Must Reads
- China Loosens Covid Restrictions as Public Anger Simmers
- Fed Could Pencil in Higher Interest Rates Next Year While Slowing Hikes in December
- Bond Rally Drags 10-Year Treasury Yield Back Down to 3.5%
- Must Inflation Be Brought Down All the Way to 2%?
- New Zealand Plans to Make Facebook, Google Pay for News
- Credit Suisse's Investment Bank Spinoff Attracts Saudi Crown Prince
Follow WSJ markets coverage here .
Stock futures traded lower on Monday, as investors remained keyed on interest rate policy from the Federal Reserve and despite a surge in China stocks over a loosening of Covid-19 restrictions in the country.
The prospects of more robust activity in the world's second biggest economy was damping demand for sovereign debt and pushing yields higher.
The increase in benchmark borrowing costs was helping contain demand for stocks, with some analysts also noting that techinical factors may hobble a rally that has seen the S&P 500 rise 13.8% from its 2022 low hit in mid October.
In Asia, benchmark indexes in Hong Kong and mainland China jumped, after local Chinese authorities took more steps to ease strict Covid-19 policies that have crimped the country's growth.
"We have this happy congruence with more and more easing in Covid policy, " Saxo Markets Hong Kong said. That is making a stronger Chinese economic rebound next year more likely.
However, the optimism may not last, Nomura said. It elaborated that should China continue to open up, caseloads could shoot up, leading to rising death rates. How Beijing responds will continue to inject volatility into Chinese markets.
"This is exactly what we saw in some other markets globally in their initial phases of reopening."
Stocks to Watch
Apple shares fell 0.2% in premarket trading after the iPhone maker was reported to have accelerated plans to shift some of its production outside China, long the dominant country in the supply chain.
Credit Suisse's New York-traded shares rose 5% premarket. Saudi Arabia's crown prince and a U.S. private-equity firm run by Barclays's former chief executive are among investors preparing to invest $1 billion or more into Credit Suisse's new investment bank.
Delta Air Lines is offering pilots raises amounting to at least 34% over the term of a proposed deal, another sign of how pilots are pushing the now-booming airline industry for better pay and other benefits.
Tesla has slashed output of the Model Y at its Shanghai factory in December by more than 20% from November in its latest production plan, Reuters reports, citing unnamed sources. The reason for the lower production couldn't be immediately determined, the report said.
XPO Logistics doesn't expect the divestiture of its European business to take place in the near term, mainly due to weakened capital markets in Europe, it said in a SEC filing. Shares fell 2% after hours.
Other Movers
The ADRs of Baidu, JD.com and Pinduoduo added about 5% premarket following the rally in Hong Kong and mainland Chinese stocks.
Agiliti, SJW Group and Cushman & Wakefield will join the S&P SmallCap 600. In after-hours trading, Agiliti, SJW and Cushman & Wakefield each gained around 7%.
Allegro Microsystems and CubeSmart will join the S&P MidCap 400 on Dec. 19. Their shares gained around 6% in after-hours trading.
Forex:
The dollar's gains after Friday's stronger-than-expected jobs data proved brief and it soon turned lower, suggesting it won't return to this year's peak and will most likely weaken in 2023, Swissquote said.
However, the falls won't be smooth as Fed interest rates still need to rise further, Swissquote said.
The broadly weak dollar helped sterling rise to a near six-month high of $1.2346, but the gains soon fade and ING said a rise beyond $1.25 looks unlikely.
"We struggle to see cable [GBP/USD] extend its rally to 1.25 and beyond, " ING said. "A contraction below 1.20 seems more appropriate given global and U.K. macro fundamentals."
Ahead of next week's Bank of England decision--which comes alongside various other rate decisions, including in the U.S. and eurozone--the pound is likely to be driven largely by the dollar and by risk sentiment, ING said.
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China's yuan strengthened below a closely watched level against the dollar, reaching its strongest value in nearly two months.
The more freely traded offshore yuan gained about 0.8% against the greenback to trade around 6.95 against the dollar in mid-afternoon Hong Kong time. It was the first time the yuan had gone below 7 against the U.S. dollar since mid-September.
Read more here .
Energy:
Oil pared early gains at the start of a crucial week for energy markets, as the impact of a ban and price cap on Russian oil remains unclear. Prices had risen more than 2% in early Asian trading.
Oil traders have many factors to consider Monday, with the price cap and EU ban on Russian oil coming into force and OPEC over the weekend deciding to leave its production levels unchanged. Some expectations had built that the cartel was considering increasing output so its decision to hold fire could be driving the modest gains.
Oil market participants are wondering what the impact of a Western-led price on Russian oil due to come into force Monday will be. According to JPMorgan, the answer is "likely nothing."
The EU's $60 a barrel cap is higher than the price of Russian oil at key ports on the Black and Baltic Seas. Russia's Urals crude has recently traded between $65 and $70, though the price at some ports is below $55 a barrel.
The EU and G-7 said they will renew the price cap regularly. If they continue to set the level "close to Russia's realized price, then status quo will prevail with minimal market disruptions," JPMorgan said.
Metals:
Base metals and gold edged higher in Europe as dollar weakness and more positivity around a China reopening boosted sentiment in global markets.
"The driving force today is the higher expectations for economic recovery in China," Marex said. More than 10 cities had waived proof of Covid test results for entrances into public places, it said.
"With China's reopening seemingly a matter of time, the focus switched to economic development," Marex said, adding this was boosting metals demand alongside further strength from a lower dollar.
TODAY'S TOP HEADLINES
New Zealand Plans to Make Facebook, Google Pay for News
New Zealand said it would seek to require online platforms like Alphabet Inc.'s Google and Facebook owner Meta Platforms Inc. to pay news publishers for content, becoming the latest country to wade into a worldwide debate about whether tech giants unfairly benefit from news shared on their platforms.
New Zealand's proposal will be based on a similar law in Australia and introduced legislation in Canada and will be designed to act as an incentive for digital platforms to reach voluntary deals with local news outlets, according to a statement from New Zealand Broadcasting Minister Willie Jackson.
Credit Suisse's Investment Bank Spinoff Attracts Saudi Crown Prince
Saudi Arabia's crown prince and a U.S. private-equity firm run by Barclays PLC's former chief executive are among investors preparing to invest $1 billion or more into Credit Suisse's new investment bank, people familiar with the matter said.
Crown Prince Mohammed bin Salman is considering an investment of around $500 million to back the new unit, CS First Boston, and its CEO-designate, Michael Klein, some of the people said. Additional financial backing could come from U.S. investors including veteran banker Bob Diamond's Atlas Merchant Capital, people familiar with that potential investment said. Credit Suisse previously said it had $500 million committed from an additional investor it hasn't named.
TSMC's Arizona Chip Plant, Awaiting Biden Visit, Faces Birthing Pains
TOKYO-The $12 billion Arizona semiconductor plant under construction that President Biden is visiting Tuesday represents U.S. hopes for a renaissance in manufacturing, but the Taiwanese company building it says it won't be easy.
High costs, lack of trained personnel and unexpected construction snags are among the issues cited by Taiwan Semiconductor Manufacturing Co. as it rushes to get the north Phoenix factory ready to start production in December 2023.
FDA Takes Tougher Line on Fast-Tracked Drugs
The Food and Drug Administration is taking a harder line on its program that fast-tracks drug approvals based on preliminary evidence, spurring GSK PLC, Roche Holdings AG and other drugmakers to remake plans for their drugs or pull them from the market.
Under the accelerated-approval program, the FDA clears the use of prescription medicines faster than it normally would. The agency relies on preliminary data to make the decision, but asks companies to conduct follow-up studies to confirm that the drug works.
CVS Tries Out Remote System to Help Fill Prescriptions
CVS Health Corp. is testing a system that allows pharmacists to process prescriptions in part remotely, a move it said could improve store working conditions and the experience for customers as the company grapples with a shortage of pharmacists.
CVS has equipped roughly 8,000 of its more than 9,000 U.S. drugstores with technology that allows pharmacists to review and enter prescription information remotely while still meeting patient-privacy requirements. About 400 of CVS's 30,000 pharmacists are currently helping prepare prescriptions either at central locations, from their homes or in stores other than where medications will be dispensed, the company said.
Chevron's Long Game in Venezuela Brings It Political Risk
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12-05-22 0622ET
