MARKET WRAPS

Watch For:

EU industrial production; trading updates from RWE, Vodacom Group and Informa

Opening Call:

Shares may be headed slightly higher at Monday's open. Asian stock benchmarks were mostly higher; U.S. bond yields broadly rose; the dollar strengthened; oil gained and gold fell.

Equities:

Stock futures point to opening gains in Europe on Monday.

U.S. stocks on Friday capped a volatile week with the biggest gains in months, boosted by hopes that inflation in the U.S. is cooling.

Investors overreacted to the report if they thought it would prompt Fed officials to consider ending interest rate increases, said Fed governor Christopher Waller.

"The market seems to have gotten way out in front on this," Mr. Waller said. "Everybody should just take a deep breath-calm down. We have a ways to go yet."

Some analysts were also sounding caution.

"We are not convinced this is the beginning of a new bull market," said Sam Stovall, chief investment strategist at CRFA Research.

"We believe that we are headed for recession. That has not been factored into earnings estimates and, therefore, share prices."

Stovall also said the stock market has yet to see the "traditional shakeout of confidence capitulation that we typically see that marks the end of the bear markets."

However, Kristina Hooper, Invesco's chief global market strategist, said the overarching story might be one of stocks sniffing out the first steps in a path to economic recovery, and the Fed potentially stopping its rate increases at a lower "terminal" rate than expected.

Forex:

The U.S. dollar strengthened early Monday.

The dollar on Friday added to broad-based weakness following the October CPI report.

Capital Economics said it appeared that the Fed's hawkish stance has mostly run its course as a key tailwind for the dollar's rally.

But it doesn't think this tailwind will shift to a major headwind just yet -- "we doubt the FOMC will put much weight on one month's data -- especially as inflation remains elevated -- or welcome the sharp easing in financial conditions."

Bonds:

The U.S. bond yields mostly gained early Monday. The bond market was closed Friday for Veterans Day.

Two-year and 10-year Treasury yields were forecast to reach 4.5% and 4%, respectively, by the end of the 1Q, Bank of America's economists said after the October CPI numbers.

By the end of 2023, they expect those benchmarks to be flat at 3.25%.

BofA advised clients "to remain cautious until there are broader signs that the labor market is slowing & inflation sustains its downward trajectory.

"The second half of 2023 would see "clearer signs of economic slowdown & eventual rate rally + Fed expected cuts."

Energy:

Oil futures rose early Monday, supported by improved sentiment after China, the world's largest crude importer, eased some of its Covid-19 restrictions.

There were emerging signs over the past week that Chinese officials may be preparing to unwind its strict zero-Covid policy, SPI Asset Management said.

"This policy pivot will help limit downside fears of a protracted restrictive approach to on-onshore activity, but it doesn't eliminate the immediate demand hit from current lockdowns," it said.

Velandera Energy Partners said that "sheer confusion" on Chinese Covid-19 policy, with the nation's approach "clear as mud," was driving the market fluctuation in oil.

"On the one hand, the Chinese are signaling easing of restrictions but on the other, they are reaffirming the zero-tolerance policy," it said.

Despite oil's recent gains, there's no path to a $100 for WTI crude "unless Russian barrels are curtailed or China abandons its zero-tolerance policy -- both of which are extremely unlikely," it added.

Metals:

Gold prices fell in Asia, after rising over 5% last week on expectations that the Fed might slow its pace of interest-rate increases.

The precious metal was "seeing some resistance around $1,760 now and may see more around $1,780 but at this point, gold bulls may have their sights set on $1,800," Oanda said.

The focus for gold would "turn to growth as we will have retail sales from China and the U.S. and GDP from Eurozone, among other things," said Fawad Razaqzada, market analyst at City Index and FOREX.com.

"Soaring prices are choking the global economic growth, which could also impact demand for metals," he said.

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Copper prices fell in Asia in a likely technical correction after last Friday's strong gains.

However, losses could be limited after China's central bank and top banking regulator issued a wide-ranging series of measures aimed at bolstering housing demand and supply, analysts said.

Positive sentiment in the commodities markets should persist today after the announcement of the measures, ING strategists said.

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China iron-ore futures rose, extending last week's rally.

The steel-making raw material's latest upturn has come on the back of improving investor sentiment for China's real estate sector, a key steel-consuming industry, Galaxy Futures said.

They reckon Beijing top authorities' latest move to dial back some restrictions in the property sector and offer more support for the sector could raise buying interest in iron ore as well.

Port inventories of the ore have also remained at low levels, a sign of supply tightness, which would further support the commodity's price, Galaxy added.


TODAY'S TOP HEADLINES

Fed Official Warns Inflation Fight Has 'Ways to Go'

The Federal Reserve needs to keep raising interest rates to get inflation under control, even after last week's report that it slowed in October, a central bank official said Sunday.

Markets rallied after the Labor Department reported Thursday that so-called core prices, which exclude volatile food and energy items, rose 0.3% from September, the smallest monthly gain in a year, and by 6.3% on a year-over-year basis, down from 6.6% in September. Investors and policy makers watch core readings closely as a reflection of broad price pressures and as a predictor of future inflation.


China Dials Back Property Restrictions in Bid to Reverse Economic Slide

For much of the past year, China's economy has been reeling under Xi Jinping's dual campaigns to rein in soaring property prices and to stamp out any traces of Covid-19 within the country's borders.

Now, as he moves to loosen pandemic restrictions, China's leader, Mr. Xi, is signaling a reversal of his real estate crackdown, too, a tacit acknowledgment of the economic pain and public frustration that the two policies have engendered.


House Majority Undecided as Democrats Keep Senate Control

WASHINGTON-Control of the House of Representatives remained unsettled Sunday after Democrats won a crucial victory in Nevada to retain their hold on the Senate.

The GOP appeared on track toward winning the barest of House majorities, nonpartisan analysts said, but the final outcome hinged on races, mostly on the West Coast, that remain too close to call. Both parties were girding for results that might not be known for days.


Some Russia Sanctions Could Extend Beyond Ukraine War's End, Janet Yellen Says

NUSA DUA, Indonesia-U.S. Treasury Secretary Janet Yellen said some sanctions on Russia could remain in place even after any eventual peace agreement with Ukraine, raising the prospect of a long-term U.S. effort to squeeze Russia's economy.

As Ukraine makes advances on the battlefield, Western leaders have started to contemplate how and if an end to the war may be negotiated with Russia. Ukrainian President Volodymyr Zelensky recently said he was open to "genuine peace talks" with Russia, and U.S. officials have said that any settlement would be up to Ukrainians.


Iran Issues First Known Death Sentence for Protester

An Iranian protester was sentenced to death for setting fire to a government building, the country's judiciary said Sunday, the first known use of capital punishment by authorities seeking to suppress nearly two-month-old antigovernment demonstrations.

The death sentence opens a new phase in Iran's attempt to use its legal system against mass protests that were sparked by the death of 22-year-old Mahsa Amini in police custody in September after she was detained for wearing attire the authorities deemed inappropriate.


Deadly Explosion Hits Busy Istanbul Pedestrian Street

ISTANBUL-A bomb blast ripped through a busy pedestrian street in the heart of Istanbul on Sunday afternoon, killing at least six people and wounding 81 others, Turkish officials said.

The blast occurred just after 4 p.m. on Istiklal, a vast canyon of a street lined with restaurants and shops on Istanbul's European side, sending crowds of tourists running for their lives. Sirens could be heard wailing in the aftermath of the explosion.


Crypto.com Withdrawals Rise After CEO Admits Transaction Problem

Customers pulled funds from Crypto.com over the weekend after the company's chief executive said the cryptocurrency exchange mishandled a roughly $400 million transaction.

Crypto.com Chief Executive Kris Marszalek said on Twitter that the transfer was sent to the wrong type of account on another exchange. The transfer of a large chunk of ether, a popular cryptocurrency, took place on Oct. 21, but came to light after Twitter users flagged the transfer as unusual, based on publicly available blockchain transaction records.


Elon Musk, Tesla Board Members to Defend CEO's Pay in Court

Elon Musk is headed to court this week to defend his multibillion-dollar pay package at Tesla Inc.

A Tesla shareholder is asking Delaware's business-law court to rescind Mr. Musk's CEO pay package, which was approved in 2018 and is valued at around $52 billion at recent share prices. The plaintiff has alleged that Tesla's board at the time failed to disclose key information about the deal and how it came together.


JPMorgan Dodges a Buyout-Loan Bullet

Sometimes in investment banking, it is the deals you don't do.

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11-14-22 0015ET