EU business & consumer surveys; Germany provisional CPI; Italy PPI; UK money and credit data; Bank of England governor appears before Lords Committee; trading updates from Schneider Electric, Exor, Infineon, Siemens Healthineers, AXA, easyJet, Yandex, Autoliv
Shares may inch higher at Tuesday's open, after sentiment improved in Asia as traders digested more news out of China. Asian stock benchmarks were mostly higher as China and Hong Kong stocks rebounded; Treasury yields rose; the dollar weakened; while oil and gold gained.
European stocks could open slightly higher after Chinese stocks led a rebound in Asia, as Chinese authorities tightened controls in reaction to protests against the country's zero-tolerance approach to Covid.
"I just don't think [authorities] will want to look as though they are backing down in response to protests," said Hargreaves Lansdown. "If you keep having rolling lockdowns, consumer demand will be dented, there will be an ongoing effect on supply chains...and there could be a drop in demand for key commodities."
Hawkish comments from Federal Reserve officials about the path of interest-rate increases could also damp market sentiment. New York Fed President John Williams on Monday said "there is still more work to do" to bring down prices. St. Louis Fed President James Bullard also discussed elevated rates moving forward.
Investors are awaiting the Labor Department's November jobs data to be released Friday, which will likely factor heavily into the Fed's December interest-rate decision.
The dollar slipped on increasing risk-off sentiment, as tighter security in China aided in restraining large-scale protests from materializing.
"The absence of any clear escalation in protests could aid to bring some calm to markets," IG said.
However, risks point both ways as rising Covid case numbers in China and consequent supply disruptions speak to persistent inflation, while oil prices have come off a long way, ANZ said.
"All of this speaks to ongoing volatility in the lead up to the December Fed meeting, and as we navigate a host of US data releases later this week," ANZ added.
Meanwhile, the risks for sterling are "skewed to the downside" as the U.K. is struggling with a "toxic mix" of double-digit inflation and close to zero growth, UBS said.
Despite the Bank of England's efforts to control inflation with higher interest rates, investors are unlikely to be drawn in further by sterling, UBS said. "A sustained recovery in sterling is only likely when inflation pressures ease."
Treasury yields rose, as China's Covid-19 unrest raised concerns about global economic growth, but appeared to do little to inspire substantial and lasting moves in U.S. Treasurys.
Investors in government debt are weighing the next move from the Fed.
Likely offsetting some of the decline in yields was news that the U.S. festive shopping season had gotten off to a strong start, suggesting there was little evidence to date that consumers are reining in spending despite the Fed's attempts to cool the economy.
Markets were pricing in a 75% probability that the Fed will raise interest rates by another 50 basis points to a range of 4.25% to 4.5% on Dec. 14, according to the CME FedWatch tool. The central bank is mostly expected to take its fed-funds rate target to at least 4.75% to 5% by March.
Later in the week, however, investors will focus on economic reports, including home prices data and a consumer confidence index on Tuesday; the ADP employment report, the revision to third quarter GDP and the Fed's Beige Book on Wednesday.
Oil prices gained in Asia, reversing earlier decline as traders digested more news out of China and the prospect of OPEC+ supply cuts.
"China markets are perking up to new housing support, a potential rate cut, and speculation that protests may expedite a shift from Covid-zero policies," SPI Asset Management said.
Meanwhile, Russia's meeting with members of the Opec+ group to discuss production policy early next month will also be in focus.
This sets up "a crucial week for the oil market as headline risk is bound to keep traders hopping," said SPI Asset Management.
Gold prices edged higher early Tuesday ahead of this week's U.S. economic data, which would offer clues on the Fed's next move on interest rates.
"Interest rate speculation in the U.S. may play a bigger role on the metals market this week than most other fundamental currents," said DailyFX.
Oanda sees support for the precious metal at $1,730 and resistance at $1,780.
If mass tensions in China continue to escalate, Insignia Consultants expects to see gold "rise and rise," as people in China "hoard" the precious metal.
Copper rebounded after steep declines in the previous session amid Covid-19-related protests in China.
The protests have created some uncertainty over how China will reopen to the outside world, which will affect demand for the metal, ANZ said.
Investors are likely to focus on signs that protests are escalating, or if the situation will be brought under control.
Chinese iron-ore futures rose on reports that authorities have stepped in to curb the protests in several Chinese cities.
Sentiment was also buoyed by recent government measures to support the country's beleaguered real-estate sector, ANZ said.
Historically low inventory levels of the raw material and restocking needs heading into winter may also offer support to iron-ore prices, Donghai Futures said.
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