MARKET WRAPS

Stocks:

European shares extended gains on Friday, led by China-exposed stocks and miners after Beijing eased some of its coronavirus curbs. Market sentiment was also boosted by Thursday's cooler-than-forecast U.S. inflation data.

"The October inflation data will make it easier for the Federal Reserve to justify a more modest 50-basis-point [interest rate] hike in December, " UBS Global Wealth Management said.

U.S. Markets:

Stock futures edged up, pointing to major indexes building on their biggest rally in more than two years after a surprise slowdown in the rate of inflation lifted hopes the Fed would slow its rate-rise campaign.

Bond markets are closed for Veterans Day.

Forex:

The dollar extended its losses to reach a near three-month low as investors bet on the Federal Reserve slowing the pace of interest rate rises after Thursday's inflation data.

Along with the inflation data, the dollar also took a hit from reduced safe-haven flows after China eased some Covid-19 curbs, ING said.

"Still, we think it's premature for a sustained dollar downtrend, as a Fed pivot is not a given yet and risk assets continue to face a variety of headwinds."

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Sterling extended its gains against the dollar and pared losses versus the euro after better-than-expected U.K. economic growth data on Friday.

The economy shrank 0.2% quarter-on-quarter in the third quarter, although less than the 0.5% contraction expected in a WSJ survey of economists. However, the data are a "further indicator of the bleak economic near-term future for the U.K.," Ebury said.

"Consumer and business confidence remains worryingly weak as the impact of the rising cost of living and interest rates dampens spending and will be a heavy anchor on future growth."

Track the latest analyst comments on the GDP data.

Bonds:

The 12 basis-point tightening in 10-year Italian BTP-German Bund yield spread to below 200 basis points following the U.S. inflation data offers an attractive entry level for short eurozone government-bond positions, Citi said.

"The most likely triggers for spread rewidening in coming weeks are weakening growth indicators, decision on QT [European Central Bank's quantitative tightening] parameters at the December ECB meeting and concerns around the return of supply in 1Q23 without QE [ECB's quantitative easing] support."

Danske Bank said the ECB is expected to publish a road map about quantitative tightening as the next step in its monetary policy calibration, but with a formal decision to be taken at the February meeting.

QT could start on April 1 at the latest, "though we could also foresee a start in mid-February or on 1 March," Danske Bank said. Its baseline scenario is March 1 for the start date of QT.

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The net supply of eurozone government bonds in 2023 without ECB purchases could even triple from around EUR200 billion in 2022, putting periphery spreads in particular under pressure, SEB said.

Increased net supply will cheapen eurozone government bonds versus risk-free rates and swaps. The absence of ECB purchases will also drive German Bund yields higher, SEB said, expecting the 10-year Bund yield to peak at 2.50%-2.70% in the coming months "before the downside trend begins to emerge as focus will shift to expectations of future rate cuts."

Read: Eurozone Govt-Bond Spreads Are Resilient But Widening Is in

Energy:

Oil prices added close to 3% as China eased some of its strict Covid-19 rules.

Chinese officials said the new measures would aim to reduce the impact of Covid-19 restrictions on economic growth. The moves will offer a big boost for commodities, whose demand has suffered because of China's harsh lockdowns.

Metals:

Base metals rallied and gold futures edged up on the news from China.

"With peak Fed in the bag, thanks to a downside surprise in inflation data, pessimism at year-end around the earnings outlook could be offset by optimism on China, mainly if the country takes a less hardline stance on rising Covid cases," SPI Asset Management said.

DOW JONES NEWSPLUS


EMEA HEADLINES

EU Lowers 2023 Growth Outlook, Raises Inflation Forecasts as War in Ukraine Takes Toll

The European Commission lowered 2023 growth expectations for the eurozone economy and raised inflation forecasts on Friday, with Russia's invasion of Ukraine denting global demand and reinforcing inflationary pressures.

Gross domestic product in the 19-member eurozone is forecast to grow by just 0.3% in 2023, the Commission said in its quarterly report, downgrading its July forecast of a 1.4% expansion. Eurozone economic growth is projected at 1.5% in 2024.


U.K. Economy Shrank in Third Quarter, Sliding Toward Recession

The U.K. economy contracted in the three months through September, as high energy prices and rising interest rates mark the beginning of what policy makers expect will be a long-lasting recession that is likely to spread across Europe in coming months.

The country's gross domestic product was 0.7% lower on an annualized basis in the third quarter compared with the three months through June, the U.K.'s Office for National Statistics said Friday. That was the first decline in output since the first three months of 2021, when large parts of the economy were in lockdown to contain a surge in Covid-19 infections.


Daimler Truck 3Q Revenue Rose Amid Strong Demand

Daimler Truck Holding AG on Friday said revenue increased in the third quarter, boosted by strong vehicle sales and higher prices.

The German commercial-vehicles maker said revenue rose to 13.5 billion euros ($13.78 billion) from EUR9.16 billion in last year's third quarter. Group sales increased 27% to 134,972 units, up from 106,304 units a year ago.


Richemont Surges as Luxury Demand Keeps Going Strong

Shares in Compagnie Financiere Richemont SA traded sharply higher Friday after the Swiss luxury-goods group struck a bullish tone despite macroeconomic uncertainty, as tourism in Europe and recovery in China aided consensus-beating first-half earnings.

At 0830 GMT, shares traded 13% higher at CHF121.05.


German Inflation Hits Highest Level in More Than 70 Years

Germany's annual inflation rate accelerated in October, hitting the highest reading since December 1951, according to final data released by the German statistics office on Friday.

The consumer price index rose 10.4% in October on year measured by national standards, up from 10.0% in September, the statistics office Destatis said, confirming its preliminary figures.


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.


Ghana Bondholders Hire Advisers After Country's Request for IMF Bailout

A group of Ghana's foreign bondholders has hired advisers ahead of prospective debt talks with the government over a bailout the country hopes to get from the International Monetary Fund, according to people familiar with the matter.

Holders of some of Ghana's $14 billion in foreign-currency bonds have hired Rothschild & Co. as a financial adviser and Orrick, Herrington & Sutcliffe LLP as legal counsel, the people familiar said. Rothschild declined to comment. Orrick didn't immediately respond to a request for comment.


GLOBAL NEWS

Chinese Stocks Surge as Beijing Eases Some Covid Restrictions

Chinese stocks surged Friday, after top officials in Beijing said they would try to minimize the economic impact from the country's zero-Covid policy and promptly eased some of its quarantine restrictions.

Hong Kong's benchmark Hang Seng Index jumped 7.7% in its biggest single-day rally since March, taking its increase so far this month to around 18%. Stocks of internet-platform companies, electronics-parts manufacturers and Chinese real-estate developers were among the biggest gainers.


Hong Kong Cuts Economic Growth Forecast for 2022

Hong Kong cut its 2022 gross domestic product forecast after taking into account the economic performance in the first three quarters of the year and the subdued short-term outlook.

The government now expects real GDP to contract 3.2% for 2022, compared with its previously projected range of 0.5% contraction to 0.5% growth.


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%.


Easing Inflation Ignites Bond-Market Rally

U.S. government bond yields marked their steepest one-day declines in more than a decade Thursday after fresh data showed inflation fell more in October than Wall Street expected.

The data fueled new optimism that the waning inflation could put the Federal Reserve on a gentler path of interest-rate increases into 2023. The Fed's fastest rate increases in decades have spurred a brutal selloff for Treasurys this year, because higher short-term rates lift the bar for the yields investors demand when buying ultrasafe government bonds.


GOP Inches Closer to Expected Narrow House Majority, With Senate Still a Tossup

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11-11-22 0533ET