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European Midday Briefing: Fed Fears Outweigh -2-

12/05/2022 | 06:15am EST

Europeans cut back sharply on their spending on goods during October, a sign that high prices at the start of a period of increasing energy usage are pushing the region's economies toward recession.

Consumer prices have surged since Russia's invasion of Ukraine, and the Kremlin's decision to weaponize the country's vast stores of energy to undermine European support for Kyiv.

Oil Price Rises After Russia Cap Kicks In

The West imposed sanctions on Russian crude, pitching the energy conflict with Moscow into an unpredictable new phase that could inject further volatility into global oil markets.

The European Union and U.K. barred inbound shipments of Russian crude Monday-a watershed for a continent striving to end its dependence on Russia's fossil fuels after Moscow invaded Ukraine and weaponized supplies of natural gas. In tandem, the EU, the U.S. and allies placed curbs on shipping, insuring and funding Russian crude anywhere in the world.

OPEC+ Keeps Oil Curbs Despite Russia Price Cap

OPEC+ said Sunday it would lock in current production levels, a pause that suggests the world's leading oil producers are uncertain about the direction of crude prices with a price cap on Russia's petroleum exports set to take effect.

The decision on Sunday allows the Organization of the Petroleum Exporting Countries and a group of producers led by Russia-collectively known as OPEC+-to take more time to assess the market impact of an EU and Group of Seven price cap, which is intended to crimp Russia's revenue for the Ukraine war. It locks in a 2 million-barrels-a-day production cut decided in October.

Ukraine Says Oil-Price Cap Won't Dent Russia's Ability to Fund War

KYIV, Ukraine-Ukraine denounced a price cap on Russian oil agreed to by the U.S. and its allies as a weak measure that would fail to deprive Russia's military machine of funds, as Moscow said it could stop supplying consumers in response.

The Group of Seven agreed Friday to cap the price of Russian oil at $60 a barrel, moving forward with an unprecedented sanction against one of the world's largest producers following its invasion of Ukraine.

Russia Will Rely on 'Shadow' Tanker Fleet to Keep Oil Flowing

Shipping companies have snapped up dozens of secondhand oil tankers this year, paying record prices for ice-class ships that can navigate frozen seas around Russia's Baltic ports in winter.

A driving force behind the purchases, say people familiar with the deals: To get Russian oil to market after the harshest sanctions to date strike Russia's energy industry next week.

Explosions Hit Russian Air Bases as More Missiles Strike Ukrainian Infrastructure

Explosions at a pair of air bases deep inside Russia killed at least three people and wounded six others on Monday, Russian authorities said, while Ukrainian officials hinted at a capability to strike deeper within Russian territory.

A fuel tanker exploded at an airfield in Ryazan, southwest of Moscow, killing at least three people, according to RIA Novosti, a Russian state-run news agency. The report didn't say what caused the explosion.

U.N. Nuclear Agency Under Pressure to Share Knowledge of Alleged Russian Abuse of Ukraine Plant Workers

Why You Can't Find Wegovy, the Weight-Loss Drug

Novo Nordisk A/S flubbed the launch of its buzzy new weight-loss drug Wegovy, missing out on hundreds of millions of dollars in sales and squandering a head start before a rival could begin selling a competing product.

Wegovy is among a new class of drugs that health regulators have approved to cut the weight of people who are obese, a goal long sought by doctors and patients. Their weight-dropping potential became a viral sensation on social media. Elon Musk tweeted about Wegovy in October. And a related drug for diabetes, Ozempic, is a hot topic in Hollywood among celebrities seeking to stay thin, according to doctors.

Iran Disbands Morality Police, Considers Changing Hijab Laws, Official Says

Iran's attorney general said the country had disbanded its so-called morality police and is considering altering the requirement that women cover their heads in public, a move that analysts said was aimed at peeling away support for antigovernment protests.

Mohammad-Jafar Montazeri outlined the steps Saturday, saying the law requiring veils, known as hijabs, was under review by Iran's Parliament and judiciary, and that the morality police had been abolished, according to government-run news agencies.


Chinese Stocks Jump After More Covid Easing

Stocks in Hong Kong and mainland China jumped on Monday, after local Chinese authorities took more steps to ease strict Covid-19 policies that have crimped the country's growth.

The Hang Seng Index was 4.5% higher on Monday afternoon in Hong Kong, with key stocks including e-commerce giant Alibaba and smartphone maker Xiaomi rising more than double that. The CSI 300 Index, a gauge of the largest listed companies in mainland China, rose nearly 2% to its highest level since mid-September.

Fed Could Pencil in Higher Interest Rates Next Year While Slowing Hikes in December

Federal Reserve officials have signaled plans to raise their benchmark interest rate by 0.5 percentage point at their meeting next week, but elevated wage pressures could lead them to continue lifting it to higher levels than investors currently expect.

They have raised rates this year at the fastest pace since the early 1980s, including by 0.75 point at each of their past four meetings to combat inflation. Fed Chair Jerome Powell indicated last week that the central bank was prepared to downshift the size of rate increases at its coming meeting on Dec. 13-14.

Bond Rally Drags 10-Year Treasury Yield Back Down to 3.5%

Hopes that inflation is easing have driven a weekslong rally in government bonds, pulling the 10-year U.S. Treasury yield back to 3.5% for the first time since September.

Treasurys started rallying with stocks after the Labor Department released better-than-expected consumer-price index data on Nov. 10. That move was supercharged last week when Federal Reserve Chairman Jerome Powell sent the clearest signal yet that the central bank plans to raise short-term interest rates by half a percentage point at its Dec. 13-14 meeting, a step down from the 0.75 percentage point increases of the past four meetings.

China Caixin Services PMI Fell to Six-Month Low

A private gauge of China's services sector slipped further into contraction in November, the lowest reading since May, reflecting continued downward pressures brought by the government's efforts to stamp out Covid-19 outbreaks.

The Caixin China services purchasing managers index dropped to 46.7 in November, down from 48.4 in October, Caixin Media Co. and S&P Global said Monday. A reading below 50 suggests a contraction in activity.

China Loosens Covid Restrictions as Public Anger Simmers

HONG KONG-Local authorities across China are paring back some of their strictest Covid-19 control measures, just days after public anger spilled over into rare protests against a zero-tolerance approach that has kept the country largely isolated for three years.

In recent days, officials in major cities-including Beijing and other areas where protests broke out a week ago-said they were lifting some curbs on residents' movements, such as by ending mandatory Covid testing for people who want to use public transport or enter parks and other public spaces.

Write to paul.larkins@dowjones.com

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

(END) Dow Jones Newswires

12-05-22 0614ET

Stocks mentioned in the article
ChangeLast1st jan.
ALIBABA GROUP HOLDING LIMITED -6.07% 111.2 Delayed Quote.26.23%
AUSTRALIAN DOLLAR / US DOLLAR (AUD/USD) -0.89% 0.6994 Delayed Quote.4.32%
BRENT OIL -1.18% 83.4 Delayed Quote.-1.80%
BRITISH POUND / US DOLLAR (GBP/USD) -0.26% 1.23174 Delayed Quote.2.52%
CANADIAN DOLLAR / US DOLLAR (CAD/USD) -0.63% 0.7424 Delayed Quote.1.78%
EURO / US DOLLAR (EUR/USD) -0.21% 1.08288 Delayed Quote.1.57%
INDIAN RUPEE / US DOLLAR (INR/USD) -0.57% 0.012207 Delayed Quote.1.48%
NEW ZEALAND DOLLAR / US DOLLAR (NZD/USD) -0.72% 0.6418 Delayed Quote.2.22%
NOVO NORDISK A/S -3.17% 933.2 Delayed Quote.2.51%
S&P GSCI NATURAL GAS INDEX -1.94% 122.9048 Real-time Quote.-36.34%
US DOLLAR / RUSSIAN ROUBLE (USD/RUB) 0.80% 70.4843 Delayed Quote.-4.54%
WTI -1.51% 76.725 Delayed Quote.-0.08%
XIAOMI CORPORATION 1.73% 12.92 Delayed Quote.16.09%
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