MARKET WRAPS
Stocks:
European stocks pushed higher on Tuesday with sentiment lifted by unverified social media reports that China planned to reopen from its strict Covid-zero policy.
The rumors lifted stocks in Hong Kong and China, with the momentum continuing into the European open. However, some analysts remained cautious.
Kenny Wen, KGI Asia's head of investment strategy, said the chatter appears to contradict recent news, including Chinese leader Xi Jinping's emphasis on security at the recent party congress and rising Covid-19 cases across the country.
Other market participants pointed to expectations for dovish signals at Wednesday's Federal Reserve policy meeting for the shift in risk appetite.
Carmignac said a 75 basis point interest rate rise by the Fed is highly likely, but the real story for markets is whether the central bank will hint at a deceleration in the pace of hikes starting in December.
"As a matter of fact, following recent reports that officials are debating the slowdown, fixed-income markets have quickly readjusted expectations for December--now pricing in a less than 50% chance of a 75bp hike," Carmignac said.
Any hints toward confirmation of a less hawkish stance would prove a further impulse for financial markets, it said.
U.S. Markets:
Stock futures inched higher, with earnings due from a diverse set of companies including Airbnb, Simon Property, AMD and Devon Energy.
Economic data due later Tuesday include the S&P manufacturing PMI for October, the ISM manufacturing index for October and job openings.
Stocks to Watch:
Goodyear Tire & Rubber: Stock price dropped 8.7% premarket after its earnings came in below expectations and said inflation and a strong dollar were presenting challenges.
GameStop: Stock was up 3.3% premarket a day after its trading was temporarily halted due to volatility that saw it soar at the open only to end the session little changed.
Stryker: It reported third-quarter results above analyst expectations but lowered its profit outlook for the year. Its shares slipped 5.4% premarket.
Forex:
The dollar turned lower as European equities started the day with gains of around 1%, causing demand for safe-haven assets to ebb.
Analysts pointed to a solid Asian session, with stocks boosted on speculation that China may relax its zero-Covid policy.
"The Chinese city of Zhengzhou is reportedly looking to lift their Covid controls for low-risk regions, and there's speculation that China is establishing a reopening committee. Asian equities jumped and the dollar fell," Mizuho said.
Trade in the dollar remained volatile as traders awaited Wednesday's Federal Reserve interest-rate decision.
Bonds:
The Bank of England is set to kick off active sales of gilts amid close market scrutiny following the recent turmoil.
"This is a landmark moment as the gilt market adjusts to a future without QE [quantitative easing]," Citi said.
The BOE is set to sell GBP750 million in gilts due between 2026 and 2029. "If the operation proves relatively easy to absorb, it could trigger some corrective steepening," Citi said, adding that concerns remain about who will buy all the gilts to year-end.
MUFG Bank said the BOE's planned sale of GBP750 million in short- and medium-maturity gilts today will test demand and could put upward pressure on yields.
"The BOE hopes that the gilt sales can run in the background without being disruptive for markets although they are another form of monetary tightening alongside rate hikes."
The BOE will not sell gilts with maturities longer than 20 years "which would prove more disruptive for pension funds," MUFG Bank said.
Read: Eurozone Government Bond Issuance in Nov Expected in Line With 2022 Monthly Average
Energy:
Oil prices were close to 2% higher in Europe on a weaker dollar and as rumors circulated in Asia that a Chinese reopening committee has been formed, helping to lift sentiment that demand for various goods will pick up in the new year.
SPI Asset Management said that although the oil market looks to be trading on the current recessionary environment, China is an upside driver of oil demand and a reopening would accelerate this trend.
Metals:
Base metals pushed solidly higher on rumors of a possible reopening of China from its strict Covid-19 protocols. Gold also made modest gains.
Marex said copper traded strongly in Asia, initially on forex moves, but later driven by chatter that a reopening committee has been formed, led by Wang Huning, a Politburo standing member.
Marex cautioned however, that nothing had been confirmed, and with the Fed policy decision due later this week, it would be challenging to forecast when prices will rise.
DOW JONES NEWSPLUS
EMEA HEADLINES
BP Profit Boosted by Natural-Gas Trading, to Buy Back More Shares
LONDON-BP PLC reported robust underlying profit for the third quarter and said it would buy back another $2.5 billion of shares, as a strong performance in natural-gas trading offset weaker refining margins.
London-based BP said Tuesday its underlying replacement-cost profit, a metric similar to the net income that U.S. oil companies report, was $8.2 billion. That beat the $6.1 billion average projection of 29 analysts compiled by BP and the $3.3 billion it reported a year earlier.
Saudi Aramco Profit Jumps 39% on High Oil Prices
Saudi Arabia's national oil company posted a 39% jump in quarterly profit on Tuesday, as high oil prices boosted earnings that help the kingdom pay for an ambitious economic transformation plan at home and expand its diplomatic influence in the region.
Aramco, officially named Saudi Arabian Oil Co., said its net income amounted to $42.43 billion in the three months ending in September, up from $30.43 billion in the same period a year earlier, driven by higher crude-oil prices and volumes sold.
Ocado Signs Partnership With South Korea's Lotte Shopping
Ocado Group PLC said Tuesday that it and Lotte Shopping Co. have signed a partnership to develop Lotte's online business in South Korea with the Ocado Smart Platform.
The online grocer and retail-technology specialist said six customer fulfillment centers will be developed nationally by 2028, the first of which is expected to go live in 2025.
Penguin Random House Blocked From Acquiring Rival Publisher Simon & Schuster
A federal judge on Monday blocked Penguin Random House from acquiring rival book publisher Simon & Schuster for about $2.18 billion, agreeing with the Justice Department that the planned merger would unlawfully lessen competition.
U.S. District Judge Florence Pan accepted the Justice Department's arguments that some writers would likely be harmed if Penguin Random House, the world's largest consumer-book publisher, was allowed to acquire another of the five largest book publishers in the U.S.
Tesla Talked to Glencore About Buying Stake in the Miner
Tesla Inc. held early-stage talks with Glencore PLC last year about buying a stake in the commodities giant, according to a person familiar with the matter.
The electric vehicle maker's interest came as manufacturers across the West look to secure supplies of so-called future-facing metals that are used in batteries and the renewable energy industry.
Russia Threatens to Stop Vessels, as Grain Ships Continue to Call on Ukraine
ISTANBUL-Russia threatened to stop vessels carrying grain from Ukraine, two days after Moscow said it would abandon an agreement that guaranteed the safety of those exports and as ships continued to make the voyages Monday anyway.
Russia's ambassador to the United Nations, Vasily Nebenzya, said Russia's navy would, if necessary, conduct inspections of ships that did get its permission to depart Ukraine. The Russian Ministry of Defense said any movement of ships along a previously designated grain corridor was unacceptable, citing security concerns.
Israelis Head to Polls in Fifth Election Since 2019
TEL AVIV-A deeply divided Israeli electorate is casting ballots Tuesday in the nation's fifth election since 2019, with polls predicting an extremely tight vote that gives neither Prime Minister Yair Lapid nor opposition leader Benjamin Netanyahu a clear path to power.
Some of the most recent polls showed Mr. Netanyahu's right-wing coalition with a slight edge of 61 seats needed for a majority in the 120-seat parliament, the Knesset. Other polls showed a 60-60 tie. Mr. Lapid, leader of the centrist Yesh Atid party, is polling at around 27 seats. Pollsters give his largely center-left coalition around 56 seats.
GLOBAL NEWS
Fed Meeting to Focus on Interest Rates' Coming Path
Wall Street analysts will be focused Wednesday on what Federal Reserve Chairman Jerome Powell says about whether the central bank might slow down interest-rate rises at its next policy meeting in December.
Fed officials have already indicated that they are likely to raise their benchmark federal-funds rate by 0.75 percentage point this week to a range between 3.75% and 4%. That would mark their fourth consecutive increase of that size as they seek to reduce inflation by slowing the economy. Some of the officials recently began signaling their desire to start reducing the size of increases after this week and to potentially stop lifting rates early next year so they can see the effects of their moves.
Government Climate Funding Pushes Private Sector to Make Good on Promises
The Biden administration is starting to dole out billions of dollars for nascent climate industries such as battery metals. That is putting pressure on banks and investors to step up with additional funds to make good on their climate promises.
(MORE TO FOLLOW) Dow Jones Newswires
11-01-22 0621ET
