MARKET WRAPS
Watch For:
Producer Price Index for October; Canada Manufacturing Survey for September; Canada Wholesale Trade for September; earnings from Home Depot, Walmart
Opening Call:
Today's Headlines:
-China's Economy Takes a Deeper Hit as Retail Sales Turn Negative
-PBOC Leaves Key Policy Rates Unchanged
-Russian Oil Exports Hold Up Despite Impending EU Ban
-New FTX CEO Unwound Enron and Other Major Corporate Failures
Follow WSJ markets coverage here.
Stocks looked likely to resume their rally on Tuesday as optimism over the Chinese economy lifted risk appetite.
Hong Kong's Hang Seng jumped 4.1%, taking its gains so far in November to 24.8%, as Chinese listed stocks welcomed signs of cooling U.S.-Sino tensions, Beijing's intentions to support its beleaguered property sector, and indications the mainland government would ease Covid-19 restrictions.
The upbeat tone from Asia--which included TSMC jumping 8% on news Warren Buffett had bought a $5 billion stake--underpinned European bourses and U.S. futures.
Analysts increasingly expect stocks to enjoy a positive end to the year. "The near-term picture still looks positive for U.S. benchmark indices and while momentum has reached intra-day overbought levels, this doesn't imply a selloff has to happen right away," Fundstrat said.
However, Swissquote Bank said that while the latest developments in China were good news for the global economy they were "bad news for global inflation".
"Rising Chinese demand next year, will put a renewed positive pressure on energy and commodity prices. Therefore, a Chinese recovery, if it materializes, will be the next battle in the global inflation war."
That's a view likely not lost on Fed officials, who over recent days have been trying to calm the market's ebullient reaction to the latest signs of cooling U.S. price pressures.
Fed speakers on Tuesday include Patrick Harker talking about the economic outlook at 9 a.m. and Michael Barr testifying on regulation at the Senate Banking Committee, starting at 10 a.m.
Forex:
The dollar fell to a three-month low of 106.0940 against a basket of currencies on improved global sentiment and after Lael Brainard said on Monday the Fed was likely to slow the pace of raising interest rates next month.
Last week's weaker-than-forecast inflation data look "enough to slow the pace of tightening," MUFG said.
Monday's meeting between Joe Biden and Xi Jinping also favored dollar weakness by lifting sentiment and reinforcing optimism over China's growth.
Bonds:
Bond investors "finally" believe the Fed's projections of the fed funds rate, making the Treasury market to be appropriately priced, Morgan Stanley Wealth Management said.
With four consecutive 75 basis point interest-rate rises behind, fed funds futures shot ahead of the peak rate suggested by the dot plots, Fed policymakers' projections of the fed funds rate, Morgan Stanley said.
"We take this as a signal that rates markets are finally priced appropriately, which creates a favorable asymmetric risk profile for investors who can now earn 4% to 5% yields on securities at the front end of the yield curve."
It said that for most of the past decade, the fed funds futures market has discounted Fed's policy guidance as overly optimistic on growth and inflation.
Energy:
Oil prices extended losses in Europe as China's Covid-19 cases continue to rise, undermining hopes that Beijing was considering easing its lockdown measures.
Chinese officials reported a rise in Covid-19 cases on Tuesday to their highest level since April. The spike has prompted fresh lockdowns in major Chinese cities.
Oil markets are "hyper-sensitive" to the restrictions, SPI Asset Management said. "Rolling lockdowns across heavily populated areas in China penalize mobility and oil demand even more than economic activity."
Metals:
Base metals and gold prices were rising in early London trading as a future relaxation of Covid-19 restrictions helped boost sentiment in China.
"Sentiment has remained strong despite the initial weak open and poor Chinese macro releases," Marex said, pointing to reports of reopening in China around air travel to Johannesburg, Seoul, Dubai as well as other internal routes.
Flight searches in China have surged with consumers hopeful of a reopening soon, Marex said.
TODAY'S TOP HEADLINES
Estée Lauder Nears Deal to Buy Tom Ford, Edging Out Kering
Estée Lauder Cos. is nearing a deal to buy Tom Ford for roughly $2.8 billion, building on a longstanding licensing deal and marking the cosmetics giant's largest-ever acquisition, according to people familiar with the matter.
Estée Lauder prevailed in an auction for the high-end fashion label that drew competition from big names in luxury including Kering SA. The French company was poised to win the auction earlier this month, The Wall Street Journal reported.
New FTX CEO Unwound Enron and Other Major Corporate Failures
The executive tapped to lead FTX through the biggest cryptocurrency bankruptcy in history has helped recover billions of dollars for creditors of Enron Corp., Nortel Networks and other major companies that have collapsed over the last two decades.
John J. Ray III was appointed chief executive of FTX just before the crypto exchange plunged into chapter 11 bankruptcy and founder Sam Bankman-Fried resigned. Mr. Ray is now tasked with investigating FTX's sudden collapse and unwinding an enterprise with more than 130 corporate affiliates in chapter 11, more than 100,000 estimated creditors and at least $10 billion listed in assets and liabilities.
Regulator Accuses Airlines of 'Extreme' Delays Refunding Fliers, Fines Six Carriers
The U.S. Department of Transportation is levying penalties against six carriers that it says were prone to "extreme delays" paying refunds they owed to passengers throughout the pandemic.
Five of the carriers which were fined are foreign airlines. Denver, Colorado-based budget carrier Frontier Airlines was ordered to pay $2.2 million-the largest penalty-and was required to repay $222 million, according to the Transportation Department.
China's Economy Takes a Deeper Hit as Retail Sales Turn Negative
HONG KONG-China's economy sank into a deeper funk last month as the weight of strict zero-Covid measures, a real-estate downturn and sinking export demand underscored the difficulties of rekindling growth amid tighter government regulations and a worsening global economy.
New data released Tuesday showed economic activity cooling across the board in October. Retail sales contracted unexpectedly for the first time in five months as factory output growth slowed and a pullback in real-estate investment accelerated.
PBOC Leaves Key Policy Rates Unchanged
China's central bank kept its key policy rates unchanged Tuesday, suggesting that it may maintain benchmark lending rates despite more signs of weakness in the world's second-largest economy.
The People's Bank of China injected 850 billion yuan ($120.16 billion) of liquidity via the one-year medium-term lending facility at an interest rate of 2.75%. It also injected CNY172 billion of funds via its seven-day reverse repurchase agreement at an interest rate of 2.0%.
Russian Oil Exports Hold Up Despite Impending EU Ban
More than 1 million barrels a day of Russian oil exports are set to be obstructed by Western sanctions that are expected to come into force within weeks, the International Energy Agency said Tuesday, and Moscow will struggle to redirect shipments elsewhere, threatening to further tighten global energy markets.
Russian crude oil exports, including to the European Union, were largely unchanged last month, despite the prospect of an imminent EU ban on Russian crude oil imports and a separate plan to cap prices for Russian crude oil sales, the Paris-based agency said in a monthly report.
Democrat Katie Hobbs Defeats Kari Lake in High-Profile Arizona Governor Race
Democratic Secretary of State Katie Hobbs won Arizona's governor race, the Associated Press has projected, in one of the most closely watched contests in the country.
Her opponent Republican Kari Lake, a former local TV anchor, has become a prominent ally of former President Donald Trump and proponent of his false claims of a stolen 2020 election.
Senate Moves Ahead With Vote on Gay-Marriage Bill
The top Senate Democrat is moving ahead on advancing legislation protecting same-sex marriage, as lawmakers got back to work following the midterm elections.
Senate Majority Leader Chuck Schumer (D., N.Y.) late Monday filed for cloture on the Respect for Marriage Act, setting up an initial vote for later this week. Any legislation would require at least 60 votes in the Senate, which is split evenly between Democrats and Republicans.
Ukraine's Zelensky Visits Newly Recaptured Kherson
Ukrainian President Volodymyr Zelensky visited Kherson on Monday, days after his country's forces recaptured the city from Russian control, as Moscow insisted the regional capital remained part of its territory.
Images posted to Mr. Zelensky's official Telegram channel showed him handing awards to Ukrainian soldiers beneath a colonnaded arch marking the entrance to the city.
U.S., Allies Announce $20 Billion Package to Wean Indonesia Off Coal
Wealthy countries including the U.S. and some of the world's biggest banks backed a $20 billion funding plan to steer Indonesia, the world's largest coal exporter, toward renewables as part of efforts to help emerging economies decarbonize.
The funding, announced at a meeting of G-20 leaders, is aimed at one of the thorniest climate challenges. Developing countries like Indonesia, India and South Africa say they can't afford to quickly transition to renewable energy. But if they stick with fossil fuels, carbon emissions will rise as their economies grow.
Justice Department Opens Probe Into Killing of Palestinian-American Al Jazeera Journalist
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11-15-22 0519ET
