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North American Morning Briefing: Powell in Focus as China Data Disappoints

11/30/2022 | 05:59am EST

MARKET WRAPS

Watch For:

Second estimate 3Q GDP; ADP National Employment Report for November; Chicago Business Barometer for November; EIA Weekly Petroleum Status Report; Royal Bank of Canada earnings

Opening Call:

Today's Headlines/Must Reads

- Jerome Powell Will Offer a New Mantra: Slow and Steady

- U.S. Not Seeking Decoupling From China, Commerce Chief Says

- Covid Controls Hit Chinese Factories, Adding Risks to Global Growth

- Junk Bonds Rally on Hopes Inflation Has Peaked

- Eurozone Inflation Eased in November, but Further Rate Rises Likely

- India's Central Bank to Launch Retail Pilot of Digital Rupee

- Twitter's Former Trust and Safety Chief Says He Left When System of Governance Went Away

Follow WSJ markets coverage here

Stock futures were slightly firmer on Wednesday as traders looked ahead to a speech from Jerome Powell.

Equities were closing out the month on a mildly positive note as traders eschewed big bets ahead of a speech by the Federal Reserve Chairman and a raft of crucial economic data in the next few days.

Despite fresh news of contracting China manufacturing, concerns about Covid restrictions in that country impacting the global economy appeared to have died down for now, allowing investors to refocus on the topic that has been driving stocks for much of the year: the Fed's monetary policy trajectory.

"A speech by Powell later today is expected to reiterate the central bank's determination to focus on inflation as its core objective, regardless of the potential ramifications," Interactive Investors said.

"Although such comments should be of little surprise, inevitably those searching for confirmation that the Fed will slow its round of rate hikes are likely to be disappointed once more."

Powell is due to speak at the Brookings Institution at 1.30 p.m. Eastern.

Deutsche Bank noted Powell's comments would likely be his last before the Fed begins its blackout period this weekend ahead of its December 14th policy meeting.

"In addition, today [Wednesday] will bring the latest data on job openings and the quits rate for October, which have recently been cited by the Fed and others as a key gauge of inflationary pressures from the labour market."

Global markets broadly rose, too. Travel, leisure and auto stocks helped push the Stoxx Europe 600 up 0.4%.

In Asia, China's Shanghai Composite Index added 0.1%. and the Hang Seng rose 2.2%, putting the Hong Kong benchmark on track for its biggest one-month advance since 1998.

Stocks to Watch

Crowdstrike: Predicted revenue of $619 million to $628 million for the current quarter, which fell short of the $634 million consensus estimate. Shares fell 19% after-hours.

Hewlett Packard Enterprise: Shares added 2.1% off hours after it reported a quarterly loss but gave an upbeat outlook for the coming fiscal year.

Horizon Therapeutics: Said it was fielding takeover interest from companies including Johnson & Johnson, Amgen and Sanofi, confirming an earlier Wall Street Journal report. Horizon shares rose 31% in after-hours trading.

Intuit: Beat expectations for revenue and earnings per share during the recent quarter. Its shares added 1.5% after hours.

NetApp: Reported fiscal second-quarter earnings above expectations but guidance came in lower than estimates. Its shares dropped 11% off hours.

Wayfair: Reported a bump in sales during the five-day shopping period from Thanksgiving through Cyber Monday. Wayfair recorded a low single-digit sales increase in the U.S. over the same period last year. Repeat customers accounted for 73% of holiday orders for the five-day period. Shares rose 11% after-hours.

Workday: Reported higher revenue for the recent quarter and lifted the low end of its subscription revenue guidance for fiscal 2023. Shares gained 8.5% off hours.

Other Movers

Alibaba, Baidu, JD.com and Pinduoduo: Shares in the Chinese tech companies rose 3%-5% premarket, suggesting they could build on Tuesday's rally.

Market Insight

Rate volatility has declined as the market seems to expect the Fed to let off the interest-rate-hike accelerator, PGIM Fixed Income said.

"As the market gains more clarity about the pace of hikes, more normal functioning may return to the bond market and more levered capital that depends on volatility metrics, such as value at risk, could return," PGIM said.

Nascent signs of that happening may emerge as off-the-run four- and six-year notes have been trading well lately even when one would expect to see investors demanding higher liquidity premiums.

Forex:

The dollar has been under less selling pressure lately, but ADP jobs data and Powell's speech could leave it vulnerable to further weakness, UniCredit Research said.

Investors "could return to selling the U.S. unit" if ADP data show an additional deceleration in net job creation.

More critically, when Jerome Powell discusses the economic outlook and the labor market later, any hints of the Fed slowing the pace of rate rises might prove negative for the dollar, although month-end position adjustments could help offset this, UniCredit said.

Read Dollar Heads For Biggest Monthly Loss Since 2010

---

Eurozone inflation data for November are expected to show an easing in price pressures but this is unlikely to materially move the euro, ING said.

"The impact of the inflation story on the EUR/USD has been, predictably, limited. External factors and dollar dynamics continue to drive the pair's performance, and we see downside risks today given that Powell is scheduled to speak."

A fall in EUR/USD below 1.0300 could fuel more downside momentum, taking the pair to the 1.0200-1.0250 levels seen earlier this week, ING said.

Read Chinese Yuan Faces Renewed Falls Amid Covid-19 Uncertainty

Energy:

Oil prices held minor gains in early European trading, helped by a drawdown in crude stockpiles, but any rise for now has been tapered by the expectation OPEC+ will keep production flat at its meeting on Sunday.

Metals:

Base metals were under pressure in London trading, while gold gained, as investors continued to weigh China's Covid-19 rules and any possible shifts in U.S. monetary policy.

Investors in Asia were weighing "Covid-zero evolutions in China ahead of a much-anticipated speech from Jerome Powell," according to SPI Asset Management.

Gold, which is up 7% this month, "looks headed for its biggest monthly gain since May 2021 after the latest U.S. CPI reading sent dollar bulls cowering for cover," SPI added.


TODAY'S TOP HEADLINES


Twitter's Former Trust and Safety Chief Says He Left When System of Governance Went Away

Yoel Roth, Twitter Inc.'s former head of trust and safety, said several factors led to his decision to leave the platform after almost eight years, including the disruptions created by rapid-fire changes from the company's new owner.

He said he left the company following the botched launch of the upgraded Twitter Blue subscription program after Chief Executive Elon Musk ignored his team's warnings about possible issues tied to the rollout.


Airbnb Aims to Attract Big Landlords With a Cut of Its Rental Sales

Airbnb Inc. is launching a listing service for rental apartments with some of the biggest landlords and property managers in the country, a bid to expand its business in multifamily buildings where owners often shun short-term rentals.

The new service will feature more than 175 buildings managed by Equity Residential, Greystar Real Estate Partners LLC and 10 other companies, Airbnb said on Wednesday.


Apollo Taps Connecticut State Treasurer Shawn Wooden for New Client Role

Connecticut State Treasurer Shawn Wooden is joining Apollo Global Management Inc. as a partner and chief public pension strategist to help expand the New York firm's business with retirement systems, which typically are the largest investors in private-equity funds.

Mr. Wooden and Apollo "will comply with all relevant restrictions," an Apollo spokeswoman said, adding that he would join Apollo in late January.


Foot Locker Searches For a New Finance Chief

Foot Locker Inc. is searching for a new finance chief to succeed Andrew Page, who is stepping down from the shoe-store chain as part of a reshuffling of its senior ranks.

Mr. Page will transition out of his role after Foot Locker reports its fiscal fourth quarter earnings next year, the company said on Tuesday. Mr. Page, who has served as chief financial officer for just over a year, is leaving to pursue other opportunities, the company said. He was previously chief accounting officer and controller at Advance Auto Parts Inc., a Raleigh, N.C.-based auto parts retailer.


Horizon Therapeutics Fields Takeover Interest From Pharma Giants

Drugmaker Horizon Therapeutics PLC said it is fielding takeover interest, as large pharmaceutical companies compete for fast-growing medicines to fuel sales.

Horizon, which develops medicines for rare and immune diseases, said it is "engaged in highly preliminary discussions with Amgen Inc., [Johnson & Johnson's] Janssen Global Services, LLC and Sanofi" SA, confirming an earlier Wall Street Journal report on takeover interest.


Eurozone Inflation Eased in November, but Further Rate Rises Likely

The annual rate of inflation in the eurozone fell in November for the first time since mid-2021 , a development economists warned wouldn't keep the European Central Bank from increasing interest rates further.

Consumer-price inflation across the 19 countries that share the euro has increased 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.


Powell Will Offer a New Mantra: Slow and Steady

Federal Reserve Chairman Jerome Powell will have an opportunity on Wednesday to lay the groundwork for where the central bank is headed when policy makers meet next month-and he'll likely use it to make the case for slower but steady interest rate hikes.

(MORE TO FOLLOW) Dow Jones Newswires

11-30-22 0558ET

Stocks mentioned in the article
ChangeLast1st jan.
ADVANCE AUTO PARTS, INC. -0.13% 151.47 Delayed Quote.3.16%
AIRBNB, INC. 1.13% 119.69 Delayed Quote.38.42%
ALIBABA GROUP HOLDING LIMITED 0.05% 105.5 Delayed Quote.19.71%
AMGEN INC. 0.06% 244 Delayed Quote.-7.10%
APOLLO GLOBAL MANAGEMENT, INC. -1.72% 72.14 End-of-day quote.13.09%
AUSTRALIAN DOLLAR / EURO (AUD/EUR) -0.01% 0.64886 Delayed Quote.0.74%
AUSTRALIAN DOLLAR / US DOLLAR (AUD/USD) 0.04% 0.69651 Delayed Quote.1.54%
BAIDU, INC. 12.18% 160.22 Delayed Quote.40.08%
BRENT OIL -0.48% 83.61 Delayed Quote.-6.97%
BRITISH POUND / EURO (GBP/EUR) -0.02% 1.12302 Delayed Quote.-1.21%
BRITISH POUND / US DOLLAR (GBP/USD) 0.00% 1.2051 Delayed Quote.-0.43%
CANADIAN DOLLAR / EURO (CAD/EUR) -0.02% 0.695841 Delayed Quote.0.28%
CANADIAN DOLLAR / US DOLLAR (CAD/USD) -0.02% 0.74657 Delayed Quote.1.04%
DEUTSCHE BANK AG 1.53% 11.53 Delayed Quote.8.90%
EQUITY RESIDENTIAL 1.19% 64.74 Delayed Quote.9.73%
EURO / US DOLLAR (EUR/USD) 0.01% 1.07306 Delayed Quote.0.81%
FLOKI INU (FLOKI/USD) 0.00%End-of-day quote.0.00%
FOOT LOCKER, INC. 1.01% 46.07 Delayed Quote.21.91%
HEWLETT PACKARD ENTERPRISE COMPANY 0.74% 16.23 Delayed Quote.0.94%
HORIZON THERAPEUTICS PUBLIC LIMITED COMPANY -0.41% 109.8 Delayed Quote.-3.51%
INDIAN RUPEE / EURO (INR/EUR) 0.16% 0.011272 Delayed Quote.-0.20%
INDIAN RUPEE / US DOLLAR (INR/USD) 0.18% 0.0121 Delayed Quote.0.62%
INTUIT INC. 3.06% 427.67 Delayed Quote.6.62%
JD.COM, INC. 0.63% 57.09 Delayed Quote.1.71%
NETAPP, INC. 2.03% 67.42 Delayed Quote.10.02%
NEW ZEALAND DOLLAR / US DOLLAR (NZD/USD) 0.08% 0.63268 Delayed Quote.-0.36%
PINDUODUO INC. 0.68% 94.45 Delayed Quote.15.03%
ROYAL BANK OF CANADA 0.36% 138.62 Delayed Quote.8.50%
S&P/CITIC 300 INDEX 0.05% 3746.02 Real-time Quote.5.54%
S&P/CITIC 50 INDEX -0.04% 3591.37 Real-time Quote.4.09%
SANOFI 2.80% 87.29 Real-time Quote.-2.84%
STOXX EUROPE 600(EUR)(TR) 0.23% 1059.46 Delayed Quote.8.52%
TESLA, INC. 1.05% 196.81 Delayed Quote.58.11%
UNICREDIT S.P.A. -0.22% 18.262 Delayed Quote.37.90%
UNITED STATES DOLLAR (B) / CHINESE YUAN IN HONG KONG (USD/CNH) 0.11% 6.78503 Delayed Quote.-1.75%
US DOLLAR / CANADIAN DOLLAR (USD/CAD) 0.01% 1.339 Delayed Quote.-1.01%
US DOLLAR / EURO (USD/EUR) -0.01% 0.931914 Delayed Quote.-0.80%
US DOLLAR / RUSSIAN ROUBLE (USD/RUB) -1.43% 71.08 Delayed Quote.-1.98%
WAYFAIR INC. -2.04% 63.53 Delayed Quote.97.17%
WTI -0.32% 77.404 Delayed Quote.-8.77%
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