MARKET WRAPS

Watch For:

U.S. Weekly Jobless Claims.

Opening Call:

Stock futures edged up ahead of earnings from Macy's and Kohl's and unemployment data that will be closely watched for insight into the pace of the economic recovery.

Oil prices fell for a second day after reports that President Biden and Chinese premier Xi Jinping have discussed jointly releasing strategic reserves to increase supply and lower prices.

"The story of the day of what's happening on the oil front," said Florian Ielpo, head of macro at Lombard Odier Investment Managers. "All eyes are currently on inflation, so every small step toward deceleration of inflation is highly regarded."

Stocks have wavered this week as earnings rolled in and concerns about consumer-price rises continued. Results have overall been strong, but some major companies such as Target have been hit by supply-chain snarls and rising costs. Despite this, major indexes are still hovering close to their record highs, with the S&P 500 just 0.3% below.

"We're in an uncomfortable period where inflation is affecting consumer sentiment," said Fahad Kamal, chief investment officer at Kleinwort Hambros. He expects this to be a short-term drag and for earnings growth to stay strong into next year.

Retailers Macy's and Kohl's are scheduled to release earnings Thursday ahead of the opening bell in New York.

Technology firm Nvidia rose over 5% in out-of-hours trading after posting record quarterly revenue after markets closed. Cisco Systems slid more than 6% after the networking company gave forward earnings guidance that was below Wall Street's estimates and said it was affected by the semiconductor shortage.

Fresh data on jobless claims, a proxy for layoffs, is due at 8:30 a.m. ET. Economists are expecting a decline as employers hang onto their workers in the tight labor market.

The pan-continental Stoxx Europe 600 index was relatively flat. Shares of Thyssenkrupp climbed 6% after the industrial conglomerate said its earnings were boosted by the rise in steel prices. German car parts manufacturer Continental declined 5% after its board fired its chief financial officer. In Asia, most major benchmarks declined.

China Evergrande Group said it planned to sell its stake in a Hong Kong-listed film production company, its latest move to generate cash to pay off its debts. It will incur a loss equivalent to around $1.1 billion from the transaction. Evergrande's shares declined close to 6%.

Forex:

The dollar's current pullback is unlikely to last due to bets the Federal Reserve will withdraw further policy support, ActivTrades said.

"The American currency is likely to remain supported in the run-up to the end of the year due to expectations that the Fed will increase the pace of tapering [bond purchases] and set firmer expectations for rate hikes in 2022," ActivTrades analyst Ricardo Evangelista said.

The prospect of Fed action increased after data on U.S. inflation data last week and U.S. retail sales on Tuesday, which both exceeded expectations, he said.

The dollar fell as traders take profit after recent hefty gains that lifted it to 16-month highs against the euro and a basket of currencies, but it should soon appreciate further, UniCredit said.

"It is still too early to say this recent episode of appreciation is over," it said.

Today's falls likely reflect a minor dollar correction due to "profit taking or position paring" as the rise in U.S. long-term yields has paused, temporarily limiting scope for yield spreads between the U.S. and the rest of the world to widen further, UniCredit said.

Sterling could weaken against the euro if the Bank of England raises interest rates by less than anticipated and if the post-Brexit trade dispute intensifies, Danske Bank said.

"We do not think the Bank of England is going to hike [rates] nearly as aggressively as priced in markets, creating some upside risks to EUR/GBP over the next three months," Danske Bank analyst Kristoffer Kjaer Lomholt said. "In addition, there is renewed Brexit uncertainty, which may start to weigh on GBP sooner or later if things are escalating." Overall, EUR/GBP may rise slightly in coming months, he said.

Bitcoin traded around $59,600, extending its fall into a fourth day. It is down another 0.8% from its level on Wednesday at 5 p.m. ET, according to data from CoinDesk.

The Turkish lira depreciated for an eighth consecutive day, reaching a record low of 10.8 lira to $1. The country's central bank will put out an interest rate decision Thursday and analysts are expecting another cut after President Recep Tayyip Erdogan renewed his calls for one, despite surging inflation.

Bonds:

The yield on the benchmark 10-year Treasury note edged down to 1.580% from 1.604% on Wednesday.

Whether inflation will be temporary or become entrenched is "far from clear," and one area of fixed income where investors can potentially find refuge from inflation is short-duration bonds ,Raymond Sagayam, chief investment officer for fixed income at Pictet Asset Management said.

"It's an asset class that has been largely overlooked for the past five or six years as most investors have been attracted to riskier assets and higher-yielding debt," he said. "Now, it looks attractive once more." U.S., eurozone and U.K. sovereign bonds, as well as emerging-market credit, have lost money over the past 12 months, with return eaten up by rising yields, Sagayam said.

As recent U.S. consumption data has been showing early signs of weakness, Julius Baer believes growth will become the source of worry soon, not inflation.

"All-in-all, with the US consumer contributing to over two thirds of gross domestic product (GDP), it will be growth we will be worrying about in a few quarters' time, not inflation," said Yves Bonzon, group chief investment officer at Julius Baer Group.

As savings are largely accrued to the top decile of the income distribution, it is from the lowest decile households that inflation carves out most of the purchasing power, he said, adding that real household income in the U.S. has decreased in the last six months.

Commodities:

Oil prices were down, with both benchmarks down between 2% and 4% so far this week. Those moves see oil prices continue their downward trend, which appears to have followed "growing expectations of a release from the U.S. Strategic Petroleum Reserve," ING's Warren Patterson said.

Similarly, "reports that President Biden asked President Xi for China to tap its oil reserves, have meant the potential for a coordinated release... [amid] growing discontent amongst key consuming nations" about the tightness of global markets, Patterson added.

All of that is serving to bring down oil prices, despite bullish EIA inventory data late Wednesday and rising European gas prices.

While gold prices have been rising on inflation expectations, the rally is likely to be capped in the long term by higher interest rates and rising bond yields, Capital Economics said. Growing concerns that inflation will prove to be more persistent than expected have supported the metal. But tightening monetary policy from the Federal Reserve will push yields higher and cause gold prices to fall in the coming years, the firm said.

Copper prices fell to their lowest level since earlier October on concerns about rising stockpiles of the metal. On-warrant LME inventories are at their highest level since October at 62,100 tons, adding to concerns that demand is dwindling.

"We are hearing reports that there is quite a lot of copper concentrates amassing at Chinese ports. The talk is that once this material is released, we could see a notable uptick in [Shanghai] inventories as end-user demand is said to be fairly restrained," Ed Meir, a metals consultant for ED&F Man, said.

TODAY'S TOP HEADLINES

Hershey Seeks Growth, Synergies From Pretzel Deals

Hershey Co. expects to grow its business and find some cost synergies, particularly in areas such as sourcing of ingredients and machinery, with its recent acquisitions of two snack makers, Chief Financial Officer Steve Voskuil said.

China Evergrande to Shed Stake in Tencent-Backed Venture for $273 Million

SINGAPORE-Cash-strapped property giant China Evergrande Group said it will sell its entire stake in a company that provides online video-streaming and Internet home services for the equivalent of $273 million, closing a chapter in a six-year business venture with internet behemoth Tencent Holdings Ltd.

Evergrande said Thursday it has agreed to unload its remaining 18% stake in HengTen Networks Group Ltd. at around a 24% discount to the Hong Kong-listed company's stock price a day earlier. The developer, which recently reported around $300 billion in liabilities, and has been scrambling to sell assets to make interest payments and avoid defaulting on its international bonds.

Deere Workers Approve New Contract, Ending Strike

Workers at Deere & Co. ratified a new six-year contract Wednesday, ending a strike against the farm and construction machinery company that lasted over a month.

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Sony's PlayStation and Others Pressure Activision Blizzard to Better Address Sexual-Misconduct Issues

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PlayStation boss Jim Ryan disclosed the request in a letter to employees Wednesday that was reviewed by the Journal. In it he said Sony reached out to Activision "to express our deep concern" about the article and that "we do not believe their statements of response properly address the situation."

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11-18-21 0612ET