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Top Headlines/Must Reads:
- SEC Heightening Scrutiny of Auditors' Crypto Work
- Shipping Industry Balks at Green Energy Transition
- Coal, No Longer Shunned, Keeps Europe's Lights on Through Frigid Weather
- UK Economy Contracted More Than Initially Estimated in Third Quarter
- Egg Prices Surge to Records as Bird Flu Decimates Poultry Flocks
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Stock futures were slightly lower on Thursday after a rally in the previous session, as activity winds down ahead of the holidays.
Volumes are starting to dry up as the year winds down, making markets more susceptible to bigger moves.
According to Dow Jones Market Data, Wednesday saw the least combined volume on major exchanges since Nov. 29.
"Even if we see some further recovery due to holiday-thin liquidity or end-of-year portfolio rebalancing next week, stocks could resume their slide at the turn of the year," XM said.
Stocks to Watch
Berkeley Lights agreed to acquire IsoPlexis in an all-stock deal valued at $57.8 million. IsoPlexis shares surged 95% in after-hours trading. Berkeley Lights dropped 10%.
Lexicon Pharmaceuticals's Phase 2 study of LX9211 in postherpetic neuralgia, didn't reach statistical significance on the primary endpoint. Shares fell 11% in after-hours trading.
Micron Technology reported a drop in sales and a net loss for the most recent quarter. Stock dropped about 2.5% premarket.
MillerKnoll's stock added 2.7% off-hours, even after it said sales were set to fall in its fiscal third quarter.
Tesla shares rose more than 1% in active premarket trading.
Economic Insight
Extreme climate events and continuing geopolitical strains are likely to provide an upside to agricultural prices in 2023, UBS said.
"2023 is set to be another volatile year," the Swiss investment bank said, citing supply issues due to extreme weather events and the war in Ukraine.
Persistent drought across parts of the U.S. has raised risks for grain and livestock fundamentals, while La Niña in Argentina has hit 95% of the country's cropping regions with drought which should cut wheat output in half, it added.
However, global weather agencies expect La Niña to fade in early 2023, UBS noted.
Read War in Ukraine Could Pose More Challenges for Agriculture Next Year
Forex:
The dollar could see renewed strength in the first quarter of 2023 if data show a robust U.S. labor market, but this won't last, MUFG Bank said.
Inflation may ease over coming months, but labor market conditions could keep the Fed's policy stance tight for longer than markets expect, MUFG added.
"That could be a source of focus for the markets in Q1 next year that we believe could result in renewed risk-off and with it renewed dollar strength."
However, MUFG said, the dollar could fall in the second quarter as the labor market weakens, easing concerns about wage inflation and supporting the case for interest rate cuts in the fourth quarter.
Read Dollar Falls as Market Enters Quiet Festive Period
Meanwhile, the sterling has scope to weaken further against the euro as the European Central Bank could tighten monetary policy more than the Bank of England next year, MUFG Bank said.
Sterling remains the third worst performing G10 currency in 2022 to date, MUFG added.
The euro, on the other hand, is close to the top of the G10 performance table in the year-to-date with only the dollar and Swiss franc outperforming the euro, MUFG said.
"That's quite a stat when you consider the war in Ukraine and recession the eurozone is now probably in."
Read Euro Looks Cheap Against Dollar But Faces Short-Term Weakness
Read Sterling, Gilts And Other UK Assets Look Unattractive
Bonds:
NN Investment Partners said it sees scope for the 10-year Treasury-Bund yield spread to tighten further.
The main reasons for this are that the ECB is more hawkish than the Fed as well as a significant increase in eurozone bond supply, NN added.
Furthermore, "there are clear signs that European inflation dynamics are lagging those in the U.S.," NN said.
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Government bonds may resume their traditional safe-haven role in the event of negative economic or geopolitical events, T. Rowe Price said.
"When market sentiment falls, especially if there is a flight to quality due to a sudden economic or geopolitical shock, the attractiveness of U.S. Treasuries, German Bunds or Japanese government bonds increases."
In general, taking advantage of the global government bond market while systematically hedging overseas currency risk provides good diversification and a broader range of investment opportunities, T. Rowe Price added.
Read Fund Manager Roundup: BOJ's Yield-Curve-Control Tweak Could Boost Demand for Japanese Bonds
Energy:
Oil prices edged up after figures showed a large slump in U.S. oil inventories and as extreme cold temperatures in North America were expected to boost demand for energy supplies.
U.S. Energy Information Administration data showed crude stocks fell by roughly 5.9 million barrels last week, significantly more than the 300,000 barrel drawdown forecast by analysts.
Record low temperatures and heavy snow are expected in some parts of the U.S. this week, potentially boosting demand for heating oil.
Metals:
Metals prices were slipping as Covid-19 cases in China mounted.
China is likely experiencing one million Covid-19 infections and 5,000 virus deaths each day as control measures start to be relaxed, Bloomberg reported, raising questions for metals demand.
That said, liquidity is "drying up ahead of the holidays," Peak Trading Research said.
"Price seasonals are broadly bullish over the coming weeks. Investors tend to buy commodity futures in January as an inflation hedge. The path of least resistance is higher," Peak Trading added.
TODAY'S TOP HEADLINES
Shipping Industry Balks at Green Energy Transition
Ocean shipping is making its biggest energy transition since switching to oil from coal decades ago, but the shift to low- or no-carbon fuels so far has been messy.
Shipowners are split on which fuel should be the new industry standard and how soon they can recoup investments to meet environmental targets established by governments and industry regulators. The price tag on investments needed in new ships, alternative fuel production and other infrastructure has been pegged at $3 trillion over the next few decades, according to shipping-services provider Clarksons.
Eyeliner Out of Stock? Blame TikTok
Sonya Dube went to buy more of one of her favorite makeup products, a Charlotte Tilbury highlighter, this summer only to find it was out of stock-again.
Ms. Dube, who is 23 and works in sales for a technology company, discovered the brand's Hollywood Flawless Filter product on social media platform TikTok, where the item is a favorite of beauty content creators for its ability to add a dewy glow to skin as a foundation or as a final touch. So, it was only natural that Ms. Dube turned to TikTok to document her exasperation at not being able to find another bottle.
Coal, No Longer Shunned, Keeps Europe's Lights on Through Frigid Weather
Europe passed its first winter test without Russian energy, keeping the lights on through this month's cold blast. The secret to its success: burning more coal than it has in years.
Consuming large amounts of coal represents a difficult choice for European nations that had promised to ditch the carbon-intensive fuel to contain climate change. Russia's cut to natural-gas supplies after invading Ukraine and outages at French nuclear plants have spurred the revival.
Egg Prices Surge to Records as Bird Flu Decimates Poultry Flocks
Egg prices are hitting records, driven by an avian-influenza outbreak that has killed tens of millions of chickens and turkeys this year across nearly all 50 states.
Wholesale prices of Midwest large eggs hit a record $5.36 a dozen in December, according to the research firm Urner Barry. Retail egg prices have increased more than any other supermarket item so far this year, climbing more than 30% from January to early December compared with the same period a year earlier, and outpacing overall food and beverage prices, according to the data firm Information Resources Inc.
SEC Heightening Scrutiny of Auditors' Crypto Work
The Securities and Exchange Commission is stepping up scrutiny of the work that audit firms are doing for cryptocurrency companies, concerned that investors may be getting a false sense of reassurance from the firms' reports, a senior official at the regulator said.
"We're warning investors to be very wary of some of the claims that are being made by crypto companies," Paul Munter, the SEC's acting chief accountant, said in an interview.
UK Economy Contracted More Than Initially Estimated in Third Quarter
The U.K. economy contracted at a steeper pace than previously thought in the third quarter, and the short-term outlook remains bleak as the country is widely expected to slide toward a recession.
Gross domestic product fell 0.3% from July to September compared with the previous three-month period compared with the 0.2% contraction previously estimated, according to data from the Office for National Statistics released Thursday.
Europe Is Rushing Arms to Ukraine but Running Out of Ammo
Europe, home to some of the world's largest weapons manufacturers, is struggling to produce enough ammunition for Ukraine and for itself, jeopardizing NATO's defense capacity and its support for Kyiv, officials and industry leaders say.
A lack of production capacity, a dearth of specialized workers, supply-chain bottlenecks, high costs of financing and even environmental regulations are putting a brake on efforts to increase output, presenting the West and Ukraine with a fresh challenge for next year.
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12-22-22 0647ET
