The Daily – November 14, 2022

November 14, 2022

 

Daily Market Commentary

NEWS

• US stock futures declined Monday and Treasury yields rose as a cautious tone from a Fed speaker tempered some of the ebullience that inflation may have peaked. Contracts on the tech-heavy Nasdaq 100, typically more sensitive to interest rates, slipped 0.6% while those on the S&P 500 dropped 0.4%. Losses in New York premarket trading were concentrated in tech names, with Tesla Inc., chipmakers Nvidia Corp., Intel Corp. and Micron Technology Inc. shedding as much as 1.5%.
• European shares were steady on Monday, clinging to last week’s strong gains as investors mull China’s plans to relax Covid restrictions against the risks from hawkish central banks. The Stoxx Europe 600 Index rose 0.2% as of 11:36 a.m. in London, with personal care and media sectors leading the advance. Roche Holding AG dropped after the company said a much-awaited experimental drug for Alzheimer’s disease failed in a pair of large studies.
• Asian stocks were steady as weakness in markets such as Japan countered gains in China, where authorities issued a sweeping rescue package to bail out the property sector. The MSCI Asia Pacific Index pared an earlier gain of as much as 0.8% to trade flat. While gauges in China pared a bulk of their early gains, the Hang Seng China Enterprises Index closed up nearly 2%, taking its surge this month to 21%.
• Gold declined as the dollar rallied after a Federal Reserve official cautioned the US central bank isn’t close to pausing interest-rate hikes as inflation remains hot.
• Oil switched between gains and losses, as the market remains caught between the outlook for global growth and China’s easing of Covid restrictions.  West Texas Intermediate futures traded near $89 a barrel and have been in a range of just over $10 for the last month.
• Nickel briefly jumped by its 15% daily limit, as an unconfirmed report about a blast at a nickel plant in Indonesia sparked the biggest rally since a historic short squeeze in March. Prices spiked by more than $4,000 a ton on the London Metal Exchange, before quickly paring gains, in a move that traders and brokers said was sparked by a report in Chinese media about an explosion at a small nickel pig iron plant in Indonesia.
• Aluminum retreated after climbing more than 5% on Friday when the London Metal Exchange decided against banning Russian metal supplies, easing risks of shortages. In a blow to big western aluminum producers and some traders who had lobbied for action, the LME announced the decision after the market closed on Friday
• The European Central Bank shouldn’t rule out raising interest rates to a level that brakes the economy but it should first do careful analysis to determine if that’s warranted, Executive Board member Fabio Panetta said.  “Being prudent does not rule out the possibility of us having to move from withdrawing accommodation to restricting demand,” Panetta said in a speech in Florence. “But in the absence of clear second-round effects, we would need convincing evidence that the current shocks are likely to keep having a more adverse effect on supply than on demand.”
• Federal Reserve Governor Christopher Waller says the central bank is far from done in raising interest rates as he urged “everybody to take a deep breath” after a lower than expected inflation print sparked a mega-market rally. Dr Waller, a voting member of the Federal Open Markets Committee that sets interest rates, said last week’s US inflation read “was just one data point” and while it was a positive sign that inflationary pressures were easing, interest rate settings were still lower than they needed to be..
• OPEC reduced its forecasts for global oil demand again as the group implements production cutbacks aimed at keeping markets in balance. Due to a weaker economic backdrop and China’s strict anti-Covid measures, the Organization of Petroleum Exporting Countries lowered estimates for the amount of crude it will need to pump this quarter by 520,000 barrels a day, following a similar-sized downgrade a month ago.
• Cryptocurrency prices rallied Monday after Binance Holdings Ltd.’s Chief Executive Officer Changpeng Zhao announced plans to launch a crypto recovery fund to help industry players facing a liquidity crunch. Bitcoin edged towards $17,000 following Zhao’s announcement.  Zhao said the fund is intended to prop up investor confidence following the dramatic collapse of Sam Bankman-Fried’s FTX crypto exchange, which wiped out about $200 billion in crypto market value. Zhao has not announced any details.
• Joe Biden and Xi Jinping shook hands on Monday to kick off the first in-person meeting between the leaders of the US and China since the pandemic began, with both calling for reduced tensions between the world’s largest economies. The two men met shortly after 5:30 p.m local time on the sidelines of the Group of 20 summit in Bali, Indonesia. They were expected to talk for at least two hours, after which Biden plans to hold a news conference.
• Congress returns to Washington Monday in an unsettled political environment that will serve as the backdrop for a robust year-end push on spending, taxes and, potentially, raising the debt limit.  Republicans appear on course to gain a narrow House majority next year, putting Democrats under enormous pressure to finish fiscal 2023 spending bills and enact priorities like enshrining same-sex marriage rights into law. In the Senate, Democrats have secured control in the next Congress, lessening the urgency for a rush on judicial confirmations. That bodes for more action on legislation, including the debt ceiling, in the weeks ahead.
• BlackRock Inc signed a pact with Saudi Arabia’s $620 billion wealth fund to explore infrastructure projects in the Middle East. Projects will be sourced across sectors including energy, power, utilities, water, environment, transportation and telecommunications, according to a statement. In its first project, the partnership will work with Saudi Investment Recycling Co. to develop and operate waste management projects in the region.
• Inflation has started to hit Tyson Foods Inc. with consumers buying less pork and prepared foods, causing a drag on profit for the biggest US meat company in a quarter that fell short of expectations. The owner of Hillshire Farms and Ball Park hot dogs said its adjusted earnings for the fiscal fourth quarter were $1.63 per share, missing the $1.70 average estimate of 11 analysts surveyed by Bloomberg. The meat industry’s profit margins on beef have eased from last year’s record highs while rising interest rates and gasoline prices have prompted consumers to scale back on meat purchases. Shares fell as much as 1.1% in premarket trading in New York.

London has lost its crown as Europe’s biggest stock market to Paris as economic growth concerns weigh on UK assets while China’s relaxation of Covid rules boosts French luxury shares. The combined market capitalization of primary listings in Paris overtook that of the UK capital in US dollar terms, according to an index compiled by Bloomberg. Domestic-focused UK shares have slumped this year, while French luxury goods-makers like LVMH SE and Gucci owner Kering SA have recently been boosted by optimism over a potential easing of China’s Covid Zero policy.

*All sources from Bloomberg unless otherwise specified