MARKET WRAPS
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UK financial markets closed, no major corporate trading updates expected
opening call:
Stocks in Europe could rise at Tuesday’s opening on positive sentiment over China’s plans to lift quarantine measures on international arrivals. In Asia, equity benchmarks broadly rose; Government bond yields were mixed; the dollar weakened; while oil and gold advanced.
Shares:
European stocks appear poised to return higher from the Christmas break on Tuesday, tracking positive sentiment in Asia after Chinese health officials announced on Monday that they would lift Covid-19 quarantine requirements for international arrivals early next month. The move is one of the country’s biggest easing of restrictions since the pandemic began, even as case numbers remain high.
Stock indexes in Europe ended mixed on Friday in holiday-thin trade as US stocks tumbled.
Recent data showing US consumer price growth slowing and suggesting the economy is resilient has sparked intermittent rallies. To make matters worse, a robust economy could keep inflation high and encourage the Fed to raise interest rates higher — and keep them higher for longer — than many investors are hoping.
“Once central banks pause, as they will sometime next year when inflation comes down, that will give markets a little more vigor,” said Susannah Streeter, senior investment and markets analyst at UK brokerage firm Hargreaves Lansdown. By then, she added, “the merry-go-round will be turning.”
UK financial markets will remain closed on Tuesday.
Currency:
The dollar weakened early Tuesday amid risk-on sentiment prompted by news that China will open its borders.
China will lift all quarantine measures for Covid-19, including requirements for inbound visitors, from Jan. 8, according to the National Health Commission.
The revision means people traveling to China from abroad only need to have a negative Covid-19 test within 48 hours to be allowed into the country, the NHC said.
Bind:
Treasury yields were mixed early Tuesday after ending a holiday-shortened New York trading session higher on Friday, marking a weekly rise on the release of US consumer spending index, the Fed’s preferred indicator of inflation, and a series other economic data strengthened .
The index of personal consumption spending rose just 0.1% in November, marking the fifth consecutive month that inflation eased after hitting a 40-year high in the summer. The annual inflation rate, meanwhile, slowed to 5.5% in November from 6.1% in the previous month, based on the personal consumption spending index. This is the smallest increase since October 2021.
Slightly bearish PCE upward revisions in October “were the biggest takeaway” from the inflation data and “set the tone for higher interest rates in the pre-Christmas low-liquidity session,” Ian Lyngen, rates strategist at BMO Capital Markets, said in a note.
“Personal income and spending growth slowed in November, pointing to a weaker consumer end of the year,” said Sam Millette, fixed income strategist at the Commonwealth Financial Network.
Energy:
Oil prices rose early Tuesday, boosted by news that China will lift Covid-19 quarantine requirements for international arrivals early next month.
The reopening of China, the world’s second-biggest oil consumer, should help offset weaker demand in the U.S. and Europe, which would lead to a slight increase in global oil demand, SPI Asset Management said.
metals:
Gold edged higher in Asia as the precious metal continued to be supported by seasonal trends and central bank buying.
Aside from institutional buying, retail investors are also recalibrating their portfolios for 2023 as investment confidence weakens and buying gold as part of a diversification strategy, SPI Asset Management said.
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Copper prices extended overnight gains after China lifted quarantine requirements for international travel.
While the general sentiment is upbeat, Galaxy Futures said trading activity in the physical market remains subdued amid staff shortages across the copper supply chain due to the surge in infections in China post-reopening.
Brokers anticipate that the “dual weakness” on both the demand and supply fronts could continue for two more weeks, and Galaxy Futures expects prices to consolidate at current levels in the near future.
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China’s iron ore futures edged higher, in line with broad gains for commodities after the country announced it would no longer quarantine international travelers.
According to Galaxy Futures, the positive impact of Beijing’s decision to reopen the economy and support the real estate sector may now be fading.
The brokerage firm noted that traders are divided on how much the real estate sector could rebound, which would support demand for iron ore.
Given the uncertainties about an actual recovery in demand and the elevated price level, iron ore could come under profit-taking pressure.
TODAY’S TOP HEADLINES
China opens borders as Covid-19 cases surge
BEIJING — Chinese health authorities plan to lift quarantine requirements for Covid-19 on international arrivals early next month, in one of the country’s biggest moves to ease restrictions since the pandemic began, though case numbers remain high.
China has maintained one of the world’s most restrictive coronavirus lockdown measures, which has significantly slowed its economy and sparked anger. Earlier this month, following waves of protests this fall, authorities abruptly abandoned the country’s strict zero-Covid-19 strategy.
Russia’s gas production and exports shrink under sanctions pressure
Natural gas production in MOSCOW-Russia will fall by 12% this year and its exports will fall by about a quarter, a senior Russian official said Monday in a sign of international pressure on the country’s energy market due to sanctions over its war in Ukraine .
Russian Deputy Prime Minister Alexander Novak told Russia’s state news agency TASS that the year-on-year drop in gas production was largely due to the shutdown of export infrastructure. Most Russian natural gas exports have been via pipelines, mainly to Europe.
According to Moscow, three people have been killed in a Ukrainian drone attack on a Russian air base
LVIV, Ukraine — Three Russian military personnel were killed in a Ukrainian drone attack on a Russian military airfield, Moscow said, the latest apparent demonstration of Kiev’s ability to attack military targets inside Russia.
The attack on Engels air base in the Saratov region, a hub for Russia’s strategic bombers, is the second this month. Though small, it reminded Moscow that even forces deep within its territory can be hit, forcing the Kremlin to divert resources and leadership attention.
Suspect charged with hate crimes at Paris Kurdish Center
PARIS — French prosecutors are bringing preliminary charges, including murder as a hate crime — but not terrorism — against the suspect in Friday’s attack on a Kurdish cultural center in the French capital that killed three people and wounded three others.
The suspected gunman in the attack, a 69-year-old French man, is also facing preliminary charges of attempted murder as a hate crime and acquiring and carrying prohibited firearms and will be detained pending a possible trial, French prosecutors said.
TikTok security dilemma revives urge for US control
Citing security concerns surrounding TikTok, some Biden administration officials are pushing for a sale of the Chinese-owned company’s US operations to ensure Beijing can’t use the app for espionage and political influence, so familiar with the situation People.
The forced sale proposal emerged amid discussions by the US Committee on Foreign Investments, a multi-agency government body that has been negotiating with TikTok for more than two years to seal off the company’s data and operations from the Chinese government, the people said.
Rising electricity prices in Europe make owning electric vehicles more expensive
BERLIN — Soaring electricity prices are increasing the cost of driving electric vehicles in Europe and, in some cases, making them more expensive to run than gas-powered models — a change that could jeopardize the continent’s electric transition.
Electricity prices have skyrocketed in the wake of the Russian invasion of Ukraine, in some cases eroding the cost advantage at the pump that electric vehicles enjoy. In some cases, the difference in cost between driving both types of vehicles over 100 miles has become negligible. In other countries, electric vehicles have become more expensive in fuel than comparable gasoline-powered cars.
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Major events expected for Tuesday
07:00 NOR: November retail sales
08:00/CZE: December Economic Survey (Consumer/Business Confidence)
All times in GMT. Backed by Onclusive and Dow Jones.
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This article is a text version of a Wall Street Journal newsletter published today.
(ENDS) Dow Jones Newswires
December 27, 2022 00:17 ET (05:17 GMT)
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