MARKET WRAPS
Watch For:
Eurozone services PMI, EuroCOIN indicator of euro area economic activity; Germany manufacturing orders, manufacturing turnover, services PMI, Italy services PMI; UK monthly car registrations figures, S&P Global / CIPS UK Construction PMI; trading updates from Ryanair, Norwegian Air
Opening Call:
European stock futures were muted at the start of the week. In Asia, stock benchmarks advanced; the dollar was steady; Treasury yields largely rose; oil futures gained while gold fell.
Equities:
Stock futures trade flat early Monday amid expectations that global central banks are nearing the end of their rate-increase cycles.
“The market is more and more confident that the Fed is done hiking,” said Tom Graff, chief investment officer at Facet.
The U.S. employment report on Friday showed a gradual cooling of the job market that would be welcome by those who want the Federal Reserve to stop raising interest rates, said Richmond Federal Reserve President Tom Barkin on Friday.
“The good news here is that the slowdown will likely keep the Fed on the sidelines going forward. One of their key concerns has been an overheated economy, especially after last quarter’s GDP growth, and this suggests that problem is going away,” said Brad McMillan, chief investment officer for Commonwealth Financial Network.
Forex:
The dollar steadied early Monday. “Hopes of a soft landing remain high, but because that’s been accompanied by a sharp fall in U.S. bond yields, it has weighed on the U.S. dollar and spurred on risk assets,” ANZ said.
ANZ thinks the USD may have now peaked, especially with markets clearly in no mood to embrace a hawkish vibe. “But that doesn’t necessarily mean the USD will keep plummeting, especially if we enter a muddle-through period,” ANZ said. “The U.S. economy isn’t exactly crashing.”
Bonds:
Treasury yields broadly fell Friday, leaving rates with back-to-back weekly declines, after the October nonfarm payrolls report produced a lower-than-expected 150,000 new jobs.
“After years of incredible strength, the labor market could finally be slowing. The topline miss, plus downward revisions and higher unemployment, deliver a strong message to Jerome Powell and the Fed. Further tightening is now highly unlikely, and rate cuts could be back on the table next year,” said David Russell, global head of market strategy at TradeStation.
Energy:
Oil futures edged higher in Asia, after Saudi Arabia on Sunday confirmed it would extend a production cut of 1 million barrels a day through the end of December.
Meanwhile, the risk premium associated with the geopolitical conflict in the Middle East has completely evaporated after two weeks of volatile prices, ANZ said.
The market’s focus has turned to the demand outlook, which remains uncertain, following China’s factory activity moving back into contraction in October and U.S. oil stockpiles rising in recent weeks, ANZ noted.
Metals:
Gold prices fell slightly early Monday as haven buying eased. U.S. jobs data gave the yellow metal a push above $2,000/oz again, but it has failed to stay above the key psychological level, Oanda said.
Sentiment is likely also influenced by investors’ view that the Israel-Hamas conflict may remain contained.
–
Copper prices rose in Asian trading, mainly driven by positive sentiment in commodities markets after the Fed hinted its tightening cycle may be over, Nanhua Futures said.
In the short term, copper prices may continue to rise slightly until mid-November amid positive sentiment and low inventories.
–
Iron-ore prices rose amid weaker supply and stronger demand, Nanhua Futures said. Though supply has rebounded a bit, it is still limited, especially as Brazil enters the monsoon season, which may lead to limited bulk shipping. Inventories are also still at low levels. Positive sentiment in commodity markets and supportive macro policy may bolster iron-ore prices this month, Nanhua said.
TODAY’S TOP HEADLINES
Foreign Firms Pull Billions in Earnings Out of China
SINGAPORE-For years, foreign companies plowed the profits they made in China back into China, using the cash to finance new hiring and investment as its giant economy expanded rapidly.
Now, as growth slows and tensions between Beijing and Washington rise, they are pulling those profits out.
How Russia Games Oil Sanctions for Big Profits
A Western price cap on Russian oil meant to curb Moscow’s war spending is increasingly losing its punch.
The latest evidence: Oil and gas tax revenue to the Russian budget in October more than doubled from September and rose by more than a quarter from the same month last year, according to data released Friday. That represents a stark turnaround from the beginning of the year when energy revenues tumbled.
Markets Got an Unexpected Boost From Washington. Will It Mark a Turning Point?
The Treasury Department handed investors a happy surprise last week. Now the question is how far they can run with it.
Stocks and bonds both staged rallies last week, getting a boost when the Treasury increased the size of longer-term debt auctions by a smaller amount than many had expected.
Where Are Commodities Prices Headed?
Individuals investing in commodities haven’t had a smooth ride over the past few years.
U.S. crude-oil futures briefly turned negative during the height of the pandemic in 2020 before rebounding to more than $82 a barrel recently. World food prices reached their highest level on record last year, in part as the Russia-Ukraine war spooked markets, but have fallen back more recently. And commodities from lumber to copper rode high and then fell, as global inflationary pressures and recession concerns drove trading.
Add Global Conflict to the Forces Keeping Interest Rates High
In times of war and conflict, investors have long piled into Treasury bonds and other safe-haven assets, bringing interest rates down.
But in today’s disintegrating geopolitical environment, where hot spots around the world threaten to upend the supply of key commodities, it’s becoming harder for investors to book their flights to safety. That helps explain why bond yields have risen recently-and may stay high.
Saudi Arabia to extend 1 million-barrel-a-day oil production cut through December
Saudi Arabia on Sunday confirmed it would extend a production cut of 1 million barrels a day, which first took effect in July, through the end of December.
In a statement citing an Energy Ministry official, Saudi Arabia said it would extend the cut through next month, affirming a September announcement that had said it would keep the cut in place through the end of 2023. The statement said Saudi production would be approximately 9 million barrels a day in December.
Tesla Raises Wages for German Workers Amid Union Pressure
BERLIN-Tesla is boosting factory worker pay in Germany amid an aggressive unionization drive, a move that comes as Chief Executive Elon Musk may face similar organizing attempts in the U.S.
Tesla’s management in Germany late last week unveiled a package of wage increases for workers during Musk’s visit to the so-called Gigafactory on the outskirts of Berlin, according to people familiar with the matter. Musk also promised the assembly plant would build its next-generation vehicle.
LVMH to Buy Eyewear Brand Favored by the Stars
PARIS-LVMH Moët Hennessy Louis Vuitton has agreed to buy Los Angeles-based eyewear maker Barton Perreira, part of the luxury conglomerate’s push to extend its reach to goods with mass-market appeal.
Eyewear has emerged in recent years as one of the first purchases that aspiring luxury consumers make before moving on to more expensive items such as handbags. That is prompting LVMH and other luxury-goods companies to wean themselves off licensing agreements with third-party manufacturers and develop in-house eyewear operations.
Prudential’s Nine-Month Sales Soared
Prudential PLC said Monday that nine-month sales rose significantly due to positive developments in multiple channels and geographic markets.
The insurance-and-investment business said APE sales-a measure that comprises the aggregate of annualized regular premiums and a 10th of single premiums on new business written during the year for all insurance products-rose 40% to $4.42 billion.
Write to [email protected]
Expected Major Events for Monday
07:00/DEN: 3Q Consumer credit
07:00/GER: Sep Manufacturing orders
07:00/GER: Sep Manufacturing turnover
08:00/CZE: Sep External trade
08:00/CZE: Sep Industry, Construction
08:15/SPN: Oct Spain Services PMI
08:30/EU: Oct EuroCOIN indicator of euro area economic activity
08:45/ITA: Oct Italy Services PMI
08:50/FRA: Oct France Services PMI
08:55/GER: Oct Germany Services PMI
09:00/EU: Oct Eurozone Services PMI
09:00/UK: Oct UK monthly car registrations figures
09:30/UK: Oct S&P Global / CIPS UK Construction PMI
11:00/IRL: Oct Irish Live Register latest monthly figures
All times in GMT. Powered by Onclusive and Dow Jones.
Write to us at [email protected]
We offer an enhanced version of this briefing that is optimized for viewing on mobile devices and sent directly to your email inbox. If you would like to sign up, please go to https://newsplus.wsj.com/subscriptions.
This article is a text version of a Wall Street Journal newsletter published earlier today.
(END) Dow Jones Newswires
November 06, 2023 00:16 ET (05:16 GMT)
Copyright (c) 2023 Dow Jones & Company, Inc.
