MARKET WRAPS

Watch For:

U.K. Bank of England's Funding for Lending and Term Funding schemes data; trading updates from DS Smith, British American Tobacco, Frasers Group, FirstGroup, Harbour Energy

Opening Call:

Shares look poised for a cautious open amid lingering Fed rate fears. Asian stock benchmarks and Treasury yields were mixed; the dollar recovered; oil futures rose and gold fell.

Equities:

European stock futures point to a cautious open on Thursday, as investor focus turns to U.S. PPI data due Friday and the FOMC decision next week, against the backdrop of China easing more Covid curbs.

Lack of clarity in how central bankers may respond to economic data has led to choppier performance in the stock market, said Edward Park, chief investment officer at Brooks Macdonald.

"Risk markets are highly dependent and seesawing with each new data print and central bank comment," said Stuart Katz, chief investment officer of Robertson Stephens.

"Fears are growing that economies are in for a rough time ahead as feverish inflation and the bitter interest rate medicine being used to bring it down take effect," said Susannah Streeter, senior investment and markets analyst, Hargreaves Lansdown.

However, Fundstrat reckons equities will benefit in coming weeks as investors start to get greater clarity on when the Fed may stop tightening policy.

"We don't think the end of the inflation war in 2022 is the Fed cutting rates. It is when Fed and markets see sufficient progress in inflation to remove the upside risks to higher rates. We think this could happen as early as the November CPI report. This will be released on 12/13," it said.

Forex:

The dollar strengthened in Asia, recovering from its overnight weakness.

There's no real clear driver right now for the dollar, Oanda said, but some of the weakness has to do with the decline in Treasury yields as recession risks rise.

Most major currencies rallied against the dollar because their worst-case scenarios are already priced in but now that's happening in the U.S., it said.

"As the yield-curve inversion deepens to a four-decade low, chances are we're not going to see just a mild recession."

ANZ said it was skeptical about the sustainability of lower U.S. bond yields given Fed rhetoric.

"Markets clearly want to move onto the next cycle, and are fading end-of-cycle factors and hawkish Fed overtones."

That speaks to volatility going into and in the wake of next week's Fed meeting.

Bonds:

Treasury yields were mixed early Thursday.

Yields on longer-dated Treasury bonds tumbled to their lowest levels in about three months on Wednesday, on investor concerns that inflation-fighting interest rate hikes by the Fed could trigger a sharper downturn than anticipated.

"Bonds are mesmerized by the fact that oil can't hold a rally," said Jim Vogel, a fixed income strategist at FHN Financial.

The trend raises questions about whether traders in the oil complex "see something wrong with the economy" that economists and the Federal Reserve don't, he said.

Energy:

Crude-oil futures were higher early Thursday.

"With the tug-of-war between a worsening Covid situation in China and increased reopening expectations, oil markets could trade in yo-yo mode, " SPI Asset Management said.

While market expectations that China could gradually reopen were continuing to rise, increasing Covid-19 infection numbers could drag on prices, it said.

Metals:

Gold prices fell slightly in Asia. The precious metal could continue to perform well due to stronger demand for safe havens amid rising recession risks, Oanda said.

The precious metal is likely to trade back and forth around the $1,800/oz level until next week's FOMC decision, it said.

Investors are "trying to assess where gold sits in the current environment," Kinesis Money said.

"A global recession with a subsequent flight to haven assets should benefit gold, as should a [Fed] forced to be less aggressive with its rate hikes to avoid tipping the U.S. economy into recession," it added.

-

Copper prices were unchanged following soaring gains overnight, as investors welcomed China's latest move to further relax Covid curbs.

ANZ said the easing of restrictions would continue to brighten the outlook for copper demand from China, one of the world's largest copper-consuming countries, and help sustain the metal's recent rally.

The bank also said China's November import data beat market expectations, a sign that restocking was picking up, as buyers prepare for a demand rebound.

-

Chinese iron-ore futures gained, adding to the rally in recent weeks as China reopening hopes buoy investor sentiment.

ANZ pointed to "signs of rising demand" from the latest official data showing 4% growth in China's iron-ore imports in November.

Supply side issues are another positive that could support prices, after a major miner cut output guidance.

However, Galaxy Futures analysts warned of potentially limited upside from the current elevated price levels.

   
 
 

TODAY'S TOP HEADLINES

Canada Proposes New Powers in Foreign-Investment Reviews

OTTAWA-Canada on Wednesday unveiled a series of changes to the country's foreign-investment laws that officials said updates tools the cabinet has at its disposal to deal with transactions that pose a national-security risk.

Among the changes Canada is proposing: allowing cabinet to impose conditions on a tentative transaction while it undergoes a government-led security review, and compelling investors eyeing investments in certain sensitive sectors - such as in quantum science, critical minerals and other sensitive technologies such as artificial intelligence-to file early notification with Ottawa about their intentions.

   
 
 

High Oil Prices Lift Saudi Arabia, Bolster Prince's Economic Plans

RIYADH, Saudi Arabia-The Saudi government posted a $27 billion budget surplus Wednesday, as this year's high oil prices accelerate Crown Prince Mohammed bin Salman's ambitious plans and boost resource-rich economies across the Persian Gulf.

Buoyant crude prices helped the kingdom's economy expand at one of the fastest rates globally, with the government spending $47 billion more than planned. In a year when global growth is pegged at 3.2%, the International Monetary Fund predicts growth of 7.6% this year in Saudi Arabia. The kingdom's output is expected to reach $1 trillion for the first time, cementing its place among the world's biggest economies.

   
 
 

EU Officials Pursue Additional Sanctions Against Russia Over Ukraine War

European Union officials proposed a new round of sanctions on Russia on Wednesday over its invasion of Ukraine, including a ban on exports of drone engines to Russia and other potential suppliers of the machines to its military, a prohibition on investing in Russia's mining sector and new financial restrictions.

The sanctions, the ninth package of restrictions on Russia since its February invasion of Ukraine, come days after the EU and the Group of Seven advanced democracies placed a price cap on Russian oil and after European countries began their embargo on imports of Russian crude.

   
 
 

Sister of Iran's Supreme Leader Calls for Overthrow of His 'Despotic Caliphate'

A sister of Iranian Supreme Leader Ali Khamenei said she had cut ties with her brother, calling him a despotic caliph who ignored the voice of Iranians, a sign that people near the top echelons of the system are growing bolder in expressing opposition to the clerical leadership.

The sister, Badri Hosseini Khamenei, also called on security forces to lay down arms and join the protesters demanding an ouster of the country's Islamic leadership.

   
 
 

Google Combines Maps and Waze Teams Amid Pressure to Cut Costs

Alphabet Inc.'s Google plans to combine the team working on the mapping service Waze with the group overseeing the company's Maps product, as the search giant faces pressure to streamline operations and cut costs.

Google plans to merge Waze's more than 500 employees with the company's Geo organization, which oversees the Maps, Earth and Street View products, beginning on Friday, according to a Google spokeswoman.

   
 
 

FTX Hires Forensic Team to Probe Money Trail

FTX's new management has hired a team of forensic investigators from advisory firm AlixPartners to help track the billions of dollars that have gone missing from the failed cryptocurrency exchange, people familiar with the matter said.

The AlixPartners team is led by Matt Jacques, a former chief accountant for the Securities and Exchange Commission's enforcement division, people familiar with the matter said. Mr. Jacques didn't respond to a request for comment.

   
 
 

Apple Plans New Encryption System to Ward Off Hackers and Protect iCloud Data

Apple Inc. is planning to significantly expand its data-encryption practices, a step that is likely to create tensions with law enforcement and governments around the world as the company continues to build new privacy protections for millions of iPhone users.

The expanded end-to-end encryption system, an optional feature called Advanced Data Protection, would keep most data secure that is stored in iCloud, an Apple service used by many of its users to store photos, back up their iPhones or save specific device data such as Notes and Messages. The data would be protected in the event that Apple is hacked, and it also wouldn't be accessible to law enforcement, even with a warrant.

   
 
 

Write to singaporeeditors@dowjones.com

   
 
 

Expected Major Events for Thursday

00:01/UK: 3Q Household Finance Review

00:01/UK: Nov RICS Residential Market Survey

01:01/UK: Nov KPMG and REC UK Report on Jobs

05:30/NED: Nov CPI

07:00/DEN: Oct Industrial production & new orders

08:00/CZE: Nov Unemployment data

08:00/HUN: Nov CPI

08:00/HUN: Oct Preliminary External Trade

10:00/GRE: Oct External Trade (provisional data)

11:00/FRA: Oct OECD Composite Leading Indicators

11:00/IRL: Nov CPI

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This article is a text version of a Wall Street Journal newsletter published earlier today.

 

(END) Dow Jones Newswires

December 08, 2022 00:15 ET (05:15 GMT)

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