Investors Hub World Daily Markets Bulletin Tuesday 29 November 2022

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Uncertainty About China May Lead To Choppy Trading On Wall Street

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US Market

The major U.S. index futures are currently pointing to a roughly flat open on Tuesday, with stocks likely to show a lack of direction following the sell-off seen in the previous session.

Lingering uncertainty about the situation in China may lead to choppy trading on Wall Street following widespread protests over the country’s Covid restrictions.

Mainland China reported the first decrease in new Covid infections in more than a week on Monday, generating some positive sentiment.

Chinese health officials also released a plan to boost vaccinations for elderly people and said they are “closely watching” the virus as it evolves and mutates.

The officials defended China’s zero-Covid policy at a press briefing on Tuesday but said lockdowns would be lifted “as quickly as possible.”

However, traders have seen their hopes for an easing of Covid restrictions in China dashed by recent events, leading to some hesitation.

Traders may also be reluctant to make significant moves ahead of the release of some key economic data in the coming days, including the Labor Department’s closely watched monthly jobs report on Friday.

Stocks moved sharply lower over the course of the trading session on Monday, largely offsetting the strong upward move seen last week. With the steep drop on the day, the Dow pulled back well off last Friday’s seven-month closing high.

The major averages climbed off their worst levels going into the close but remained firmly negative. The Dow tumbled 497.57 points or 1.5 percent to 33,849.46, the Nasdaq plunged 176.86 points or 1.6 percent to 11,049.50 and the S&P 500 dove 62.18 points or 1.5 percent to 3,963.94.

Concerns about the latest developments in China contributed to the substantial pullback on Wall Street, as widespread protests against the Beijing’s zero-Covid policy broke out over the weekend.

A recent surge in new Covid cases in China has led officials to impose new restrictions in several major cities, dashing hopes the world’s second-largest economy was on the way toward easing curbs.

Craig Erlam, senior market analyst at OANDA, said the protests “highlight how increasingly frustrated the public is becoming with the leadership’s zero-Covid policy.”

“Record cases across multiple cities are putting the policy to the test and the unrest highlights the enormity of the challenge facing President Xi Jinping and his commitment to zero-Covid,” Erlam said.

He added, “The combination of these creates huge uncertainty, both in terms of how the protests are handled and what the whole experience means for the future of the policy and the economy.”

The weakness on Wall Street may also have reflected lingering uncertainty about the outlook for interest rates ahead of next month’s Federal Reserve meeting.

While the Fed is widely expected to slow the pace of interest rate hikes next month, the minutes of the central bank’s early November meeting suggested some officials think rates will be to be raised higher than previously anticipated.

Gold stocks showed a substantial move to the downside on the day, resulting in a 4.3 percent plunge by the NYSE Arca Gold Bugs Index. The sell-off by gold stocks came amid a decrease by the price of the precious metal.

Considerable weakness was also visible among airline stocks, as reflected by the 3.1 percent nosedive by the NYSE Arca Airline Index.

Energy stocks also saw significant weakness even though the price of crude oil recovered from an eleven-month low to close notably higher.

Commercial real estate, semiconductor and computer hardware stocks also saw notable weakness, moving lower along with most of the other major sectors.

 

U.S. Economic Reports

Standard & Poor’s is scheduled to release its report on home prices in major metropolitan areas in the month of September at 9 am ET.

At 10 am ET, the Conference Board is due to release its report on consumer confidence in the month of November. The consumer confidence index is expected to dip to 100.0 in November from 102.5 in October.

 

Stocks in Focus

Shares of Bilibili (BILI) are moving sharply higher in pre-market trading after the China-based internet company reported third quarter results that exceeded expectations on both the top and bottom lines.

Delivery giant UPS (UPS) may also move to the upside after Deutsche Bank upgraded its rating on the company’s stock to Buy from Hold.

Meanwhile, shares of Hibbett (HIBB) are likely to come under pressure after the sporting goods retailer reported weaker than expected third quarter results.

Chemical company Chemours (CC) may also see initial weakness after warning its full-year results are tracking slightly below the low end of its guidance.

 

Europe

European stocks have moved mostly higher on Tuesday amid hopes that anti-lockdown protests may pressure the Chinese government into eventually relaxing its zero-COVID policy.

According to a press briefing, China’s health authorities today released a plan to boost vaccinations for elderly people and said they are “closely watching” the virus as it evolves and mutates.

A publicity campaign will be launched to fight vaccine hesitancy among the aged, promoting the benefits of vaccines in staving off severe illness and death, the National Health Commission said.

While the German DAX Index is nearly unchanged, the French CAC 40 Index is up by 0.1 percent and the U.K.’s FTSE 100 Index is up by 0.7 percent.

British equipment rental specialist Vp Plc has shown a significant move to the upside after posting solid first-half results.

Dutch semiconductor company ASM International has also moved sharply higher raising its fourth quarter sales outlook.

Private equity firm Bridgepoint Group is little changed, recovering from an early tumble, after confirming that it is evaluating a number of potential strategic opportunities, including the possible acquisition of energy transition investor Energy Capital Partners.

On the other hand, EasyJet have moved notably lower after the airline posted a full-year loss and scrapped its 2022 dividend.

Telecom major Vodafone has also slumped after launching a buyback offer for up to $2.3 billion of its 4.375% notes due in May 2028.

Brenntag SE shares have also moved lower, giving up earlier gains. The German chemicals distributor confirmed a Bloomberg News report that it’s mulling the acquisition of U.S. distributor Univar Solutions.

 

Asia

Asian stocks rose on Tuesday, with mainland China and Hong Kong markets leading the surge, as China reported a slight dip in new COVID-19 infections and China reopening rumors swirled ahead of a press conference later in the day on COVID prevention and control measures.

China’s Shanghai Composite Index jumped 2.3 percent to 3,149.75, while Hong Kong’s Hang Seng Index surged 5.2 percent to 18,204.68.

Shares and bonds of China’s property developers soared after the country’s securities regulator eased a restriction on developers’ fundraising.

Japanese shares bucked the regional trend to end at a one-week low after protests erupted in major Chinese cities, raising concerns about economic growth. Disappointing retail sales data also weighed on sentiment.

The Nikkei 225 Index dropped 0.5 percent to 28,027.84, marking its lowest since November 21. The broader Topix closed 0.6 percent lower at 1,992.97. Eisai plummeted 6.2 percent after reports of a second death in a trial of its Alzheimer’s treatment.

Seoul stocks rallied after Beijing rolled out more stimulus measures and speculation mounted that the Chinese government was considering scaling back its anti-COVID policies following countrywide protests over the weekend.

The Kospi climbed 1.0 percent to 2,433.39, snapping a two-session losing streak. Hyundai Motor rose 0.9 percent and its affiliate Kia Corp. jumped 2.9 percent.

Australian markets eked out modest gains as higher ore and energy prices helped lift miners and energy stocks. The benchmark S&P/ASX 200 index rose 0.3 percent to 7,253.30, while the broader All Ordinaries Index ended 0.3 percent higher at 7,442.

 

Commodities

Crude oil futures are jumping $1.20 to $78.44 a barrel after climbing $0.96 to $77.24 a barrel on Monday. Meanwhile, after falling $13.50 to $1,755.30 an ounce in the previous session, gold futures are rising $11.20 to $1,766.50 an ounce.

On the currency front, the U.S. dollar is trading at 138.38 yen compared to the 138.95 yen it fetched at the close of New York trading on Monday. Against the euro, the dollar is valued at $1.0360 compared to yesterday’s $1.0340.

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