MARKET WRAPS

Watch For:

Construction Spending for October; ISM Report on Business Manufacturing for November; EIA Weekly Petroleum Status Report; Federal Reserve Beige Book; Canada Building Permits for October; Royal Bank of Canada 4Q earnings

Opening Call:

Stock futures and oil prices rose Wednesday, suggesting markets would claw back some losses sparked by worries over the Omicron variant and the unwinding of Federal Reserve stimulus.

Investors have little to go on as they assess whether the variant will lead to renewed restrictions in the U.S. and elsewhere and, if so, how governments and central banks would respond to support the economy. Though drugmakers have said the variant first identified in southern Africa looks like it could make existing vaccines less effective, they expect to be able to update the shots. Investors say a return to full-scale lockdowns is unlikely. The uncertainty has led to seesaw moves in global markets that extended into Wednesday.

"We just don't know how much more infectious it is, how severe the symptoms are and what the impact of that is," said Sebastian Mackay, a multiasset fund manager at Invesco. "What I'd assume now is this probably isn't enough to derail the recovery that's going on."

Invesco's multiasset funds have bought stocks at cheaper levels since Omicron first rattled markets last week, Mr. Mackay added.

Ahead of the bell, Merck shares rose 4.8% after scientific advisers recommended the Food and Drug Administration authorize the company's experimental Covid-19 oral antiviral. Salesforce.com fell 7.4% after the software company's guidance for fourth-quarter earnings fell short of expectations.

One cause for concern, money managers say, is that the rapid pace of inflation could prevent the Fed and other central banks from unleashing stimulus in the event of severe disruption caused by Omicron. Jerome Powell added to those worries Tuesday when he opened the door to an interest-rate rise in the first half of 2022.

For a reading on inflationary pressures, investors will parse the Institute for Supply Management's manufacturing index at 10 a.m. ET. Economists expect the survey to show factories experienced another month of strong new orders in November, but also rising prices and long waiting times for materials.

Overseas markets gained. The Stoxx Europe 600 rose 0.7%, led higher by shares of travel, leisure and basic-resource companies, which would all be exposed to an economic downturn. Asian markets were broadly higher.

Stocks to Watch:

Chip-maker GlobalFoundries is seeing sustained willingness from customers to make long-term buying commitments during the semiconductor shortage. The company that went public in late October had around $2.5 billion in customer prepayments in hand as it prepared for its IPO. That number now tops $3 billion, said CFO Dave Reeder after the company posted its third quarter results. Long-term revenue commitments now top $20 billion, up from roughly $19 billion, over the same short period.

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Salesforce, habitually acquisitive, isn't ready to dive back into M&A after its blockbuster acquisition of Slack. "Right now the focus is on integrating Slack," newly minted Co-CEO Bret Taylor said on a call. Marc Benioff, the other co-CEO, said it will be several more quarters before it is more fully integrated.

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The emergence of another Covid-19 variant could be welcome news for the global container shipping market. Citi said that container-shipping companies stand to gain if the Omicron variant leads to tighter movement and gathering restrictions. That could prompt more port suspensions, intensifying the current shipping capacity shortage and driving shipping times up, which would mean higher rates for faster transport.

And that increase would come as shipping rates--especially on routes between Asia and North America--are already at very high levels, where they have been throughout most of the year amid tight capacity and rebounding consumption in the U.S.

Citi said high container freight rates between Asia and the U.S. will likely be sustained into mid-2022, as continuing shipping-capacity shortages push up prices. Citi said its channel checks with Taiwan exporters suggest no signs that shipping supply tightness-caused by slower port operations amid the pandemic--could ease "in the foreseeable future."

Lead time for orders from Asia has also significantly increased because of longer shipping time, which also suggests tight capacity and could underpin elevated freight rates. Citi said many shipping companies could book substantial income thanks to the high prices, and return more cash to shareholders next year.

Forex:

Comments by Jerome Powell that the notion of 'transitory' inflation should be retired is likely to cause the dollar to strengthen into year-end, albeit dependent on how the Omicron variant of coronavirus develops, said MUFG.

"This speech from Powell certainly reflects increased concerns over inflation risks going forward and points to a faster QE taper that points to further dollar strength into year-end," said Derek Halpenny, head of research for global markets for EMEA.

For now, however, given the uncertainty over the new Covid-19 strain, investors remain unwilling to "revert completely back to pre-Omicron level of rate hike expectations."

Bonds:

Wednesday's move back into riskier assets knocked the government bond market. The yield on benchmark 10-year Treasury notes rose to 1.500% from 1.440% Tuesday.

The yield curve flattened this month, as the two-year rose 0.033 percentage point to 0.524% and the 10-year fell 0.115 p.p. to 1.440%. The performances extended the two-year's gain to four consecutive months and snapped the 10-year's three-month winning streak.

Longer-term, the 30-year yield was down for two consecutive months, and in November it lost 0.157 p.p. to 1.784%. The month was marked by bets on how much more hawkish the Fed could turn as inflation rises.

Commodities:

Oil recovered most of Tuesday's losses during early European trading, but prices are still down 11-12% over the past week, a selloff described by Goldman Sachs as overdone.

A lack of progress in Iran nuclear talks and a month-long pause from OPEC+ in its policy of easing production curbs when it meets Thursday could offset nearly half of the impact of Omicron and SPR releases, said Goldman Sachs's Damien Courvalin.

Analysts said OPEC may pause plans to pump more oil in January, or further cut output.

Gold edged higher after prices slumped following Jerome Powell's comments, but likely higher rates, a firmer dollar and strong global growth are factors why Fitch expects bullion prices to weaken in 2022.

Fitch forecasts gold averaging $1,700 a troy ounce next year. We "are now turning increasingly bearish as the balance of factors affecting the asset are now weighted to the downside. We now believe that prices are unlikely to reach once again the all-time high of $2,075 an ounce."

TODAY'S TOP HEADLINES

GlobalFoundries Says Revenue Rose 56% as Chip Shortage Continues

GlobalFoundries Inc. swung to a third-quarter profit and its revenue rose 56%, driven by strong demand amid a chip shortage.

The contract chip maker, one of the world's largest chip makers and Ford Motor Co.'s semiconductor partner, reported a $5 million profit for the September quarter, compared with a $293 million loss a year earlier. On a per share basis, the profit was one penny, or 7 cents on an adjusted basis.

Nuclear-Fusion Startup Lands $1.8 Billion as Investors Chase Star Power

Commonwealth Fusion Systems LLC said it has raised more than $1.8 billion in the largest private investment for nuclear fusion yet as startups race to be the first to generate carbon-free energy like the sun.

Big-name investors backing the latest funding round for the Massachusetts-based company include Microsoft Corp. co-founder Bill Gates and George Soros via his Soros Fund Management LLC. Some of Commonwealth Fusion's competitors, including Helion Energy Inc., have also recently secured huge funding as investors pile into clean energy technologies amid growing concerns about climate change.

Electricity-Market Tech Platform Voltus Going Public in $1.3 Billion SPAC Deal

Voltus Inc. is going public by combining with a special-purpose acquisition company in a merger that values the electricity-market technology startup at about $1.3 billion, the companies said.

Based in San Francisco, Voltus uses software to manage small, decentralized electricity systems known as distributed energy resources for customers such as Coca-Cola Co. and Home Depot Inc. Called DERs, distributed energy resources are anything that consumes, produces or stores electricity and can be connected to a grid. Examples include a store's electricity demand and electric-vehicle charging.

Beijing Goes Full Nanny State on Internet Tech

The Wild West days of China's consumer internet are now well and truly over.

Instead, the sheriffs from Beijing seem determined to micromanage industries like ride-hailing and online advertising for the benefit of the little guy-or at the very least be seen to be doing so, as regulators rally behind President Xi Jinping's new policy of "common prosperity."

Ex-Mastercard CEO Ajay Banga to Join General Atlantic

Ajay Banga, former chief executive officer of Mastercard Inc., is joining General Atlantic as vice chairman, officials at the private-equity firm said.

Mr. Banga, who stepped down as CEO at the card network Jan. 1 after more than a decade in the role, will advise General Atlantic's top management on the firm's strategy and work with its sector and geographic leaders on investment strategy.

Blue Prism Agrees to Improved GBP1.23 Bln Offer from SS&C; Withdraws Vista Recommendation

Blue Prism Group PLC said Wednesday that it has agreed a new, higher 1.23 billion-pound ($1.64 billion) takeover by SS&C Technologies Holdings, Inc. and withdrawn its recommendation for Vista Equity Partners' offer.

Under the offer, accepting shareholders of the U.K. automation-software company will get 1,275 pence in cash for each share held, a 53% premium to the company's closing share price of 832 pence on Aug. 27, the last day before the Vista offer period.

CNN Suspends Chris Cuomo Indefinitely Over Role in Brother's Response to Sexual-Misconduct Allegations

CNN suspended prime-time anchor Chris Cuomo indefinitely after records released this week by the New York attorney general's office provided a detailed look into his efforts to help his brother, former New York Gov. Andrew Cuomo, respond to allegations of sexual misconduct.

In a statement released Tuesday, CNN said that the records "raise serious questions" about Chris Cuomo's conduct. "These documents point to a greater level of involvement in his brother's efforts than we previously knew," a CNN spokesman said. "As a result, we have suspended Chris indefinitely, pending further evaluation."

Judge Questions If Purdue's Sacklers Abused Bankruptcy System

The federal judge weighing the $4.5 billion settlement between Purdue Pharma LP and the Sackler family members who own the OxyContin maker said she had serious concerns about whether they abused the bankruptcy system by collecting billions of dollars from the company before it filed for chapter 11 protection.

Judge Colleen McMahon of the Southern District of New York said during a hearing Tuesday there was "quite a bit" of circumstantial evidence made public during Purdue's chapter 11 case to suggest members of the Sackler family transferred money out of the company to shield their wealth after the drugmaker pleaded guilty in 2007 to federal charges over how it marketed OxyContin, its flagship opioid painkiller.

Microsoft Shareholders Force Company to Disclose Sexual Harassment Data

An investor proposal to Microsoft Corp. demanding greater disclosure on its handling of sexual harassment at the company was approved at the annual shareholders' meeting on Tuesday.

The proposal requested an annual report that summarized the number of sexual harassment cases investigated and their resolution, as well as results of any independent investigation into Microsoft's executives, including co-founder Bill Gates.

Derby's Take: Powell Reiterates Importance of Diversity in Boston, Dallas Fed Searches

Federal Reserve Chairman Jerome Powell reiterated Tuesday that two regional leadership openings at the central bank could be a chance to broaden the diversity of those who help set monetary policy.

Mr. Powell, who was speaking before a Senate committee, was addressing the process under way to replace the leaders of the Boston and Dallas Federal Reserve banks. The leaders of those two institutions stepped down at the end of September after it emerged they actively traded stocks and other investments, some of which are sensitive to changes in monetary policy, while helping to set central-bank policy. The officials' trading drew disapproval from Mr. Powell and others.

Turkish Lira Plumbs Record Low on Erdogan's Continued Calls for Rate Cuts

ISTANBUL-Turkey's currency crisis deepened after President Recep Tayyip Erdogan defended his policy of demanding lower interest rates despite rising inflation, sparking another selloff of the lira.

The currency hit record lows after Mr. Erdogan said he hoped interest rates would continue to fall until Turkey's next national election in 2023. The president holds the unconventional view that cutting interest rates is the best way to stop soaring inflation and spur economic growth, a policy most economists say is a recipe for disaster.

Credit-Card Applications Hit Pandemic High

Americans are applying for credit cards at a rate not seen since before the pandemic.

Close to 27% of U.S. consumers said in October that they had applied for a credit card in the past 12 months, according to the Federal Reserve Bank of New York. That is the highest level since 2019 and well above the record low of 16% recorded a year ago.

China's Caixin Manufacturing Gauge Slips in November on Weaker Demand

A private gauge measuring activity in China's manufacturing sector slipped in November and fell into contractionary territory, as both domestic and overseas demand waned.

The Caixin China purchasing managers index dropped to 49.9 from 50.6 in October, indicating that overall business conditions faced by Chinese manufacturers were broadly unchanged, according to data released Wednesday by Caixin Media Co. and researcher Markit. A reading below 50 indicates contraction of activity, while a result below 50 means an expansion.

BOJ Policy Board Member Sees Path Toward Higher Prices in Japan

Bank of Japan policy board member Seiji Adachi said Wednesday that he sees a greater chance that the nation's inflation rate will increase after years of flat prices.

Mr. Adachi pointed out changes in Japanese companies' price-setting behavior and improvements in their growth expectations.

Australia Economy Shrinks in Third Quarter But Rebound Already Underway

SYDNEY-Australia's economy shrank in the July-September quarter as efforts to combat the Delta variant of the Covid-19 virus forced more than half the country into strict and lengthy lockdowns.

The economy contracted by 1.9% in the third quarter from the previous quarter and grew 3.9% over the year, the Australian Bureau of Statistics said Wednesday. Economists had expected a 2.5% contraction in the third quarter.

OPEC+ at a crossroads as oil prices post worst monthly drop since the pandemic began

Major oil producers face a difficult decision on production levels Thursday as a recovery in energy demand hit a setback with the discovery of a new variant of the coronavirus that causes COVID-19.

"This week's meeting of OPEC+ ministers is shaping up to be one of the most significant since the pandemic demand recovery began, and the key signal will be how much more oil will be added to supply to start the new year," Peter McNally, vice president and global lead at Third Bridge, told MarketWatch.

Americans Consider China Top National-Security Threat, Survey Finds

Americans listed China as the nation's top foe and their trust in the U.S. military dropped to its lowest levels in three years, according to the first major national-security survey conducted since the U.S. withdrawal from Afghanistan.

For the first time since the Ronald Reagan Presidential Foundation and Institute began surveying Americans about national security four years ago, a majority of Americans-52%-named China as the nation posing the greatest threat to the U.S. That is up from 21 percent four years ago. Russia came in at a distant 14%-a shift from three years ago when 30% of Americans considered that country to be the biggest risk, while China came in second place at 21%.

Stricter Covid-19 Testing Requirements for Travelers to U.S. Being Considered to Curb Omicron Spread

WASHINGTON-The Biden administration is weighing stricter Covid-19 testing requirements for travelers entering the U.S., including U.S. citizens, to slow the spread of the emerging Omicron variant.

The Centers for Disease Control and Prevention said rules under consideration would require all travelers, regardless of their vaccination status, to present a negative Covid-19 test within 24 hours of boarding a plane to the U.S., rather than the 72 hours currently allowed for vaccinated travelers. Travelers could also be required to take a second test three to five days after arriving in the U.S.

Judge Temporarily Blocks Biden Vaccine Mandate

A federal judge issued a temporary nationwide block against a Biden administration mandate that millions of healthcare workers get vaccinated against Covid-19 starting next week.

In a ruling issued Tuesday in the United States District Court for the Western District of Louisiana, Judge Terry Doughty said there was no question that mandating a vaccine for healthcare workers at facilities participating in Medicare and Medicaid is something that should be done by Congress and not by a government agency. Even then the judge said it was unclear whether such a mandate would be constitutional.

Supreme Court Hears Arguments in Landmark Mississippi Abortion Case

WASHINGTON-The Supreme Court is scheduled to hear the most significant abortion case in a generation Wednesday, one that antiabortion activists hope will lead the justices to abolish what a court majority in 1973 found to be women's constitutional right to end unwanted pregnancies.

The court faced a similar crossroads in 1992, when, like today, the court's personnel had been reshaped by Republican presidents who opposed abortion rights. But instead of overruling Roe v. Wade, a troika of Reagan and Bush appointees sought middle ground, curbing but not eliminating women's power over their pregnancies. That opinion, Planned Parenthood v. Casey, allowed government to regulate abortion rights even before fetal viability so long as the restrictions didn't impose an undue burden on women.

Australia Investigates Whether Omicron Variant Spread on Flight

ADELAIDE, Australia-Australian authorities are trying to figure out how two people who traveled from Africa to Australia appear to have contracted the Omicron variant of Covid-19 and whether the virus was transmitted while they were on a plane together.

Solving that puzzle would go some way to understanding how contagious Omicron is compared with other variants of Covid-19, including the dominant Delta strain.

Andre Dickens Wins Atlanta Mayor Race, Faces Rising Crime Problem

ATLANTA-Voters elected City Councilman Andre Dickens as Atlanta's next mayor in a runoff election Tuesday, after a campaign dominated by concern over a rise in violent crime in Georgia's largest city.

The Associated Press declared Mr. Dickens the winner late Tuesday night over City Council President Felicia Moore, with 62% of the votes in the two-person race, with 44% of precincts reporting. Both are Democrats, though the post is officially nonpartisan.

Write to paul.larkins@dowjones.com TODAY IN CANADA

Earnings:

BRP 3Q

Descartes Syss 3Q

Natl Bank of Canada 4Q

Royal Bank of Canada 4Q

TECSYS 2Q

Economic Indicators (ET):

0830 Oct Building Permits

0930 Nov Canada Manufacturing PMI

Stocks to Watch:

Gencan Capital: John A. McMahon, Others Acquire Majority Stake in Company; C$1.4M in Shares Bought at C$0.10 Each; Buyers Acquired 13,999,336 Shrs From Genterra Capital, Forum Financial, York Capital Funding; McMahon Now Has Stake of Approximately 12.4% in Company; Gencan: Company Directors, Officers Have Resigned; Board of Directors Now Comprised of McMahon, Chris Hobbs, Tim Diamond; McMahon Will Act as CEO, Cameron Day Will Be CFO

Nevada Copper: High-grade Sugar Cube Zone Planned to Be Drilled in Dec and Mining Expected to Commence in Early 1Q 2022; Surface Ventilation Fans on Schedule to Arrive on Site in Approximately 3 Weeks With Installation and Commissioning Expected to Be Completed on Time in Line With Demands of Mine Plan; Nevada Copper Intends to Undertake an Infill Drilling Campaign and to Update Its Open Pit Studies to Reflect Opportunities for Increased Scale, Larger Resource and Other Optimization Workstreams

Orvana FY21 Loss/Shr $0.01; Rev $106M

Expected Major Events for Wednesday

00:01/UK: Nov CBI Growth Indicator Survey

00:01/UK: Nov Shop Price Index

00:30/JPN: Nov Japan Manufacturing PMI

05:00/JPN: Nov Auto sales

06:00/RUS: Nov Russian Manufacturing PMI

07:00/GER: Oct Retail Trade

07:00/UK: Nov Nationwide House Price Index

08:45/ITA: Nov Italy Manufacturing PMI

08:50/FRA: Nov France Manufacturing PMI

08:55/GER: Nov Germany Manufacturing PMI

09:30/UK: Nov CIPS / Markit Manufacturing PMI

09:30/UK: Nov Narrow money (Notes & Coin) and reserve balances

12:00/US: 11/26 MBA Weekly Mortgage Applications Survey

13:15/US: Nov ADP National Employment Report

13:30/CAN: Oct Building permits

14:30/CAN: Nov Canada Manufacturing PMI

14:45/US: Nov US Manufacturing PMI

15:00/US: Nov ISM Report On Business Manufacturing PMI

15:00/US: Oct Construction Spending - Construction Put in Place

15:30/US: 11/26 EIA Weekly Petroleum Status Report

16:00/US: Nov Global Manufacturing PMI

19:00/US: U.S. Federal Reserve Beige Book

21:00/US: Nov Domestic Auto Industry Sales

23:50/JPN: Nov Monetary Base

All times in GMT. Powered by Kantar Media and Dow Jones.

Expected Earnings for Wednesday

BQE Water Inc (BQE.V) is expected to report for 3Q.

Brp Inc (DOO.T,DOOO) is expected to report $1.35 for 3Q.

Build-A-Bear Workshop (BBW) is expected to report $-0.17 for 3Q.

C3.ai Inc (AI) is expected to report for 2Q.

Claros Mortgage Trust Inc (CMTG) is expected to report for 3Q.

Costco Wholesale Corp (COST) is expected to report.

CrowdStrike Holdings Inc (CRWD) is expected to report for 3Q.

Culp Inc (CULP) is expected to report $0.08 for 2Q.

Daktronics (DAKT) is expected to report $0.10 for 2Q.

Descartes Systems Group Inc (DSG.T,DSGX) is expected to report $0.31 for 3Q.

Donaldson Co (DCI) is expected to report $0.56 for 1Q.

Exco Technologies (XTC.T) is expected to report $0.29 for 4Q.

Five Below (FIVE) is expected to report $0.29 for 3Q.

G-III Apparel (GIII) is expected to report $1.79 for 3Q.

National Bank of Canada (NA.T,NTIOF) is expected to report $2.26 for 4Q.

Okta Inc (OKTA) is expected to report $-1.26 for 3Q.

PVH Corp (PVH) is expected to report $2.07 for 3Q.

Patterson Companies (PDCO) is expected to report $0.42 for 2Q.

Platinum Group Metals Ltd (PLG,PTM.T) is expected to report for 4Q.

Rex American (REX) is expected to report for 3Q.

Riley Exploration Permian Inc (REPX) is expected to report for 4Q.

Royal Bank of Canada (RY,RY.T) is expected to report $2.76 for 4Q.

Semtech (SMTC) is expected to report $0.52 for 3Q.

Snowflake Inc (SNOW) is expected to report for 3Q.

Splunk Inc (SPLK) is expected to report $-1.99 for 3Q.

Synopsys Inc (SNPS) is expected to report $1.15 for 4Q.

Tecsys (TCS.T) is expected to report $0.07 for 2Q.

Veeva Systems (VEEV) is expected to report $0.68 for 3Q.

VersaBank (VB.T) is expected to report $0.24 for 4Q.

Weber Inc (WEBR) is expected to report for 4Q.

Zscaler Inc (ZS) is expected to report $-0.48 for 1Q.

Zuora Inc (ZUO) is expected to report $-0.17 for 3Q.

nCino Inc (NCNO) is expected to report for 3Q.

Powered by Kantar Media and Dow Jones.

ANALYST RATINGS ACTIONS

Abeona Therapeutics Cut to Market Perform From Outperform by SVB Leerink

Central Garden & Pet Cut to Hold From Buy by Argus Research

Cheniere Energy Partners Cut to Underweight From Equal-Weight by Barclays

DMC Global Raised to Buy From Neutral by Sidoti & Co.

Dollar Tree Cut to Neutral From Buy by Goldman Sachs

Engagesmart Raised to Strong Buy From Outperform by Raymond James

Falcon Minerals Cut to Equal-Weight From Overweight by Wells Fargo

Goodrich Petroleum Cut to Neutral From Buy by Roth Capital

Kimbell Royalty Partners Raised to Overweight From Equal-Weight by Wells Fargo

Sigilon Therapeutics Cut to Hold From Buy by Jefferies

Spirit of Texas Bank Cut to Market Perform From Outperform by Keefe, Bruyette & Woods

Square Inc Raised to Neutral From Underperform by B of A Securities

Zoom Video Communications Raised to Underperform From Sell by Daiwa Capital

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

(END) Dow Jones Newswires

December 01, 2021 06:02 ET (11:02 GMT)

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