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ECOFIN meeting of EU finance ministers; Germany manufacturing orders, Italy economic outlook; trading updates from Munich Re, Continental AG, E.ON, Glencore, Swedbank AB, Ferguson, Ashtead Group, Sberbank, British American Tobacco, Norwegian Air Shuttle, Phoenix Group, Harmony Gold Mining

Opening Call:

Shares may be little changed at the open after strong overnight U.S. data raised the specter of the Fed keeping rates higher for longer. Asian stock benchmarks were broadly lower; the dollar softened; Treasury yields gained; while oil and gold rose.


European stocks may trade flat at the open on Tuesday, as investors brace for the Fed staying on its rate-increase path in 2023.

Major U.S. indexes fell Monday after new readings on service-sector activity and factory output suggested the economy remained resilient.

"If nothing else, the ISM services report is being interpreted as very strong, and thus the economy is overheating and that means more Fed tightening," said Will Compernolle, a senior economist at FHN Financial.

Katie Stockton, a technical strategist at Fairlead Strategies, said the latest pullback for stocks was "a sign that the market is fragile, and reasonably so given the longevity and magnitude of the relief rally."

DataTrek Research said the main concern for stocks right now is that investors have been ignoring risks of further downward revisions to corporate earnings expectations, as well as other potential blowback from a looming recession that many economists view as likely.

Optimism over China's reopening could help lift stocks through the first half of 2023, Nomura said. But it cautioned that should China continue to open up, caseloads could shoot up, leading to rising death rates.

"This is exactly what we saw in some other markets globally in their initial phases of reopening," it said.

Read: Why Monday's stock-market rout should be a wake up call for investors


The dollar gave up overnight gains to move lower early Tuesday.

Goldman Sachs analysts said a slower pace of rate increases by the Fed means easier financial conditions, which should support risky assets in part by dictating a greater response to downside surprises.

"This was apparent on Friday when wage growth jumped and payrolls beat at +263k, but our (financial conditions index) was essentially unchanged on the day."

This makes it hard for the U.S. dollar to regain lost ground in the near term, but GS maintains the view that the dollar should get a second wind and it's too early for a sustained turn.


Treasury yields rose in Asia, maintaining their upward momentum.

Two- and 10-year Treasury yields jumped by the most in at least a month on Monday after strong U.S. data pointed to signs of strength in the U.S. economy.

Markets are pricing in a 74.7% probability that the Fed will raise its policy interest rate by another 50 basis points to a range of 4.25% to 4.5% on Dec. 14, according to the CME FedWatch tool.

"It's fascinating that at the moment the market is focusing squarely on the very strong likelihood that we'll ratchet down to 'only' a 50bps hike next week and extrapolating that level of dovishness rather than focus on any risks that the terminal rate could end up being nearer say 6% than 5%," Deutsche Bank said.

According to Truist Advisory Services, investing in the nearly $24 trillion U.S. Treasury market and other forms of government-backed debt could be a good bet next year, particularly if another recession hits.

"History has shown that during economic slowdowns, both investment-grade and high-yield corporate bonds have underperformed U.S. government bonds, " the Truist strategy team said it its 2023 outlook.

"Given our expectations of decelerating growth next year, we recommend an up-in-quality bias for fixed-income allocations entering 2023."


Crude oil futures gained early Tuesday, reversing from their drop overnight.

The recent gains for crude oil likely reflect optimism that China may further ease Covid-19 restrictions, ANZ said.

ANZ pointed to news reports saying Beijing may announce new easing measures as soon as Wednesday. Signs that Russian oil supplies are tapering off were also keeping prices supported, they said.

Jay Hatfield, chief executive officer at Infrastructure Capital Management, said his company projected a trading range of $80 to $100 for WTI oil during 2023.

"Weakness in projected demand from a likely recession in Europe and sluggish growth in China will be offset by the ongoing energy crisis in Europe," he said.

However, Velandera Energy Partners cautioned that "continued Fed tightening can only reduce demand for oil."


Gold prices rose in Asia. It should be a quiet week for the metal until the release of producer-price index data and University of Michigan inflation expectations, Oanda said.

"Gold looks like it will consolidate below the $1,800 level but a sustained move lower could require a fresh inflationary catalyst," it added.

Friday's U.S. jobs data was "a big setback" for the yellow metal, Oanda said.

The hotter-than-expected November jobs print, combined with hot wage-growth numbers reinforced the notion that the Federal Reserve still has a long way to go in its quest to suppress inflation, it said.


Copper prices advanced, extending gains as investors increasingly look forward to China's reopening.

Beijing officials' recent moves to ease Covid-19 restrictions have put the market in a "bullish mood," ANZ said.

But signs of rising copper supplies at some Chinese ports could indicate lower import demand and weakness in the physical market, the bank said.


Chinese iron-ore futures gained, building on a recent rally amid optimism over the stabilization of the country's real-estate industry.

However, Galaxy Futures warned that further upward momentum in iron ore may be limited, as elevated price levels have likely priced in most of the potential demand boost from the expected property recovery in China.

"Investors should watch out for downward correction pressure in the near term," Galaxy Futures said.

Meanwhile, Citi said iron-ore prices could rally toward $150/metric ton if China rolls out meaningful credit easing in the next three to six months.

The analysts upgraded their up-to three-month target for the steelmaking commodity to $120/ton from $110/ton previously.

"Historically, iron ore has rallied to record levels on the back of demand expectations amid policy stimulus from China" and "a slew of news headlines published last week reconfirm our view that China is making meaningful progress towards further reopening," Citi said.


The bear market rally is running out of stream, and it is time to take profits, says Morgan Stanley's Wilson

The stock market's bounce off the October lows is running out of room, and it is time to take profits, according to Morgan Stanley's Michael Wilson.

The chief equity strategist who correctly predicted this year's stock-market selloff, now expects the S&P 500 SPX to resume declines from the beginning of the year, after the benchmark last week crossed above its 200-day moving average.

RBA Raises Rates; Says Path to Soft Landing Is Narrow

SYDNEY-The Reserve Bank of Australia continued to raise interest rates cautiously at its final board meeting for the year, maintaining the pace of increases despite early signs that inflation may be peaking.

The RBA on Tuesday raised the official cash rate by 25 basis points to 3.10%. It was the third straight month that the RBA, which said it still expects to raise rates further, increased borrowing costs by that amount.

U.S., EU Agree to Coordinate Semiconductor Subsidy Programs

COLLEGE PARK, Md.-Top U.S. and European Union officials agreed to work closely to strengthen semiconductor supply chains, including sharing information about their respective programs to provide massive subsidies to promote domestic chip production.

At a Monday gathering to discuss trade and technology issues, however, the two sides failed to make progress on a dispute over the U.S.'s new electric-vehicle program that has strained bilateral ties, an issue that was raised by French President Emmanuel Macron during his meeting with President Biden last week.

Iran Considers Easing Some Restrictions on Women as Protests Continue

Iranian officials said they were finalizing plans to overhaul the enforcement of laws around women's dress, as hundreds of businesses in Tehran and other Iranian cities closed their doors Monday at the start of a three-day strike called by antigovernment protesters.

But the prospect of government concessions appeared unlikely to satisfy many protesters who have called for a mass rally in Tehran on Wednesday.

Facebook Threatens to Pull News From Platform if Congress Passes Bill Helping Publishers

Meta Platforms Inc. is threatening to remove news from Facebook in the U.S. if Congress passes legislation meant to help publishers team up to negotiate payments from tech companies, echoing similar warnings that the company has lobbed at various governments around the world.

"If Congress passes an ill-considered journalism bill as part of national security legislation, we will be forced to consider removing news from our platform altogether rather than submit to government mandated negotiations that unfairly disregard any value we provide to news outlets through increased traffic and subscriptions," Meta tweeted on Monday as part of a longer statement condemning the bill, known as the Journalism Competition and Preservation Act.

Uber Reaches Settlement with Chicago Over Fees and Restaurant Listings

Uber Technologies Inc. agreed to a multimillion-dollar settlement with the city of Chicago over what authorities there called deceptive practices at UberEats and Postmates.

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12-06-22 0015ET