MARKET WRAPS
Watch For:
New Home Sales for October
Today's Top Headlines/Must Reads:
- Investors See Interest-Rate Cuts Coming Soon, Recession or Not
- Stock Market Heads Into Year's End With Serious Momentum
- Retailers Have Cleaned Up Their Inventories for the Holidays
Opening Call:
Stock futures were a touch lower on Monday following a soft session out of Asia.
News that profits of China's industrial companies increased by just 2.7% for the year to October raised concerns about deflation in the world's second biggest economy, dampening sentiment across the region.
The S&P 500 has advanced four weeks in a row, gaining 8.7% for the month to date as benchmark bond yields have tumbled from 16-year highs amid hopes the Federal Reserve is finished raising borrowing costs.
"The most recent narrative among investors is that interest rates have peaked and that the aggressive Federal Reserve hiking policy has had limited impact on an economy which continues to show few signs of bruising," Interactive Investor said.
News over the weekend of record online Black Friday spending appeared to support the view that the consumer so far has indeed shrugged off tighter monetary policy.
The data highlight of the week is likely to be Thursday's personal consumption expenditure report for October, which may set the tone in bonds, and by extension stocks, in the short term.
"Taken together, an inflation number which continues to drift lower while leaving GDP relatively unaffected is the Goldilocks scenario, and could also relieve some tension as markets move into the final month of the year," Interactive Investor said.
Premarket Movers
Crown Castle was up 2.34% after it was the target of renewed activist attention.
Dish Network was down 3.28% after disappointing earnings earlier in the month sparked downbeat analyst notes. Dish had posted a surprise third-quarter loss and announced the sale of some assets.
Nvidia slipped premarket. They had fallen 1.9% on Friday, after Reuters reported Nvidia will delay the launch of a new AI chip destined for China.
Forex:
The dollar fell on growing conviction that the Fed has finished raising interest rates and as losses gathered pace after the DXY dollar index on Friday dropped below its 200-day moving average, a key technical support.
"The DXY dollar index is down around 3.5% from its highs seen in October. The drop looks largely down to the view that the Federal Reserve's tightening cycle is over and that portfolio capital can now be put back to work in bonds, equities, and emerging markets," ING said.
Last week's announcement of moderate U.K. fiscal stimulus plus improved PMI data showing a slight expansion in U.K. services activity have helped lift sterling, ING said.
With the currency hitting a 12-week high against the dollar, investors were now looking for only around 50 basis points of Bank of England interest-rate cuts, "clearly less" than for the Fed or ECB, where money markets imply rate cuts of at least 75 basis points, according to Refinitiv.
Energy:
Oil prices inched lower, with all eyes on Thursday's OPEC+ meeting.
"With the meeting delay tied to reports that Nigeria and Angola wanted higher production quotas for next year, markets have justifiably reduced their expectation that the group will deliver deeper production cuts," Commonwealth Bank of Australia said.
Metals:
Base metals prices were mixed, while gold pushed to a six-month high, with a weaker dollar providing support.
"Gold's shine is returning," Goldman Sachs said.
Goldman said its 12-month price target is $2,050 an ounce, adding that "the potential upside in gold prices will be closely tied to US real rates and dollar moves, but we also expect persistent strong consumer demand from China and India, alongside central bank buying to offset downward pressures from upside growth surprises and rate cut repricing."
Investor sentiment toward the mining sector is improving, Jefferies said, attributing the shift to a combination of the weakening U.S. dollar, a potential end to rate increases by the Fed and Chinese property market stimulus.
With lithium supplies rising and demand less than previously anticipated, the market is facing surpluses in the near term that could lead prices to undershoot expectations, UBS said.
That said, there are a "myriad of signals at play in the lithium market" and, "with the market still looking to grow 3-4x over the next decade, we still like the space with potential opportunities emerging at the low-end of the cost curve," it added.
UBS also said a stabilizing Chinese property market would be supportive for steel ingredient iron ore , which is trading around $135 a metric ton. That means there could be some upside to UBS's forecasts, which are for $100-ton iron ore in 2024 and $90-ton iron ore in 2025.
TODAY'S TOP HEADLINES
Behind Tesla's Challenges in Making the Cybertruck: Ultrahard Stainless Steel
With the Cybertruck, Tesla sought to break from convention by cladding its electric pickup in ultrahard stainless steel, a material that doesn't need to be painted, resists dents and adds to the vehicle's distinctive look.
Turns out, the choice of metal has further complicated an already difficult new-model launch for the world's most valuable automaker.
The Biggest Delivery Business in the U.S. Is No Longer UPS or FedEx
https://urldefense.com/v3/__http://Amazon.com__;!!F0Stn7g!CdD17-MS1Dll8UB2mJzJXxlZM8to88Kbnawhmpey_KAWyFsqS8BVa0Tw4ygevjDqFY-m8OSt2o0EeI2OJVJ5WeNNMeP5BQofQOnI8_c1Ymw$ has grabbed the crown of biggest delivery business in the U.S., surpassing both UPS and FedEx in parcel volumes.
The Seattle e-commerce giant delivered more packages to U.S. homes in 2022 than UPS, after eclipsing FedEx in 2020, and it is on track to widen the gap this year, according to internal Amazon data and people familiar with the matter. The U.S. Postal Service is still the biggest parcel service by volume; it handles hundreds of millions of packages for all three companies.
Will Livestreaming Be TikTok's Amazon-Killer?
TikTok is trying to tap in to shoppers in the U.S. So-called social shopping is already a huge phenomenon in Asia.
Success isn't guaranteed-and politics could intervene. But given how effectively TikTok has already disrupted the social-media landscape, U.S. e-commerce giants like Amazon should be watching their back.
China Scrambles to Contain a Looming Shadow-Bank Meltdown
Chinese authorities are taking more forceful action to contain the growing financial troubles of one of the country's biggest shadow lenders.
Police in Beijing said over the weekend that they had taken "criminal coercive measures"-a euphemism for arrests-against multiple employees of Zhongzhi Enterprise. The privately held conglomerate operates several businesses that sold investment products to many wealthy individuals and companies in China, and has struggled for months to make promised payments to investors.
Oil Prices Are Falling. OPEC Is Reaching the Limits of Its Power.
Oil prices were down early Monday as members of the Organization of the Petroleum Exporting Countries prepared to meet later this week.
The meeting was supposed to be held over the weekend and has now been moved to Thursday, and will take place online rather than in person. According to a Reuters report, the reason for rescheduling it was that Nigeria and Angola are pushing for a higher output allowance. Both countries were given lower allowances in June after previously not being able to pump enough to meet their quotas.
Cyber Insurers Warn Catastrophic Hacks Will Require Government Help
A cyberattack that disrupts everyday life in the U.S. will likely cost more than the insurance industry can afford to cover, requiring government intervention, insurers and brokers said.
The idea of a federal backstop to help insurers cope in the event of a catastrophic cyberattack has been examined by the government in recent years, but has gained momentum with tandem efforts at the Treasury Department, the Office of the National Cyber Director and the Cybersecurity and Infrastructure Security Agency over the past year. Government officials and the insurance industry plan to meet in April to work out exactly what such a program would look like.
Putin Has Staked Russia's Resources on Victory in Ukraine. Can the West Match Him?
KYIV, Ukraine-As Russia's war against Ukraine approaches its third year, Moscow holds the advantage on the military, political and economic fronts.
Russia has far more men to replenish its battered army than the Ukrainians, who are running short of well-trained infantry. President Vladimir Putin is militarizing the Russian economy, using strong oil revenues to pay for rising weapons production. Meanwhile, political paralysis in the U.S. and Europe is threatening the supply of arms and money that Ukrainian survival depends on.
Senators' Top Target in Border Talks: Tighter Asylum Rules for Migrants
WASHINGTON-Tightening the initial standard immigrants must meet when applying for asylum could form the basis of a bipartisan border agreement in the Senate, where a group of lawmakers is racing to strike a deal before the end of this year that could unlock billions of dollars in aid to Ukraine.
Senate Republicans have demanded a crackdown on asylum at the U.S.-Mexico border as a condition for backing President Biden's request for emergency funding for Ukraine, part of a $106 billion proposal that also includes aid for Israel and Taiwan as well as money to bolster the immigration system. Senate Democrats have acknowledged that changes to border policy will likely be part of any deal.
Write to ina.kreutz@wsj.com
TODAY IN CANADA
Earnings:
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OrganiGram Hldgs 4Q
Economic Calendar (ET):
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11-27-23 0618ET
