MARKET WRAPS

Watch For:

S&P CoreLogic Case-Shiller Home Prices Index for August; Conference Board -- Consumer Confidence for October; earnings from Alphabet, Coca-Cola, General Electric, General Motors, Microsoft, Raytheon, UPS, Visa

Opening Call:

Today's Headlines:

-Hong Kong, China Stocks End Flat After Volatile Day

-Yuan Slumps Further After Chinese Party Congress

-U.K. Bonds, Sterling Extend Rally As Rishi Sunak Set to Become Prime Minister

Follow WSJ markets coverage here.

Stocks looked set to edge back from their best levels in a month, with investors facing a heavy slate of key earnings.

"Maybe lower prices are ahead of us over the longer term, but never forget the biggest and fastest rallies occur during bear markets, and the last time I checked, this was still a bear market," said Jani Ziedins of the Cracket Market blog.

The economics calendar includes the Conference Board's measure of consumer confidence, shortly after the market open.

Strategists at Goldman Sachs noted a steepening yield curve, particularly for inflation-protected securities.

"Our market implied U.S. recession probability model also suggests investors are willing to fade recession risk over the next year, possibly helped by a better-than-expected U.S. earnings season so far. The curve steepening and a re-pricing of cyclicals vs. defensives has driven the implied probability lower to levels roughly in line with the 35% recession odds from our economists," they said.

Overseas, Asian stock indexes wavered, with shares in Hong Kong China closing near-flat. In Europe, the Stoxx Europe 600 rose 0.3%.

U.K. assets were modestly higher ahead of Rishi Sunak's formal ascent to the role of prime minister. The British pound gained 0.3% and the 10-year government bond yield edged down 0.05 percentage point to 3.694%. U.K. stocks were mixed.

Forex:

The decision by the PBOC to loosen its hold on its tightly-controlled currency fixing by setting the rate at a 14-year low is positive for the dollar, ING said.

"The two episodes of PBOC-sanctioned CNY weakness earlier this year [mid-April to May, and mid-August to late September] saw some of the strongest dollar gains of the year," ING said.

A rise in USD/CNY to 7.40 or higher should support the dollar over coming weeks, ING added.

USD/CNY rose 0.6% to 7.3047, after earlier hitting its highest level since December 2007 at 7.3084.

Energy:

Oil prices weakened slightly in Europe as fears continued to linger about Chinese demand.

President Xi Jinping broke with tradition and secured a third term as the nation's leader and stacked the Chinese Communist Party's standing committee with loyal figures, including those who oversaw the nation's strict Covid-19 lockdowns.

"The line-up has fuelled speculation that tackling COVID and maintaining national security are being prioritised above economic considerations, which is depressing the oil demand outlook in the world's second highest consuming nation," StoneX said.

Metals:

Copper prices edged down in London trading, with the yuan at its lowest level in 14 years, giving China less buying power for dollar denominated goods like LME-copper.

Peak Trading Research also pointed to a similar story for agricultural futures, saying that Chinese markets were "cratering."

Other Insight:

Narrowed spreads between the prices of lower and higher grades of iron ore should widen again as early as the first half of 2023, Morgan Stanley said.

The premium for ore with 65% iron content--versus the 62% benchmark--is roughly $11/metric ton, or 13%, while the discount for 58% iron ore is also $11/ton, or 11%.

"A potential steel margin recovery from improving demand from March/April onwards under a 1H23 China-reopening scenario--while China's NDRC continues to manage production capacity--could be the catalyst for a normalization in spreads," Morgan Stanley said.

"But even in the absence of such a steel-margin boost, we expect the premium for high-grade fines to bounce on seasonally tighter supply."

It has tipped a first half 2023 65% iron ore premium of $18/ton and 58% iron ore discount of $28/ton.


TODAY'S TOP HEADLINES


Microsoft Earnings Growth Seen Slowing as Computer Sales Slip

Microsoft Corp. likely recorded slower earnings and sales growth last quarter as a sharp decline in personal computer sales eroded demand for its Windows software, counteracting some of the demand for its cloud and other businesses serving companies.

The Redmond, Wash., corporation's revenue growth is expected to slow to about 10% in the three months through September compared with a year earlier, while its net income is expected to edge up 1%, according to analysts surveyed by FactSet. They predicted the company would report sales of $49.66 billion and net income of $17.36 billion for the period.


Google Sales Growth Expected to Continue to Slow

Google is expected to report its fifth consecutive quarter of slowing sales growth as weakness in the economy continues to dampen online advertising spending.

Alphabet Inc., Google's parent company, is expected to report revenue of $71 billion in the third quarter, up 9.1% from a year earlier, according to analysts surveyed by FactSet. Alphabet reports after the closing bell on Tuesday.


Warner Bros. Discovery Flags Up to $4.3 Billion in Restructuring Costs

Warner Bros. Discovery Inc. said it expected to incur as much as $4.3 billion in pretax restructuring charges through 2024, the result of a cost-cutting effort following the combination earlier this year of Discovery Inc. and AT&T Inc.'s WarnerMedia unit.

The majority of the charges-between $2 billion and $2.5 billion-are tied to restructuring the company's content operations, including writing down the value of some content and killing off projects that were in development, Warner Bros. Discovery said in a securities filing Monday. The company is expected to report third-quarter earnings Nov. 3.


Intel CEO Calls New U.S. Restrictions on Chip Exports to China Inevitable

LAGUNA BEACH, Calif.-Intel Corp. Chief Executive Pat Gelsinger said that recently imposed U.S. restrictions on semiconductor-industry exports to China were inevitable as America seeks to maintain technological leadership in competition with China.

Speaking at The Wall Street Journal's annual Tech Live conference, Mr. Gelsinger said the restrictions, which require chip companies to obtain a license to export certain advanced artificial-intelligence and supercomputing chips as well as equipment used in advanced manufacturing, are part of a necessary shift of chip supply chains.


Juul Discusses a Possible Bailout With Two of Its Biggest Investors

Juul Labs Inc. is in talks with two of its biggest investors on a bailout that could help the e-cigarette maker stave off a bankruptcy filing, according to people familiar with the matter.

Hyatt Hotels heir Nick Pritzker and California investor Riaz Valani are considering putting up money to cover the vaping company's operations and near-term legal liabilities, the people said. Messrs. Pritzker and Valani were early investors in Juul, have been longtime directors and are among the company's largest shareholders.


WhatsApp Suffers Global Outage, Company Says

HONG KONG-Meta Platforms Inc.'s popular WhatsApp messaging service suffered a global outage Tuesday, with some users saying they were unable to use it for more than an hour.

"We're aware that some people are currently having trouble sending messages and we're working to restore WhatsApp for everyone as quickly as possible," a WhatsApp spokeswoman said soon after being hit by the outage. Some users later said on social media they were able to send messages again.


HSBC Promotes Veteran Banker to CFO; Profit Falls on Higher Credit Losses

HSBC Holdings PLC reported a 46% drop in third-quarter profit and named a veteran banker as its new chief financial officer, putting him in the mix as a possible successor to the top job at the global banking giant.

The bank has appointed Georges Elhedery, 48 years old, as its new finance chief. He is replacing Ewen Stevenson, who is stepping down from the job at the end of the year and leaving the bank in April. HSBC Chief Executive Noel Quinn called Mr. Elhedery "an exceptional leader" in a statement.


Health-Insurance Inflation Is Poised to Drop Sharply

Health insurance has put upward pressure on the main measure of inflation, but is now swinging into reverse. This swing will act as a much-needed, albeit small, drag on inflation currently running at four-decade highs, economists say.

"With the magnitude of each forthcoming Fed hike this year hanging heavily on the latest consumer-price index print, the swing in healthcare insurance's steady contribution could help provide the 'compelling evidence' of inflation slowing on a consistent basis that the FOMC is looking for to ease up on its current pace of tightening," Sarah House, senior economist at Wells Fargo said in an email, referring to the Federal Open Market Committee.


Soaring Inflation Pushes Halloween Candy Prices Scary High

Soaring inflation has already strained home buyers, drivers at the gas pump and people buying plane tickets.

Now it's coming for shoppers in the Halloween candy aisle, too.


EU Energy Ministers Wrangle Over Emergency Price Cap for Gas

BRUSSELS-European Union energy ministers will debate details of a possible emergency limit on natural-gas prices and other proposals meant to tackle the painfully high energy bills resulting from Russia's economic war with the West.

Energy ministers gathered in Luxembourg on Tuesday for a meeting where they are talking about proposals related to the EU's climate plans. Europe is facing an energy crunch after Russia-once its biggest natural gas supplier-invaded Ukraine earlier this year and sharply constrained supplies of gas to the bloc.


German Business Sentiment Remains Depressed in October

(MORE TO FOLLOW) Dow Jones Newswires

10-25-22 0606ET