MARKET WRAPS

Watch For:

EU money supply; UK monthly automotive manufacturing figures; France consumer confidence survey, unemployment; Italy foreign trade; trading updates from Barclays, Standard Chartered, Deutsche Bank, Heineken, Banco Santander, BASF, SEB, Telenor, WPP, Reckitt Benckiser, Mercedez Benz, Sodexo, Carrefour, Atos, EDP Renovaveis, Norwegian Air Shuttle, Yandex, Thales Group, Koninklijke (Royal) KPN, Assa Abloy

Opening Call:

European shares may open little changed Wednesday as investors focus on corporate earnings. Asian markets were higher; Treasury yields declined while the dollar gained; oil prices fell and gold was slightly higher in choppy trade.

Equities:

Stock futures point to a flat open Wednesday as investors brace for a spate of earnings results from corporates including Standard Chartered, Barclays, Deutsche Bank, Banco Santander, BASF and SEB, to name a few.

U.S. stock indexes rose Tuesday, continuing a market rally with investors cheering earnings from large financial firms.

"We are seeing better-than-feared earnings reports, and Treasury yields are pulling back-both are positives for the stock market," said Art Hogan, chief market strategist at B. Riley Financial Inc.

From a technical standpoint, market strategists expect the rally in stocks may have more room to run now that the S&P 500 has surmounted strong resistance at the 3800 level, clearing the way for the large-cap index to rise past 3900, Hogan said.

There's plenty of froth that needs to be squeezed out of markets after nearly two years of extraordinary monetary and fiscal stimulus unleashed in the wake of the Covid-19 pandemic, said Interactive Brokers.

Mike Wilson, Morgan Stanley's chief U.S. equity strategist and chief investment officer, reiterated that stocks were looking ripe for a bounce.

"Last week's tactical bullish call was met with doubt from clients, which means there is still upside as we transition from Fire to Ice -- falling inflation expectations can lead to lower rates and higher stock prices in the absence of capitulation from companies on 2023 EPS guidance," Wilson said.

Forex:

The U.S. dollar strengthened in Asia early Wednesday, likely as safe-haven demand for the greenback was stoked by weaker-than-expected second-tier U.S. economic data overnight.

The gloomy outlook for the economies of the U.S. and the rest of the world will ultimately be a source of strength for USD in coming months, CBA said.

The pound fell slightly versus the dollar early Wednesday.

"With Rishi Sunak now at the helm, markets expect some semblance of fiscal orthodoxy to return, mitigating pressure on bond markets and giving the Bank of England room to focus on fighting inflation," Corpay's Karl Schamotta said.

Societe Generale said the pound was unlikely to rise much further.

"With the economy surely already in recession and set to suffer from possibly even tighter fiscal policy, sterling is unlikely to enjoy much more of a relief bounce and over time, EUR/GBP is likely to meander slowly up to 0.90 or so," SocGen forex strategist Kit Juckes said.

Bonds:

Treasury yields were broadly lower early Wednesday.

"We're seeing yields come down for the first time in a while, so stocks are going up," said Art Hogan, chief market strategist at B. Riley Financial Inc.

Odds remain high of another hawkish 75-basis-point rate increase by the Fed next week, but investors are increasingly seeing a slowdown to a 50 bp or even a 25 bp hike in December, according to the CME's FedWatch.

"Forwards still anticipate hikes to 5.0% by early 2023, but the momentum toward 5.25% or 5.50% deflated on Friday and has not returned," said Jim Vogel, vice president of FHN Financial in Memphis.

Yields pulled back on Tuesday -- with 10- and 30-year rates coming off their highest levels since 2008 and 2011, respectively.

Energy:

Crude-oil futures were lower early Wednesday amid a dim economic outlook.

"The prospect of a global economic slowdown and tighter monetary policy has been outweighing the specter of supply reductions in recent weeks," ANZ said. Weak economic data from China was also likely to weigh on demand for crude oil, ANZ added.

"Oil prices, in the short term, are locked in a bit of a trading range," said The Price Futures Group. "We are still in shoulder season and we're still being influenced by concerns about the global economy and interest rates," it said.

When the dollar shows strength, it has put downward pressure on oil."

Still, as the market gets into the winter season, "we'll see a disconnect between the dollar/oil relationship because oil is going to be needed."

Sevens Report Research analysts said oil's new trading range spanned "between support in the upper $70s and resistance in the low $90s, as traders assess the outlook for demand amid growing recession concerns but still-tight global supply dynamics."

Metals:

Gold prices were slightly higher in Asia in choppy trade.

"Gold's bearish trend has firmly been in place after prices could not hold the $2,000 level in the spring," Oanda said.

The market's focus may remain on Treasury yields and the release of U.S. economic data, it added.

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Copper edged lower on continued worry over China's economic slowdown.

A rout in Chinese equities earlier this week reflected broader concerns about China's economic prospects after President Xi Jinping tightened his control, ANZ said.

These concerns were outweighing signs of tightness in physical markets, ANZ said, noting that copper inventories in LME warehouses had plunged to the lowest level since April.

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Chinese iron-ore futures rose in rangebound trade as investors weighed the prospect of more supportive measures against prolonged weakness in the property sector.

Sporadic Covid-19 outbreaks in China have subdued sentiment, Guotai Junan Futures said.

There were also expectations that Beijing could signal or roll out policy stimulus, it added.


TODAY'S TOP HEADLINES

Australia's Third-Quarter Inflation Rocks Cautious RBA Policy Stance

SYDNEY-Australian consumer prices rose at a much faster pace than expected in the third quarter, prompting concerns that the Reserve Bank of Australia will need to raise interest rates more than previously expected.

Consumer prices rose 1.8% on quarter and 7.3% on year, its fastest pace since 1990, the Australian Bureau of Statistics said Wednesday.


Russia Tells U.N. That Ukraine Plans to Detonate 'Dirty Bomb'

Russia escalated its accusations that Ukraine plans to detonate a so-called dirty bomb, claiming in a letter to the United Nations Security Council that Kyiv would in turn use the fallout from the explosion to blame Moscow for using a tactical nuclear weapon.

The dirty-bomb accusations-repeatedly denied by Ukraine-have rattled U.S. and European officials who worry that Russia is seeking a pretext to escalate its war in Ukraine.


Ukraine Presses West for Billions in Economic, Military Aid After Russian Attacks on Infrastructure

Western leaders meeting in Berlin said the effort to rebuild Ukraine would take generations, as Kyiv stepped up its requests for economic and military support and fissures began to emerge in Washington's long-solid backing for Ukraine.

Ukrainian President Volodymyr Zelensky publicly pressed Western political and business leaders gathering in Berlin on Tuesday for more funding to rebuild his country, as Russian attacks have left Ukraine struggling to produce enough electricity as winter draws near.


Intel Prices Widely Anticipated IPO for Self-Driving Car Unit Mobileye

Intel Corp.'s self-driving car unit Mobileye Global Inc. priced its initial public offering at $21 a share, a dollar above the top of its targeted range, according to people close to the deal.

Mobileye raised $861 million by selling 41 million shares, valuing the company at roughly $17 billion, the people said. That is more than the $15.3 billion that Intel paid for the Mobileye in 2017 but a far cry from the $50 billion or more that the chip giant originally set its sights on when it unveiled plans for the listing late last year.


Sequoia Capital's Roelof Botha Predicts Success for Elon Musk at Twitter

Roelof Botha, the head of Sequoia Capital, said he thinks there are large improvements to be made for Twitter Inc.'s current business and that Elon Musk's takeover bid for the social-media company will be a success.

Mr. Botha, speaking at The Wall Street Journal's Tech Live conference, said he thought Twitter could find better ways to make money beyond advertising and improve its product. Sequoia has committed $800 million for the deal. The funding is set to come from Sequoia's main venture funds, its wealth management business called Heritage, and its crossover fund Sequoia Capital Global Equities.


Google Shares Fall as YouTube and Search Ads Take Hit

Google reported its fifth consecutive quarter of slowing sales growth, with its YouTube video platform posting a drop in advertising revenue for the first time since the company began reporting the unit's performance.

The results show weakness in the economy spreading to some of its more resilient names, including many tech companies that saw their sales and stock prices rise during the pandemic. Microsoft Corp. on Tuesday reported its worst quarterly earnings in more than two years, and Texas Instruments Inc. said it was seeing flagging demand in personal electronics and from some other industrial buyers.


Microsoft Earnings Fall, Stock Slides as PC Demand and Strong Dollar Hurt Sales

Microsoft Corp. shares tumbled Tuesday after it said it expects a sharp decline in personal computer sales and the dollar's strength to continue to weigh on growth.

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10-26-22 0024ET