MARKET WRAPS

Watch For:

Eurozone GDP, employment; Germany industrial production index; France trade, balance of payments; Italy retail sales; UK Halifax house price index, narrow money; trading updates from Siemens, IAG, Finnair, SAS

Opening Call:

Shares look poised for a mixed open, as Fed rate fears persist. In Asia, stock benchmarks largely fell; Treasury yields and oil futures were mixed; while the dollar and gold eked out slight gains.

Equities:

Stock futures point to a mixed open for European indexes at Wednesday's open, as investors continue to weigh fears about the outlook for interest rates against optimism surrounding China's reopening.

U.S. economic data has tended to beat expectations, a strength that could exacerbate inflation and, in turn, prompt Federal Reserve officials to raise interest rates to higher-than-expected levels and keep them there for longer.

"The economy continues to show a degree of strength that I think was not expected," said David Donabedian, chief investment officer at CIBC Private Wealth US.

"The consumer is hanging in there quite well, jobs continue to be added, wage growth is significant and consumers are still spending."

Some investors still stress patience regarding when the Fed's aggressive rate increases are going to start affecting closely watched jobs data.

"When you look at what the Fed's trying to do, everyone talks about the lag," said Stephanie Lang, chief investment officer at Homrich Berg. "Even though they've been hiking for a while, we are just getting to the point where it's going to really impact the broader economy."

Adding to worries that the Fed will keep lifting interest rates to control price increases and eventually trigger a recession, investors also heard some downbeat economic warnings from top executives at some of the Wall Street's largest banks.

JPMorgan Chase CEO Jamie Dimon on Tuesday warned that stubbornly high inflation could trigger an economic recession next year as steep prices cause consumer spending to dry up.

"Rates are now on their way to 5%. When you're looking forward, those things very well might derail the economy and cause this mild to hard recession people are talking about ... so that may erode the economy," Dimon said in a CNBC interview.

Goldman Sachs's David Solomon also said Tuesday that he expects a recession in the coming months, while the markets will have some bumpy times ahead and smaller bonuses and even potential job cuts should come as no surprise.

Read: Jamie Dimon Sounds Alarm About a Recession Again. This Metric Confirms His Fears.

Forex:

The dollar strengthened slightly in Asia. Foreign-exchange markets have been a bit muted since the start of December, Silicon Valley Bank said.

"A lot of traders are waiting for news out of the FOMC next week. Everyone is sitting on their hands."

Silicon Valley Bank said the dollar's recent decline makes sense - "the dollar has had a nice run this year, the Fed has been aggressive about rate hikes and the expectation is that the FOMC may slow down from here."

Bonds:

Treasury yields were mixed early Wednesday, after falling overnight as the likelihood of further interest-rate increases by the Fed collided with fears of a U.S. slowdown.

Tuesday's drop in yields was a "textbook" example of "slowdown fear repricing as the Fed prepares to push policy rates up and terminal estimates higher, even as the headwinds facing the economy build," said BMO Capital Markets.

"The market is realizing that the labor market's strength is the biggest hurdle to a Fed pause or pivot because employment is a barrier to lower inflation," said Ryan Belanger, founder and managing principal of Claro Advisors.

Investors appear to be "repricing November's optimism, which was fueled by hopes that the Fed would be willing to pause its pace of rate hikes." The fed-funds rate "is likely to reach close to 6% over the next year and it may be decades before we see 0% interest rates again," Belanger said.

"The Fed has been crystal clear on its intentions to slow the economy in order to cool inflation and it's unwise to fight the Fed at this point."

Energy:

Crude-oil futures were mixed early Wednesday amid an uncertain outlook.

While there has been recent optimism over China further easing its Covid restrictions, refiners have been cutting output this month due to fears that demand is dwindling, ANZ said.

Fears of weaker global economic growth could also weigh, ANZ added.

Metals:

Gold prices rose slightly in Asia. Prices for the precious metal are holding up despite the risk-off mood on Wall Street on recession fears, which is driving a move back to safe havens, said Oanda.

"The direction of yields and the U.S. dollar is likely to remain the key driver for gold prices, with next week's [Federal Reserve] meeting the key catalyst when it comes to the next move in prices," said CMC Markets UK.

-

Copper prices fell slightly, pulling back from a strong rally in recent days, amid a broad downturn in global commodities.

Investors are likely taking time to "re-evaluate the macroeconomic backdrop following recent strong gains across the commodities complex," ANZ said.

"The specter of tighter monetary policy" has likely further weighed on risk-taking sentiment.

While copper has gained substantial ground on the back of demand optimism from an expected China reopening, ANZ pointed to a slowing global economy and signs of excessive supply in the physical market for the metal.

-

Chinese iron ore futures rose, extending a strong upturn seen in recent weeks. Gains are likely driven by increasing investor confidence in China's real-estate sector, a main source of demand for steel and iron ore, Galaxy Futures said.

Buying interest is likely to remain high on Chinese officials' continued rescue measures for the property market, Galaxy Futures said. Supply-side dynamics also look favorable, with low iron ore inventories and expectations of tight supply supporting prices.

   
 
 

TODAY'S TOP HEADLINES

China November Exports Fall; Trade Surplus Narrows

BEIJING-China's exports fell for a second consecutive month in November, weighed down by weakening global demand, official data showed Wednesday.

Outbound shipments declined 8.7% on year in November, compared with a 0.3% year-over-year decline recorded in October, according to the General Administration of Customs. The decline was much steeper than the 2% fall expected by economists polled by The Wall Street Journal.

   
 
 

Goldman CEO David Solomon Prepares for a Possible Recession

Goldman Sachs Group Inc. Chief Executive David Solomon signaled Tuesday that the firm will likely have to trim its operations as it deals with a slowing economy.

Mr. Solomon, speaking at The Wall Street Journal's CEO Council Summit, said the idea shouldn't come as a surprise given how closely the firm's growth is correlated to the global economy. He also noted that the banking industry hired aggressively during the pandemic deal making boom of 2020 and 2021.

   
 
 

U.S. Watchdog Sanctions KPMG Firms, Audit Professionals

The U.S. audit watchdog sanctioned three firms and four audit professionals from KPMG's global network for alleged misconduct such as failing to cooperate with an inspection and cheating on training exams.

The Public Company Accounting Oversight Board on Tuesday said it reached settlements on seven disciplinary orders sanctioning the firms and individuals for violations of professional auditing standards, quality control standards and PCAOB rules. Along with the fines totaling $7.7 million, the sanctions include barring or suspending the four named auditors from auditing public companies and requiring the three member firms-KPMG U.K., KPMG Colombia and KPMG India-to review quality control policies and procedures and improve them as necessary, the PCAOB said.

   
 
 

Oil Prices and Energy Stocks Are Headed in Different Directions. What Gives?

Oil is sitting out Wall Street's year-end rally.

While recent hopes that inflation has peaked sparked sharp gains in stocks and bonds, oil prices have floundered amid worries about slowing global growth eating into demand for fuel. The prospect that tightening by the Federal Reserve could ripple across commodity markets helped pull U.S. crude futures Tuesday to their lowest price of the year.

   
 
 

Airbus Warns It Will Miss Full-Year Delivery Target

LONDON-Airbus SE, the world's biggest plane maker, said it would likely miss its key delivery target this year after the company's chief executive warned that supply-chain woes were still at least six months away from normalizing.

The European manufacturer said on Tuesday that due to a "complex operating environment," Airbus's previously forecast goal of achieving around 700 deliveries this year is now "out of reach."

   
 
 

Exiled Russian TV Channel Loses License in Latvia

The Latvian government suspended the license Tuesday of a Russian opposition television channel operating from its soil, calling it a security risk after one of its presenters made a clumsy show of support for Russian servicemen who had been mobilized to fight in Ukraine.

The chief editor of the channel, TV Rain, called the Latvian government's decision "absurd and having nothing to do with common sense." The presenter, who was fired from the channel, offered an apology and said his words were taken out of context. The channel, staffed by journalists who fled Russia, is now looking for a new country to base its operations.

   
 
 

Elon Musk's Release of Documents Triggers Twitter Lawyer Jim Baker's Exit

Elon Musk said one of Twitter Inc.'s top lawyers "was exited," part of the fallout from the billionaire's unusual efforts to release internal communications to criticize prior practices at the company he bought almost six weeks ago.

Mr. Musk announced in a tweet Tuesday the departure of Deputy General Counsel Jim Baker, who had been with the company since 2020. Since completing the $44 billion acquisition, Mr. Musk has fired several company leaders, including Mr. Baker's immediate boss.

   
 
 

TikTok National-Security Deal Faces More Delays as Worry Grows Over Risks

WASHINGTON-A potential deal between the Biden administration and TikTok-once expected around year-end-has run into more delays, according to people familiar with the situation, as worry grows over national-security concerns that U.S. officials say the popular app poses.

The review has dragged on amid a range of concerns, including how TikTok might share information related to the algorithm it uses to determine what videos to show users, and the level of trust Washington would need to place in the company, these people said. U.S. officials haven't returned to TikTok with additional demands to address the recent concerns, some of the people said, leaving the path forward unclear.

   
 
 

Write to singaporeeditors@dowjones.com

   
 
 

Expected Major Events for Wednesday

06:45/SWI: Nov Unemployment

07:00/NOR: 3Q Balance of Payments

07:00/SWE: Oct New orders & deliveries in industry

07:00/SWE: Oct Industrial Production Index

07:00/GER: Oct Industrial Production Index

07:00/NOR: Oct Industrial Production Index

07:00/ROM: 3Q GDP

07:00/UK: Nov Halifax House Price Index

07:00/FIN: Oct Foreign trade

07:45/FRA: Oct Foreign trade

07:45/FRA: Oct Balance of Payments

08:00/HUN: Oct Preliminary Industrial Production

08:00/SWI: Nov SNB foreign currency reserves

08:00/CZE: Oct Industry, Construction

08:00/CZE: Oct External trade

08:00/AUT: Sep Foreign Trade

09:00/ITA: Oct Retail Sales

09:00/BUL: 3Q GDP - preliminary data

09:00/ICE: Nov External trade, preliminary figures

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

10:00/GRE: 3Q Provisional GDP

10:00/EU: 3Q GDP and Main Aggregates Estimate

10:00/EU: 3Q Employment

10:00/LUX: Nov CPI

10:00/CRO: Nov PPI

10:00/LUX: 3Q GDP

11:00/IRL: Oct Industrial Production and Turnover

16:59/POL: Polish interest rate decision

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(END) Dow Jones Newswires

December 07, 2022 00:15 ET (05:15 GMT)

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