MARKET WRAPS
Watch For:
U.S. Employment Report for November; U.S. Factory Orders for October; Canada Labor Force Survey for November; Canada International Reserves for November; Bank of Montreal 4Q earnings.
Opening Call:
Stock futures wobbled, while oil prices continued to rise after OPEC and a group of Russia-led oil producers agreed to continue pumping more crude.
Investors are grappling with the unclear impact of Omicron for the global economy. The variant has triggered fresh restrictions around the world, throwing up new obstacles to overseas travel just as it was starting to bounce back from last year’s Covid-19 measures. Scientists are trying to gauge how effective current vaccines will be against the variant.
“What we see now this week since we had the Omicron news is extremely high volatility and extreme nervousness in markets,” said Carsten Brzeski, ING Groep’s global head of macro research. He expects this to continue until more is known about Omicron.
Brent crude futures, the benchmark in global oil markets rose after OPEC and a group of Russia-led oil producers agreed Thursday to continue pumping more crude, betting that pent-up demand in a post-lockdown world would outweigh any hit to economic activity from the recent Covid-19 permutations.
But the group said its session would remain open, a technical move that would allow it to reconvene quickly and change course if the Covid-19 situation changes dramatically.
Investors are awaiting data at 8:30 a.m. ET on how many jobs U.S. employers added in November. Employers say they are eager to hire from a depleted pool of workers, leading to increased bargaining power and rising wages for many employees.
A strong rebound in the labor market could impact the Federal Reserve’s timeline for paring back some of its monetary policy support that has supported asset prices.
“After a week of mixed macro news, some stronger news would be good for the market,” Mr. Brzeski said.
Stocks to Watch:
Shares of DocuSign were sinking in premarket trading Friday after the e-signature software company issued a fourth-quarter forecast that missed estimates.
Analysts at Citigroup said DocuSign “delivered one of the biggest [Software as a Service] whiffs in recent memory.”
The company said it expects revenue for the fiscal fourth quarter ending Jan. 31, of $557 million to $563 million, below analysts’ expectations of $573.8 million. DocuSign expects fourth-quarter billings of $647 million to $659 million. Analysts were forecasting fourth-quarter billings of $705.4 million, according to FactSet.
Tesla’s China business is recalling 21,599 locally made Model Ys due to issues with auto parts from suppliers.
The company has filed the recall plans with China’s top market regulator, according to a notice posted Friday by an affiliate of the State Administration for Market Regulation.
A component known as a steering knuckle, which allows the wheels to turn, might be deformed or break while the car is in use, increasing the risk that an accident could occur, the notice said.
Tesla Shanghai will carry out related checks on the affected vehicles for free and replace substandard steering knuckles, the regulator said.
The recall, which affects vehicles manufactured between Feb. 4 and Oct. 30, isn’t the first time the company has had to deal with safety issues in the world’s largest auto market.
Forex:
The dollar could receive a further boost from U.S. nonfarm payrolls data, particularly after Federal Reserve Chair Jerome Powell said earlier this week that inflation no longer looks transitory, ING said.
Strong data would add to the view that the Fed could remove monetary stimulus more quickly, it said.
“Any sharper than expected drop in the unemployment rate (3.8% has been suggested as a metric for full employment and the start of tightening) or sharper rise in average hourly earnings (e.g. more than 0.4% month-on-month) could drive the dollar higher today.”
The consensus in a WSJ poll is for nonfarm payrolls to rise by 573,000 and an unemployment rate of 4.5%.
The Turkish lira fell after ratings agency Fitch downgraded the country’s outlook to “negative” from “stable” and following data that showed inflation accelerated.
Fitch said premature interest rate cuts and the prospect of further easing have weakened domestic confidence, reflected in the lira’s sharp depreciation and rising inflation, which create risks to macroeconomic and financial stability and could re-ignite external financing pressures.
Data on Friday showed consumer prices jumped 21.31% year-on-year in November after rising 19.89% in October.
With no signs President Recep Tayyip Erdogan will permit large rate rises, the lira will struggle to recover and inflation will remain very high through most of the next six-to-nine months, Capital Economics economist Jason Tuvey said.
Bonds:
In bond markets, the yield on the benchmark 10-year Treasury note ticked down to 1.446% from 1.447% Thursday.
Within a year, the monetary policy environment changed from “QE infinity” and “lower interest rates for longer” to one characterized by a global, generalized and rapid rise in interest rates, said Gergely Majoros, member of Carmignac’s investment committee.
With this backdrop, Carmignac remains “very cautious” on core sovereign bonds and very selective in corporate bonds, while it sees value niches in emerging-market bonds and equity markets, he said.
Majoros said that in an environment where inflation should persist longer, Carmignac’s risk management focuses on an active management of duration exposure, cash and short-term instruments which are the most suited in episodes of volatility, and the USD given its safe-haven status and dynamics.
Pimco maintains a positive view on spread securities from the eurozone periphery, especially Italy, while focusing on receiving adequate compensation for policy uncertainty, Konstantin Veit, portfolio manager and head of European rates, said.
Given the euro area’s unique institutional structure and uneven macroeconomic conditions, Pimco expects yields in the region to remain relatively more anchored than elsewhere in the world, and Pimco therefore is positioned rather independently from benchmark indexes with a view to overall duration, he said.
“While starting valuations offer limited room for spread tightening and the macroeconomic outlook remains highly risky, a less crisis-prone euro area generally bodes well for risky assets,” he said.
Commodities:
Brent crude oil rose after OPEC+ pressed ahead with plans to raise oil production by 400,000 barrels a day in January despite the emergence of the Omicron coronavirus variant and the recent move by oil consuming nations to tap strategic reserves.
Prices fell after the decision on Thursday but then rebounded on the day and continue higher Friday.
Goldman Sachs’s Damien Courvalin points to the alliance’s promise to immediately adjust their plans should the situation require it. Similarly, while OPEC+ will raise production in January, the small increase exacerbates “the long-term deficit…[and] we believe current price levels offer compelling opportunities to reposition for the ongoing structural bull market,” he added.
London gold prices were flat, with the selloff in the precious metal appearing to lose steam. The prospect of the Fed tapering its asset-buying program has boosted the U.S. dollar this week, putting pressure on gold.
That is despite the rising risk aversion and asset selloffs that have come with the emergence of the Omicron coronavirus variant, said Oanda’s Jeffrey Halley.
LME three-month copper futures were, after gentle losses on Thursday, with most metals prices moving higher as well.
TODAY’S TOP HEADLINES
Covid-19 Vaccine Demand Strains CVS, Walgreens
The U.S. has plenty of Covid-19 vaccines but retail pharmacies are struggling to quickly administer them in some places.
Vaccine seekers in some states face waits of days or weeks for doses as local health officials hustle to improve access to meet surging demand. CVS Health Corp., Walgreens Boots Alliance Inc. and Walmart Inc., which are facing staffing shortages, now say they may not be able to accommodate people without appointments.
Citigroup Applies for China Securities License
Citigroup Inc. has applied for a securities license in China, according to a person familiar with the matter, as the New York-based banking giant eyes a bigger presence in the world’s second-largest economy.
The bank recently submitted its application to the China Securities and Regulatory Commission, the person said. Citigroup is also planning to apply for a futures license in the coming months and intends to hire around 100 people in mainland China in the next two years to support its expansion onshore, the person added.
Lyft Poaches Amazon Executive to Lead Its Finances
Lyft Inc. poached an Amazon.com Inc. executive to become its next finance chief, a change in the ride-hailing firm’s C-suite that comes shortly after the company reached an important profitability milestone.
San Francisco-based Lyft on Thursday said Elaine Paul has been named chief financial officer, effective Jan. 3. Ms. Paul succeeds current CFO Brian Roberts, who is stepping down after seven years in the role but will stay on as an adviser until June 2022. His departure as CFO isn’t the result of any disputes or disagreements, Lyft said in a filing with securities regulators.
Elon Musk’s Tesla Share-Selling Spree Tops $10 Billion
Elon Musk has now unloaded more than $10 billion in Tesla Inc. stock as the billionaire’s share-selling spree involving his holdings in the electric-vehicle maker stretched into a second month.
Mr. Musk on Thursday sold more than…
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