MARKET WRAPS
Watch For:
Flash Manufacturing PMI for October; Flash Services PMI for October
Opening Call:
Today’s Headlines:
-Early Earnings Reports Worry Investors
-Hong Kong Stocks Dive After China Party Meeting
-China’s Economy Grew 3.9% in Third Quarter
-Yen-Dollar Trading Grows Volatile as Japan Fights Speculators
-Alibaba Stock Price Tumbles to Below IPO Level
Follow WSJ markets coverage here.
Stock futures shed around 0.4% to start a week that will include earnings reports from nearly a third of the S&P 500.
Markets are gearing up for a wave of earnings this week, including from a number of tech giants.
Swissquote Bank pointed out that the correlation between S&P 500 stocks is at the highest levels since July 2020, which “makes this week’s Big Tech results even more crucial for the overall market mood, as Apple, Microsoft, Alphabet and Amazon, together, stand for 20% of the S&P 500’s total valuation.”
Overseas, stocks in mainland China and Hong Kong tumbled after Chinese leader Xi Jinping cemented his control over the ruling Communist Party. Hong Kong’s Hang Seng Index fell 6.3%. China’s CSI 300 dropped 2.9%.
Most major European benchmarks made modest gains.
In the U.K., gilts and the pound rallied after Boris Johnson pulled out of the race for prime minister, giving an edge to rival Rishi Sunak.
Forex:
The dollar gained slightly against a basket of currencies after hitting a two-and-a-half-week low of 111.474 on Sunday after a WSJ report that said the Fed could slow the pace of rate rises.
Read: Fed Eyes Slowing The Pace Of Rate Increases
ING said the dollar is likely to receive support from this week’s U.S. economic data, which should keep the Fed hawkish in raising interest rates, ING said.
“Third-quarter gross domestic product should come in around 2% quarter-on-quarter annualised and the September readings [both headline and core] for the personal consumption expenditures price deflator should both rise and move further away from the Fed’s year-end expectations,” ING said.
GDP and PCE data are due on Thursday and Friday, respectively.
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The euro extended its losses against the dollar after key measure of eurozone manufacturing and services activity fell by more than expected in October.
The S&P composite purchasing managers’ index dropped to a 23-month low of 47.1 in October from 48.1 in September. Economics polled by the WSJ expected a reading of 47.6.
“The eurozone economy looks set to contract in the fourth quarter given the steepening loss of output and deteriorating demand picture seen in October, adding to speculation that a recession is looking increasingly inevitable,” S&P said.
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Sterling also fell after the S&P U.K. composite PMI fell to 47.2 in October from 49.1 in September, compared with the 48.7 reading expected by analysts in a WSJ survey.
“The heightened political and economic uncertainty has caused business activity to fall at a rate not seen since the global financial crisis in 2009 if pandemic lockdown months are excluded,” S&P said.
Energy:
Oil prices fell more than 1% in Europe on signs of weak demand from China, following data that showed the nation’s crude imports were down 2% year-on-year, as continued lockdowns crimped demand, ANZ said.
“The recent recovery in oil imports faltered in September. Independent refiners failed to utilise increased quotas amid ongoing lockdowns weighing on demand,” ANZ said.
“Brent-linked hedging activities have picked up recently as sanctions on Russian crude exports come into effect in early December and Brent is exposed to more political uncertainties,” CIBC Capital Markets said.
Metals:
Metals were mixed, with copper down 1.4% but gold nudging higher, as traders expect more interest-rate hikes from central banks in the coming weeks.
Traders will gather in London this week for the London Metal Exchange week, where talk of Russian bans and the role of the exchange as a benchmark is set to dominate. Traders are also looking ahead to Thursday’s ECB interest-rate decision and to next week’s Fed meeting.
TODAY’S TOP HEADLINES
Philips to Cut 4,000 Jobs as Big Recall, Supply Snags Hit Earnings
Royal Philips NV said it would cut 4,000 jobs in a bid to turn around its embattled business, as it grapples with supply-chain challenges and the fallout from a huge recall of devices used to treat sleep apnea.
The Dutch healthcare conglomerate said Monday that the job cuts, which amount to about 5% of its 80,000-strong workforce, would simplify its operations and save about 300 million euros, equivalent to about $296 million, a year.
Tesla Cuts Prices In China. Bears Are Likely to See Demand Problems.
Electric-vehicle maker Tesla looks to be cutting prices in China, the largest market for new cars and new electric vehicles on the planet. Trading Monday will give investors some idea of how the market views the move.
Tesla’s Chinese website on Sunday showed lower prices to buy Tesla vehicles. A Model Y, for instance, now starts at about 289,000 Chinese yuan (about $39,500). A little while ago, the Model Y started at about $43,000.
Apple, Amazon, McDonald’s Headline Busy Earnings Week
Amazon.com Inc., Apple Inc. and Meta Platforms Inc. are among the tech heavyweights featured in a packed week of earnings that investors will probe for indicators about the broader economy.
Other tech companies scheduled to report their latest quarterly reports include Google parent company Alphabet Inc. and Microsoft Corp. Investors also will hear from airlines such as Southwest Airlines Co. and JetBlue Airways Corp., automotive companies General Motors Co. and Ford Motor Co., and energy giants Chevron Corp. and Exxon Mobil Corp.
Early Earnings Reports Worry Investors Already Battered by Stock Selloff
Early results from the third-quarter earnings season haven’t provided much comfort to jittery investors.
While some corporate leaders noted glimmers of hope for consumers and the economy, many have reported a host of challenges to profits, including persistent inflation, rising interest rates and a generational surge in the dollar that has pressured revenue generated overseas.
Companies Take Different Strategies to Navigate High Inflation
Procter & Gamble Co. is ramping up advertising on premium brands. Verizon Communications Inc. is raising prices on wireless plans, while Whirlpool Corp. has slashed production of appliances.
High levels of inflation in the U.S. and shifts in underlying demand are putting the spotlight on the strategies executives are taking to navigate a global economy where costs are rising and consumer appetite for some products has waned.
Finance Chiefs Switch Jobs, Retire as Companies Face Uncertainties
A number of finance chiefs at some of the country’s biggest companies have left their jobs in recent weeks, an exodus that comes amid the pressures that high inflation and the Covid-19 pandemic have had on corporate balance sheets and the economic outlook.
Fall is often a period of heightened CFO turnover, because this is when companies tend to launch searches to bring in new finance executives for the early part of the next year, recruiters said. This time around, however, recruiters are seeing more churn than usual among finance executives, which they expect to continue throughout the end of the year.
Boeing 737 MAX Criminal Settlement Can Be Challenged, Judge Rules
Families of people who died in two Boeing 737 MAX crashes have rights as crime victims under federal law and may continue to challenge last year’s settlement that spared the company from prosecution, a federal judge in Texas found.
Ruling in a challenge brought by the families, U.S. District Court Judge Reed O’Connor in Fort Worth, Texas, said they have standing to question the January 2021 agreement with the Justice Department because Boeing Co.’s conduct before the crashes led to the tragedy. Boeing said in the settlement that two of its former employees misled federal air-safety regulators about how the MAX’s automated flight-control system worked.
Facebook Says It Is Prepared to Block News Content in Canada
OTTAWA-Facebook owner Meta Platforms Inc. has warned Canada it is prepared to block the sharing of Canadian news content-like it did in Australia last year-unless the Liberal government amends legislation that would compel big digital companies to compensate domestic media outlets.
The legislation is under review by a parliamentary committee, and lawmakers voted this week to stop hearing further testimony from witnesses. Facebook said it wasn’t given an opportunity to testify, so late Friday it issued a statement outlining the company’s concerns with Canada’s proposed rules-and a warning.
Grindr Public Listing Can’t Keep It Casual
Investors will soon be able to hook up with the world’s most-popular gay-dating platform. A merger with the special-purpose acquisition company Tiga Acquisition, announced in May, values Grindr at $2.1 billion and is expected to close by the end of the year. As with any SPAC merger, historical details on the business are slim. In online dating, though, a snapshot often says all you need to know.
Grindr’s popularity relative to its total market size is impressive. A study commissioned by Grindr estimates the size of the LGBTQ+ population as of 2021 was just about 7% of the global tally. Meanwhile, Grindr had amassed 601,000 paying users as of last year, according to its registration filing, about 40% of the number of paying users of Bumble, the No. 2 dating app after Tinder.
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