MARKET WRAPS

Watch For:

EU retail trade; Germany manufacturing orders, manufacturing turnover; UK Bank of England's financial stability report, narrow money (notes & coin) and reserve balances, construction PMI; annual OECD revenue statistics; trading updates from Siemens Energy, Siemens AG, TUI, British American Tobacco

Opening Call:

Shares could open slightly higher in Europe on Wednesday. In Asia, stock benchmarks were mostly up; Treasury yields rose slightly; the dollar weakened; oil was mixed; while gold inched up.

Equities:

European stocks seem poised for mild gains on Wednesday, as investors digest the possibility of rate cuts next year by the European Central Bank and U.S. Federal Reserve, as well as Moody's decision to downgrade its outlook on China's debt.

"A Moody's decision to cut the Chinese credit outlook raised concerns over the sustainability of the country's fiscal pathway. The shift onto a 'negative' outlook highlights concerns that its current fiscal spending habits pose a risk to the economy," Scope Markets said.

Meanwhile, data showed that job openings in the U.S. fell in October to a 28-month low, which may play into expectations that the Fed is done with its interest-rate hikes.

"Markets should expect demand and supply for labor to come closer into balance, which should solidify expectations the Fed is done tightening, suppressing yields and supporting risk appetite," LPL Financial said.

The Fed will wrap up its next policy meeting on Dec. 13. It is expected to leave interest rates unchanged at a range of 5.25% to 5.50%.

Forex:

The dollar lost some ground in Asia amid divergent signals.

Mild gains in U.S. stock-index futures could support risk appetite, while mostly higher Treasury yields may underpin the appeal of U.S. fixed-income assets and demand for the greenback.

Meanwhile, the dollar's carry advantage seems to be providing support, along with a sudden shift in market expectations of ECB rate cuts in recent weeks, RBC Capital Markets said.

Bonds:

Treasury yields eked out some gains, following losses amid expectations that major central banks will cut rates in 2024 and the possibility of a swifter-than-expected U.S. economic slowdown.

Multiple factors appeared to be at play during the previous day's session. One was expectations for a rate cut next year by the European Central Bank. Another is the decision by investors and traders to remove some term premium - or compensation that had been demanded for the risks of holding longer-term debt to maturity and was put into place earlier this year.

The third factor the market is weighing is the possibility of an unexpectedly faster U.S. economic slowdown that could morph into a growth scare and undermine expectations for a soft landing, analysts said.

Energy:

Oil futures were mixed after edging higher earlier in the session in a likely technical rebound after settling at their lowest level since July.

Analysts said gains may be capped.

Market participants remain unconvinced that supply reductions by OPEC+ will be fully implemented, ANZ Research said.

The lack of detail on new quotas leaves open the possibility of producers not adhering to their voluntary reductions, it added.

"The OPEC+ decision was a clear disappointment last week due to both the underwhelming amount of additional [oil] output curbs and the voluntary nature of the 2024 policy cuts," said Sevens Report Research.

Metals:

Gold ticked higher, supported by mild weakness in the dollar, which typically has an inverse correlation with the precious metal.

The outlook for gold futures in the coming months is mostly contingent on the dollar, CBA said.

But there is probably a limit to the dollar's weakness being tied to Fed rate-cut expectations next year, it added.

This is because if expectations increase to 150bps worth of rate cuts by end-2024, as CBA forecasts, that would be consistent with a mild U.S. recession, it said. Under that scenario, the dollar should strengthen, it added.

---

Copper prices rose, boosted by supply concerns and hopes for commodities support from Beijing.

Moody's affirmation of its long-term A1 rating on Chinese sovereign bonds could "help spur government support, which could ultimately boost demand for copper and other commodities," ANZ said.

It added that investors remain concerned about Panama's decision to shut down a mine that produces about 1.5% of global copper supply, which has already led to lower Chinese smelter fees "amid concerns of increasing competition for supplies."

---

Iron ore futures were higher amid supply growth constraints.

ANZ noted that Brazilian iron-ore exporter Vale plans to keep its production of the steel-making material steady next year and expects to produce around 310 million-320 million tons in 2024 versus this year's 315 million tons.

Vale's decision signals a broader shift among iron-ore producers to concentrate on margins instead of volumes amid slowing demand in China, ANZ said.

The constraints on supply growth will likely keep the market relatively tight and support prices, it added.

   
 
 

TODAY'S TOP HEADLINES

Job openings fall to 28-month low as U.S. labor market cools

The numbers: Job openings in the U.S. fell in October to a 28-month low of 8.7 million, adding to evidence that the labor market is cooling off in response to higher interest rates.

Job listings sank from a revised 9.4 million in September, the Labor Department said Tuesday.

   
 
 

Rio Tinto Plans $6.2 Billion Investment in Guinea Iron Ore Project

Rio Tinto's single biggest investment over the next few years is likely to be a huge African iron ore project that could reshape global supplies of the steelmaking ingredient.

The world's second-largest miner by market value said Wednesday it expects to contribute roughly $6.2 billion to the initial development of the Simandou mine, including port and rail infrastructure needed to export the ore.

   
 
 

Europe Faces New Terrorism Threat Fueled by Israel-Hamas War

PARIS-Europe's security services are confronting a resurgence of terrorism threats, in a sign of how fallout from the Israel-Hamas war is rippling across the West.

Radicals pledging allegiance to Islamic State have carried out three attacks on European soil-killing two people in France and one in Belgium-since the Oct. 7 attack by Hamas militants spurred Israel's bombing campaign and ground invasion of the Gaza Strip. Images of the war-beamed to screens across the continent and flooding social media-are stirring Islamist radicals to lash out, European officials say, sometimes with deadly effect.

   
 
 

Putin Seeks Closer Middle East Ties in Rare Overseas Visit

Russian President Vladimir Putin heads to the Middle East this week in a rare overseas trip focused on global oil markets, the conflict between Israel and Hamas and the war in Ukraine, analysts say, seeking to widen any gap between the U.S. and the key power brokers in the strategic region.

It will be a brief visit. On Wednesday, Putin is scheduled to travel to both Saudi Arabia and the United Arab Emirates, where he is aiming to strengthen Russia's relationships as Moscow grapples with the impact of Western sanctions. The following day, Putin will host Iranian President Ebrahim Raisi in Moscow, deepening ties that were bolstered last year when Tehran began supplying military drones for Russia to use in Ukraine.

   
 
 

Senators Are on Collision Course in Ukraine-Aid Vote

WASHINGTON-Senate Democrats and Republicans were headed for a showdown over a $111 billion foreign-aid package that includes money to back Ukraine in its war with Russia, as longstanding differences over border policy proved too contentious to quickly resolve.

Senate Majority Leader Chuck Schumer (D., N.Y.) lined up an initial vote related to the package Wednesday, but the broken state of the talks meant it was likely headed for defeat. The White House has warned that the U.S. wouldn't be able to keep providing weapons to Ukraine if Congress doesn't act before the end of the year.

   
 
 

Russia Rejects 'Significant Proposal' to Trade for WSJ's Gershkovich, Whelan, U.S. Says

WASHINGTON-U.S. negotiators made a fresh offer to Russia in recent weeks to secure the release of detained Americans Evan Gershkovich and Paul Whelan, but Moscow rejected the American proposal, the U.S. State Department said Tuesday.

The offer involved trading prisoners, people familiar with the matter said, but they didn't offer further details.

   
 
 

Elon Musk's AI Startup Seeks to Raise $1 Billion

Elon Musk's artificial-intelligence company, xAI, is looking to raise $1 billion, according to a new SEC filing.

Musk launched xAI in July, with the company saying its mission is "to advance our collective understanding of the universe." Musk spent months recruiting researchers and has envisioned the new effort as becoming a rival to OpenAI, whose ChatGPT sparked an AI frenzy in the tech industry.

   
 
 

Apple is a $3 trillion company again, for the first time since August

Apple Inc. is once again worth $3 trillion, hitting that milestone Tuesday for the first time in more than four months.

Shares of Apple AAPL closed up 2.1% in Tuesday's session, giving the company a market capitalization of $3.01 trillion. The company hasn't been valued in $3 trillion territory since Aug. 3, according to Dow Jones Market Data.

   
 
 

Write to singaporeeditors@dowjones.com

   
 
 

Expected Major Events for Wednesday

07:00/ROM: Oct Retail trade

07:00/GER: Oct Manufacturing orders

07:00/GER: Oct Manufacturing turnover

07:00/NOR: 3Q Balance of Payments

07:30/HUN: Oct Retail Sales

07:30/HUN: Oct Preliminary Industrial Production

08:00/SVK: Oct Internal trade, incl Wholesale & Retail

08:00/CZE: Oct Retail trade

08:00/AUT: Nov Wholesale Price Index

09:30/UK: 3Q Household Finance Review

09:30/UK: Nov S&P Global / CIPS UK Construction PMI

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

10:00/EU: Oct Retail trade

10:00/GRE: 3Q Provisional GDP

10:00/LUX: Nov CPI

11:00/IRL: Nov Monthly Unemployment

16:59/POL: Polish interest rate decision

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(END) Dow Jones Newswires

December 06, 2023 00:16 ET (05:16 GMT)

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