1. Manufacturing surveys improve, but China cautions
Purchasing manager indices from around the world ticked up in an apparent sign that the world economy is stabilizing after a sharp slowdown this year in the shadow of the U.S.-China trade war and Brexit.
However, any optimism was held in check after China’s central bank governor Yi Gang published an article warning that the slowdown was likely to be protracted, and that China should steer clear of extraordinary monetary stimulus programs. In addition, Hong Kong said that retail sales fell 24.3% by value in October, the worst drop on record and the fourth straight month of double-digit declines.
Separately, Beijing said it would suspend the right of U.S. warships to dock in Hong Kong, in the latest of a string of largely symbolic countermeasures to the passage of the U.S.’s Hong Kong Human Rights and Democracy bill.
2. Online shopping frenzy sets new records
U.S. shoppers are poised to make today the biggest-ever day for online shopping in the U.S., with an estimated $9.4 billion in purchases, up 19% from last year, according to Adobe (NASDAQ:ADBE) Analytics.
That comes on top of what an estimated $4.2 billion in online sales on Thanksgiving day and $7.4 billion in online sales on Black Friday, both of which also constituted records, according to Adobe (NASDAQ:ADBE).
Adobe (NASDAQ:ADBE) Analytics measures transactions from 80 of the top 100 U.S. online retailers. The figures suggest that overall spending remains buoyant, although there is no immediate clarity on how far online sales have cannibalized sales at physical stores.
3. Stocks hit new highs overnight
U.S.stock markets are poised to open at new record highs on Monday, supported by the seemingly strong retail performance over the holiday weekend and the improvement in global manufacturing surveys.
The S&P 500 Futures contract hit a new all-time high of 3,157.62 overnight before retracing slightly to trade at 3,151.62 by 6:15 AM ET (1115 GMT), a gain of 0.3% from late Friday. Dow futures and Nasdaq 100 futures lagged slightly, up 0.2%.
Asian and European markets had also traded higher overnight.
Walt Disney (NYSE:DIS) was set to be supported by another record-breaking weekend for Frozen 2, which grossed another $123.7 million over the holiday weekend in the U.S. and Canada. It’s now made $738.6 million globally in the two weeks since it opened, and is well on course to gross over $1 billion. The Wall Street Journal cited Comscore data as suggesting that Frozen 2’s performance would narrow the gap between this year’s overall box office takings and 2018’s record numbers.
4. Merkel's coalition nears fatal rupture
Germany’s government lurched closer to breaking up after the center-left Social Democratic Party elected a new leadership at the weekend, with an eye to ramping up spending to sharpen its profile vis-a-vis Chancellor Angela Merkel’s Christian Democratic Union.
The yield on the German 10-year benchmark bond rose to a three-week high of -0.27%, before falling back slightly, as the market anticipated a shift to a more expansive fiscal position.
The CDU, which is the senior partner in the current coalition in Berlin, has said it won’t abandon its policy of balanced budgets, but the SPD’s move adds a further source of domestic political pressure to pump up spending, adding to repeated calls from the European Central Bank and International Monetary Fund.
5. Saudi leans on allies for deeper output cuts
Crude oil prices rose after a Reuters report claiming that Saudi Arabia will push for deeper production cuts from Russia and OPEC members when they review their current deal on output restraint at the end of the week.
Reuters said Saudi Arabia wants its partners to agree to hold another 400,000 barrels a day of output back from world markets, in addition to the 1.2 million b/d currently withheld. Reuters said the kingdom wanted to keep prices firm while the initial public offering of Saudi Aramco moves toward its conclusion.
The IPO will be priced on Dec. 5, the same day OPEC meets in Vienna. The OPEC+ grouping – which includes Russia – is due to meet on Dec. 6. Russia has so far opposed deeper cuts and signalled it wants exemptions for its output of condensate, which is due to rise next year as new gas fields come online.
By 6:30 AM ET, Brent futures were up 2.1% at $61.77 a barrel, while U.S. crude futures were up 2.2% at $56.36.
By 6:30 AM ET, Brent futures were up 2.1% at $61.77 a barrel, while U.S. crude futures were up 2.2% at $56.36.
1. Debate Breaks out on Wall Street as VIX Hits Lows
For anyone looking to gauge how deep fear runs in markets, look no further than the VIX index or the “fear gauge.” In the current good times of record high equity markets, the fear gauge plummeted to more-than-one-year lows earlier this week, prompting debate on whether investors lack vigilance.
“The developments over the past weeks might support the usual narrative that investors are being complacent, and the idea that we could be in for another equity selloff,” said Hubert de Barochez, markets economist at Capital Economics, in a research note.
The CBOE Volatility Index closed at 11.54 on Tuesday. Its lowest level since Aug. 9, 2018.
The ongoing plunge in the VIX has recently stirred up debate on the next big move in markets.
Some say the fear gauge is likely to continue its decline and pave the way to yet more record highs in equities. But others see eerily similarities to a trend that unfolded last year that led to a major selloff.
At the end of September last year, stocks were flirting with highs. The VIX was toying with lows. And the good cheer on Wall Street was palpable.
But the VIX bottomed soon after. A jolt in volatility pierced through markets, and stocks suffered their biggest correction since the Financial Crisis.
With expectations growing that volatility may be on the cusp of getting a second lease of life, Evercore ISI strategist Dennis DeBusschere suggested it may be time for investors to seek shelter.
“Since the S&P is making new all-time highs, now is an opportune time to hedge,” DeBusschere said.
But some disagree.
Greg Boutle, U.S. head of equity and derivative strategy at BNP Paribas, told Bloomberg in an interview this week that he sees further signs of upside in the market as traders continue to bet on a further decline in VIX.
"We've seen the VIX break down on the downside through the 12 level and in terms of positioning, the number of people shorting the VIX is at a record, so the market is positioning for a risk-on move," Boutle said.
2. Competition Limits Price Hikes to Combat Tariffs
One question on the minds of many investors is how, with the current U.S. economic expansion, has inflation remained very tame.
And the regional reports in the Federal Reserve’s Beige Book show that businesses are finding themselves in an increasingly tricky situation on prices and rising input costs, especially on the retail side.
“Despite the reported softness in prices charged to consumers, firms' input costs continued to increase at a moderate rate,” the St. Louis Fed reported. “On net, 32% of business contacts reported higher nonlabor costs, the same share as in the previous quarter. Business contacts in retail and manufacturing reported facing increased price pressures due to tariffs.”
In the Atlanta Fed region “firms most affected by tariffs indicated they were more likely to pass along cost increases to customer.”
But whether companies were actually able to boost prices varied.
“On the consumer side, a clothing retailer reduced the use of price discounting to offset higher costs resulting from tariffs,” the Cleveland Fed said. “By contrast, a food retailer said that while tariffs had increased costs, the company ‘cannot raise prices on a whim’ because of fierce competition.”
Retail prices increased “modestly” in the Chicago Fed region.
“One contact said that food, home goods, and apparel retailers were struggling to pass on higher costs; in contrast, another contact noted that retailers continued to raise prices to reflect higher potential and realized tariffs,” it said.
On perk for tourist in New York for the Thanksgiving festivities – Broadway show ticket prices had declined modestly.
3. Silver Price Estimates Reined In
Silver prices will see a solid rise next year, but the gains won’t be as strong as originally thought, according to J.P. Morgan.
The investment bank sees a 10% year-over-year rise in silver for 2020, but that’s about 15% lower than its previous estimates as it become more optimistic on the global economy.
“On a quarterly basis, we now see silver prices peaking in 2Q20 at a quarterly average of around ($18.70)/oz before selling off lower towards a 4Q20 average around $17.1/oz, as the U.S. economy likely finds more solid footing later in the year,” J.P. Morgan said in its quarterly metals report, released this week.
Looking at supply and demand fundamentals, with J.P. Morgan’s “more constructive economic view for 2020,” it now sees industrial fabrication rising 1.5% year over year.
But “(e)ven with this relatively more optimistic industrial use view, we still see total fabrication demand largely remaining flat as the jewelry, silverware and photography segments all come under pressure next year,” it said.
“(W)e continue to think silver’s appeal as an alternative precious metal to gold will still be the major price driver, likely boosting silver prices in 1H20 before the precious fervor eases somewhat in 2H20,” J.P. Morgan added.
1. Black Friday test for department stores
Will Black Friday put any more nails into the coffins of U.S. department stores? There’ll be more scrutiny than usual on the likes of JC Penney (NYSE:JCP) and Kohls Corp (NYSE:KSS) after disappointing results for the three months through September.
Apparel stores are also under pressure after a tough year – none more so than Gap (NYSE:GPS), which announced the resignation of its CEO Art Peck after a particularly grisly third quarter.
The other big unknown is whether Amazon.com (NASDAQ:AMZN) will reap enough new business to justify the massive outlays that hit its latest earnings report. Big-box retailers Walmart (NYSE:WMT) and Target (NYSE:TGT) are, by contrast, expected by analysts to fare better than most, the former in particular reaping the benefits from previous investment in its online offering.
2. Hong Kong sells off as Huawei fights on
Global stocks came under pressure overnight as confidence in an imminent U.S.-China trade deal faltered in the wake of President Donald Trump’s decision to sign into law the Hong Kong Human Rights and Democracy Act.
The Shanghai Composite fell another 0.6% and the Hong Kong Hang Seng index fell 2% ahead of what is expected to be another weekend of unrest, after the relative calm of last weekend when Hong Kongers voted in droves in favor of candidates sympathetic to pro-democracy protesters.
Elsewhere, the Wall Street Journal reported that Huawei, the telecoms company at the heart of the U.S.-China trade dispute, will fight last week’s ruling from the Federal Communications Commission that further curtails its business with U.S. customers.
3. Eurozone CPI ticks up; German jobless cheer
Eurozone inflation rose by more than expected in November, according to preliminary figures released by Eurostat. That reduces the pressure on incoming European Central Bank President Christine Lagarde to take any further action at her first policy-making council meeting in two weeks’ time.
The headline annual rate rose to 1.0% from 0.7%, while the core CPI rate rose to 1.3%, its highest in over six years. That’s likely to embolden opposition to any further easing under the new regime.
There was also better news from the German labor market, where the jobless count surprisingly fell by 16,000 in November, as opposed to the 6,000 increase expected.
The euro remained stuck at around $1.1000 against the dollar.
4. Johnson promises no income tax, VAT hikes
U.K. Prime Minister Boris Johnson promised not to raise income taxes or value added tax if his party wins the U.K. general election on Dec. 12. He also promised on a radio show to take the U.K. out of the EU by the scheduled date of Jan. 31 if his Conservative Party wins a working majority.
Johnson also implored Donald Trump to stay out of the election campaign when he visits the U.K. in the week before the election. Johnson’s closeness to Trump is widely seen as a vote-loser.
Even so, the Conservatives appear to be riding out a storm of controversy around false claims over their plans for spending on healthcare, helped not least by the opposition Labour Party facing similar accusations of misleading voters ahead of the poll.
5. Loonie faces test from Canada's Q3 GDP
With no U.S. data scheduled for Friday, it’s Canada’s turn to take center stage with third-quarter gross domestic product figures due at 8:30 AM ET (1330 GMT). Analysts expect an annualized growth rate of 1.2% after an anomalously high 3.7% rate in the three months to June.
The loonie has weakened to within 0.5% of what would be a five-month low the dollar in anticipation of fresh action from the Bank of Canada to support the economy.
1. Trump signs Hong Kong bill
President Donald Trump signed into law the Hong Kong Human Rights and Democracy Act, effectively putting China’s treatment of pro-democracy protests at the heart of U.S. trade policy toward the country. Trump also signed an order banning the export to China of crowd control munitions such as tear gas.
The move threatens to further complicate trade negotiations, given Beijing’s sensitivity to what it considers an infringement of its sovereignty. However, it comes after a week that showed the U.S. economy withstanding the pressure of the trade war better than China’s.
While Beijing repeated its condemnation of the bill and threatened countermeasures, it has so far not taken any action.
2. Global stocks stall on fear of new delay to trade deal
Global stock markets retreated after seeing another hurdle raised to the oft-promised-but-never-delivered ‘phase-1’ deal on trade between the U.S. and China.
The Euro Stoxx 600 had closed on Wednesday within 1% of its first all-time high in four and a half years but fell 0.2% at the open and drifted sideways from there. The Shanghai Composite composite index fell 0.5%.
By 6 AM ET (1100 GMT), Dow futures were down 83 points or 0.3%, while S&P 500 futures were down 0.2% and Nasdaq 100 futures were down 0.3%. All cash stock and bond markets in the U.S. will, however, be closed for Thanksgiving.
3. Pound rises as Conservatives close in on U.K. election victory
U.K.-focused assets rallied after a much-anticipated opinion poll by YouGov showed the Conservative Party on course for its biggest election victory in over 30 years.
The YouGov poll predicted a Tory majority of 68 seats in the new parliament. That’s big enough not only to ensure the passage of Prime Minister Boris Johnson’s EU Withdrawal Bill, but also arguably big enough for him to face down hardline Brexiteers who will be expected to press for a thorough rupture with the EU’s standards and regulations as the U.K. negotiates its future trading arrangements.
The pound hit a six-month high against the euro on the news, but failed to make fresh highs against the dollar, where it remains firmly capped below $1.3000. The FTSE 100 fell 0.4%, but the more domestically focused FTSE 250 rose 0.2%, while the 10-year Gilt yield fell three basis points to 0.63% before bouncing a little.
4. Indian Supreme Court rattles telecoms sector
One of the world’s biggest telecoms market was thrown into turmoil as India’s Supreme Court ruled that the country’s leading network operators must pay the government an extra $13 billion in network-related fees.
The ruling threatens the viability of the three biggest carriers in the country – Bhati Airtel and Vodafone Idea. Vodafone (LON:VOD) in the U.K. fell over 3% on the news.
The government of Prime Minister Narendra Modi has signalled that it may offer the operators relief, possibly in the form of deferring payment for new spectrum rights. Analysts see that as a preferable political alternative to the loss of competition that would follow the collapse of Bhati and Idea.
5. Euro zone close to bottoming out
There were fresh signs of a bottoming out in the eurozone economy as the European Commission’s economic sentiment index, which includes both business and consumer sentiment, rose more than expected to 101.3 in November.
In addition, the European Central Bank said M1 monetary growth, one of the more reliable leading indicators of the economy, increased to an annual rate of 8.4% in October, from 7.9% in September.
Preliminary German consumer inflation data for November avoided any negative surprises, although the same could not be said for Italy’s producer prices, which fell at their fastest rate in over three years in October.
1. China's companies suffer U.S. tariff hit
The pressure on China’s economy from U.S. tariffs was in evidence, as data showed aggregate industrial profits fell 9.9% on the year in October – the fastest rate since China started compiling the data in 2011. The news came after data showing the U.S. goods trade deficit shrunk to the narrowest in over a year in October.
Analysts at ING pointed out a sharp divergence by sector within the overall data, with trade-related sectors faring much worse than infrastructure-related ones. Chemical fibers, automotive, paper and textiles all suffered, while mining companies and those in non-auto transportation more than doubled their profits.
The news came after more comments from President Donald Trump late on Tuesday which – like so many comments – were carefully hedged, even though markets zeroed in on his claim that the two countries are in the “final throes” of talks to secure a ‘phase-1’ deal to de-escalate the trade war.
2. Pre-holiday data dump incoming
There’s a heavy dump of U.S. economic data due, as weekly jobless claims numbers are moved up from their usual Thursday slot to avoid falling on Thanksgiving. The jobless claims numbers are due at 8:30 AM ET (1330 GMT), along with durable goods orders and prices for personal consumer expenditures, a measure tracked particularly closely by the Federal Reserve.
The most-watched number, however, maybe the second reading of third-quarter gross domestic product. The first reading indicated that annualized growth slowed to 1.9% in the three months through October, the slowest rate since mid-2017.
Durable goods orders for October are also due at 8:30 while the Chicago PMI follows at 9:45 AM.
3. Stocks set to open higher
U.S. stock markets are poised to inch a little higher on the last day of trading before the holiday weekend, supported by President Trump’s latest aside on trade talks with China (which included no mention of whether he intends to veto the bill that would tie China’s trade preferences to its treatment of pro-democracy protesters in Hong Kong).
By 6:15 AM ET, Dow futures were up 21 points or 0.1%, while the S&P 500 and the Nasdaq 100 futures contracts were both up by 0.2%.
European stocks overnight hit a four-year high, also lifted by Trump's comments.
One of the last major earnings reports is due before the bell in the form of Deere & Co., whose update will provide an insight into the ongoing effects of a trade war that has badly hit Chinese purchases of U.S. farm goods.
4. Silver Lake bets on the blue half of Manchester
U.S. private equity made another big bet on European soccer, as Silver Lake agreed to inject $500 million into the reigning English champions Manchester City at a valuation of $4.8 billion. That makes Manchester City notionally the most valuable sporting franchise in Europe.
The deal comes at a time when Liverpool FC, owned by Fenway Sports Group, are running away with the English Premier League after winning the UEFA Champions League, the world’s most lucrative prize in club soccer, last season.
Manchester City is currently majority owned by Abu Dhabi-based sovereign funds. According to the Financial Times, Silver Lake – better known for its investments in tech companies - intends to hold its stake for “about a decade” before exiting via an IPO or sale to another private investor.
5. The U.K. election poll to end all polls (or not)
Want to know who’s going to win the U.K. election? Then head to the website of The Times of London at 5 PM ET (2200 GM) for the publication of what’s seen as the touchstone of opinion polls.
YouGov’s “Multilevel Regression and Post-stratification” poll was the one that correctly forecast the Conservatives would lose their majority in 2017 at a time when all other polls were predicting a comfortable victory for then-Prime Minister Theresa May – just like they do for Boris Johnson at the moment.
The poll uses a sample of around 50,000 voters – as opposed to the usual 1,000-1,500 and analyses them through a number of filters. However, because of its scale, its results may not reflect late changes in attitude.
1. China's trade call
China’s Commerce Ministry kept up the happy talk on trade, issuing a statement that China and the U.S. had “reached consensus on properly resolving relevant issues” on a phone call with U.S. Trade Representative Robert Lighthizer and U.S. Treasury Secretary Steven Mnuchin. It added that the two sides had agreed to stay in contact on the remaining points for a “phase one” trade deal.
However, the statement provided no further detail and markets reacted with a shrug, having already rallied on Monday in the wake of equally waffly statements about Chinese commitment to curbing intellectual property theft.
2. Liquidity fills Powell’s glass
Federal Reserve Chairman Jerome Powell gave a strongly upbeat assessment of the economy in a speech on Monday evening in Providence, R.I.
“At this point in the long expansion, I see the glass as much more than half full,” Powell said in comments that all but ruled out any further cuts to interest rates for the foreseeable future.
He stressed though that the Fed remains data-driven, and there’s data aplenty due Tuesday. The October trade balance is published at 8:30 AM ET (1330 GMT), along with retail inventories, while S&P/Case-Shiller house price data for September are due at 9 AM, to be followed an hour later by new home sales data for October.
Also at 10 AM, the Conference Board publishes its consumer confidence survey for November, while the Richmond Fed publishes its monthly business survey.
3. EBay continues M&A flurry
eBay (NASDAQ:EBAY) agreed to sell StubHub to Swiss-based Viagogo for $4.05 billion, a deal that will go some of the way to appeasing activist investors Elliott Management and Starboard Capital who have been pressuring it to streamline since January.
The deal follows a flurry of activity on Monday that saw the confirmation of Charles Schwab's (NYSE:SCHW) all-share offer for TD Ameritrade (NASDAQ:AMTD), LVMH (PA:LVMH) paying $16 billion for Tiffany (NYSE:TIF) and Novartis AG (SIX:NOVN) buying Medicines Co. (NASDAQ:MDCO) for $9.7 billion.
While Schwab is taking advantage of elevated equity market to use its shares as currency in the Ameritrade deal, Novartis and LVMH are borrowing to raise cash for their respective deals.
4. Stocks already have an eye on Thursday
U.S. stock markets are settling in for the holiday weekend already, by the look of things. All three major indices are set to open effectively unchanged, shrugging off the latest Chinese comments on trade.
By 6 AM ET, Dow futures were down 2.5 points, less than 0.1%, while S&P 500 futures and Nasdaq 100 futures were also flat, unmoved even by the confirmation of the merger of Charles Schwab and TD Ameritrade.
5. API inventories due; UN report blasts lack of Paris compliance
Oil traders can’t afford to relax yet, however. The American Petroleum Institute will release its weekly assessment of crude oil stocks at 4:30 PM ET. Crude prices are drifting just below two-month highs on a combination of a series of upbeat comments on trade and signs of a slowdown in U.S. shale oil output growth.
Elsewhere Tuesday, an annual report by the UN on Climate Change again argued the need for more dramatic action to cut fossil fuel use, highlighting the difference between countries’ pledges under the Paris Accord and their actual policies.
"If governments don't change policy, we see emissions sky rocketing,” International Energy Agency director Fatih Birol said at a presentation.
1. LVMH to buy U.S. jeweler Tiffany
Shares in French luxury goods maker LVMH (PA:LVMH) rose after it said it has reached an agreement to buy U.S. jeweler Tiffany (NYSE:TIF) for $16.2 billion, in its biggest acquisition to date.
The $135-per share cash deal will boost LVMH's smallest business, the jewelry and watch division and help it expand in one of the fastest-growing sections of the industry.
"The acquisition of Tiffany will strengthen LVMH's position in jewelry and further increase its presence in the United States," LVMH and Tiffany said in a joint statement.
Tiffany CEO Alessandro Bogliolo said the transaction would "provide further support, resources and momentum."
Founded in New York in 1837 and known for its signature robin's egg blue packaging, Tiffany is one of the best-known names in the jewelry industry, but is in turnaround mode after struggling to win over younger shoppers in recent years.
2. Uber stripped of London license, again
Uber (NYSE:UBER) has been stripped of its London operating license for the second time in just over two years after the city's regulator said the global ride sharing company put passenger safety at risk.
A change to Uber's systems allowed unauthorized drivers to upload their photos to other drivers' accounts, meaning they could pick up passengers as if they were the booked driver, which happened in at least 14,000 trips, Transport for London (TfL) said.
Uber said it will appeal the ruling, which it called “extraordinary and wrong” and can continue to operate pending the outcome provided it launches official proceedings within 21 days.
3. Stocks set to rise on trade deal hopes
U.S. futures pointed to a higher open on Wall Street on Monday, at the start of a holiday shortened week, following reports that Washington and Beijing were nearing a trade agreement.
The Chinese state-backed Global Times newspaper said on Monday China and the United States were "very close" to an initial trade agreement, adding to optimism from Friday, when the presidents of both the countries reiterated their desire for a deal.
By 5:55 AM ET (1055 GMT), Dow futures were up 80 points, or 0.3%. S&P 500 futures were up 0.2% and Nasdaq 100 futures were up 0.4%.
Tommy Hilfiger and Calvin Klein parent company PVH (NYSE:PVH) is due to report earnings ahead of the open, while HP (NYSE:HPQ) and Palo Alto Networks (NYSE:PANW) are scheduled to report after the close.
4. Jerome Powell speech
Federal Reserve Chair Jerome Powell is due to speak at the Greater Providence Chamber of Commerce annual dinner later Monday and is expected to underline that the central bank is in no hurry to reassess the path of interest rates. The Fed has cut rates three times so far this year.
In congressional testimony on the economic outlook last week Powell said the impact of this year’s cuts were still to be fully felt and will let the central bank likely hit pause on further rate moves unless there is a “material” change in the economic outlook.
The Fed has one more interest-rate setting meeting before the end of the year, on Dec.10-11, but investors now see the Fed keeping interest rates unchanged until at least mid-2020.
5. Bitcoin extends slide to hit 6-month lows
Bitcoin extended a steep slide into a second week on Monday, falling below the psychologically important $7,000 level to plumb the lowest levels in six months following reports that Chinese authorities are cracking down on cryptocurrency operations.
The world’s largest cryptocurrency hit a low of $6,534.8, the weakest since May 11 and was trading at $6,940 by 5:55 AM ET (1055 GMT), according to the Investing.com Bitcoin index.
Bitcoin has fallen more than 26% this month but has still racked up substantial gains for the year after ending 2018 at $3,709.4. It hit highs of $13,929.8 in late June but was unable to sustain the gains made in the first half of the year and has been gradually declining since then.
--Reuters contributed to this report
1. Mixed messages on trade deal
The leaders of the U.S. and China on Friday both underscored their desire to sign an initial trade deal and defuse a 16-month tariff war that has roiled financial markets and acted as a drag on global economic growth.
Chinese President Xi Jinping said Beijing wants to work out an interim or 'phase one' trade pact but is not afraid to retaliate when necessary.
U.S. President Donald Trump said Friday a trade accord with China is "potentially very close," before adding, "The question is whether or not I want to make it."
But negotiations could flounder if Trump signs into law a bill supporting Hong Kong's pro-democracy protesters or if U.S. warships keep sailing near islands claimed by China in the South China Sea.
2. U.S. economic data
Both manufacturing and consumption will be in the spotlight this week with investors monitoring regional manufacturing PMIs for any signs of a slowdown in the U.S. factory sector. Consumer confidence data on Tuesday, along with the start of the annual Black Friday retail extravaganza will give investors fresh insights into the resilience of consumer spending. Federal Reserve Chairman Jerome Powell is to speak on Monday, but Wednesday’s data on durable goods orders for October will likely be the highlight of the calendar, while a second reading on third quarter GDP the same day is not expected to bring any significant revision.
3. Earnings results
There is a full slate of earnings reports coming out in the run up to the Thanksgiving holiday with global apparel company PVH (NYSE:PVH), which owns brands including Tommy Hilfiger and Calvin Klein, reporting ahead of the open on Monday. Cybersecurity company Palo Alto Networks (NYSE:PANW) is due to release its first fiscal 2020 earnings report after the closing bell the same day.
Retailers Burlington Stores (NYSE:BURL), Dollar Tree (NASDAQ:DLTR), Best Buy (NYSE:BBY) and Dick’s Sporting Goods (NYSE:DKS) are set to report ahead of the open on Tuesday, while Dell (NYSE:DELL) and HP (NYSE:HPQ), which is being targeted by Xerox (NYSE:XRX) for an acquisition, will report after the close.
Agricultural machine maker Deere (NYSE:DE) is set to report on Wednesday. The Sino-U.S. trade war has pressured Deere amid persistent uncertainty over the outlook for the agriculture sector.
4. Black Friday
U.S. retailers launch annual Black Friday sales on Nov 29, ushering in the high-stakes holiday shopping season for store chains that are struggling to adapt to shrinking mall traffic.
The seismic shift in the consumer landscape has exposed a growing divide between retailers capable of adapting their bricks-and-mortar stores to the online world, and others struggling to keep customers coming through their doors.
Recent quarterly reports illustrate that divide. Shares in Target (NYSE:TGT) for instance surged to record highs after it raised full-year earnings forecasts, but department stores Macy’s (NYSE:M) and Kohls (NYSE:KSS) cut their outlooks ahead of the holiday season. Macy's shares extended their losses for 2019 to 50%.
But even with so many store chains struggling, U.S. retail stocks haven't done too badly. The S&P 500 Retailing index is up 21% for the year, not far behind the S&P 500's 24%.
5. Euro zone CPI
Friday’s preliminary data on euro zone inflation will be closely watched, not least by new European Central Bank chief Christine Lagarde. Price growth in the bloc has undershot the ECB's target of close to but just below 2% since 2013 and is not expected to approach that level any time soon, let alone this month.
On the bright side, predictions are for annual inflation to have edged up in November for the bloc and in Germany. Lagarde has also pledged to review the ECB's inflation strategy, following in the footsteps of the U.S. Federal Reserve.
Several ECB officials, including Chief Economist Philip Lane are also due to speak this week.
--Reuters contributed to this report
1. Schwab and Ameritrade roll the dice
The future of the U.S. brokerage market looks different after the announcement that Charles Schwab (NYSE:SCHW) is in talks to merge with TD Ameritrade (NASDAQ:AMTD). The deal would combine the U.S.’s two biggest brokerages, as long as antitrust regulators approve it.
There’s every reason to believe it will get the regulatory ok, given how the brokerages are being squeezed both by roboadvisor startups and more established competition, including Wall Street’s biggest banks.
The news confirmed speculation that consolidation would surely follow as a result of the price war that erupted last month when Schwab, Ameritrade and others all cut commissions on trading basic U.S. products to zero. The shares of both Schwab and Ameritrade rose sharply on Thursday, putting the near-term focus squarely on the likes of E*Trade (NASDAQ:ETFC), which now needs to come up with some kind of strategic response. E*Trade’s stock fell over 9% on Thursday.
2. Lagarde signals continuity, as do Europe's weak PMIs
It looks like more of the same in Europe, at least in the short term: on the economic front, flash purchasing manager indices for the euro zone showed stabilization but nothing more in November.
Optimists will point to the bigger-than-expected upticks in French and German manufacturing activity; pessimists will counter that the fundamental cause of their weakness – the U.S.-China trade war – is as far as ever from being resolved. They’ll also chip in that service sector activity and job creation are also cooling.
The fact that things aren’t getting noticeably worse will, however, lessen the need for any urgent policy action from Christine Lagarde, whose first major speech as European Central Bank president suggested she would stick to Mario Draghi’s strategy of keeping monetary policy loose while badgering euro zone governments to do more heavy lifting. Bank stocks advanced after she omitted to say anything that smelled of cutting rates further into negative territory.
3. Stocks set to edge higher at end of a down week
U.S. stock markets are set to open higher but are still on course to end the week down after belief in a quick trade deal with China slipped.
The U.S. Chamber of Commerce’s Myron Brilliant told CNBC earlier Friday that the increase in tariffs on Chinese imports scheduled for Dec. 15th is likely to go ahead, given that there is little prospect of the two sides finding common ground before then.
By 6:30 AM ET (1100 GMT), Dow futures were up 20 points, or 0.1%. S&P 500 Futures were also up 0.1% and Nasdaq 100 futures were up 0.3%.
Retailer Nordstrom (NYSE:JWN) looks set for a pop at opening after reporting sharply better-than-expected profit numbers for the third quarter, while Gap (NYSE:GPS) stock also rose in after-hours trading after it beat expectations. Auto components group Wabco (NYSE:WBC) may be in for a tougher time after missing forecasts.
4. Tesla's taking aim at the pickup segment
Tesla (NASDAQ:TSLA) stock is poised to open at a nine-month high after the company showcased its latest vision: an all-electric pickup truck with a price tag starting at $40,000. Higher-end versions of the so-called ‘Cybertruck’ would have a towing capacity of 14,000 pounds, CEO Elon Musk said at a presentation. That would compare favorably with Ford’s F-150, which tows up to 13,200 lbs.
The presentation was only slightly marred by an embarrassing failure of the truck’s glass, which turned out to be not as strong as Musk claimed.
The pickup truck segment has been Detroit’s most reliable money-spinner in recent years. Expanding its product range could give Tesla (NASDAQ:TSLA) an extremely valuable extra source of revenue and profit.
5. Unsafe havens crash
Bitcoin fell to its lowest in six months, extending losses in a miserable week that has seen it slide 17%.
The world’s most valuable digital currency touched $7,000 overnight before recovering to trade at $7,182.40 by 6:15 AM. Ethereum and XRP, the two next most valuable, have lost 18% and 12% respectively this week.
As so often with cryptocurrencies, there has been no visible trigger for the move, the mere fact of which has only served to undermine the notion of digital assets as a “safe haven”.
1. China talks tough on HK, underlining trade impasse
China ramped up its criticism of the bill passed by the Senate earlier this week tying China’s trade preferences in the U.S. to its respect for Hong Kong’s political autonomy. Reports suggest the bill will be sent to President Donald Trump today for signing.
"If the U.S. side obstinately clings to its course, the Chinese side will inevitably adopt forceful measures to take resolute revenge, and all consequences will be borne by the United States," the Communist Party’s People’s Daily said in a front-page editorial.
Trump indicated on Wednesday that the administration is considering exempting Apple (NASDAQ:AAPL) from the increase in import tariffs on Chinese goods that is scheduled to come into force on Dec. 15. That would make it easier for the hike in import duties to go ahead, given that it would pre-empt a sharp rise in iPhone prices that would be highly visible evidence of the negative impact of tariffs on U.S. consumers.
Trump also said China wasn’t “stepping up” as he hoped as regards ongoing trade talks. China’s Commerce Ministry said it would keep all communications channels with the U.S. open, but Reuters sources said there is a growing risk that no deal will be signed this year.
2. More retailers to report as stocks edge lower
U.S. stock markets are on course to open the day slightly lower, after overnight news from China underlined the obstacles to reaching a ‘phase-1’ deal to de-escalate trade tension in the short term.
By 5:45 AM ET (1045 GMT), the futures on all three main U.S. indices were down less than 0.1%, with Dow futures a modest 11 points in the red.
A day after weak results from Kohl's (NYSE:KSS) sent a shudder through the sector, it’s show time for another handful of battered retailers.
Macy’s Inc (NYSE:M) and BJs Wholesale Club Holdings Inc (NYSE:BJ) get the ball rolling ahead of the open, while Nordstrom Inc (NYSE:JWN), Gap Inc (NYSE:GPS) and Ross Stores Inc (NASDAQ:ROST) round off what should be an eventful day after the closing bell. Jack In The Box Inc (NASDAQ:JACK), Splunk Inc (NASDAQ:SPLK) and Williams-Sonoma Inc (NYSE:WSM) are also all scheduled to report.
3. Impeachment Hearings
Impeachment hearings are set to continue in front of the House Intelligence Committee at 9 AM ET, with testimony from former White House Russia expert Fiona Hill and David Holmes, an official with the U.S. embassy in Kyiv.
Their testimony, in the last hearing scheduled for this week. will build on some explosive disclosures Wednesday by Gordon Sondland, a former Trump donor who is now Ambassador to the EU. Sondland said he had pressed Ukraine to announce investigations into the son of Joe Biden at the “express direction” of Trump, adding that “everyone was in the loop”, including Secretary of State Mike Pompeo.
Later in the day, Laura Cooper, the deputy assistant secretary of defense for Russia, Ukraine and Eurasia, had also testified that Ukraine was aware that the administration was holding back military aid approved by Congress as early as July 25, undermining Republican claims that the country’s government couldn’t have felt itself under pressure to offer a ‘quid pro quo’ because it wasn’t aware of what Trump wanted.
4. Fiat Chrysler under pressure from GM lawsuit
Fiat Chrysler (NYSE:FCAU) shares extended losses in Europe overnight after General Motors (NYSE:GM) sued the company for alleged racketeering by bribing union officials to ensure it didn’t lose a long-standing advantage in labor costs over the other big two Detroit motor companies.
Fiat Chrysler shares fell 1.6% in Milan, after losing 3.7% on Wednesday in New York as the news broke.
Shares in France’s PSA Group, the owner of the Peugeot, Citroen and Opel brands, edged fractionally higher, with any concern at the possible disruption of its merger talks with FCA offset by the feeling that PSA shareholders were upset about paying too much for the deal in the first place.
5. Jobless Claims to draw more attention
There may be more eyes on the weekly jobless claims numbers than usual at 8:30 AM ET, after initial claims hit their highest level since June in last week’s report. Economists expect initial claims to fall to 219,000 from 225,000 – a figure that’s still extremely low by historical standards.
Elsewhere, the Philadelphia Fed releases its monthly manufacturing survey at the same time, while existing home sales data are due at 10 AM ET.
Elsewhere across the world, the European Central Bank will release the accounts of Mario Draghi’s last meeting as president, a day ahead of his successor Christine Lagarde’s first keynote speech.
Earlier, the central bank of Indonesia left its key interest rate unchanged after three successive cuts, but it still loosened conditions further by cutting banks’ reserve ratio requirements. South Africa’s central bank is due to make its call on local rates at 7:30 AM ET.
1. China reacts badly to Senate vote
Beijing reacted angrily to the Senate’s vote to approve a bill that would allow the U.S. to curtail China’s trade preferences if it failed to respect Hong Kong’s political autonomy. A Chinese foreign ministry spokesman called it “interference” in China’s internal affairs and said it was “doomed to fail.”
The vote came only a day after Beijing threatened to overturn a ruling by Hong Kong’s highest court that quashed the authorities’ efforts to ban the wearing of masks at protests, a threat that was broadly seen as a new level of mainland intrusion into Hong Kong’s political affairs.
The Senate had previously held back from voting on the bill, afraid of complicating the administration’s trade talks with China. President Donald Trump still has to sign it into law.
2. Stocks to open lower under Chinese influence
U.S. stock markets are set to extend Tuesday’s losses when they open later as the deterioration in relations between Washington and Beijing threatens to disrupt détente on trade.
By 6 AM ET (1100 GMT), Dow futures were down 105 points or 0.4%, while S&P 500 Futures were down 0.3%. Nasdaq 100 futures were down by 0.5%.
Overnight, the news had shaken both Asian and European markets, with the main Shanghai and Hong Kong indices both falling 0.8%, despite the Chinese central bank shaving its one-year and five-year loan prime rates (LPR) by another 5 basis points each. The move was largely expected. Selling may have been amplified by the need to accommodate the year’s biggest share offering (to date) into portfolios. Alibaba (NYSE:BABA) priced its offering in Hong Kong, selling 500 million shares and raising some $12.9 billion.
European markets also fell, with trade-sensitive German DAX losing 0.9% and the U.K. FTSE 100 falling 1.2%
3. Sondland and others to testify in impeachment hearings
President Trump, meanwhile, has other concerns. Four more witnesses are scheduled to testify before the House on Wednesday, including Ambassador to the EU Gordon Sondland, who admitted in testimony behind closed doors that he told a Ukrainian official that military aid to Ukraine would be conditional on Kyiv announcing an investigation into a company where Joe Biden’s son Hunter served as a director.
Sondland will testify in the morning, while Laura Cooper, deputy assistant secretary of defence for Russian, Ukrainian and Eurasian affairs, and David Hale, under-secretary of state for political affairs, will testify in the afternoon.
On Tuesday, National Security Council expert on Ukraine Lt. Col. Alexander Vindman had testified that he thought it “improper” for the president to request a politically-motivated investigation in return for the aid, saying it undermined U.S. policy toward the country, which has been partly occupied by Russian-backed rebels since 2014
4. Retailers to report; Fed minutes also due
After mixed results from Home Depot, TJX and Urban Outfitters on Tuesday, it’s the turn of Target and Lowe’s to report – both due before the opening.
At 2 PM, the Federal Reserve will release the minutes of its last policy meeting, where two members of the Federal Open Markets Committee voted against the decision to cut the target range for fed funds by 25 basis points. However, given that Fed Chairman Jerome Powell has already testified in Congress since those meetings, the minutes are likely to be of historic interest only.
5. Oil steadies ahead of government inventory data
The U.S. government will release its weekly report on U.S. oil supplies at 10:30 AM ET (1530 GMT), after two days of heavy falls for crude futures on fears for the global demand outlook.
Figures released on Tuesday by the American Petroleum Institute showed a 5.95 million-barrel increase in U.S. crude stocks last week, well above the 1.5 million-barrel increase expected.
By 6 AM ET, U.S. crude had stabilized at around $55.22 a barrel, up 0.3% on the day, having dipped as low as $54.86 overnight. Brent was up 0.5% at $61.20 a barrel.
1. Stocks rise on Huawei extension
U.S. stock markets are pushing higher in the wake of the U.S.’s decision to issue a new 90-day extension allowing U.S. companies to continue doing business with China's Huawei Technologies Co Ltd.
By 5:30 AM ET (1130 GMT), Dow futures were up 110 points or 0.4%, while S&P 500 futures were up 0.3% and Nasdaq 100 futures were up 0.4%.
2. Retail's big day
It’s a big day for retail earnings, with TJX (NYSE:TJX), Urban Outfitters (NASDAQ:URBN) all scheduled to report. In addition, there’ll be the Redbook research survey of large store sales at 8:55 AM ET.
Analysts expect TJX (NYSE:TJX) to report earnings per share of 66 cents on $10.31 billion in revenue, both of which would represent a gain of around 5%. For Urban Outfitters (NASDAQ:URBN), the forecast is for 57c EPS (down nearly 20% on the year) on a small increase in revenue to $1 billion.
In addition, there’ll be an update from department store Kohl’s, where earnings are expected to be down around 8% on the year at 86c on effectively unchanged revenue.
3. Housing market update
The biggest retailer to report today is, however, Home Depot (NYSE:HD), which is expected to post an 11% rise in earnings per share to $2.52 on a 5% gain in revenue.
Home Depot (NYSE:HD) had complained earlier in the year that its sales had been hit by high lumber prices. These seem to have reversed partially in recent months. However, activity in the housing market has remained choppy since then, with increases in housing starts and building permits in August being reversed in September.
October’s figures for housing starts and building permits are both due at 8:30 AM ET (1330 GMT)
4. Hong Kong stand off continues
The standoff between protesters and police at a university campus in Hong Kong continued, as police appeared to keep the campus in a state of siege while allowing under-18s to leave without being immediately arrested.
Fears of an immediate intervention by Chinese troops stationed in Hong Kong, which rose after they were spotted on the streets in a clean-up operation at the weekend, still haven’t been realized.
However, the situation remains tense, with Chinese media reporting the suspension of train services between Hong Kong and the mainland.
5. Johnson vs Corbyn
The first major televised debate of the U.K. general election takes place later, pitting Conservative leader Boris Johnson against his Labour counterpart Jeremy Corbyn.
Given the Conservatives' double-digit lead in the polls, it's Corbyn who's under more pressure to deliver a major victory. Failure to do so is likely to see the Tories cement their dominance.
The debate starts at 8 PM U.K. time (3 PM ET).
1. Saudi Aramco, the trimmed-down blockbuster
Saudi Arabia scaled down plans for the initial public offering of oil company Saudi Aramco in response to tepid demand from international investors.
Aramco is now aiming to sell only 1.5% of its shares on the domestic stock exchange, barely a quarter of initial hopes for a $100 billion deal. It also announced a price range valuing at between $1.6 trillion and $1.71 trillion, some 15% short of the hoped-for valuation even at the top end of the range.
Tellingly, plans to market the offering in the U.S., Canada and Japan have been scrapped. That leaves it highly dependent on selling to local investors. To make that easier, The Saudi Arabian Monetary Authority will allow smaller retail investors to borrow twice their cash investment, double the leverage it usually allows at IPOs, according to Bloomberg.
2. Police battle students in Hong Kong, but the stock market rises
Protests in Hong Kong escalated still further at the weekend, with police and protesters inconclusively battling for hours for control over one of the city’s university campuses. There were over 150 arrests.
“The police might not storm the campus but it seems like they are trying to catch people as they attempt to run,” Democratic lawmaker Hui Chi-fung told Reuters.
The Hong Kong stock index closed 1.4% higher, however, on hopes that the police action may break the back of student resistance without any further escalation in violence and casualties.
3. Stocks set to open higher
U.S. stock markets are set to open at fresh highs, extending an unbroken six-week rally, ostensibly reflecting confidence that the U.S. and China will reach some kind of trade deal before too long, despite the lack of fresh evidence to suggest an agreement is near.
By 6:15 AM ET, Dow futures were up 60 points, or 0.2%, while S&P 500 Futures were up 0.1% and Nasdaq 100 futures were up 0.2%.
With 92% of companies in the S&P 500 having now reported earnings for the quarter through September, the average annual decline in earnings is around 2.3%, according to FactSet. If that trend is confirmed, it will be the biggest annual drop in earnings since the middle of 2016 – and also complete the longest sequence of declining earnings in three year.
In other corporate news, HP's (NYSE:HPQ) board unanimously rejected a merger offer from Xerox (NYSE:XRX).
Read More: 5 Earnings Reports To Watch This Week: Retailers Edition
4. Pound surges as Conservatives extend poll lead
The British pound surged over the weekend to trade at close to a six-month high after a new round of opinion polls confirming a large lead for the Conservative Party of Prime Minister Boris Johnson.
Polls published over the weekend showed the Tories leading the left-wing Labour Party by between 15% and 17%, something that political scientists said should be enough to guarantee the party a majority despite the vagaries of the U.K.’s first-past-the-post electoral system.
Both sides are making more and more expensive promises on taxes and spending as the campaign runs into its last month. Johnson is scheduled to outline a cut in corporate income tax at a rally Monday, hoping to win over businesses that have stayed overwhelmingly skeptical about the benefits of Brexit. By 6:15 AM ET (1115 GMT), the pound was at $1.2967, up 0.5% from late Friday, and at 1.1720 against the euro, its highest in nearly seven months.
5. Trump reportedly delays decision on e-cigarettes
President Donald Trump put off a decision on threatened restrictions on e-cigarettes and vaping products in response to resistance from the industry and users, the Wall Street Journal reported, citing an administration official.
Trump had threatened to ban most vaping products from the U.S. marketplace in September on health grounds, sending all of the major tobacco groups' stock prices sharply lower on fears that the product on which they're building their strategies for the future could be outlawed.
He's due to meet with industry representatives sometime in the near future but it's not clear that that will have a clear result, the WSJ said.
1. Central banks in focus
On Wednesday the Fed is to publish the minutes from its October meeting, when it indicated that its easing plans were now on hold after three consecutive rate cuts. The U.S. central bank has described the rate cuts as an insurance policy against the drag from slowing global growth and geopolitical and trade uncertainty.
The minutes come after Fed Chair Jerome Powell testified before congressional committees last week, reiterating that the Fed is done with easing for now. Meanwhile, New York Fed President John Williams, Cleveland Fed President Loretta Mester and Minneapolis Fed President Neel Kashkari are all due to speak this week, with investors on the lookout for additional policy insights against a background of ongoing trade uncertainty.
On Thursday, the European Central Bank will publish the minutes of its most recent meeting, the last under the leadership of Mario Draghi and newly minted ECB President Christine Lagarde will give a speech on Friday.
2. Trade developments
Stocks bounced on Friday, with the Dow reaching 28,000 for the first time ever, after White House economic advisor Larry Kudlow said China and the U.S. were getting close to an agreement about ending their 16-month trade war, which has roiled financial markets and acted as a drag on global growth.
Chinese state media Xinhua reported Sunday that the two sides had "constructive talks" on trade in a high-level phone call on Saturday but gave no further details on the timing of a possible deal.
An agreement had appeared likely in May, but those prospects were dashed after U.S. negotiators said China backed away from the text of a draft agreement. Concerns flared again last week amid reports that the trade talks had hit a snag.
3. Economic data
Investors will be looking ahead to flash PMI’s from Japan, the Eurozone and the U.S. on Friday, numbers widely regarded as a forward-looking indicator of economic health. October PMIs pointed to some stabilization, raising expectations that hefty central bank easing had helped the global economy to bottom out.
On Thursday, the U.S. is due to release existing home sales data along with numbers on initial and continuing jobless claims.
Financial stability reviews from the ECB and the Bundesbank are also due this week.
4. Retail earnings
Home Depot (NYSE:HD), Kohl's (NYSE:KSS), Urban Outfitters (NASDAQ:URBN), Target (NYSE:TGT), Macy’s (NYSE:M) and Gap (NYSE:GPS) are among the chains reporting this week as third quarter earnings season winds up. Based on results from 458 S&P 500 companies that have reported, earnings are down 0.4% from Q3 2018, Refinitiv data shows.
The big stores, plus online behemoth Amazon (NASDAQ:AMZN), are a key indicator of whether the U.S. consumer -- representing more than 70% of the economy-- is still spending, even as manufacturing struggles and job growth plateaus. It's particularly important heading into the make-or-break, year-end shopping stretch.
Amazon's weak holiday quarter guidance last month fed worries that the trade spat is hurting the U.S. retail industry.
5.Alibaba to price stock before Hong Kong listing
Chinese e-commerce giant Alibaba (NYSE:BABA) Group is expected to set the offer price for its secondary listing in Hong Kong on Tuesday, after U.S. markets close, which is expected to raise up to $13.4 billion to fund its expansion plans.
Analysts say establishing a base outside the U.S. gives the U.S.-listed company options, especially in the light of the U.S.-China trade dispute.
The share sale, set to be Hong Kong’s largest in more than nine years, will be seen as a vote of confidence in the global financial hub even as protests grow increasingly violent.
Alibaba holds the record for the world’s biggest initial public offering, with its $25 billion New York listing in 2014.
Meanwhile, Saudi Aramco on Sunday set a price range for its upcoming listing, valuing the oil giant between $1.6 trillion and $1.7 trillion, making it potentially the world's biggest IPO.
1. Alibaba's monster offering in Hong Kong
Alibaba (NYSE:BABA) completed the world’s biggest share offering so far this year, placing as much as 575 million new shares at a price of around $24.01 in a listing on the Hong Kong Stock Exchange.
That means the total offering will raise as much as $13.8 billion if the ‘greenshoe’ option is exercised fully.
The deal comes at a critical juncture for Hong Kong and its stock market after a week of intensified and frequently violent protests (the authorities blamed demonstrators Friday for killing a 70-year old cleaner, a bystander at one protest, with a brick).
President Xi Jinping said that restoring order is the city’s “most urgent task” and called on the city’s leader Carrie Lam to take more decisive action.
2. Key data on retail sales, industrial output due
U.S. retail sales and industrial production data for October will show how much momentum the U.S. economy carried into the fourth quarter, a day after the comparable figures from China both came out weaker than expected. They come after two days of Congressional testimony by Federal Reserve Chairman Jerome Powell that confirmed there will likely be no further U.S. rate cuts unless the economy weakens significantly.
Retail sales (due at 8:30 AM ET or 1330 GMT) are expected to have rebounded 0.2% from September’s shock decline, while core retail sales, which exclude autos, are expected to have risen a more robust 0.4%.
Industrial production figures, which are announced 45 minutes later at 9:15 AM ET (14:15 GMT), are more of a cause for concern. Analysts predict another 0.4% drop from September, with manufacturing production expected to drop 0.6%.
3. Stocks lifted by Kudlow comments on trade deal
U.S. stock markets are set to open higher in the absence – for now - of any major crackdown by Beijing in Hong Kong. Comments by White House economic advisor Larry Kudlow that a trade deal with China is close are also supporting sentiment.
The S&P 500 Futures contract hit a new all-time high of 3,110.38 overnight but had retraced a little to hold just above 3,100 by 6:30 AM ET (1130 GMT), up 0.2% from late Friday. Dow futures were also up 0.2%, while Nasdaq 100 futures were up 0.3%, helped by stronger-than-expected earnings after the close on Thursday by chipmaker Nvidia.
Nvidia’s numbers more or less wrapped up this week’s earnings dump.
4. IEA predicts ample oil supply in 2020
The International Energy Agency warned that OPEC and its Russian-led allies face a “major challenge” in balancing the oil market next year, as some 2.3 million barrels a day of capacity comes online in other countries around the world.
The IEA left its estimate for oil demand growth next year unchanged at only 1.2 million barrels a day, far less than the projected increase in non-OPEC supply. The so-called OPEC+ group is due to review its existing deal on output restraint, which keeps 1.2 million barrels a day off the market, in the first week of December. So far, its members have resisted the idea of deepening production cuts any further.
The IEA said it expects U.S. demand growth to rise 190,000 b/d next year after remaining flat in the first three quarters of 2019. Chinese demand growth is expected to slow to 375,000 b/d from 600,00 b/d.
U.S. crude prices are on course to end the week roughly where they started it. They were down 0.4% at $56.58 as of 6:30 AM ET.
5. U.K. Labour to tax Silicon Valley to pay for telecom nationalization
The U.K. Labour Party dramatically expanded its plans to renationalize parts of the economy sold into private hands by Margaret Thatcher some 30 years ago.
The party’s finance spokesman John McDonnell said a Labour government would nationalize the last-mile infrastructure arm of telecoms group BT, known as Openreach, and deliver free broadband to every home and business by 2030. He said the plans would be paid for by higher taxes on digital giants such as Facebook (NASDAQ:FB) and Alphabet (NASDAQ:GOOGL) unit Google.
The news sent BT shares down as much as 4% and hit independent competitors such as mid-cap stock Talk Talk even harder.
However, there are several strong reasons to think the plans won’t ever see the light of day.
1. Economic gloom persists worldwide
There was further evidence of global economic weakness, as China’s retail sales, industrial production and fixed asset investment all slowed in October, falling short of expectations on all three counts. The official data do, however, need to be measured against signs of record high levels of oil imports and the breathtaking sales volumes generated by Alibaba’s Singles Day event over the weekend.
The euro zone economy, meanwhile, grew at a decidedly sedate 0.2% in the third quarter, the main highlight being that Germany – traditionally the region’s engine room – avoided a technical recession by eking out 0.1% in growth through September.
There was no putting a gloss on some miserable figures from Japan, however, where quarterly GDP growth missed expectations and the annual rate slowed to only 0.2%, due largely to weak private consumption and external demand.
2. Walmart's report due early, Nvidia's up later
Walmart Inc (NYSE:WMT) is set to unveil results for the third quarter before the opening, with all eyes on how it’s faring in its battle for market share with Amazon.com (NASDAQ:AMZN) ahead of the crucial holiday season.
Amazon (NASDAQ:AMZN) scrapped a $15 delivery fee for Prime members recently, upping the pressure on Walmart (NYSE:WMT) to respond with something equally friendly to customers and damaging to margins.
Analysts expect a minuscule uptick in earnings per share to $1.09, on a 3% rise in sales to $128.6 billion.
After the closing bell, it will be the turn of chipmaker Nvidia (NASDAQ:NVDA) to update.
3. Stocks weighed on by data, Powell comments
U.S. stock markets are poised to open slightly lower on the back of the negative economic data from around the world overnight. In addition to the Chinese and euro zone figures, Australia’s labor market and Britain’s retail sales both weakened sharply.
By 6:30 AM ET (1130 GMT), Dow futures were down 45 points, a little under 0.2%, while S&P 500 futures and Nasdaq 100 futures were down in parallel.
There’s little on the U.S. data calendar that seems likely to turn the market around, with only weekly jobless claims and October’s producer price inflation data both due at 8:30 AM ET (1330 GMT).
4. Powell damped rate hopes - will others follow?
There is, however, a chorus of speakers from the Federal Reserve. Chairman Jerome Powell returns to Capitol Hill for a second day of testimony after pushing back Monday against pressure for more interest rate cuts.
In addition, Chicago Fed President Charles Evans and vice-chairman Richard Clarida are due to speak at 8:10 AM ET, while NY Fed President John Williams speaks at 11 AM and St. Louis Fed President James Bullard at 11:20.
Investing.com’s Fed Rate Monitor Tool now implies that there’s a better-than-even chance of no further rate cuts all through the first half of next year.
5. Oil market awaits OPEC, EIA numbers
The Organization of Petroleum Exporting Countries will release its monthly report on the oil market at 7:10 AM ET (1210 GMT), against the backdrop of efforts by Saudi Arabia to shore up prices while it markets its mammoth IPO of Saudi Aramco.
Elsewhere, the U.S. government will release its weekly figures on U.S. oil supplies, a day later than normal due to the Veterans’ Day holiday at the start of the week.
Analysts expect a modest rise of 1.65 million barrels in crude inventories, after last week’s bumper 7.9 million-barrel build. The American Petroleum Institute estimated on Wednesday that U.S. crude stockpiles actually fell by 500,00 barrels last week.