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China Covid-19 Outbreak, Facebook Earnings, Oil Squeeze - What's Moving Markets

EconomyOct 25, 2021 06:41AM ET
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© Reuters.

By Geoffrey Smith 

Investing.com -- China's latest Covid-19 outbreak spreads and Goldman Sachs (NYSE:GS) cuts its growth forecasts for the world's second-largest economy next year. Facebook (NASDAQ:FB) will report earnings after the closing bell, at a time of heightened market and regulatory scrutiny of the social media giant. Stocks are set to inch higher despite reports of the Democrats implementing a wealth tax. Europe's economy is slowing and Itlian Prime Minister Mario Draghi's efforts to offload a problem bank get derailed. Oil prices continue to be squeezed higher. Here's what you need to know in financial markets on Monday, 25th October.

1. China's Covid-19 outbreak spreads

China said its latest Covid-19 outbreak had spread to 11 of its 23 provinces, raising the specter of fresh lockdowns as it continues with its ‘zero tolerance’ approach to the disease.

China is one of few remaining countries to stick with an approach that routinely imposes economically damaging lockdowns to stop the spread of the disease. Most other countries have switched to allowing a controlled spread within the community, mitigated by social distancing and vaccination regulations.

Case numbers remain low in the current outbreak, but the summer outbreaks in China pushed much of the economy back into contraction. Goldman Sachs over the weekend cut its forecast for Chinese growth next year to 5.2% from 5.6%.

Chinese markets remained broadly positive on Monday in the wake of China Evergrande’s suspiciously miraculous avoidance of default on Friday.

2. Facebook to report under harsh spotlight

Facebook will report earnings after the closing bell, at a time of heightened scrutiny from both markets and regulators.

Facebook stock has fallen 15% in the last two months amid concerns about both its governance and its near-term revenue outlook. The latter is in especially sharp focus after rival Snap (NYSE:SNAP) posted weak revenue in the third quarter due to changes in Apple’s privacy settings, which left advertisers unable to target adds on Apple (NASDAQ:AAPL) devices and, accordingly, less willing to pay to place them.

The Wall Street Journal reported fresh disclosures on Sunday that showed how Facebook repeatedly intervened to moderate and filter the political content on parts of its site, notably in suppressing conservative publications such as Breitbart.

Others to report on Monday include Kimberly-Clark and Royal Caribbean (NYSE:RCL) Cruise Line. Overnight, HSBC followed Wall Street's trend in releasing earnings that were heavily bolstered by the release of loan provisions.

3. Stocks set to edge higher.

U.S. stock markets are set to open modestly higher but likely to remain rangebound pending the release of Big Tech earnings this week. Alphabet (NASDAQ:GOOGL) and Microsoft (NASDAQ:MSFT) will follow Facebook on Tuesday, while Amazon (NASDAQ:AMZN) reports on Thursday.

By 6:15 AM ET (1015 GMT), Dow Jones futures were up 16 points, or 0.1%, while S&P 500 futures were up 0.1% and Nasdaq 100 futures were up 0.3%.

There was little immediate to reports over the weekend that Democratic lawmakers are moving closer to an agreement on tax hikes to fund their spending programs. Treasury Secretary Janet Yellen said at the weekend that the proposals are likely to include a tax on unrealized equity gains over a certain threshold.

Stocks likely to be in focus later include PayPal (NASDAQ:PYPL) and Pinterest (NYSE:PINS), after the former said there are no talks ongoing for the two to merge.

4. Europe labors toward the year end

Europe’s largest economy faces “a difficult quarter”, according to the Ifo research institute, whose closely-watched index of German business confidence fell for a fourth straight month on Thursday. The Ifo business climate index fell to its lowest in six months in October, as more and more of the country’s manufacturing sector fell victim to component shortages – notably for semiconductors.

Across the Baltic, Sweden’s Volvo was forced to scale down the size of its IPO, amid concerns about the chip issue and about its majority Chinese ownership. The carmaker is a unit of Geely Automotive.

There was bad news from other parts of Europe too, with the Bank of Spain reportedly slashing its growth forecasts for this year and next, and with the breakdown of talks between the Italian government and Unicredit (MI:CRDI) over the sale of long-running problem Banca Monte dei Paschi di Siena.

5. Oil market tightens further

Crude oil prices started the week on a firm footing, with premiums for spot delivery approaching some of the highest in recent years.

The degree of so-called ‘backwardation’ – the premium over futures contracts that is paid for immediate delivery – is now close to an all-time high, with the April futures contract trading over $5 below the spot physical price.

Such dynamics are typically taken as bullish signals, reflecting strong real demand. Goldman Sachs analysts estimate that global demand is now back at 99 million barrels a day, effectively erasing the dip in demand caused by the pandemic.

By 6:30 AM ET, U.S. crude futures were up 0.8% at $84.45 a barrel, while Brent was up 0.7% at $85.20 a barrel.

China Covid-19 Outbreak, Facebook Earnings, Oil Squeeze - What's Moving Markets
 

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Comments (8)
Krishnendu Maity
Krishnendu Maity Oct 25, 2021 6:36PM ET
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If its not fake news, China is shooting at their own feet. China’s economy is nothing without the world market.
Matt Kay
Matt Kay Oct 25, 2021 11:09AM ET
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Printer goes BRRR. Stonks only go up... as long as printer is going BRRR, that is.
Eduff San
Eduff San Oct 25, 2021 9:35AM ET
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so what?? hahaha very funny. More covid cases make oil more strong. Its gift
Anna Kaliszewska
Anna Kaliszewska Oct 25, 2021 9:35AM ET
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You are wrong.
Rodney Dangerfield
Rodney Dangerfield Oct 25, 2021 8:58AM ET
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I'll tell you something that moved bitcoins from 2010 somebody cashed them in for USD the Ponzi has started to fall over like dominoes interesting times ahead
Whaling Trawler
Whaling Trawler Oct 25, 2021 8:25AM ET
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that wuhan lab needs to be shut down permanently
Aaseevakan Thurai
Aaseevakan Oct 25, 2021 7:13AM ET
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C19 still an issue? you fake reasons 🤣
Steffen vdm
Steffen vdm Oct 25, 2021 7:13AM ET
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Yes, still an issue. Mostly because 10-15% of people don't want to get vaccinated but account for 80% of the Covid patients hospitalized, putting more and more pressure on health care system. To a point where other people cannot get the much required medical treatment for other serious illnesses, forcing society to go back into lockdown. Thanks for the selfishness of those who think they don't need to be vaccinated
Antonio Velardo
Antonio Velardo Oct 25, 2021 7:13AM ET
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Steffen vdm good post, well said.
Andrew Allen
Andrew Allen Oct 25, 2021 7:13AM ET
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not true in other countries Steffen. Lockdown isn't necessary, it's tyranny. Educate yourself about the countries and states that didn't do your favorite covid rituals (hint: they're just fine)
Ronald Warren
Ronald Warren Oct 25, 2021 7:13AM ET
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Hey Steffen!! New York has the highest number of new Covid cases. One of the leading bastions of left policies and Covid vaccines!!
Steffen vdm
Steffen vdm Oct 25, 2021 7:13AM ET
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Looking at the total number of cases, the states/countries you are probably referring to have a low population density and are doing fine. I agree that lockdown measures could be less strict in these regions. But looking at the number of cases per million population however, these areas are amongst the worst performing. I live in Europe and I can tell you, most countries are not doing fine. Not surprisingly these are densely populated countries. I hope I have educated you a bit
Jack Peterson
Jack Peterson Oct 25, 2021 7:08AM ET
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Buckle up! This quarter is lining up to be a doozy……
Eetu Chen
Eetu Chen Oct 25, 2021 7:02AM ET
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"  spread to 11 of its 23 provinces ". And we are talking about totally 573cases, 39 new cases.  Why not writing detail number?  Perfectly confusing readers.
Andrew Allen
Andrew Allen Oct 25, 2021 7:02AM ET
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it isn't news media's job to educate the public. Only to run a successful business even if that means helping advertisers, governments, and investors with a biased agenda. Some of them actually believe they are good little activists, the worst type of journalism. OBJECTIVITY is necessary for good journalism
 
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