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Fed Decision, ADP, Zhengzhou Lockdown - What's Moving Markets

Published 11/02/2022, 06:37 AM
Updated 11/02/2022, 06:45 AM
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By Geoffrey Smith

Investing.com -- The U.S. Federal Reserve is expected to raise its key interest rate by another 75 basis points in its efforts to bring down inflation, amid hopes that Fed Chair Jerome Powell will signal a slower pace of monetary policy tightening at future meetings. ADP releases its estimate of private sector hiring in October, a day after a mixed report on Job Openings from the Labor Department. Europe's PMIs continue to fall further into contractionary territory as the world's biggest shipping line warns that the pandemic party is finally over. And Zhengzhou, home to the world's largest iPhone assembly line, is locking down for a week, pouring cold water on a rumored relaxation of China's Zero-COVID strategy. Here's what you need to know in financial markets on Wednesday, 2nd November.

1. Fed decision day. Will the first signs of a pivot come?

The Federal Reserve is set to raise the target range for fed funds by another 75 basis points to 3.25-4.00% when its two-day meeting concludes at 14:00 ET (18:00 GMT).

That much is almost taken for granted, given Fed officials' recent guidance and a raft of data showing inflation dynamics that are still too strong for comfort. However, recent signs of a slowdown, especially in interest-rate-sensitive sectors of the economy such as real estate, have encouraged hopes that Fed Chair Jerome Powell will be able to talk about slowing the pace of tightening at his regular press conference.

Treasury yields backed up on Tuesday after falling sharply in anticipation of the beginning of a 'pivot'. That rally in bonds created the risk that Powell – who has been consistently hawkish over recent months – may again disappoint such hopes. By 06:30, the benchmark 10-Year Treasury note traded at 4.06%, down from a high of 4.34% two weeks ago.

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2. ADP October payrolls, Challenger job cuts survey to cast more light on labor market

Before the Fed decides, the market will get a sneak preview of labor market trends in October, two days before the government's payroll data are published. ADP's survey of private sector hiring is expected to show a slight slowdown last month, with consensus forecasts for a gain of 195,000, down from 208,000 in August.

Tuesday's Job Openings and Labor Turnover survey from the Labor Department had shown a small but, nonetheless, clear decline in quits continuing, suggesting that good new jobs are getting harder to find and that the willingness to give up a bird in the hand is weakening as the economy slows.

The Challenger job cuts survey is also due for release at 07:30 ET, while the weekly data from the Mortgage Bankers Association will show whether mortgage rates held above 7% after breaching that level for the first time in 20 years last week.

3. Stocks set to open flat as market waits for Fed; insurers in focus after PRU hit

U.S. stock markets are set to open flat, with the tech-heavy Nasdaq 100 reversing its underperformance of Tuesday after better-than-expected quarterly numbers from Uber (NYSE:UBER) on Tuesday.

By 06:15 ET, Dow Jones futures were effectively unchanged, while S&P 500 futures were up less than 0.1%, and Nasdaq 100 futures were up 0.3%, after falling 0.9% on Tuesday.

Stocks likely to be in focus later include Advanced Micro Devices (NASDAQ:AMD), which fell in after hours trade on Tuesday after predicting revenue below consensus forecasts in the fourth quarter due to a pronounced slowdown in PC sales and other gadgets. Prudential Financial (NYSE:PRU) is also set to open under pressure after taking a hit from rising interest rates. Rivals MetLife (NYSE:MET) and Allstate (NYSE:ALL) announce their earnings after the bell Wednesday.

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CVS (NYSE:CVS), Humana (NYSE:HUM), and KFC owner Yum! Brands (NYSE:YUM) head the list of early reporters, while Qualcomm (NASDAQ:QCOM), Booking (NASDAQ:BKNG), and lithium miner Albemarle (NYSE:ALB) head the late list.

4. The party's over (for shipping anyway)

The party for the global shipping industry is formally over. Danish shipping giant A.P. Møller – Mærsk (CSE:MAERSKb) warned overnight that global container demand will fall by as much as 4% this year, as the pandemic boom fades and world supply chains iron out their remaining wrinkles. Maersk had earlier forecast volumes would stay at 2021's levels.

The slowdown in world trade is just one of the reasons that Europe's export-heavy economy continues to languish. Final purchasing managers indices from around the region showed sharp drops in new orders to Germany's manufacturing sector in October (although the German labor market remains as much in need of workers as ever after a minimal 8,000 rise in seasonally adjusted jobless rate).

The French, Spanish and Italian manufacturing PMIs joined their German counterpart in falling more deeply into contraction territory.

5. Oil slips as Zhengzhou lockdown provides Zero-COVID reality check

Crude oil prices fell back as another day passed without any sort of confirmation of the rumor that China may soon relax its Zero-COVID policy.

By 06:30 ET, U.S. crude futures were down 0.5% at $87.89 a barrel, while Brent futures were down 0.5% at $94.11 a barrel. Actual news flow regarding Chinese demand has, if anything, gone in the other direction: earlier on Wednesday, city authorities locked down the Zhengzhou Airport Economy Zone - home to the world's biggest iPhone assembly plant – for a week due to a COVID outbreak.

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Elsewhere in commodities, wheat prices reversed their Monday gains after Russia rejoined the UN-sponsored deal on guaranteeing safe passage for exports.

Latest comments

Why do these articles always argue that the Fed might pivot due to the bursting of the real estate bubble?
o try
o
o
Guys, it’s not the Fed’s job to please financial markets … anymore. They have bigger fish to fry for a long time to come.
Hello
Blow out your candles and make a wish...Fed pivot.
even russia changes direction to resume participating in grain deal. fed shall pivot. massive market rally is likely
I hope today will be U turn in Market. Santa on the way so chill bro.
Powell would probably say something implying time to pivot
why? literally nothing in the data has suggested to do so.
Investing.com's rumors moving market....
Watch it turn green when the rates are 'priced in'. Consensus hike - with moderate speech tone- green. Lower rates and the thing will go to the sun. I can't see a higher rate happening. Consensus and green is my bet. Happy to be wrong, I have stocks and capital currently so green good, red good.
a smaller hike is not a Fed pivot.  a fed pivot is reducing rates.   it shall not come for a long time.   economy has barely budged after all the consecutive hikes.  when the Fed is at 6%, then we'll start to see a contraction which is enough to reduce the prices of everything.
Zero chance the FED goes to 6%. You lost your mind and our obviously a short
*are*
 i would not say 0%,  for sure we will get to 5%, its quite possible to be at 6% by end of 2023, if inflation continues.  its just 25bps a quarter.
The criminal magic show in the greatest financial fraud in history continues.
If everything is as stuffed as worst case scenario could be then you'll have your wet dream soon enough.
Look in the mirror and say it 5 times. Fed pivot.
shaddup wet back
Really! You know , we all disagree on our point of view from time to time. Even poke fun. Racial slurs are in my opinion not acceptable on this forum and evidence of the low life you are. Crawl back under your rock and find another site!
Too bad. I'm Irish.
RAVI
hello
hello
hello
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