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Georgia runoff, trade data, Pepsi layoffs - what's moving markets

Economy Dec 06, 2022 06:20AM ET
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By Geoffrey Smith 

Investing.com -- The last remaining U.S. Senate contests will be decided in Georgia, while President Joe Biden is set to announce he'll run for re-election in 2024. China announces the relaxation of more COVID-19 measures. Stocks are still under the weather after a surprisingly strong services PMI on Monday, Pepsi is reportedly laying off hundreds of people, and oil prices hit their lowest in a week ahead of U.S. inventory data later. Here's what you need to know in financial markets on Tuesday, 6th December.

1. Georgia runoff to round off U.S. midterms; Biden expected to run for re-election

The final U.S. Senate seat, still up for grabs, will be decided in a runoff between Democrat Raphael Warnock and his Republican challenger, the former NFL star Herschel Walker.

While the Democrats have already secured effective control of the Senate, a victory for Warnock would cement that control and deliver a further setback to the caucus of Republicans who still hope to bring back Donald Trump as president in 2024. Walker owed his nomination as GOP candidate largely to Trump, but the former president has distanced himself in recent days, apparently wary of being too closely associated with a campaign that polls suggest will end in defeat.

Trump’s opponent in 2020, Joe Biden, is meanwhile set to announce he’ll run for re-election in 2024, according to comments from his chief of staff, Ron Klain. Biden, 80, is already the oldest president in the U.S.'s history.

2. China relaxes more COVID rules, but market rally pauses

Beijing moved further away from its Zero-COVID policy, relaxing more regulations on quarantining and testing.

Authorities in the Chinese capital said negative tests would no longer be required to enter various public venues, although they will remain a requirement for restaurants, bars, and nightclubs. That follows a pattern set by other major cities such as Shanghai and Shenzhen and comes as a wave of outbreaks at the start of winter starts to recede. Official case numbers are now down by one-third from their peak in late November.

The rally in Chinese stocks and the yuan nevertheless paused for a breather.

3. Stocks still reeling from ISM Non-Manufacturing PMI; Pepsi layoffs eyed

U.S. stocks are set to open mixed later, still under pressure from a stronger-than-expected non-manufacturing PMI from the ISM on Monday that reminded investors of the likelihood of further interest rate hikes from the Federal Reserve. Interest rate futures now project a ‘terminal’ rate for fed funds above 5%.

By 06:30 ET (11:30 GMT), Dow Jones futures were effectively flat, as were S&P 500 futures. Nasdaq 100 futures inched up 0.2%. All three of the major cash indices had fallen by between 1.4% and 1.9% on Monday.

Stocks likely to be in focus later include PepsiCo (NASDAQ:PEP), after The Wall Street Journal reported that it is set to lay off hundreds of people in North America, largely from its snacks and drinks business. The news is surprising in as much as PepsiCo was prominent among the companies that had been able to expand its profit margins in the third quarter, setting it apart from cash-squeezed tech companies that had grabbed most of the layoff headlines.

Trade data for October dominates an otherwise thin economic calendar.

4. Russian tankers trapped by G7 price cap

A line of Russian oil tankers formed at the Bosporus Strait, as Turkish authorities indicated they will enforce the G7 price cap on Russian crude exports.

The tankers had been unable to provide the marine insurance certification required for passing through the busy straits, which are the gateway to world markets for oil coming out of Russia’s Black Sea ports. Under the mechanism, EU companies are banned from insuring any Russian oil cargo bought for more than $60 a barrel.

The EU and U.S. drew up the mechanism to restrict the flow of petrodollars to finance Russia’s war in Ukraine. It came into force on a day when Ukraine demonstrated that it could hit military targets deep inside Russia with drones, aiming to relieve the pressure of repeated missile strikes against its energy infrastructure.

5. Oil hits lowest in a week; API inventories due

Crude oil prices fell to their lowest in a week, as the market grappled with the added layer of complexity in delivering crude arising from the G7 measures. The broader pause in the China-led risk rally also contributed to the dip.

If the bottleneck at the Bosporus lasts for any length of time, that could restrict the overall supply of crude to world markets. However, it might also lead to the diversion of more Russian oil to export points where it has to be priced more cheaply in order to attract buyers.

By 06:45 ET, U.S. crude futures were down 1.3% at $75.97 a barrel, while Brent futures were down 1.2% at $81.68 a barrel. The American Petroleum Institute reports weekly inventory data at 16:30 ET.

Georgia runoff, trade data, Pepsi layoffs - what's moving markets
 

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Comments (6)
rob finch
rob finch Dec 06, 2022 10:26PM ET
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LGB! Nobody has ever represented the democrat party better. And noone has ever "reached out" to the dead constituency or even bothered to shake their hands. No wonder he gets 100% of the dead vote.
Ronald Warren
Ronald Warren Dec 06, 2022 8:08AM ET
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This is a propaganda rag. Smooth story line, but pay attention to the quoted facts. There is no senate caucus that wants Trump in office. Crude cannot be down because oil deliveries have been cut off. Why not tell us the real reason or say nothing.
Warm Camp
Warm Camp Dec 06, 2022 8:08AM ET
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This author seems to be the most political out of all authors, inhabiting the front page of this site.
Brad Albright
Brad Albright Dec 06, 2022 8:08AM ET
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Great examples of why the know-nothing right will eventually fail: they dismiss facts they don't like as partisan or conspiracy.
Prabhat Negi
Prabhat Negi Dec 06, 2022 7:42AM ET
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markets will be green because Pepsi and most companies are laying off people . great news .. it'll make fed pivot. .yay... let's rise because economy is going down with less people working
Jay Ow
Jay Ow Dec 06, 2022 7:38AM ET
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Pepsi and Coca, Nestle steal water source. All this companies are in disfavor of people now. This the main problem.
Mario tragik
Mario tragik Dec 06, 2022 7:20AM ET
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Sleepy J again? oh no God forbid. Also surprising PMI lol it was within consensus range. beware of shorting these traps, wait close of after Opex.
Warm Camp
Warm Camp Dec 06, 2022 7:19AM ET
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For what reason Russian oil, diverted from Black Sea to Baltic and Pacific ports, will be priced cheaper? Just because the author wants this?
Ronald Warren
Ronald Warren Dec 06, 2022 7:19AM ET
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Because the G7 ordered it.
Brad Albright
Brad Albright Dec 06, 2022 7:19AM ET
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Yes! Just because the author wants it. That's right. (For someone with such strong opinions, you sure are uninformed.)
 
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