Markets Today: Stocks Pressured by Record Covid Infections in China

Morning Markets

December S&P 500 futures (ESZ22) this morning are up +0.02%, and December Nasdaq 100 E-Mini futures (NQZ22) are down -0.24%. 

Stock indexes this morning are mixed.  A rally in energy stocks in pre-market trading is supportive for S&P futures, with crude oil up more than +2% as the European Union considers the price-cap curb on Russian oil.   Also, M&A activity is supportive for stocks, with Coupa Software up more than +3% in pre-market trading after Bloomberg reported that Vista Equity Partners is exploring an acquisition of the company.

A bullish factor for global stocks is increased stimulus measures from China after the People’s Bank of China today reduced the reserve requirement ratio for most banks by 25 bp to 11.00% from 11.25%, effective Dec 5.

Technology stocks are weaker and are pressuring Nasdaq futures this morning, with Apple down nearly -1% in pre-market trading after the city of Zhengzhou, home to Apple's largest iPhone manufacturing site, will be locked down for five days starting Friday.  Also, Reuters reported that Apple’s iPhone production in November at the Zhengzhou plant could fall -30% after worker protests at the plant disrupted operations. In addition, a fall of more than -4% in Activision Blizzard in pre-market trading is weighing on tech stocks after Politico reported that the U.S. Federal Trade Commission is likely to file an antitrust lawsuit to block Microsoft’s $69 billion deal to buy the company.

Another bearish factor for global stocks is the continued surge in Chinese Covid infections after China reported a record 31,9874 new Covid infections on Thursday.  The rise in infections dampens optimism that China’s economy may soon fully reopen as the government is forced to expand lockdowns and pandemic restrictions. 

Overseas stocks today are mixed.  The Euro Stoxx 50 index today is up slightly by +0.03%.  Better-than-expected German economic news today was supportive for stocks after German Q3 GDP was revised upward.   Gains in the overall market were limited after JPMorgan Chase said investors are "jumping the gun" as the rebound in European equities driven by expectations of peaking inflation and bond yields is nothing but a bear market rally. 

German Q3 GDP was revised upward to +0.4% q/q and +1.2% y/y from the initially reported +0.3% q/q and +1.1% y/y.

German Dec GfK consumer confidence rose +1.7 to -40.2, weaker than expectations of -39.6.

China’s Shanghai Composite closed up +0.40%, and Japan’s Nikkei Stock Market Index closed down -0.35%.  Japanese markets were closed today for the Labor Thanksgiving holiday.  Chinese stocks found support today on increased stimulus measures after the PBOC today reduced the reserve requirement ratio for most banks by 25 bp to 11.00% from 11.25%, effective Dec 5.  Gains in stocks were limited by concern the recent surge in Chinese Covid infections will prompt the government to expand lockdowns and pandemic restrictions.   China reported a record 31,9874 new Covid infections on Thursday, and the city of Zhengzhou, home to Apple's largest iPhone manufacturing site, will be locked down for five days starting Friday.

Japanese stocks today closed moderately lower on concerns about rising inflation.  Tokyo Nov consumer prices ex-fresh food rose +3.6% y/y, the most in 40 years and above expectations of a +3.5% y/y increase. Also, higher bond yields weighed on Japanese stocks after the 10-year JGB bond yield rose to a 2-1/4 month high of 0.274%, above the 0.250% upper limit of the BOJ’s targeted 10-year yield range of 0% to 0.25%. 

Pre-Market U.S. Stock Movers

Energy stocks and energy service providers are moving higher in pre-market trading, with the price of crude oil up more than +2%.  Devon Energy (DVN), Marathon Oil (MRO), Haliburton (HAL), Diamondback Energy (FANG), Schlumberger (SLB), and ConocoPhillips (COP) are up more than +1%.

Coupa Software (COUP) climbed more than +3% in pre-market trading after Bloomberg reported that Vista Equity Partners is exploring an acquisition of the company.

Manchester United Plc (MANU) jumped more than +7% in pre-market trading after Saudi Arabia’s sports minister said his government would support private sector bids for the team. 

AstraZeneca (AZN) rose +0.5% in pre-market trading after S&P raised the company’s long-term credit rating to A from A-.

Apple (AAPL) slipped nearly -1% in pre-market trading after the city of Zhengzhou, home to Apple's largest iPhone manufacturing site, will be locked down for five days starting Friday.  Also, a report from Reuters said that Apple’s iPhone production in November at the Zhengzhou plant could fall -30% after worker protests at the plant disrupted operations.

Activision Blizzard (ATVI) dropped more than -4% in pre-market trading after Politico reported that the U.S. Federal Trade Commission is likely to file an antitrust lawsuit to block Microsoft’s $69 billion deal to buy the company.

U.S.-listed Chinese stocks are falling in pre-market trading, with record new Covid cases in China dampening optimism that the country will reopen soon.  Alibaba Group Holding (BABA), Baidu (BIDU),  and JD.com (JD) are down more than -2%.  Also, Pinduoduo (PDD) and NetEase (NTES) are down nearly -1%.

Today’s U.S. Earnings Reports (11/25/2022)

None.

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