Pre-Market Brief: Stocks Plunge as China's COVID Protests Weigh On Sentiment

December S&P 500 futures (ESZ22) are trending down -0.87% this morning after three major US benchmark indices closed mixed in a subdued trading session on Friday as market participants shied away from risk, focusing on Black Friday sales and COVID-19 cases in China. Three major U.S. stock indexes ended the holiday-shortened week in the green as investors proved optimistic amid potentially smaller interest rate hikes from Federal Reserve.

In Friday's trading session, Apple (AAPL) slid about -2% amid worries about reduced iPhone shipments in November from a Foxconn plant in China as production was hit by COVID-related worker unrest.

"The biggest news item is what's going on in China, the protests against the zero-covid-tolerance policies," said Brian Jacobsen, a senior investment strategist at AllSpring.

The Federal Reserve meets next month to decide the path for interest rates after hiking its benchmark rate by 0.75 percentage points at each of its last four meetings. Meanwhile, U.S. rate futures have priced in a 74.7% chance of a 50 basis point rate increase and a 25.3% chance of a 75 basis point hike at December's monetary policy meeting. 

This week, U.S. Nonfarm Payrolls data for November will be the main highlight as investors hope that the Federal Reserve will slow the pace of rate increases soon. Also, market participants will be eyeing U.S. CB Consumer Confidence, ADP Nonfarm Employment Change, ISM Manufacturing PMI, U.S. GDP in Q3, JOLTs Job Openings, Pending Home Sales, Crude Oil Inventories, Core PCE Price Index, PCE Price index, Unemployment Rate, and Personal Spending data.

In addition, investors will closely monitor Fed Chair Jerome Powell's speech at the Brookings Institution on Wednesday.

The U.S. economic data slate is largely empty on Monday. However, investors will likely focus on speeches from St. Louis Fed President James Bullard and New York Fed President John Williams for further clues on the Fed's rate hike path.

In the bond markets, United States 10-Year rates are at 3.663%, down -1.06%.

The Euro Stoxx 50 futures are down -0.83% this morning as global investors keep a close eye on unrest in China as protests against strict COVID curbs and lockdowns intensified over the weekend. Another negative factor for European equities is the more than -8% drop in Brenntag Se (BNR.D.DX) after the German chemicals distribution company announced over the weekend that it held preliminary discussions with U.S. rival Univar Solutions over a potential acquisition.

Today, eyes in Europe will be on ECB President Christine Lagarde's speech at the European Parliament as investors look to Wednesday's release of preliminary Eurozone inflation data for November. Economists, on average, forecast the November CPI to stand at +10.4% y/y, compared to the previous figure of +10.6% y/y. The ECB raised rates by 75 basis points to 1.5% at its meeting in October to combat high inflation and is widely expected to deliver another 50- or 75-basis-point hike on December 15th.

Eurozone M3 Money Supply and Eurozone Private Sector Loans data were released today.

Eurozone October M3 Money Supply has been reported at 5.1% y/y, weaker than expectations of 6.2% y/y.

Eurozone Private Sector Loans stood at 4.2% y/y, weaker than expectations of 4.5% y/y.

Asian stock markets today settled in the red amid worsening protests in China against the Government’s strict zero-COVID policy. China’s Shanghai Composite Index (SHCOMP) closed down -0.75%, and Japan’s Nikkei 225 Stock Index (NIK) closed down -0.42%.

China’s Shanghai Composite today closed lower as rare protests in major Chinese cities against the country's severe zero-COVID restrictions boosted investors' worries about the growth implications for the world's second-largest economy. Chinese civilians clashed with the police in several cities, including Beijing and Shanghai, over the weekend. At the same time, the country logged a fifth consecutive day of record daily COVID-19 infections, reporting 40,052 new cases on Monday. The strict zero-COVID measures overshadowed any support to investor sentiment from the central bank’s 25 basis point cut to the reserve requirement ratio announced on Friday.

"Clearly the harsh China lockdowns have been impacting their consumer and business sentiment for some time and the persistent downgrades to China GDP have been consistent for well over a year now with further downgrades to come," said George Boubouras, an executive director of K2 Asset Management in Melbourne.

At the same time, Japan’s Nikkei 225 Stock Index closed lower, weighed down by losses in the Rubber, Electrical/Machinery, and Steel sectors. The Nikkei Volatility, which takes into account the implied volatility of Nikkei 225 options, closed down 0.11% to 17.49.

Pre-Market U.S. Stock Movers

Cryptocurrency-exposed stocks are moving lower in pre-market trading, with the price of Bitcoin dropping to the $16,200 mark. Marathon Digital (MARA) is down more than -1%. Also, Coinbase Global (COIN) is down more than -2% and Riot Blockchain (RIOT) is down about -2%. 

Anheuser Busch Inbev NV ADR (BUD) climbed more than +4% in pre-market trading after JPMorgan upgraded the stock to overweight from underweight.

Twilio Inc (TWLO) tumbled over -3% in pre-market trading after Jefferies downgraded the stock to hold from buy, cutting a price target to $50 from $110.

Canoo Inc (GOEV) jumped over +5% in pre-market trading, extending Friday's gains after the company's CEO Tony Aquila bought 4.5M shares of the company in a total transaction size of $5.0M.

Boston Scientific Corp (BSX) slid over -1% in pre-market trading after the company announced the first results from its ACURATE neo2 PMCF study. 

Advanced Micro Devices Inc (AMD) dropped over -1% in pre-market trading, extending Friday's losses after JPR said third-quarter CPU shipments were down 18.6% compared to Q3 of 2021.

You can see more pre-market stock movers here

Today’s U.S. Earnings Spotlight: Monday - November 28th

British American Tobacco ADR (BTI), Pinduoduo (PDD), Prudential Public ADR (PUK), Lonza Group AG (LZAGY), Telstra Corporation ADR (TLSYY), Citic ADR (CTPCY), Techtronic Industries ADR (TTNDY), China Resources Beer ADR (CRHKY), Legal & General Group Plc (LGGNY), Trip.com ADR (TCOM), Li Auto (LI), Polyus ADR (OPYGY), Surgutneftegaz OAO (SGTPY), Tatneft ADR (OAOFY), Siemens Gamesa ADR (GCTAY), Bank Hapoalim ADR (BKHYY), Brambles ADR (BXBLY), Sonic Healthcare ADR (SKHHY), Sonic Healthcare ADR (SKHHY), ASX ADR (ASXFY), Legend Bio (LEGN), Admiral Group ADR (AMIGY), Ayala ADR (AYALY), Nedbank Group Ltd (NDBKY), Spark New Zealand ADR (SPKKY), Allkem (OROCF), Grupo Simec ADR (SIM), UOL ADR (UOLGY), Manchester United (MANU), Arrowhead Pharma (ARWR), Alumina Limited PK (AWCMY), Azek Company (AZEK), Autogrill ADR (ATGSY), Beijing Capital Airport ADR (BJCHY), Boral ADR (BOALY), Kenon Holdings (KEN), Eaton Vance Tax Managed Diversified (ETY), HUTCHMED DRC (HCM), Adams Diversified Equity Closed (ADX), Bumi Resources ADR (PBMRY), Sims Metal Management Ltd PK (SMSMY), Paladin Energy (PALAF), Asseco Poland ADR (ASOZY), Nexters (GDEV), Naas Tech ADR (NAAS), Anavex Life Sciences (AVXL).

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