Pre-Market Brief: Stocks Mixed As Slowing Rate Hike Looms, China Reopening Hopes

December S&P 500 futures (ESZ22) are trending down -0.16% this morning, pulling back slightly after three major US benchmark indices finished the regular session sharply higher as investors weighed up Federal Reserve Chair Jerome Powell Powell's signal that the central bank might scale back the pace of its interest rate hikes as soon as December. Three major U.S. stock indexes were fueled primarily by gains in the Technology, Consumer Goods, and Consumer Services sectors.

Powell acknowledged that rates were approaching “the level of restraint that will be sufficient to bring inflation down.” However, the Fed chair added that the fight against inflation was far from over, and the rates were still a long way from peak levels.

Meanwhile, U.S. rate futures have priced in a 79.4% chance of a 50 basis point rate increase and a 20.6% chance of a 75 basis point hike at December's monetary policy meeting. 

“We continue to expect the FOMC to slow the pace of rate hikes to 50bp in December and to 25bp in February, March, and May, raising the funds rate to a peak of 5-5.25%,” Goldman Sachs said in a note ahead of Powell’s speech.

Data on Wednesday showed that private employment increased at a slower-than-expected pace in November, indicating cooling labor demand amid high-interest rates. Another reading revealed the U.S. economic growth was higher than expected in the third quarter.

Today, all eyes are focused on the U.S. Core PCE Price Index data in a couple of hours. Economists, on average, forecast that October's Core PCE Price Index will stand at +0.3% m/m and +5.0% y/y, compared to the previous values of +0.5% m/m and +5.1% y/y.

Also, investors are likely to focus on the ISM Manufacturing PMI data, which was at 50.2 in October. Economists foresee the new figure to be 49.8.

U.S. Manufacturing PMI data will be reported today. Economists foresee this figure to stand at 47.6 in November, compared to October's value of 50.4.

U.S. Personal Spending data will come in today. Economists expect October's figure to be +0.8% m/m, compared to the previous number of +0.6% m/m.

U.S. Initial Jobless Claims data will be reported today as well. Economists estimate this figure to be 235K, compared to last week’s value of 240K.

In the bond markets, United States 10-Year rates are at 3.616%, down -2.23%.

The Euro Stoxx 50 futures are up +0.33% this morning, with risk appetite increasing after Federal Reserve Chair Jerome Powell said the central bank is set to slow its pace of interest rate hikes later this month. The Eurozone CPI reading also showed a bigger-than-expected fall in November, bolstering hopes for a slowdown in European Central Bank rate increases later this month. In addition, the relaxation of some COVID-19 curbs in several cities in China boosted the sentiment.

U.K. Nationwide HPI, Germany's Retail Sales, Switzerland's CPI, Switzerland's procure.ch PMI, Spain’s Manufacturing PMI, Italy's Manufacturing PMI, France's Manufacturing PMI, Germany's Manufacturing PMI, Eurozone's Manufacturing PMI, Eurozone's Unemployment Rate, and U.K. Manufacturing PMI data were released today.

U.K. November Nationwide HPI has been reported at -1.4% m/m and +4.4% y/y, weaker than expectations of -0.3% m/m and +5.8% y/y.

The German October Retail Sales stood at -2.8% m/m and -5.0% y/y, weaker than expectations of -0.6% m/m and -2.8% y/y.

Switzerland's November CPI came in at +3.0% y/y, in line with expectations.

Switzerland's November procure.ch PMI was 53.9, weaker than expectations of 54.0.

The Spanish November Manufacturing PMI stood at 45.7, stronger than expectations of 45.6.

The Italian November Manufacturing PMI was at 48.4, stronger than expectations of 47.0.

The French November Manufacturing PMI came in at 48.3, weaker than expectations of 49.1.

The German November Manufacturing PMI has been reported at 46.2, weaker than expectations of 46.7.

Eurozone November Manufacturing PMI stood at 47.1, weaker than expectations of 47.3.

Eurozone October Unemployment Rate stood at 6.5%, stronger than expectations of 6.6%.

U.K. November Manufacturing PMI came in at 46.5, stronger than expectations of 46.2.

Asian stock markets today closed in the green. China’s Shanghai Composite Index (SHCOMP) closed up +0.45%, and Japan’s Nikkei 225 Stock Index (NIK) closed up +0.92%.

China’s Shanghai Composite today closed higher on hopes for a full reopening. Investor sentiment towards China was improved by the scaling back of some anti-COVID restrictions in Guangzhou and Chongqing after a series of protests against the government’s severe zero-COVID measures. At the same time, data on Thursday showed that China's factory activity shrank in November, underlining the deepening economic cracks in the country. However, the Chinese stock markets mainly ignored economic data in the recent sessions amid growing hopes that worsening economic growth would push the government into easing its strict zero-COVID strategy.

Japan’s Nikkei 225 Stock Index closed higher, supported by stronger-than-expected capital spending numbers in the third quarter. The index's upward momentum was fueled by gains in the Shipbuilding, Real Estate, and Textile sectors. The Nikkei Volatility, which takes into account the implied volatility of Nikkei 225 options, closed up 1.18% to 18.93.

Pre-Market U.S. Stock Movers

Splunk Inc (SPLK) gained about +9% in pre-market trading after the company reported upbeat Q3 results and provided favorable Q4 guidance.

Okta Inc (OKTA) jumped about +14% in pre-market trading after the company reported stronger-than-expected Q3 results and issued solid Q4 guidance.

Salesforce Inc (CRM) plunged over -6% in pre-market trading despite earnings beat after the company said that its co-Chief Executive, Bret Taylor, would leave the company.

FREYR Battery SA (FREY) tumbled about -4% in pre-market trading after the company revealed its plans to make a public offering of 13.5M of its Ordinary Shares, without nominal value, in an underwritten registered public offering.

G-III Apparel Group Ltd (GIII) plunged over -26% in pre-market trading after the company reported mixed Q3 results and provided weak FY2023 guidance.

Snowflake Inc (SNOW) dropped over -5% in pre-market trading after the company reported upbeat Q3 results but provided a lower-than-expected Q4 product revenue outlook.

CTO Realty Growth Inc (CTO) slid more than -4% in pre-market trading after the company announced that it had commenced an underwritten public offering of 2.5M shares of its common stock.

You can see more pre-market stock movers here

Today’s U.S. Earnings Spotlight: Thursday - December 1st

Toronto Dominion Bank (TD), Bank of Montreal (BMO), Dollar General (DG), Canadian Imperial Bank (CM), Marvell (MRVL), Kroger (KR), Veeva Systems A (VEEV), Ulta Beauty (ULTA), Zscaler (ZS), Siemens Gamesa ADR (GCTAY), Uipath (PATH), ChargePoint Holdings (CHPT), Ambarella (AMBA), Patterson (PDCO), GMS Inc (GMS), Methode Electronics (MEI), C3 Ai (AI), Zuora (ZUO), Designer Brands (DBI), Nano Dimension (NNDM).

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