Risk-on pile on, PCE prices, Twitter-Apple peace - what's moving markets

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Risk-on pile on, PCE prices, Twitter-Apple peace - what's moving markets
Credit: © Reuters.

By Geoffrey Smith

Investing.com -- The dollar weakens as global markets join the risk-on party started by Federal Reserve Chair Jerome Powell's speech on Wednesday. U.S. stocks are remembering that Powell didn't really say much new, however. China loosens its COVID-19 regulations a bit more, helping the risk-on tone, but there are more dire economic numbers out of Europe. The U.S. will release PCE inflation figures as well as personal spending and income data for October, and Elon Musk says he's made peace with Apple, just as Congress moves to impose peace on the railroad sector. Here's what you need to know in financial markets on Thursday, 1st December.

1. Risk-on rally goes global as China eases quarantine rules

Global risk assets followed U.S. stocks higher overnight, swept up by the euphoria at Fed Chair Jerome Powell’s near-verbatim repetition of the guidance he gave after the central bank’s last policy meeting.

In a speech to the Brookings Institute, Powell had signaled that the Fed will most likely slow the pace of interest rate hikes at this month’s policy meeting. That message was lent extra credibility by the collapse of the Chicago Fed’s monthly purchasing managers index , which suggested that the U.S. may be closer to recession - and a decisive Fed pivot - than the consensus thinks.

The risk-on tone was helped overnight by more announcements of looser COVID-19 controls in China, which will now allow some people to quarantine at home rather than in mass isolation centers, and by a surprising rebound in China’s Caixin manufacturing PMI .

2. U.S. data dump: spending, income data due; PCE prices and Challenger job cuts eyed

The U.S. labor market continues to churn out data with the monthly Challenger Job Cuts survey due at 07:30 ET and weekly jobless claims due an hour later. The jobless numbers have pointed to a slow softening of the labor market in recent weeks, although the Labor Department’s Job Openings survey indicated that there were still over 1.5 vacancies for every unemployed person in October.

The claims data come out alongside personal income and spending data for October as well as the October reading for the personal consumption expenditures price index (the Fed’s preferred measure of inflation), which is expected to slow moderately from September.

Dallas Fed chief Lorie Logan and Fed governor Michelle Bowman speak shortly after the data.

Numbers out of Europe overnight were less encouraging but didn’t stop the euro and pound rising against the dollar. German retail sales slumped in October, while U.K. house prices fell the most in over two years in November.

3. Stocks pause for breath; Musk makes peace with Apple

U.S. stock markets are expected to wake up with a bit of a hangover later, after partying hard on Powell’s remarks.

By 06:20, Dow Jones futures were down 99 points, or 0.3%, while S&P 500 futures were down 0.2% and Nasdaq 100 futures were down 0.4%. Those are small corrections compared to gains of between 2.2% and 4.1% posted by the main cash indices on Wednesday. The Dow’s gain, notably, brought it out of bear market territory.

Stocks in focus later are likely to include Salesforce (NYSE: CRM ), which announced late on Wednesday that its co-CEO Bret Taylor is to step down, leaving Marc Benioff as sole CEO. Salesforce stock shed over 6% in premarket trading. Snowflake (NYSE: SNOW ) is also marked lower after disappointing numbers last night.

Also in focus will be Apple (NASDAQ: AAPL ), after Elon Musk said Twitter has resolved its differences with the iPhone maker, adding that there is no risk of Twitter being removed from Apple’s App Store.

4. Congress moves to impose peace in railroad dispute

The House of Representatives passed a bill to end the long-running dispute between railroad operators and their labor unions, using a 1926 law that allows Congress to intervene in such disputes if they threaten to disrupt the economy.

The House also attached a proposal to approve seven days of paid sick leave for railroad workers.

Unions are currently prevented from striking by a ‘cooling-off’ period that runs until December 9th. The administration has warned that a national railroad strike would severely disrupt supply chains for the auto and food sector, as well as for waste management.

Union Pacific (NYSE: UNP ) stock hit a two-month high in after-hours trading on the news.

5. Oil prices edge to new 1-month high on China hopes

Crude oil prices advanced as hopes for a lasting reopening of the Chinese economy strengthened in response to the authorities’ latest announcements.

Vice-Premier Sun Chunlan, in charge of coordinating public health measures to combat COVID-19, said the struggle had entered “a new phase,” acknowledging that the dominant Omicron strain is “less pathogenic” than previous ones.

By 06:40 ET, U.S. crude futures were just off a fresh one-week high at $81.51 a barrel, up 1.2%. Brent futures were up 1.0% at $87.81 a barrel.

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