Marketmind: Full of energy

[November 01, 2022]  A look at the day ahead in U.S. and global markets from Mike Dolan.

Global stocks just won't lie down, doggedly clinging to hopes that central banks will ease off the policy brakes or that China might ease COVID curbs, just as energy firms reap massive windfall profits.

Entering the penultimate month of a dire 2022, world equity indices don't want to give up the ghost yet on the near 10% rebound since Oct. 13. Everything from central bank speculation, big rotations of equity sectors and talk of yearend seasonal flows in a U.S. election year are all cited.

And after a downbeat start to the week, stocks jumped back yet again on Tuesday - even on some pretty thin reasoning.

Underperforming Hong Kong and China stocks surged late in the day, with the former closing up more than 5%, after social media chatter that China was planning some reopening from strict COVID curbs in March. The reports were dismissed by officials.

The spark was also enough to see China's yuan bounce off a near 15-year low against the dollar.
 

The optimism comes as the U.S. Federal Reserve starts its two-day policy meeting amid hopes it may signal a downshift in the pace of rate hikes next month.

The Reserve Bank of Australia underscored those hopes on Tuesday by gearing down its tightening to just a quarter point hike after a series of half point rises previously - following on from the Bank of Canada's move to reduce the size of its rate rises last week.

U.S. stock futures were higher, with Treasury yields and the U.S. dollar on the back foot.

Morning commuters walk on Wall St. as the Union Jack flies at half staff outside the New York Stock Exchange (NYSE) in New York City, U.S., September 9, 2022. REUTERS/Brendan McDermid

European downshifting was far less certain. After Monday's news that euro zone inflation rose to a record 10.7% in October, European Central Bank chief Christine Lagarde said the ECB must keep raising interest rates to fight off inflation, even if the probability of a euro zone recession has increased.

Energy sector earnings show clear winners from the year's Ukraine-related price shock.

BP more than doubled its third-quarter profit from a year earlier to $8.15 billion, lifted by strong natural gas trading, as it expanded its share buybacks by $2.5 billion amid rising calls to increase windfall taxes on the sector.

U.S. President Joe Biden on Monday called on major oil companies who are bringing in big profits to stop "war profiteering", threatening to hit them with higher taxes if they don't increase production.

Key developments that should provide more direction to U.S. markets later on Tuesday:

* U.S. Federal Reserve kicks off two-day meeting; Bank of Canada Governor Tiff Macklem speaks in parliament

* U.S. Oct manufacturing surveys from ISM and S&P Global; Sept U.S. JOLTS job openings data; Dallas Fed Oct services index

* U.S. Corporate Earnings: AIG, AMD, Marathon, Pfizer, Eli Lilly, Edison, Clorox, Prudential Financial, Molson Coors, Fox etc

(By Mike Dolan, editing by Ed Osmond, [e-mail]. Twitter: @reutersMikeD)

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