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China COVID cheer, Musk vs. Apple, weak Eurozone inflation - what's moving markets

By Geoffrey Smith -- Chinese markets and other risk assets rise as the National Health Commission said it will speed up vaccinations for seniors and moved away from its apocalyptic warnings about the dangers of COVID-19. Inflation in the Eurozone is set to turn out lower than expected, driving bond yields lower (but not convincing the European Central Bank's President). U.S. stocks are being supported by both of those factors, as well as getting the popcorn to hand as Elon Musk takes a swing at Apple over alleged censorship and market abuse. And the American Petroleum Institute will give an indication of how strong travel demand was in the holiday week just passed. Here's what you need to know in financial markets on Tuesday, 29th November.

1. China to speed up vaccination campaign

Chinese markets rallied after the National Health Commission said it will speed up vaccination of older people as part of a broader shift in its approach to COVID-19.

In a rare press conference, the NHC also shifted its narrative around the virus, saying that the dominant Omicron strain is less dangerous than previous strains.

Low vaccination rates with relatively ineffective vaccines – particularly among older age cohorts - are one of the chief reasons why the authorities have been hesitant about implementing Beijing’s guidelines on easing the burden of COVID-19 controls. The shift in the narrative meanwhile is also a move away from previous policy, which stressed low case rates as proof of China’s superior handling of the crisis.

Chinese stock markets rose as much as 4% while the offshore yuan rose 1%, not least on perceptions that the reaffirmation of the move to reopening will forestall any more disruptive protests like those seen at the weekend.

2. Eurozone inflation eases

The Eurozone appeared to take a big step closer to peak inflation, as numbers out of Germany and Spain both fell short of expectations. Eurozone bond yields fell sharply in response.

Data from Germany’s largest federal states showed prices falling by between 0.3% and 0.8% on the month in October, helped by a dip in heating oil prices and vehicle fuel, but also by bigger drops in prices for consumer durables such as televisions.

The CPI in Spain – the Eurozone’s fourth-largest economy - fell 0.1% and the national rate – which peaked in August – fell further to 6.8%.

Analysts warned that the figures may flatter the underlying trend, given that core inflation measures remained strong. European Central Bank President Christine Lagarde warned on Monday that she doesn’t think inflation has peaked yet.

3. Stocks set to open slightly higher; Chinese ADRs, house price data in focus

U.S. stock markets are set to open fractionally higher later, taking stock after a downbeat reopening in the wake of the holiday weekend.

By 06:20 ET (11:20 GMT), Dow Jones futures were up 18 points, or less than 0.1%, while S&P 500 futures were up 0.3% and Nasdaq 100 futures were up 0.5%, outperforming again on growing hopes for a pivot in central bank policy, despite Federal Reserve officials sticking broadly to their existing lines on the need for further interest rate hikes.

Stocks likely to be in focus later include Chinese ADRs, especially consumer-focused ones, after the NHC’s press conference raised hopes for a reopening of public life. Pinduoduo (NASDAQ:PDD) will be doubly in focus after beating market expectations with its quarterly numbers.

U.S. house price data for October are due at 09:00 ET and are expected to show one of the biggest drops since 2008.

4. Musk takes a swing at Apple

Elon Musk dragged Apple (NASDAQ:AAPL) into his culture war of choice, accusing it of censorship and abusing its dominant market position.

“Apple has also threatened to withhold Twitter from its App Store, but won’t tell us why,” Musk claimed via the social media site.

Apple stands to collect a large chunk of the monthly subscription fee that Musk plans to levy from verified users. Its notoriously steep commissions for revenue earned through its App store have already sparked antitrust lawsuits from Epic, the publisher of videogame Fortnite, and others.

Musk’s outburst comes at a time when a growing number of corporate advertisers have paused their spending on Twitter, waiting to see how its content moderation evolves under Musk. Musk, who styles himself a “free speech absolutist”, announced a general amnesty for suspended accounts last week, having fired the company's content moderation team immediately after taking it over.

5. Oil rebounds on China news; API due

Crude oil prices rebounded on the news out of China, which reassured market participants that the government remains committed to moving beyond the COVID-Zero policy that has stifled Chinese oil demand for the last year.

By 06:35 ET, U.S. crude futures were up 2.4% at $79.12 a barrel, while Brent futures were up 2.7% at $86.13 a barrel.

The American Petroleum Institute releases its weekly inventory data at 16:30 ET, which could cast light on the strength of demand during the holiday weekend. Analysts expect the U.S. government inventory data to show a drop of around 2.5 million barrels in crude stockpiles.


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