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China reopening, OPEC+ rollover, Foxconn revenue shock - what's moving markets

By Geoffrey Smith -- Chinese assets fly as the country's reopening momentum builds. Oil also rises, after OPEC+ leaves production quotas unchanged as Europe's embargo on Russian crude and products comes into force. Stocks are set to open lower, with Apple supplier Foxconn reporting a 29% drop in monthly revenue in November. The ISM's non-manufacturing survey will add some more details to a labor market report that smacked of stubborn inflation pressures, and crypto extends its recovery despite ongoing concerns about the exchange Genesis. Here's what you need to know in financial markets on Monday, December 5.

1. China reopening

Chinese assets rallied strongly again, pushing up prices for industrial commodities, as more cities announced a relaxation of their public health measures, bolstering belief that the country is serious about reopening its economy.

The offshore yuan rallied through the level of 7 against the dollar, hitting its highest in two and a half months. Battered stock market indices, notably the Hang Seng TECH, surged again, while prices for crude oil and iron ore rose sharply, the latter also contributing to fresh gains in mining stocks.

Over the weekend, Shanghai and neighboring Hangzhou had both relaxed their restrictions, while experts from the Chinese Center for Disease Control said the country should embrace rapid antigen tests and allow home isolation for people with only mild infections.

2. Oil up on Chinese news; Russian oil embargo comes into force

The Organization of Petroleum Exporting Countries and allies led by Russia extended their existing production quotas for another month, against a backdrop of high uncertainty caused by contrasting newsflow from various parts of the world.

The prospect of the release of pent-up demand in China gained the upper hand in overnight trading in Asia and Europe, pushing U.S. crude futures up by 2.6% to $82.07 a barrel and Brent futures up by 2.6% to $87.83 a barrel by 06:45 ET (11:45 GMT).

However, the risk of a looming recession in the U.S. and Europe remains a drag on demand, while the effects of an EU embargo on Russian oil imports, which comes into force on Monday, remain uncertain. The EU, along with partners in the G7, has also imposed a ban on the provision of key shipping and insurance services to carriers of Russian oil unless the cargo’s price is under $60 a barrel. Russia repeated that it won’t sell to any buyers who abide by the G7 ‘cap’.

3. Stocks set to open lower; Apple in focus after Hon Hai update

U.S. stock markets are set to open lower, after a stronger-than-expected jobs market report for November provided a stiff reality check to those believing in a rapid end to Federal Reserve interest rate hikes. By 06:25 ET, Dow Jones futures were down 139 points, or 0.4%, while S&P 500 futures were down by a similar amount, and Nasdaq 100 futures were down 0.2%.

Stocks likely to be in focus later include Apple (NASDAQ:AAPL), after contract manufacturer Hon Hai Precision (TW:2317) - aka Foxconn – said its revenue fell 29% in November from October due to extreme disruption of its operations at the so-called iPhone City in Zhengzhou, where workers revolted against lockdown conditions. The sometimes violent protests appear to have been a key factor in causing Beijing to move away from strict enforcement of its Zero-COVID policy.

Apple, which was reported by The Wall Street Journal to be eyeing plans to move production out of China at the weekend, was flat in premarket.

4. ISM non-manufacturing, Durable goods orders due; Eurozone retail sales slump

The Institute for Supply Management’s non-manufacturing survey will cast more light on the health of the key services sector, following on from a Labor Market Report on Friday that showed labor shortages keeping inflation pressures very much intact.

Analysts expect the ISM’s purchasing managers index to have fallen to 53.3 from 54.4, a level that would still suggest a solid rate of expansion. Of particular interest will be the sub-indices for employment and prices, the latter of which is still close to a record high.

Elsewhere, there will also be durable goods and factory orders data for October and the Conference Board’s employment trends index. Data overnight from the Eurozone was predictably grim, with Eurozone retail sales falling 1.8% in October and November’s PMIs confirming the single currency area clearly in contractionary territory.

5. Crypto recovery extends despite Genesis worries

Cryptocurrency prices were resilient in weekend trading despite new revelations and commentary that continued to paint the asset class in an unflattering light.

The Financial Times reported that digital asset trading group Genesis and its parent company, Barry Silbert’s Digital Currency Group, owe customers of the Winklevoss twins’ crypto exchange Gemini $900 million. Withdrawals from Genesis and from Gemini’s Earn program, its flagship lending project, have been suspended for three weeks and there are few signs of that suspension being lifted any time soon.

Elsewhere, Sam Bankman-Fried, whose fall from grace caused the trouble, continued to talk himself into trouble, doubling down in interviews with the FT and WSJ on claims of ignorance about the true state of affairs at FTX and its hedge fund affiliate Alameda Research.

Bitcoin nonetheless strengthened above $17,000 for the first time in over three weeks, while alt-coins also extended their recovery.


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