Five things you need to know before the market opens on Monday December 5:
1. -- Stock Futures Lower As Market Weigh Recession Risk
U.S. equity futures drifted lower Monday, while the dollar extended declines against its global peers, as investors faded bets on easing Covid restrictions in China and focused on the prospect of near-term recession in the domestic economy.
Multiple reports overnight have noted a modest easing of various pandemic-era rules in China, with cities across the country removing demands for negative Covid tests to use public transport and re-opening malls, parks and movie theatres in the wake of rate public unrest in the world's second-largest economy late last month.
The changes helped boost China stocks in overnight trading, with the Shanghai Composite rising 1.76% on the session and the region-wide MSCI ex-Japan benchmark gaining 1.7% heading into the final hours of trading.
However, data showing a fifth consecutive contraction in economic activity in Europe, and highlighting the prospect of an early 2023 recession, blunted the impact of China's loosening Covid policy and clip overnight gains for U.S. equity futures, which are also fighting against the prospect of tighter Federal Reserve policy following a firmer-than-expected reading of November job gains last Friday.
The report, which showed U.S. employers added 263,000 new hires last month, also showed average hourly earnings rising by 0.6%, double the Street consensus forecast and rekindling concerns that the tight labor market will continue to stoke inflation pressures into the early months of next year.
Recession concerns, however, are holding down Treasury bond yields s investors look to a rapidly-weakening housing market, a still-hawkish Fed and contracting business activity heading into the final months of the year.
Benchmark 10-year Treasury note yields were marked 3 basis points lower on the overnight session at 3.521% while 2-year note yields drifted to 4.319% - pegging the gap between the pair at around 80 basis points, near to the steepest level of inversion since the early 1980s.
The U.S. dollar index, which tracks the greenback against a basket of six global currencies, was marked 0.1% lower at $104.447, matching levels last seen in early June.
Heading into the start of the trading day on Wall Street, futures contracts tied to the S&P 500 are indicating a modest 15 point pullback while those linked to the Dow Jones Industrial Average are priced for a 95 point decline. The tech-focused Nasdaq is looking at a 28 point pullback. .
2. -- Week Ahead: Light Calendar Puts China, Sentiment Data In Focus
Wall Street is likely to focus on market reaction to Friday's stronger-than-expected November jobs report, as well as developments in China's Covid crisis, in what is expected to be a quiet week for earnings and data releases.
Producer price inflation figures on Friday, as well as trade and export data Tuesday, are the key economic data points in focus as traders piece together their 2023 forecasts amid a rising debate over the chances of recession in the world's largest economy.
Other releases include factory orders and ISM Services data on Monday, weekly jobless claims on Thursday and what could be an important reading of consumer sentiment from the University of Michigan's closely-tracked survey on Friday.
On the earnings front, updates from Broadcom (AVGO), Costco Wholesale (COST) and Lululemon (LULU) will round out the third quarter reporting season, which is expected to deliver collective S&P 500 profits of $463.8 billion, a modest 4.4% gain from last year.
Estimates for the final three months of the year suggest earnings will fall by 0.6% to around $454.6 billion, before rebounding by around 9.9% over the first quarter of next year.
3. -- Oil Prices Gain On China Optimism; OPEC Holds Production Levels
Global oil prices moved higher Monday after OPEC leaders, as well as key allies including Russia, agreed to maintain their program of production cuts until at least the end of next year.
The cartel, which concluded a virtual meeting late Sunday, made no changes to their October agreement, which pulled 2 million barrels from the market each day amid worries over global demand linked to recession risks.
The moves followed a late Friday decision by the leaders of the G-7, along with Australia, to agree a cap on the price of imported Russian crude at $60 a barre, but were partly offset by optimism linked to China's moderately improving Covid situation, which could stoke demand in the world's biggest energy market.
Brent crude futures for February delivery, the global pricing benchmark, were last seen $1.46 higher on the session at $87.07 per barrel. WTI contracts for January, which are tightly-linked to U.S. gasoline prices, were marked $1.14 higher at $81.44 per barrel.
4. -- Tesla Slides On Reports of EV Production Cuts In China
Tesla (TSLA) shares moved lower in pre-market trading following reports that the carmaker will reduce output at its key China factory amid fading demand in the world's biggest EV market.
Bloomberg reported Monday that Tesla is planning to cut production volumes at its Shanghai 'gigafactoy', which typically makes around 85,000 cars each month, by as much as 20% in December. Reuters reported planned reductions of more than 20% for Tesla's Model Y.
In late October, Tesla cut prices for its China-made cars for the first time this year, just days after its third quarter earnings report echoed the impact of rising production costs and indicating narrowing profit margins for the world's most-valuable car company.
Tesla shares were marked 1.4% lower in pre-market trading to indicate an opening bell price of $192.11 each.
5. -- Sam Bankman-Fried Says He'll Testify On FTX Collapse Before Congress
Sam Bankman-Fried, the disgraced former CEO of the bankrupt FTX, indicated late Sunday that he would be prepared to testify on the crypto trading platform's collapse in front of Congress late this month.
In response to a Tweet from the Chairwoman of the House Financial Services Committee, Maxine Waters, which praised Bankman-Fried's willingness to speak publicly on the FTX implosion, the former CEO said he would appear before hearings scheduled for December 13.
"Once I have finished learning and reviewing what happened, I would feel like it was my duty to appear before the committee and explain," Bankman-Fried said.
In a host of interviews since FTX filed for Chapter 11 bankruptcy protection in early November, Bankman-Fried has pushed back against accusations of fraud under his leadership at the Bahamas-based exchange, but has yet to provide a convincing explanation for an estimated $8 billion hole in the group's broader balance sheet, nor fully and directly addressed the issue of comingling of client funds between FTX and his wholly-owned hedge fund, Alameda Research.
