North American Morning Briefing: Stock Futures Edge Up as Thin Holiday Trading Continues

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Stock futures edged higher Wednesday in quiet trading over the holiday period, as investors remained optimistic despite rising Covid-19 cases.

Stocks have largely edged up in recent days as markets look ahead to the new year, with many expecting a continued economic recovery and strong earnings from companies.

Investors say they are becoming increasingly comfortable with the theory that the Omicron variant may not lead to harsh restrictions on commerce and movement as more information emerges. State governors are implementing light-touch measures to try to avoid disruptions.

“There’s an element of positivity. The data continues to suggest that the disease itself caused by Omicron is materially less severe than the variants which have preceded it,” said James Athey, an investment manager at Abrdn. “That’s always been the endgame for the pandemic.”

Read Omicron’s Spread Will Slam First-Quarter GDP. Here’s How Bad Things Look

Fresh data on the housing market is slated to go out at 10 a.m. ET when the National Association of Realtors puts out a report on U.S. pending home sales in November. Economists are forecasting a slowdown from the previous month.

Overseas, the pan-continental Stoxx Europe 600 rose 0.2%, rising for a third straight day and trading close to its all-time high. The FTSE 100 advanced 1.1% on the first day of trading this week after U.K. markets were closed for bank holidays.

In Asia, most major benchmarks slid, led by declines in technology stocks.

Stocks to Watch:

Tesla rose 2.3% in premarket trading. Elon Musk exercised the final batch of a package of vested stock options, a series of transactions that have boosted his stake in the company.

Shares in egg producer Cal-Maine Foods sank 7.7% in out-of-hours trading after the company reported a decline in profit, citing higher costs.


The dollar could weaken further if Omicron infection cases fall and social restrictions are less severe than feared, said Oanda, adding that support remains between levels of 95.80 and 95.85, and resistance at 96.30 initially.

Currency markets remain largely in holiday mode but Oanda expects activity to pick up in the second half of next week.

Bitcoin was trading below $48,000, adding to losses that have seen cryptocurrencies limp into the end of the year. Ethereum, the second-largest digital currency, fell more than 3% to below $3,800.00.

While demand for the two largest cryptocurrencies has waned into the end of the year, amid rising interest rates, tighter liquidity in financial markets and shifting regulatory stances, they both have posted sizable gains in 2021. Bitcoin has risen 65% year to date, while Ethereum has soared a whopping 414%.


Treasury yields were little changed in subdued European trading, as investors remained hopeful that Omicron would have limited global economic impact.

Tuesday’s surge in short-term yields was driven by “market optimism that Omicron will soon fade and that the Federal Reserve will bring forward its intention to hike rates as soon as the March Federal Open Market Committee meeting,” said Steen Jakobsen, chief investment officer at Saxo Bank.

Further out, however, “much of the U.S. yield curve is rather stuck in the mud, either because the market doesn’t believe in the outlook for sustained inflation or because it is predicting a drastic slowdown in the economy beyond the next year or two,” Jakobsen said.

Lawrence Gillum, fixed-income strategist at LPL Financial, sees the yield on the 10-year note climbing only modestly in 2022, ending the year in a range of 1.75% to 2%.

“For 2022, near-term inflation expectations above historical trends and improving growth expectations once the Covid-19 variants recede are reasons why we believe interest rates could move moderately higher from current levels,” Gillum wrote in an outlook published Monday.

On the flip side, an aging global population in need of income and continued bullishness around U.S. stocks, potentially triggering a “more frequent rebalancing into fixed income,” are two reasons why his team thinks longer-term rates will fail to move much higher next year.

Read more here.


U.S. oil futures remained above $76 in Europe, with investors looking ahead to official crude inventory data which could add pressure to oil markets that have enjoyed a recent rally.

“Omicron’s rampage could show up in higher oil derivative stockpiles. That may give the oil recovery some food for thought but is very unlikely to derail it,” said Oanda’s Halley. “The fast-money tail-chasers inhabiting the oil market recently look like they are finally taking a holiday break instead of drinking too much coffee.”

Copper nudged higher, while other base metals were mixed, as trading resumed in London after the holiday break, although volumes are expected to remain light until after the new year. Both this week and next will be shortened trading weeks, with the LME also closed on Jan. 3.




Google and Tech Rivals Tap Cash Reserves to Realize Cloud Ambitions

Google and its rivals are wielding a new weapon in the battle for cloud-computing market share: big-dollar investments in companies that agree to sign on to their services.

With Thomas Kurian serving as cloud chief executive since 2019 after a long tenure at Oracle Corp., the Alphabet Inc. unit has been tapping its $142 billion treasure chest of cash to make it more attractive to customers. Google has taken equity stakes over the past year in companies including Univision Communications Inc. and CME Group Inc., in turn winning multiyear commitments to its cloud service worth as much as $1 billion or more.


Elon Musk Exercises Final Batch of Tesla Stock Options Behind CEO’s Recent Share Dealings

Elon Musk has exercised the final batch of a package of vested Tesla Inc. stock options that have underpinned several weeks of share dealings by the chief executive.

Mr. Musk on Tuesday converted more than 1.5 million options due to expire in August 2022 into stock and sold more than 934,000 shares to cover associated taxes, according to regulatory filings.


Chinese AI Giant SenseTime’s IPO Comes at a Bad Time

China’s SenseTime has overcome headwinds to go public. Its next challenge is to find a path to profit.

The Chinese artificial intelligence company said Wednesday that it raised around $700 million from its initial public offering, at the low end of the price range. The company was forced to delay its IPO earlier this month after the U.S. government added SenseTime to an investment blacklist, alleging that the company’s facial-recognition technology was used in the oppression of mainly Muslim ethnic minorities in China’s Xinjiang region. SenseTime said its lawyers advised that the sanctions applied only to an unlisted subsidiary, but it anyway excluded U.S. investors from its IPO after its restart this week. Support from cornerstone investors, including state-backed ones, have helped carry it through the storm.


CDC Investigating 86 Cruise Ships With Covid-19 Cases

The U.S. Centers for Disease Control and Prevention is investigating or monitoring 86 cruise ships with reported Covid-19 cases on board, according to a list posted on its website Tuesday, as the highly transmissible Omicron variant spreads around the world.

The CDC investigates a ship if there are one or more reported Covid-19 cases among the crew or if cases reported account for at least 0.10% of total passengers in the past seven days. For a ship with 6,500 passengers, that would mean seven cases would trigger an investigation.


IPOs Had a Record 2021. Now They Are Selling Off Like Crazy.

Looming behind a record-breaking run for IPOs in 2021 is a darker truth: After a selloff in high-growth stocks during the waning days of the year, two-thirds of the companies that went public in the U.S. this year are now trading below their IPO prices.

Traditional initial public offerings raised more money than ever before in 2021, as startup founders and early investors tried to cash in on sky-high valuations. In the first eight months of the year, IPO shares rose. In November, 2021’s class of IPOs were trading up 12% on average, according to Dealogic. By late December, they traded 9% below their IPO prices.


Cash Floods Municipal-Bond Market

Investors have poured more money into municipal bond funds so far this year than they have in decades, driving borrowing to fund new bridges, sewers and other state and local projects to a second-straight 10-year high.

Municipal bond funds now hold an unprecedented 24% of outstanding debt compared with 16% five years ago, according to Federal Reserve data. The move marks the latest step in a fundamental shift away from a buy-and-hold market where individual investors quietly collect interest year after year.


Hong Kong Pro-Democracy Site Stand News Closes After Arrests, Raid

HONG KONG-National security police in Hong Kong arrested seven people linked to the popular pro-democracy news site Stand News, prompting it to shut down and dealing a further blow to freedom of speech in a city once celebrated for its rambunctious journalism.

The city’s National Security Department said Wednesday that the arrests were for conspiracy to publish seditious content, an offense under the colonial-era Crimes Ordinance. The offense is punishable by up to two years in prison and a fine of 5,000 Hong Kong dollars, equivalent to $641.


CDC Shortens Isolation for Some Covid Infections

U.S. officials cut the number of days that they recommend people isolate after being infected with Covid-19 to five days from 10, reflecting recent research, new pandemic-management ideas and stress on some industries as the Omicron variant has sickened workers.

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December 29, 2021 05:50 ET (10:50 GMT)

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