Fed minutes, JOLTS, ISM, China tech hope - what's moving markets

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Fed minutes, JOLTS, ISM, China tech hope - what's moving markets
Credit: © Reuters.

By Geoffrey Smith 

Investing.com -- The Federal Reserve will publish minutes of its last policy meeting in December, while we will also get the first big U.S. data releases of the year in the form of the ISM Manufacturing survey for December and the Labor Department's Job Openings survey for November. In Washington, there's an entirely new kind of deadlock, as MAGA and Freedom Caucus Republicans block the appointment of Kevin McCarthy as House Speaker. Chinese ADRs fly after signs that the Communist Party is easing the pressure on the sector. U.S. stocks are trying to form a bottom after Tuesday's Tesla-inspired declines. And oil hits a two-week low amid fears for global demand. Here’s what you need to know in financial markets on Wednesday, 4th January.

1. Fed Minutes to follow JOLTS and ISM numbers

The U.S. provides its first big data dump of the year, with the minutes of the last Federal Reserve policy meeting, at 14:00 ET (19:00 GMT), the climax of a day that will also include the monthly Job Openings and Labor Turnover survey and the Institute for Supply Management’s manufacturing survey .

The minutes should shed light on how strongly Fed officials feel about the need to keep interest rates high if inflation – as many expect – continues its downward path this year. The JOLTS and ISM numbers – both due at 10:00 ET - should tell us a little more about how realistic it is to hope for a quick and painless process of disinflation.

Weekly mortgage application and interest rate data are also due at 07:00 ET, as usual.

2. Deadlock in the House

The U.S. House of Representatives is paralyzed, after failing to elect a speaker at the first pass for the first time in 100 years. Kevin McCarthy has now failed in three separate votes to secure majority support, thanks to a handful of right-wing holdouts in the Republican Party who consider him to be too close to the Washington, DC mainstream consensus.

The 20 holdouts come largely from the staunchly conservative Freedom Caucus, which nominated Jim Jordan as Speaker, despite his insistence that he didn’t want the job.

There was no sign of compromise from either part of the GOP on Tuesday, leaving few clues as to when Capitol Hill will actually be able to get on with the business of making laws.

3. Stocks set to bounce a little; Tesla overshadows events

U.S. stock markets are set to open a little higher after Tuesday’s losses, which were driven largely by fears for two of the market’s biggest heavyweights.

By 06:20 ET, Dow Jones futures were up 93 points or 0.3%, while S&P 500 futures were up 0.4%, and Nasdaq 100 futures were up 0.6%. The three main cash indices lost between 0.1% and 0.8% on Tuesday.

Tesla’s (NASDAQ: TSLA ) 12.4% drop – a reaction to it missing the expectations for deliveries in fourth quarter - was its biggest daily fall in over two years, reflecting growing fears about demand for its cars. Apple's (NASDAQ: AAPL ) decline was more sentiment-led, driven by reports that its market cap was about to fall below the $2 trillion level. It does, however, also reflect broader fears about demand for gadgets in general after years of stimulus-fueled demand subside.

Other stocks in focus later will include Tesla rival Rivian (NASDAQ: RIVN ), which likewise missed its delivery targets in the fourth quarter.

4. Chinese ADRs fly after regulators lighten up on Ant Group

Chinese stocks extended their rally on signs that the government is following through with promises to go easier on the technology sector.

The Hong Kong Hang Seng index surged to a five-month high after reports that Ant Group had received permission from the country’s securities regulators to raise capital. Regulators had notoriously blocked Ant Group’s IPO in 2020 at the start of a broad crackdown that reasserted the supremacy of politics over business in the Communist-led country.

ADRs in Alibaba (NYSE: BABA ), an affiliate of Ant Group which shares some of its political risks due to the fact that the same man - Jack Ma - founded both companies, rose 7.0% in premarket trading, while ADRs in Pinduoduo (NASDAQ: PDD ) and JD.com (NASDAQ: JD ) also rose. Tencent (HK: 0700 ), another tech giant to face heavy regulatory pressure last year, rose 4.6% in Hong Kong.

5. Oil hits two-week low on demand fears; API numbers due

Crude oil prices fell to two-week lows, as fears for the global economic outlook weighed on sentiment, adding to near-term oversupply in the U.S. caused by last week’s storms. By 06:40 ET, U.S. crude futures were down 2.6% at $74.95 a barrel, while Brent futures were down 2.6% at $80.00, having traded below that level for much of the European morning.

The American Petroleum Institute will publish its weekly inventory data at 16:30 ET as usual, which is likely to show the impact of drivers being kept at home by adverse weather last week.

Natural Gas prices meanwhile steadied, despite European prices hitting a new 11-month low. Demand for U.S. gas is set to stay high nonetheless, something reflected in a Reuters report overnight claiming that a Tokyo utility is in talks to buy gas producer Rockcliff Energy for $4B.

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