China announced more easing of Covid-19 health measures after new data showed its trade slowed significantly in November. Apple's iPhone production is one that has been impacted. Central banks in Brazil and Poland are expected to halt interest rate hikes, but Canada is poised to tighten policy further.
Not forgetting that Xi Jinping is about to visit Saudi Arabia following the rise in oil prices has reduced their profits for the year so far due to fears of an economic recession. For investors and traders, here's what you need to know in the financial markets on Wednesday, December 7.
1. China moves further away from Zero-COVID move after worrying trade slump
China's foreign trade data explains why Beijing is suddenly so keen to loosen its Zero-Covid strategy.
Exports fell 8.7% on the year in November, the most since the worst day of the outbreak in March 2020, while imports fell a steeper 10.6%. Both figures were significantly weaker than analysts' forecasts. The figures are heavily influenced by the disruption of the new wave of Covid-19 but also by the sharp decline in global demand which is also evident in indicators such as shipping rates, which are now down 50% from their peak.
The central government in Beijing announced another plan to ease restrictions on Wednesday, including limiting the ability of local government officials to arbitrarily lock down businesses and residential districts, as well as further loosening testing requirements to enter public places.
2. Canada is expected to raise rates by 50bps, but others may have peaked, where U.S. productivity data so focus
U.S. market has expressed concern over higher terminal rates for fixation. On the other hand, central banks elsewhere are starting to step off the brakes.
Brazil and Poland, which both started tightening monetary policy ahead of the Federal Reserve, are expected to keep key interest rates at 13.75% and 6.75% respectively. Another early mover the Reserve Bank of Australia raised its rates by a modest 25 basis points on Tuesday.
The Bank of Canada is expected to raise its key rate by 50 basis points to 4.25%.
3. The stock market is expected to open slightly lower
US stock markets are expected to open lower then try to stabilize after a second straight day of heavy losses amid concerns that the Federal Reserve may trigger a recession by raising interest rates above 5% next year.
Dow Jones futures were down 44 points or 0.1%, while S&P 500 futures were down 0.2%, and Nasdaq 100 futures were down 0.3%. The three major cash indexes lost between 1% and 2% on Tuesday.
4. Apple is struggling
One of the biggest factors behind the decline in China's exports was the disruption at Apple iPhone supplier Foxconn's massive factory complex in Zhengzhou last week.
Norio Nakajima, president of major Apple supplier Murata Manufacturing, told Bloomberg on Wednesday that he expects a downward revision to orders, with the main risk coming from U.S. consumers.
Apple shares came under further pressure when Bloomberg reported that the company had pushed back the tentative launch date for its electric car a year later to 2026, after concluding that existing technology would not allow fully autonomous driving.
5. Oil cuts China gains in 2022 amid recession fears. Xi arrived in Riyadh
Crude oil prices erased their gains for the year in response to Chinese trade data, which reinforced concerns that the U.S. will lead the world into recession next year.
The U.S. crude oil futures market. fell as low as $73.81 a barrel overnight, while Brent futures hit $79.03 a barrel before recovering slightly in European trade.
Chinese President Xi Jinping is expected to arrive in Riyadh on Wednesday for talks with Saudi Arabia and other Gulf countries, which may have implications for OPEC production plans. In the U.S., meanwhile, government raw inventory data is expected to show an increase.
