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Nov. 28, 2022 - Unrest in China over lockdowns dampens risk sentiment


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‼️ Unrest in China over lockdowns dampens risk sentiment

Stock futures fell early in the week as social unrest from ongoing Covid restrictions in China weighed on markets and oil prices also fell. Today's losses come after Wall Street posted gains in the Thanksgiving holiday-shortened week after the prospect of more moderate Federal Reserve rate hikes boosted sentiment for riskier assets in recent sessions.

Unrest in China has complicated expectations for the country's path to reopening. Markets and investors are fearful of uncertainty, and conditions in China make it difficult to predict how the Chinese economy and corporate sales in China will evolve in the coming months. Protests in China, which are normally very rare, are increasing and spreading throughout the country. At the same time, the chances of a chaotic, earlier-than-expected exit from Beijing's Zero-Covid policy - which would still be positively received, but would further damage the reputation of China's President Xi - are increasing.

The Chinese yuan fell as much as 1.1% before recouping its losses against the USD. The JPY and CHF also benefited from increased demand for sanctuary assets. The EUR remains in demand and is supported by the lower energy prices.

The subdued sentiment in China contrasts with the upswing in sentiment in global markets, which was triggered by increasing hopes that the Fed may actually taper its upcoming monetary tightening measures as the U.S. economy shows increasing signs of slowing and inflation shows signs of cooling.

We see equity markets weighed down by weakness in Chinese equities and concerns about a further slowdown in Chinese demand and further supply chain disruptions. The steep decline in oil prices has also weighed heavily on energy stocks in European trading. I expect most of the selling to end during U.S. trading hours. 

In the short term, oil prices are oversold, but concerns about falling demand, especially from China, are weighing on oil prices. Oil prices will get a boost once OPEC says it will continue to support oil prices.

The focus will remain on the Fed. Fed Chairman Jerome Powell and New York Fed President John Williams will give speeches this week. Much of the attention this week will also be on US jobs reports - especially the NFP report for November on Friday


🇺🇸 US Markets ↕️ (limited downside after US pre-market losses)
Cyclical Stocks ↕️/↘️
Tech/Growth Stocks ↕️
Financial Stocks ➡️/↘️
Defensive Stocks ➡️
Energy Stocks ↘️

💱 Forex Markets
EUR ↗️ (benefiting from lower oil prices)
CHF, JPY ➡️/↗️
USD ➡️
GBP ➡️/↘️

Commodity Markets ↕️/↘️
Oil prices ↕️ (after losses deeper in oversold territory)
Natural Gas prices ↘️
Metal prices ➡️
Precious Metals ➡️/↗️

Crypto Market ↕️
(no recommendation to trade a "recovery")

(*↗️ bullish, ↘️ bearish, ➡️ sideways / stable, ↕️ mixed / volatile)

Yours, Robert 🇺🇸🏦🇨🇳🚷🤬🔍


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