Monday, February 6, 2023
HomeMarketDo China Protests Offer Economic Hope? The Markets Don’t Think So.

Do China Protests Offer Economic Hope? The Markets Don’t Think So.

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The return to work after a pleasant Thanksgiving break can feel like a shock. It certainly is going to be a busy week.

For a start, there’s a raft of U.S. economic data to keep an eye on. The jobs report is due on Friday, with data on job openings, consumer confidence, spending, and home prices coming before that.

But the bigger question over the next few days will be what happens with the widespread protests in China against zero-Covid policies.

For now, markets see this as likely to further weaken demand in the world’s second-biggest economy. Stocks and oil prices are down, and it’s worth asking why. After all, if China were to change the policy of strict lockdowns that has restrained growth, that might seem to be a good thing.

However, protests in China don’t have a great record of affecting big change. The ones in Hong Kong a few years ago came to little. Ditto for Tiananmen Square in 1989. Authorities may well be able to disperse the crowds and then quietly make some concessions to quell dissent.

The bigger worry is that the Chinese government can’t afford to change its policies much. Surely it would love to stop the lockdownsand speed up the economy’s expansion now this year’s targets are out of reach.

But China’s vaccine rollout has been ineffectual, both in terms of distribution and in immunizing against the virus. Cases are still hitting record highs. If the country could afford to open up without putting large numbers of lives at risk, it surely would have done so by now.

Heading into 2023, it looks like China faces more lockdowns as well as social unrest—bringing further uncertainty for markets. It’s an unwelcome combination.

—Brian Swint

*** Join MarketWatch’s economics editor Greg Robb today at noon when he will interview St. Louis Fed President James Bullard about the outlook for the economy and monetary policy. Bullard rattled financial markets earlier this month by suggesting the Fed’s benchmark federal-funds rate may need to rise to 7%. Sign up here.

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Cyber Monday Could Rack Up $11.2 Billion in Spending

Adobe
Analytics expects shoppers to cap off the holiday weekend’s brisk shopping totals by spending
another $11.2 billion in Cyber Monday deals today, up 5.1% from last year. Cyber Monday is projected to be the year’s biggest online shopping day, generating 16.3% of November-December holiday sales.

  • Cyber Monday is expected to be the best day to buy computers (27% off, on average), and furniture (11% off), but shoppers looking to buy appliances should consider waiting until Thursday, Dec. 1, when discounts are set to peak at 18% on average, according to Adobe.

  • Consumers spent a record $9.12 billion online on Black Friday, up 2.3% from last year, and a record $5.29 billion online on Thanksgiving, also more than last year. For the five-day Cyber Week between Thanksgiving and Cyber Monday, Adobe projects $34.8 billion in spending.

  • While Adobe’s numbers aren’t adjusted for inflation, which was up 7.7% in October from last year, this year’s sales numbers suggest demand growth. Adobe’s digital price index for October was down 0.7% from last year, compared with a 0.2% drop for the year ended in September.

  • Although store traffic increased 7% on Black Friday, and in-store sales rose 0.1%, shoppers on average spent less than they did last year, said RetailNext, which tracks shopper foot traffic. Sensormatic Solutions said Black Friday traffic increased 2.9% over last year.

What’s Next: Amid the holiday spending, Adobe is also seeing more prominent signs of a budget-conscious consumer, including more shoppers embracing “buy-now, pay-later” payment options, said Vivek Pandya, lead analyst, Adobe Digital Insights.

Janet H. Cho

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Thousands of Flights Delayed After Busy Thanksgiving Travel Weekend

More than 4,400 U.S. flights were delayed and 132 were canceled as of early evening on Sunday, according to FlightAware’s live tracking site, affecting hundreds of journeys for
American Airlines,

Delta Air Lines,

United Airlines,

Spirit Airlines
and others as weather threatened to snarl a busy travel weekend.

  • Flights were grounded or delayed across the country, from Reagan National and Newark Liberty International to Seattle-Tacoma and Chicago O’Hare airports, for weather, airspace volume, and poor visibility conditions, according to the Federal Aviation Administration’s website.

  • The Transportation Security Administration expected to screen more than 2.5 million travelers on Sunday, as part of a holiday travel weekend it predicted would approach 2019 volumes. TSA’s busiest single day was the Sunday after Thanksgiving 2019, when it screened nearly 2.9 million passengers.

  • AAA expected 4.51 million Americans to fly to their Thanksgiving destinations over the five-day weekend, up 8% from 2021, and around 98% of 2019 levels. From Wednesday through Saturday, TSA had screened more than 8.1 million passengers.

What’s Next: U.S. airlines have forecast a strong fourth quarter, building on their bumper third-quarter revenue and anticipating continued pent-up demand. Capacity constraints exacerbated by a nationwide pilot shortage and aircraft delivery delays have enabled airlines to increase fares.

Janet H. Cho

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Oil Slumps Ahead of OPEC Meeting, China Growth Fears

Oil prices fell early Monday as protests and record Covid-19 cases in China sparked demand fears, while adding renewed significance to OPEC’s meeting later this week.

  • Brent crude, the international benchmark, was down around 3% just above $81 a barrel. West Texas Intermediate, the U.S. standard, also slipped close to 3% to $74 a barrel. Both contracts dropped to 10-month lows last week.

  • As the unrest in China casts a shadow over the outlook for oil demand, the Organization of the Petroleum Exporting Countries (OPEC) is due to meet Dec. 4. After cutting output targets in October, an official at Iraq’s state oil marketer said the next meeting will take into account market conditions.

  • Another factor affecting the oil market is the talks among European Union leaders to set a cap on the price of Russian exports. Talks ended without a resolution last week. The limit on what Russia can charge, which will be enforced by Group of Seven members, is due to come into effect next week.

What’s Next: OPEC will certainly be closely watching events in China when making their decision on oil production. With several factors converging at once, it could be a volatility week for oil.

Callum Keown

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Chevron Gets New License to Resume Venezuelan Oil Production

Chevron
can resume pumping oil in Venezuela under a new Treasury Department license, a significant crack in a longstanding embargo as the Biden administration fights rising energy prices. Chevron told Barron’s the new license allows it to “commercialize” the oil produced there.

  • The license was issued after Venezuelan President Nicolás Maduro’s government and an opposition coalition agreed to let the United Nations manage $3 billion that will be directed for humanitarian relief and continue talks in Mexico City about holding free and fair elections.

  • Chevron has joint ventures with the national oil company, Petróleos de Venezuela or PDVSA. Oil produced under the new license has to be sent to the U.S. PDVSA can’t receive any profit. Chevron told Barron’s “We are determined to remain a constructive presence in the country.”

  • Sanctions on Venezuela started 15 years ago and were tightened under the Trump administration. Saturday’s shift might be an opportunity for other oil producers to restart operations there. Venezuela produces about 700,000 barrels of oil a day, significantly less than the millions a day it pumped more than two decades ago.

  • Republican lawmakers criticized the move, saying the Biden administration should be encouraging an increase in domestic production. Democrats said the action wasn’t motivated by lowering the price of oil, but as a way to keep pressure on Venezuela to make political and human rights concessions.

What’s Next: Biden administration officials said the U.S. is prepared to revoke or amend the license, which will be in effect for six months, at any time if Venezuela doesn’t negotiate in good faith.

Liz Moyer

***

November Jobs Report Caps Off Big Economic Data Week

This week features several economic reports in advance of the Federal Reserve’s next interest rate decision next month, not the least of which will be Friday’s jobs report for November. Analysts expect the economy added 220,000 jobs, down from October, with the unemployment rate remaining 3.7%.

  • Before that, the Bureau of Labor Statistics will release the job openings report on Wednesday. Economists forecast October ended with 10.5 million job openings, fewer than in September. And ADP’s job report the same day is expected to show the economy added 180,000 private-sector jobs.

  • The Conference Board’s consumer confidence figure for November, due out Tuesday, is expected to tick down from October.

  • On Thursday the Bureau of Economic Analysis is expected to report gains for both personal income and personal spending in October. Income is forecast to rise 0.4% from September and spending is expected to rise 0.7%.

  • This week also brings data on home prices. Tuesday’s S&P CoreLogic Case-Shiller National Home Price Index for September is expected to show home prices rose 10.4% from last year after a 13% jump in August.

What’s Next: The Fed’s favored inflation gauge, the core personal-consumption expenditures price index, is forecast to have jumped 5% in October from the same time last year, which is slightly lower than September’s 5.1% gain. The number is released Thursday.

Liz Moyer

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MarketWatch Wants to Hear From You

What is ‘effective altruism,’ the philanthropic movement championed by Sam Bankman-Fried? Five facts you need to know.

A MarketWatch correspondent will answer this question soon. Meanwhile, send any questions you would like answered to thebarronsdaily@barrons.com.

***

—Newsletter edited by Liz Moyer, Patrick O’Donnell, Rupert Steiner

Credit: marketwatch.com

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