Markets struggle on reports of more Covid cases in China

Dow inched up 2, advancers over decliners 4-3 & NAZ was off 65.  The MLP index added 3+ to the 225s & the REIT index rose 6+ to the 383s.  Junk bond funds crawled higher & Treasuries saw selling, bringing higher yields.  Oil recovered 1+ to the 78s & gold gained 10 to 1763 (more on both below).

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A top Federal Reserve official anticipates that interest rates need to rise further & stay high for stubbornly high prices.  new York Fed Pres John Williams said that policymakers have more work to do in order to control inflation, which remains "far too high."  "My baseline view is that we’re going to need to raise rates further from where we are today," he said.  "I do think we’re going to need to keep restrictive policy in place for some time. I would expect that to continue at least through next year."  The Fed raised rates by 75 basis points at the beginning of Nov for the 4th straight meeting as it tries to wrestle inflation closer to its 2% target with the most aggressive tightening since the 1980s.  Traders widely expect the Fed to approve a smaller ½-point rate hike at the conclusion of its next 2-day meeting on Dec 14, although 32% still anticipate another super-sized, 75-basis-point increase.  Williams said nothing to sway markets against that expectations.  Inflation using the Fed's preferred measurement, the personal consumption expenditures price index, climbed 6.2% in Sep from the previous year.  Williams said he expects inflation to settle between 5-5.5% by the end of the year & between 3- 3.5% next year.  The Fed's target is 2%.

Inflation fight could last until 2024, Fed official warns

Starting in 2026, Qatar will supply Germany with liquefied natural gas for the next 15 years, as gas supplies from Russia have gone dry due to the war in Ukraine.  The agreement is between Qatar Energy, the country's state-owned oil company, & Germany's ConocoPhillips, which will give Europe access to oil from Qata''s North Field expansion project for the first time.  Officials from both countries did not provide an official price tag to the deal, but Qatar will send up to 2M tons of gas to German annually via the Brunsbuettel Terminal that is currently under construction.  "[The agreements] mark the first ever long-term LNG supply agreement to Germany with a supply period that extends for at least 15 years, thus contributing to Germany’s long-term energy security," said Qatar Energy CEO Saad Al Kaab in a joint news conference with his German counterpart.  Following Russia's Feb invasion of Ukrainian territory, Moscow cut key gas supply lines to European countries that sanctioned Russia & supported Ukraine via military aid.  Germany was thrown into a fueling inflation & energy crisis because more than ½ its gas came from Russia at the time.  The gas supply to Germany officially shut down in Aug, forcing the European state to find new suppliers going into winter.  Moreover, the majority of Germany's current supply of gas comes from more European-friendly states such as Belgium, Norway & the Netherlands.  Germany is also building five liquefied natural gas terminals to prevent a short-term energy crunch.

Germany signs 15-year oil deal with Qatar amid Ukraine War

Mainland China reported more than 31K Covid infections today, including cases without symptoms.  That surpassed the 29K high seen in mid-Apr, during the Shanghai lockdown.  However, daily Covid infections with symptoms remain well below the high seen in Apr.  Nearly 90% or more of total Covid cases reported in recent days have been asymptomatic.  The southern city of Guangzhou, the national capital of Beijing &  the southwestern municipality of Chongqing have been the hardest hit in the latest Covid wave.  But nearly all of China’s 31 province-level regions have reported new Covid infections, with & without symptoms, each day.  Since the weekend, 6 Covid-related deaths have been reported as of today.  China's stringent Covid controls have weighed on sentiment & business activity. National GDP barely grew during the 2nd qtr due to the Shanghai lockdowns.  As of the end of the 3d qtr, growth for the year was up by just 3% from a year ago — well below the official target of around 5.5% announced in Mar.  Factories located near Covid outbreaks have tried to maintain operations using what's called closed-loop management, which typically requires staff to live on-site.

Mainland China’s total daily Covid cases soar above Shanghai lockdown highs    

Gold futures finished higher      to recoup much of loss from a day earlier, as the $ stabilized, easing pressure on the $-denominated prices for precious metal.  Gold for Feb, which is the most-active contract, rose $8 (0.5%) to settle at $1763 an ounce after losing 0.8% yesterday.  Gold futures climbed on the heels of a big relief rally in Chinese & Hong Kong equity markets.

Gold Ends Higher to Recoup Much of its Recent Loss as the Dollar Stabilize

Oil rose on on expectations for a loosening of China's strict COVID-19 controls, but concerns that OPEC+ would keep its output unchanged at its upcoming meeting limited gains.  Brent crude futures settled at $83.03 a barrel, losing 16¢.  West Texas Intermediate (WTI) crude futures settled at $78.20 a barrel, up 96¢ (1.2%).  Chinese health officials said the country plans to speed up COVID-19 vaccinations for elderly people, aiming to overcome a key stumbling block in efforts to ease unpopular zero-COVID curbs.  The prospect of a return to normality, in an economy that is the world's largest oil importer, was enough to make oil prices jump in the first significant price rebound of the last 2 weeks.  Weakness in the $, which tends to trade inversely with oil, also helped to boost crude prices.  The $ index has fallen to 106.65 from a 20-year high as investors look toward the Federal Reserve reaching a peak rate early next year with inflation pressures expected to ease.  The strong rebound is being furthered by a weakening in the $ & a need to discount some loss of Russian crude availability via next week's scheduled initiation of sanctions.

U.S. oil prices settle higher on hopes China will relax COVID curbs

Tomorrow the 2nd estimate for GDP will be released.  Changes from last month's data will drive the stock market.  Meanwhile intl stories are getting a lot of attention starting with China's Covid problem.  Dow was in the red for most of the day.

Dow Jones Industrials