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Tencent’s Top Shareholder Prosus Embraces Tech’s New Normal

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Europe-listed Prosus, which has long used dividends from the Chinese gaming giant to fund expensive bets such as food delivery, is moving more aggressively to stem losses

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Stocks Waver After Data Shows Slowing Pace of Inflation

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Commerce Department figures also showed households boosted spending in October

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Dow down nearly 200 points, S&P 500, Nasdaq waver on soft ISM manufacturing data, key inflation measure

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U.S. stocks traded mostly lower in midday trading on Thursday with the Dow Jones Industrial Average falling nearly 200 points, while the S&P 500 and the Nasdaq Composite struggled for direction, after a drop in a closely watched gauge of U.S. manufacturing activity.

Stocks had opened mostly higher Thursday after the Federal Reserve’s preferred inflation measure showed price pressures cooling somewhat in October, while reports suggested China is taking steps to relax its COVID restrictions to allow its economy to recover. Investors also awaited October jobs data on Friday that could determine the pace of the central bank’s interest-rate hikes.

How stock indexes are trading
  • The Dow Jones Industrial Average
    DJIA,
    +0.48%

    fell 190 points, or 0.6%, to 34,398.

  • The S&P 500
    SPX,
    -0.21%

    was nearly flat, at 4,079.

  • The Nasdaq Composite
    COMP,
    +3.85%

    gained 22 points, or 0.2%, to 11,490.

On Wednesday, the Dow rose 737 points, or 2.2%, the S&P 500 jumped 3.1%, and the Nasdaq Composite advanced 4.4%. The Dow rose 20.4% during October and November, the biggest two-month percentage gain since July 1938, according to Dow Jones Market Data.

What’s driving markets

The Institute for Supply Management’s manufacturing index, a key barometer of activity at American factories, fell to 49% in November. A reading of less than 50% indicates a contraction. The index was at 50.2% in October.

The ISM report is viewed as a window into the health of the manufacturing economy.

Stocks turned down on profit-taking after Wednesday’s big jump, said Michael Hewson, chief market analyst at CMC Markets, in a note, while the ISM data underlined expectations the Fed has room to slow down the pace of rate increases.

“This peak inflation, softer growth narrative was reinforced by the ISM manufacturing survey which fell into contraction territory for the first time since May 2020, while prices paid fell to 43, and employment also contracted at 48.4,” he wrote.

Earlier, a gauge of U.S. inflation, the personal-consumption expenditures index, rose a modest 0.3% in October, adding another piece of evidence that points to slowly easing price pressures. The yearly rate of inflation slowed to 6% in October from 6.2% in the prior month and a 40-year high of 7% last summer. Moreover, core PCE rose 0.2%, instead of the 0.3% expected by economists

“We’re watching the inflation data closely and the most important inflation report of the year is going to be the CPI report on 12/13, which could confirm the downtrend in inflation, which was first observed on 11/10 (and which ignited a 5.5% single-day gain in the S&P 500),” said Chris Zaccarelli, chief investment officer at Independent Advisor Alliance.

“On the other hand, if inflation surprises to the upside on 12/13, then all bets are off and we could see a sell-off into year-end – especially if the Fed decides to raise by 75 bps the next day, instead of the 50 bps which everyone is counting on.”

See: Global financial markets having ‘awful year’ despite ‘great’ November for most assets, says Deutsche Bank

Stocks jumped Wednesday when Federal Reserve chairman Jerome Powell made a speech that was less hawkish than expected.

The S&P 500 index surged 3.1% on Wednesday following the Fed chairman’s confirmation that a lower pace of interest rate hikes to combat inflation was more likely in coming months. It took the U.S. stock benchmark’s gains since its 2022 low in mid-October to 14.1%, after recent signs of easing price pressures had encouraged risk appetite once more.

“The general upbeat feeling since last month’s soft CPI print has carried into December after stocks surged thanks to a speech from Fed Chair Powell,” said Stephen Innes, managing partner at SPI Asset Management. “With markets increasingly predisposed to a terminal rate below 5% and inflation getting back close to target in 2024, the stock market’s rally could extend as pivot hopes should increase with interest rate risk now disproportionately skewed to the downside.”

“With so much money on the sidelines, fund managers may need to move into catch-up mode, so I suspect the market makers will position to get ahead of this flow in the new year so that the stock market dips will be shallow,” Innes added.

However, investors will be aware that the Fed’s policy trajectory remains dependent on data showing inflation continuing to slow as the economy cools. To that end traders will be keenly eyeing a batch of data over the next two sessions.

Two-year Treasury yields
TMUBMUSD02Y,
4.268%
,
which are particularly sensitive to monetary policy trends, continued to edge lower after the inflation data. The dip in yields has taken the shine off the dollar index
DXY,
-1.06%
,
off 0.3% to, its lowest since August.

Meanwhile, more Chinese cities eased antivirus restrictions and police patrolled their streets Thursday as the government tried to defuse public anger over some of the world’s most stringent COVID measures and head off more protests.

Companies in focus

 Jamie Chisholm contributed to this article.

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LSEG CEO says recent volatility has exposed weak spots in markets By Reuters

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© Reuters. LSEG (London Stock Exchange Group) CEO David Schwimmer attends the Reuters NEXT Newsmaker event in New York City, New York, U.S., December 1, 2022. REUTERS/Brendan McDermid

(Reuters) – London Stock Exchange Group (LON:) PLC Chief Executive David Schwimmer said on Thursday that large spikes in volume associated with algorithmic trading have exacerbated recent market volatility, exposing weaknesses in the global market infrastructure.

“What that means is when there’s an event … some kind of crisis like the onset of COVID in the spring of 2020, you see massive moves in the markets very quickly, and a lot of the plumbing out there can not handle that,” he said in an interview at the Reuters NEXT conference.

At the onset of the COVID pandemic in March 2020, some banks reached out to LSEG, asking it to close its markets for a day or two so they could catch up with post-trade processing, he said.

“We didn’t do that, obviously, because it’s important for us to keep the markets open and maintain that functionality, but I mentioned that because it’s where there may be some progress made over time,” he said.

Another “weak spot” in global markets is in the private equity and debt markets, which have grown quickly in recent years, while using lots of leverage, but with very little transparency, he said.

“A lot of people are sort of wondering and watching, how does that play out as rates continue to go up,” he said.

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