By Geoffrey Smith
Invesitng.com — Central bank meetings are set to dominate the week, with the Federal Reserve, European Central Bank and Bank of England all expected to raise key rates by 50 basis points. Anticipation keeps the markets relatively calm in the meantime. Amgen is the last man standing in a $26 billion auction for Horizon Therapeutics, while Microsoft is to take a stake in London Stock Exchange Group in connection with a large contract for the sale of Azure services. The number of COVID cases in China appears to be exploding, hitting local assets and oil prices. Here’s what you need to know in financial markets on Monday, December 12.
1. A new cycle of monetary tightening
The curtain rises on a week that is expected to be dominated by central bank meetings in the United States and Europe, which should lead to a further tightening of global financial conditions.
The United States is expected to raise the federal funds target range by 50 basis points to an upper limit of 4.50% on Wednesday, after four giant steps of 75 basis points in each of its last four meetings. The is expected to follow suit on Thursday, along with , and .
Any doubts about the BoE’s rise this week were likely dispelled earlier by data showing more than expected in the month after Queen Elizabeth’s funeral, although a recession over the next six months seems inevitable.
2. Amgen is part of the Horizon deal
Amgen (NASDAQ:) is aiming for a deal with (NASDAQ:), after its French rival Sanofi (NASDAQ:) said it would pull out of an auction for the drugmaker this weekend, leaving Amgen as the only remaining bidder. Johnson & Johnson (NYSE:) had already withdrawn its interest.
The deal, valued at more than $26 billion, would be Amgen’s largest ever and could add up to $4 billion a year to Amgen’s annual revenue, according to some estimates.
Horizon develops drugs for rare autoimmune and acute inflammatory diseases. Its biggest seller is Tepezza, which is used to treat thyroid eye disease. Amgen stock was down 3.1% in premarket trading on the news, while Horizon stock was up 14%.
3. Stocks should rise slightly; Rivian puts German deal on ice, while Microsoft hangs LSE
US equity markets are also expected to open moderately higher later, although volumes are expected to be subdued with many participants effectively sidelined ahead of the Federal Reserve meeting.
As of 6:30 a.m. ET (11:30 a.m. GMT), they were up 58 points or 0.2%, while they were up 0.3% and up 0.4%. The three main currency indexes had lost between 1.4% and 2.1% last week on fears that the Fed could continue its tightening longer than expected, with the federal funds rate peaking at more than 5%.
Other stocks likely to be targeted later include Microsoft (NASDAQ:), which is set to take a spot on the London Stock Exchange Group (LON:) in return for a major 10-year commitment to its hosting service. Azure cloud. Azure chief Scott Guthrie is expected to take a non-executive seat as part of the deal.
There will also be a focus on Rivian (NASDAQ:), which has a plan that would have seen it start manufacturing electric vans in Europe in partnership with Mercedes. Rivian shares were down 5% in premarket, while Mercedes (ETR:) was down 0.7% in Frankfurt.
4. COVID stress in China is increasing
China’s stock indexes fell with the after authorities announced a sharp rise in admissions to the country’s fever clinics.
The figures, along with plenty of anecdotal evidence from a health service under increasing pressure, indicate how quickly COVID-19 has spread since mobility restrictions were eased earlier this month in response to the widespread protests that expressed their anger against the Communist Party and President Xi Jinping himself.
Beijing fever clinics received 22,000 people on Sunday, up 16 times from a week earlier, according to the Global Times, an English-speaking spokesperson for the CCP. Other media reported on long lines of people outside hospitals awaiting treatment, disruption of delivery services due to couriers being sick and state media urging people not to call the emergency medical helpline unless they are seriously ill.
5. Oil down as China news weighs, Citi cuts forecast
Crude oil prices hit 13-month lows overnight in response to COVID-19 news from China, which cast growing doubt on the country’s growth prospects for the next six months. Citigroup analysts cut their average forecast for crude next year by 10% to $80 a barrel.
That overshadowed comments by Russian President Vladimir Putin, who warned that Russia could cut oil production in response to Western moves to cap the price of the country’s exports. Early developments, following the imposition of this cap, have left the bulk of Russian exports severely curtailed as they struggle to find buyers willing to pay high freight charges.
As of 6:45 a.m. ET, futures were down 0.8% at $70.43 a barrel, while futures were down a similar amount at $75.47 a barrel.