Geoffrey Smith 

Investing.com — China’s Covid-19 epidemic spreads, and Goldman Sachs’ (NYSE:), growth projections for China’s second largest economy fall next year. Facebook (NASDAQ:), will announce earnings following the closing bell. It is during heightened regulatory and market scrutiny. Even though the Democrats have announced a wealth tax, stocks are expected to climb. Europe’s economy slows and Mario Draghi (Itlian Prime Minister) fails in his efforts to get rid of a trouble bank. As oil prices fall, they continue to rise. These are the facts about Monday 25th Oct in the financial markets.

1. China’s Covid-19 virus spreads

China said its latest Covid-19 outbreak had spread to 11 of its 23 provinces, raising the specter of fresh lockdowns as it continues with its ‘zero tolerance’ approach to the disease.

China remains one of few countries that have not abandoned an economic-dangerous approach to stopping the spread of the disease. The majority of countries now allow the spread of the disease to be controlled within the communities. This is achieved through vaccination regulations and social distancing.

While the actual outbreak has not seen many cases, it is clear that the economic contraction was triggered by the China summer epidemics. Goldman Sachs cut its prediction for Chinese growth to 5.2% over the weekend from 5.6%.

Chinese markets remained broadly positive on Monday in the wake of China Evergrande’s suspiciously miraculous avoidance of default on Friday.

2. Facebook will report on harsh circumstances

Facebook will announce earnings at the close of business, a moment when regulators as well as markets are paying more attention to it.

Facebook stock fell 15% during the past 2 months, amid worries about its governance and near-term revenue outlook. The latter is in especially sharp focus after rival Snap (NYSE:) posted weak revenue in the third quarter due to changes in Apple’s privacy settings, which left advertisers unable to target adds on Apple (NASDAQ:) devices and, accordingly, less willing to pay to place them.

The Wall Street Journal published new revelations Sunday showing how Facebook intervened repeatedly to filter and moderate political content in certain areas of its website, including suppressing Breitbart’s conservative publication.

Kimberley Clark is also expected to report Monday Royal Caribbean Cruise Line. (NYSE: Overnight, HSBC followed Wall Street’s example and published earnings that were heavily bolstered through the release of loan provision.

3. Stocks are expected to rise.

U.S. stock exchanges are expected to open higher than normal, although they will remain rangebound in the absence of Big Tech earnings. Facebook will continue to be followed by Alphabet (NASDAQ.) and Microsoft. Amazon (NASDAQ.) will report Thursday.

At 06:15 ET (1115 GMT), we were up 16 points or 0.1%. We were up 0.1% and up 0.3%, respectively.

According to the reports, Democratic legislators are closer to an agreement regarding tax increases to finance their spending programs. Janet Yellen, Treasury Secretary, stated at the weekend the proposal are likely to contain a tax for unrealized equity gains above a threshold.

Stocks that are likely to come into focus include Pinterest (NYSE:) and PayPal (NASDAQ:). After Pinterest stated there is no merger talks, the latter said they will not be making any announcements.

4. Europe works towards the end of the year

Europe’s largest economy faces “a difficult quarter”, according to the Ifo research institute, whose closely-watched index of German business confidence fell for a fourth straight month on Thursday. The Ifo business climate index fell to its lowest in six months in October, as more and more of the country’s manufacturing sector fell victim to component shortages – notably for semiconductors.

Across the Baltic, Sweden’s Volvo was forced to scale down the size of its IPO, amid concerns about the chip issue and about its majority Chinese ownership. Geely Automotive owns the carmaker.

Bad news also came from Europe, as the Bank of Spain reported reducing its growth forecasts this year and next. Also, talks between Unicredit (MI) and the Italian government over Banca Monte dei Paschi di Siena, a long-standing problem, broke down.

5. Oil market tightens further

Prices for crude oil started this week in a stable place, and spot delivery premiums are approaching the top of recent years.

The degree of so-called ‘backwardation’ – the premium over futures contracts that is paid for immediate delivery – is now close to an all-time high, with the April futures contract trading over $5 below the spot physical price.

This is a sign of strong demand and bullishness. According to Goldman Sachs, the demand for global oil is back at 99,000,000 barrels per hour. This effectively reverses the decline in demand that was caused by the pandemic.

Futures rose 0.8% to $84.45 per barrel by 6:30 ET. They were 0.7% higher at $85.20 per barrel at the same time.