MARKET WRAPS
Stocks:
European markets rose as investors stayed positive despite
downbeat trading in Asia, where indexes were hit by gathering fears
around an economic slowdown and debt problems with giant property
developer China Evergrande Group.
Growth across a range of Chinese economic indicators pulled back
sharply in August, as a new outbreak of the Covid-19 Delta variant
and tighter government regulations on the property market hit
consumer spending and the housing sector.
Investors were also worried that problems at Evergrande, one of
China's largest residential developers, could upend the country's
real-estate sector, which makes up a large part of economic
spending and household wealth.
"Evergrande has brought forward that there are so many
vulnerabilities in the China system and it's hard to know where the
Chinese government steps in," said Seema Shah, chief strategist at
Principal Global Investors. "There is that just weighing on
confidence.
Elsewhere, the Bank of England is likely to leave monetary
policy unchanged next week despite a stronger labor market and
higher inflation, said RBC Capital Markets.
The Canadian bank adjusted its BOE call after the August meeting
and is now forecasting two interest rate rises in 2022,
encompassing a 15 basis-point increase to 0.25% at the May 2022
meeting and a further 25 basis-point increase to 0.5% at the
November 2022 meeting.
"That change was prompted by the rapid improvement in the labour
market, " analysts said. While the Monetary Policy Committee were
still relatively confident that goods price inflation would prove
temporary as mismatches between supply and demand issues ironed
themselves out, it was less certain the same was true of the labor
market, RBC said.
Shares on the move:
Shares of Lagardère surged 20% after media conglomerate Vivendi
struck a deal to increase its stake in the French group, a move
that opens the door to a full takeover.
Shares of Ryanair Holdings rose 4% after the airliner raised its
five-year growth forecast to 225 million passengers by March 2026.
Shares of other airlines also gained, with EasyJet up 3.3% and Wizz
Air Holdings up 2.9%.
Data in focus:
Oxford Economics' eurozone recovery tracker posted a modest
improvement over the past two weeks, rising to 86.3, a new pandemic
high.
"Despite a markedly slower pace compared to the second quarter,
the gains show the recovery remains on solid footing and point to
robust growth in 3Q," Oxford Economics' economist Tomas Dvorak
said.
The eurozone economy remains well below its pre-pandemic size,
and with most of the easy gains from reopening nearly exhausted,
economic recovery moves into a slower and tougher phase, the
economist said.
Dvorak said consumer spending will continue driving the
recovery. Mobility has enjoyed a strong summer and remains solid,
while supply-chain bottlenecks continue weighing on the industrial
sector, keeping it under pre-pandemic activity levels, Dvorak
said.
U.S. Markets:
Stock futures wavered ahead of retail sales.
U.S. retail sales, due at 8:30 a.m. ET, are expected to fall in
August. Supply-chain issues are hindering auto production and
crimping sales, while resurgent Covid-19 is denting consumer
confidence and possibly purchases at stores, restaurants and
online.
Investors will also get fresh figures on the number of Americans
who applied for first-time unemployment benefits in the week ended
Sept. 11. Filings for jobless benefits reached a pandemic low at
the start of September, but economists surveyed by The Wall Street
Journal expect claims could tick higher in the most recent
data.
"Markets, particularly in the U.S., are cherry-picking news
headlines and tier-two data to fit the narrative of flip-flopping
daily sentiment, " said Jeffrey Halley, an analyst at broker
Oanda.
Halley said he expects to see Wall Street's Wednesday surge
reversed if U.S. retail sales print lower than -0.8%, but investors
could equally ignore those data and focus on the Philadelphia Fed
manufacturing survey or initial jobless claims.
"Hopefully, next week's cast of ...central bank policy
decisions, starting with the Federal Reserve, delivers more
thematic clarity," Halley added.
Forex:
U.S. retail sales for August are expected to be weak, with the
consensus in a WSJ poll calling for a 0.8% on-month decline, which
could cause the dollar to fall, UniCredit said. The impact will
likely be limited, however, as major currencies remain stuck in
tight ranges.
UniCredit expects a 1.0% monthly fall in retail sales which it
says in theory could "prove sharply USD negative" but in practice
the dollar might not fall too far.
Aggressive EUR/USD buying is unlikely given the euro has failed
to rise above $1.1850 in recent days, while the DXY dollar index is
"flipping around 92.50," it said.
Bonds:
Eurozone government bond yields are moving higher in early trade
as the market faces up to around EUR20 billion in bond issuance
from Spain, France and Austria, but the market is still in a search
of direction, UniCredit analysts said.
"The bond market continues to be caught between a rise in
inflation globally, with investors uncertain whether this is a
temporary phenomenon or something more persistent, and concerns
about global growth due to the spread of the Delta variant,"
UniCredit said.
The 10-year Bund yield was trading 1.5 basis points higher at
-0.303%, while yield increases are smaller in bonds of peripheral
countries, such as Italy, Spain and Portugal, according to
Tradeweb.
U.S. Treasurys could gain if retail sales data show another drop
in spending, said UniCredit.
After a move higher in global inflation expectations drove
Treasury yields higher and bond prices lower Wednesday, another
fall in retail sales driven partly by the spread of the Delta
variant could trigger some risk-off sentiment and lift Treasury
bond prices, analysts at the bank said.
Gains could be even higher if the data undershoots
expectations.
Pictet Asset Management said it remains neutral on U.S.
Treasurys, saying that 10-year U.S. yields appear too low at
current levels of around 1.30%.
The current market levels are a good 40 basis points below what
Pictet AM's own models suggest as a long-term fair value. That
said, the asset manager said it doesn't foresee a disruptive rise
in yields.
Commodities:
Oil prices held steady a day after rallying to their highest
level since mid-July on a larger-than-expected drawdown in U.S.
crude oil stocks. U.S. crude inventories fell by 6.4 million
barrels last week to 417.4 million barrels.
Stockpiles are being drawn down while refiners in the Gulf of
Mexico continue to recover from Hurricane Ida.
"Hurricane Ida is limiting any material increase in supply from
the U.S.," said Helge Andre Martinsen at DNB Markets.
"Demand is reviving in China, while easing restrictions in other
countries are keeping oil demand prospects strong," he said.
Gold was slightly lower as investors weigh the rise in Treasury
yields, which is sapping appetite for the precious metal, ANZ
said.
"Subdued inflation expectations have been a headwind, with our
gold valuation model still suggesting it is undervalued, driven by
expectations that the spike in inflation will transitory," it
said.
Oanda thinks support for gold remains at $1,780.00. If it
breaches that level then Oanda expects deeper losses to
$1,750.00.
Base metals prices slipped after China says it has new plans to
release metals from state reserves. Three-month copper on the LME
fell 1.7% to $9,442 a metric ton while aluminum dropped 0.8% to
$2,867 a ton and nickel slumped 2.7% to $19,400 a ton.
Unhappy about high prices for the metals on which its economy
depends, China has auctioned off some of its metals stockpiles in
an attempt to cool the market.
China's National Development and Reform Commission said Thursday
that it planned to continue releasing stocks of copper, aluminum,
and zinc in order to bring prices down. "Currently, copper,
aluminum, and zinc prices are still high," a Chinese official said,
according to Reuters.
EMEA HEADLINES
Lagardere Shares Surge After Vivendi Paves Way for Full
Takeover
Shares in French media group Lagardere SA surged Thursday after
Vivendi SE struck a deal to increase its stake in the company, a
move that opens the door to a full takeover.
At 0800 GMT, Lagardere shares traded 21% higher at EUR23.60.
Ryanair Raises Five-Year Passenger Growth Forecast to 50%
Ryanair Holdings PLC on Thursday raised its five-year growth
forecast to 225 million passengers by March 2026.
The Irish airline said it expects to deliver traffic growth of
50% from the pre-pandemic figure of 149 million passengers a year.
This is up from the previous target of 33% and 200 million
passengers a year by March 2026.
Eurozone Exports Rose on Month in July
Eurozone exports rose in July after six consecutive falls,
signaling that international goods trading was on a weak footing
despite the easing of most coronavirus-related restrictions.
The European Union's statistics agency said Thursday that the
currency area's exports rose by 1.0% in July from June, while
imports increased 0.3%, both adjusted for seasonal variations. The
seasonally adjusted trade surplus was 13.4 billion euros ($15.8
billion) compared with EUR11.9 billion in June.
EU New Car Sales Declined Noticeably in August
Passenger-car registrations in the European Union fell strongly
in August, as EU markets showed a weak performance during the
summer amid a semiconductor shortage.
New car registrations--a reflection of sales--declined 19% on
year to 622,993 vehicles in August, the European Automobile
Manufacturers Association said Thursday. The EU's major
markets--Spain, France, Italy and Germany--all reported strong
decreases.
Airbus, Air New Zealand to Jointly Study Hydrogen Aircraft
Feasibility
Airbus SE and Air New Zealand Ltd. have agreed to jointly
research the feasibility of operating a hydrogen-fueled aircraft by
the end of this decade.
Airbus, which has been exploring three hydrogen-powered aircraft
concepts, said the joint study would help it understand the
practical challenges of putting an aircraft powered by a renewable
energy source into service. Air New Zealand would assess the
possible impact that a hydrogen aircraft would have on its network,
operations and infrastructure.
Veolia Launches EUR2.5 Bln Capital Increase to Fund Suez
Acquisition
Veolia Environnement SA is launching a capital increase of 2.5
billion euros ($2.95 billion) to partly fund its takeover of Suez
SA.
The French resource-management company said Thursday that the
raise would provide a lifeline to acquire a 70.1% stake in Suez,
valued at around EUR9 billion. Veolia already owns a 29.9% stake in
the company.
DP World Invests GBP300 Mln in London Logistics Hub
DP World said Thursday that it will invest 300 million pounds
($415.3 million) on a fourth berth at its London Gateway logistics
hub to increase its supply-chain resilience and create more
capacity.
The supply-chain solutions company said that the total sum
builds on the GBP2 billion investment made in Britain over the last
decade.
U.S. to Share Nuclear Submarine Technology With Australia in New
Pact
WASHINGTON-The U.S., the United Kingdom and Australia are
creating a new security partnership in the Indo-Pacific, building
on the longstanding alliance between the three to share
intelligence, deepen cooperation and help Australia to build
nuclear-powered submarine capabilities as China's influence
grows.
The new agreement, announced Wednesday by leaders of the three
countries, was described by administration officials as a way to
line up common interests in the Asia Pacific.
U.K. Prime Minister Boris Johnson Shifts Dominic Raab Aside in
Cabinet Reorganization
LONDON-British Prime Minister Boris Johnson Wednesday shuffled a
number of top ministerial jobs in a bid to enforce discipline
within Conservative Party ranks and move on from the Covid-19
crisis.
The most high-profile change was Foreign Secretary Dominic Raab,
who was moved aside to head the justice ministry while also being
given the title of deputy prime minister.
Triago's Matthew Swain Sees Bumper Crop of Family-Owned Company
Deals
Placement and advisory firm Triago in Paris has promoted Matthew
Swain to managing partner and co-leader of Americas operations with
Victor Quiroga, founding partner, based in New York. The moves are
part of a personnel push that also included hiring Valerie Auffray
as a partner in London. Triago advises fund sponsors and investors
on fundraising as well as on secondary deals and direct
investments. WSJ Pro Private Equity spoke to Mr. Swain about what
is shaping up to be one of the busiest years in the firm's history.
Responses have been edited for clarity.
WSJ Pro: How have you seen the rebound in deal and fundraising
activity this year affect your business?
GLOBAL NEWS
Jobless Claims Likely Remained Near Pandemic Low Last Week
Jobless claims likely held near a pandemic low last week, as
layoffs ease despite a rise in coronavirus cases tied to the Delta
variant.
Economists expect a Labor Department report on Thursday to show
initial unemployment claims rose slightly to 320,000 last week from
a pandemic low of 310,000 a week earlier. Delayed filings following
Hurricane Ida, which hit Louisiana at the end of August, could have
contributed to a small increase last week, some economists say.
U.S. Retail Sales Likely Took a Hit From Delta Variant
Product shortages and the Delta variant are preventing many
Americans from spending at retailers, restraining the economic
recovery.
U.S. retail sales likely fell for the second straight month in
August, according to economists surveyed by The Wall Street
Journal. The Commerce Department will release official figures at
8:30 a.m. ET Thursday.
Rising Shipping Costs Are Companies' Latest Inflation Riddle
Transportation costs-typically a fraction of a finished
product's price-are emerging as another supply-chain hurdle,
overwhelming some companies already paying more for raw materials
and labor.
The fabric and crafts retailer Jo-Ann Stores LLC said it has
spent 10 times more than its historical cost in some cases to move
products from one point to another.
Elizabeth Warren Calls On Fed Banks to Bar Leaders From Stock
Trading
Sen. Elizabeth Warren (D., Mass.) is calling on regional Federal
Reserve Banks to set rules that would prevent their leaders from
trading individual stocks, following recent disclosures that the
chiefs of the Boston and Dallas banks actively traded stocks and
other investments last year.
"The controversy over asset trading by high-level Fed personnel
highlights why it is necessary to ban ownership and trading of
individual stocks by senior officials who are supposed to serve the
public interest," Ms. Warren wrote in letters addressed to the
leaders of the 12 regional Fed banks.
FTC Moves Toward Stricter Antitrust Scrutiny of Vertical
Mergers
WASHINGTON-A divided Federal Trade Commission on Wednesday
withdrew guidelines adopted just last year on how the government
reviews so-called vertical mergers of companies that don't directly
compete with one another, the latest signal the agency is looking
to escalate antitrust scrutiny of deal making.
FTC Chairwoman Lina Khan, during a virtual public meeting, said
she was concerned that the recent Trump-era guidelines gave too
much credit to business efficiencies and other potential upsides of
vertical mergers while not fully recognizing the harms that some of
those deals could create in the marketplace.
Covid-19 Pandemic Aid Kept Millions of Americans Out of Poverty
in 2020
The sweeping financial assistance Congress provided to Americans
earlier in the Covid-19 pandemic kept millions from sliding into
poverty during the worst economic fallout from the crisis, new
census figures show.
The U.S. poverty rate rose in 2020 after five years of annual
declines, according to data released by the Census Bureau this
week. But the broader Supplemental Poverty Measure, which factors
in some expenses and accounts for a wider range of income-including
hundreds of billions of dollars in pandemic aid-dropped to a record
low 9.1%, marking the first time that yardstick has fallen below
the official poverty rate.
Evergrande's Woes Fuel Selloff in Chinese Property Shares
A selloff in Chinese property stocks intensified Thursday, as
concern mounted about the effects of an official campaign to rein
in the sector that has already sparked turmoil at China Evergrande
Group.
The Lippo Select HK & Mainland Property Index dropped 4.9%,
closing at its lowest level in more than four years, FactSet data
showed. The drawdown in property shares helped pull Hong Kong's
flagship Hang Seng Index down about 1.5% to 24667.85, the
benchmark's lowest closing value of 2021.
Taiwan Plans to Bulk Up Military Budget to Contend with Chinese
Pressure
PINGTUNG, Taiwan-Taiwan plans to significantly increase military
spending in the next five years, according to a draft bill that
calls for new outlays on weapons systems that would better equip
the island to repel an attack by China.
The proposal, unveiled by Taiwan's cabinet on Thursday, calls
for the allocation of the equivalent of about $8.7 billion, over
the next five years to fund the acquisition of homegrown precision
missiles, high-performance naval ships and weapons systems for
existing warships.
France Says It Has Killed Islamic State Leader Responsible for
Deaths of U.S. Soldiers
France said Thursday it had killed Adnan Abu Walid al-Sahrawi,
the Islamic State leader who led the killing of four U.S.
servicemen in Niger in 2017 and was the architect of one of the
terrorist outfit's most successful franchises following the group's
loss of its Middle East territories.
"This is another major success in our fight against terrorist
groups in the Sahel," French President Emmanuel Macron said,
referring to the vast semiarid region south of the Sahara that has
become home to some of the world's most deadly jihadist cells. He
didn't provide details on when or where precisely al-Sahrawi had
died.
Afghan Refugees on U.S. Military Bases Wait to Begin Their New
Lives in America
RAMSTEIN AIR BASE, Germany-In between the threat of Taliban
violence and the promise of American freedom lies this large
military installation, which has become a conduit between two
worlds for thousands of Afghans.
Many of the Afghans arriving here say they were both hopeful and
shellshocked from split-second decisions to leave home, probably
forever, and head to the U.S. They are being met by U.S. military
personnel, whose missions were transformed overnight from fighting
on the front lines to embracing evacuees fleeing the end of nearly
20 years of war.
Parents Seek Out Covid-19 Vaccine Trials for Their Children
Ahead of Official Authorization
Rachael DiFransico's 14-month-old daughter Sybil chewed on a
plastic toy at a doctor's office in the Cleveland suburbs while
waiting one recent day to enroll in a study testing whether a
Covid-19 vaccine works safely in children.
"This trial is our best shot at getting the vaccine as quickly
as possible," said Ms. DiFransico, who said she wanted Sybil to be
able to spend more time with other children and extended family.
"We want some semblance of normalcy for her."
U.S. to Share Nuclear Submarine Technology With Australia in New
Pact
WASHINGTON-The U.S., the United Kingdom and Australia are
creating a new security partnership in the Indo-Pacific, building
on the longstanding alliance between the three to share
intelligence, deepen cooperation and help Australia to build
nuclear-powered submarine capabilities as China's influence
grows.
The new agreement, announced Wednesday by leaders of the three
countries, was described by administration officials as a way to
line up common interests in the Asia Pacific.
Write to sarka.halas@wsj.com
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(END) Dow Jones Newswires
September 16, 2021 06:42 ET (10:42 GMT)
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