MARKET WRAPS

Watch For:

U.K. Public sector finances; U.S. Federal Open Market Committee meeting; OECD Interim Economic Outlook Report; updates from Kingfisher, Compass Group.

Opening Call:

European stocks could rise at the open Monday's market rout. U.S. stock futures point to higher open. Dollar flat. Oil and copper gain, while gold remains flat.

Equities:

European stocks are set to rebound at the open Tuesday as equity markets look calmer after Monday's volatile trading.

U.S. futures edged higher, suggesting markets there could regain some ground, after concerns about the Chinese property sector helped fuel a global selloff in the previous session.

In Asia, Hong Kong's flagship Hang Seng Index fell as much as 1.3% in early trading but quickly recouped most of those losses.

Shares in China Evergrande Group, the heavily indebted Chinese developer whose financial difficulties have concerned investors, dropped another 4.4% to 2.18 Hong Kong dollars a share. That took its year-to-date decline to more than 85%.

Elsewhere in the region, Japanese stocks caught up with Monday's selloff, with the Nikkei 225 dropping about 2% by late morning Tokyo time. Japan's market had been closed Monday for a public holiday.

In European equities, Citi boosted estimates for Deutsche Post and puts the company on "positive catalyst watch" on rising freight rates.

Citi projects 45% growth in ocean-freight pricing from 2Q to 3Q and rising airfreight rates boosting the freight forwarding unit.

"We believe the current tight supply in the container shipping will likely result in an extended Q3 peak season thus paving the way for the stronger pricing in Q4," Citi wrote.

The firm sets a target price of EUR74, or the equivalent of $86.82 a share, on projected adjusted EBIT of about $2.19B.

Moody's Investors Service on late Monday said it upgraded the long-term deposit ratings of Greece's National Bank of Greece S.A., Eurobank S.A., Alpha Bank S.A. and Piraeus Bank S.A., the nation's four largest banks.

Moody's said it upgraded National Bank of Greece, Eurobank and Alpha Bank to B2 from Caa1 and Piraeus Bank to B3 from Caa2. The rating action was "primarily driven by their improving asset quality and solvency and good prospects for further enhancing their recurring profitability," Moody's said.

Moody's also said its outlook on the deposit rating of all four banks is positive, reflecting expectations they will "continue to improve their credit profiles, and be in a good position to manage any new problem loan formation as a consequence of the coronavirus pandemic."

Forex:

Sterling could struggle in coming weeks due to a less confident tone from the Bank of England this Thursday and beyond, said Rabobank.

"We are becoming less confident that GBP can achieve our long-held target of EUR/GBP 0.84 by year-end," said senior currency strategist Jane Foley. Rabobank's 3-month GBP/USD forecast of 1.39 may "prove out of reach" too and it plans to review these forecasts after Thursday.

Despite strong U.K. inflation figures, retail sales and other indicators have been weak and Rabobank is reluctant to forecast an interest-rate rise until 2023, Foley said.

Any sterling gains following Thursday's BOE announcement will likely lose steam, she said.

The dollar was flat against the euro but firmer against riskier currencies like the Canadian and Australian dollars.

Investors Monday were looking for safe havens and the dollar weakened against the yen and Swiss franc on fears Chinese property developer company Evergrande.

The WSJ Dollar Index was slightly higher. Evergrande's collapse is "a slow-motion trainwreck that has been coming off the tracks for years," says Karl Schamotta of Cambridge Global Payments, "that could capture headlines and drive risk sentiment in foreign exchange markets.... But comparisons to the 'Lehman moment' which nearly took down the Western financial system in 2008 look overblown."

Bonds:

The yield on the 10-year U.S. Treasury note rose modestly, to 1.324%, according to Tradeweb.

Any potential losses in corporate bonds on the back of the U.S. Federal Reserve's policy decision this week are likely to be short-lived, said Societe Generale.

"We suspect that even if there is a hawkish tone, credit markets will not be impacted for long," the bank said, adding that "credit metrics remain solid, the economies continue to improve, and the Delta variant seems under control, even if there are still some hotspots worldwide."

Euro- and dollar-denominated corporate bonds spreads in both investment grade and high yield stand to rally and break trough the floors of this year's trading ranges after companies start releasing third-quarter earnings results and issuance slows, it said.

Energy:

Oil gained in early Asian trade as the rally in natural gas and coal prices could cause utility companies to switch to burning fuel oil instead, ANZ said.

Oil demand should also be helped by the U.S. announcing it will lift the travel ban for vaccinated foreign travelers in early November, the bank said.

Supply-side disruptions could add further support, with ANZ pointing out that Shell's Mars and Ursa oil drilling platforms in the U.S. Gulf wouldn't come online until the end of 2021 after Hurricane Ida.

Metals:

Gold was little changed in early Asian trade, as the market awaits clearer signals that should come after the conclusion of the FOMC meeting, Commerzbank said.

For now, the precious metal is under pressure from a firm U.S. dollar and higher bond yields, the bank said.

Commerzbank believes that the Fed will start scaling back bond-buying at the start of the new year, but added that "if Fed Chair Powell can convince the market that tapering will not be quickly followed by any rate hikes, gold could recover somewhat in the second half of the week."

Copper roses in early Asian trade, snapping a three-session losing streak stemming from concerns over property developer China Evergrande's potential debt default, Commonwealth Bank of Australia said.

Price support from tightness in the copper market seems to be outweighing the downward pressure from Evergrande's credit problems, with ANZ noting that the copper market recorded a 90,000-ton deficit in June and was undersupplied by 2,000 tons in 1H.

The three-month LME copper contract was 0.2% higher at $9,048.00 a ton.

TODAY'S TOP HEADLINES

China Evergrande Fallout Hits Western Bond Funds

The potential default of real-estate developer China Evergrande Group is taking a toll on funds in Europe and the U.S. that chased high yields in the Chinese corporate bond market.

Concerns that Evergrande might not pay its bonds this month triggered selling of other companies in the country's property sector, weighing down funds managed by Ashmore Group, BlackRock Inc. and Pacific Investment Management Co., among others.

Democrats Add Debt Limit to Spending Measure, Sparking Showdown With GOP

WASHINGTON-Democratic leaders said Monday they would attach a suspension of the debt limit through December 2022 to a short-term spending bill, setting up a clash with Republicans over preventing both a partial government shutdown and a potential default on U.S. debt.

The House is expected to vote on the combined measure this week, but GOP opposition in the Senate cast uncertainty over how and when lawmakers will act to prevent the federal government from running out of cash. Many Republicans said Monday they wouldn't supply any votes for an effort to raise the government's borrowing limit in protest to Democrats' plans to move trillions of dollars in new spending through Congress.

Bitcoin Price Slides as China Jitters Hit Crypto Markets

Bitcoin fell sharply on Monday as a wave of selling triggered by tumult in China's indebted property sector hit the crypto markets.

The world's largest cryptocurrency was trading at about $43,489 at 5 p.m. ET, down 8.6% from Friday, according to CoinDesk.

Surging Energy Prices Push U.K. to Weigh Helping Hard-Hit Industries

LONDON-The U.K. government is considering measures to soften the fallout from a sharp increase in energy prices that has put power suppliers to consumers out of business and stoked problems for a range of industries from steel to brewing and fertilizers.

Natural-gas prices across Europe have surged as economies bounce back from the pandemic at a time when stores of the fuel are low and Asian demand is strong.

Glasgow Climate Summit Faces 'High Risk of Failure,' U.N. Leader Says

NEW YORK-The coming climate summit in Glasgow, Scotland, runs a "high risk of failure" unless world leaders take stronger measures to stem greenhouse-gas emissions, United Nations Secretary-General António Guterres said Monday.

Mr. Guterres made his comments to reporters following a two-hour closed session with U.K. Prime Minister Boris Johnson, U.S. climate envoy John Kerry and other leaders on the sidelines of the U.N. General Assembly meeting.

U.S. to Relax Covid-19 Travel Restrictions as Tensions Mount With Allies

WASHINGTON-The Biden administration is easing a series of Covid-19 travel bans and will require foreign nationals seeking to fly to the U.S. to show proof of vaccination under new rules aimed in part at assuaging mounting frustration among European allies.

The new restrictions would replace a series of travel bans imposed during the Trump administration that limit travel into the U.S. from Europe, China, Iran and Brazil, and were later expanded to include South Africa and India. President Biden has been under pressure from European politicians and major airlines to lift the restrictions.

U.S. Home-Builder Sentiment Increased Slightly in September -- NAHB

Home-builder confidence in the U.S. rose slightly in September on lower lumber prices and strong housing demand, according to a measure released Monday by the National Association of Home Builders. Here are the report's main takeaways:

--The association's housing-market index, which gauges the single-family housing market, rose to 76 in September from 75 in August, ending a three-month decline. A number above 50 indicates that more builders view conditions as good than poor.

Transitory Inflation Can Be a Lasting Affair

Today's inflation may be transitory, but how long "transitory" means is becoming a real head-scratcher for investors. At the risk of intellectual incoherence, they seem more worried about the next five years than the next 10.

Electricity prices are hitting all-time highs in many European countries, making inflation front-page news. Overall eurozone consumer-price growth was 3% in August, much higher than in July, according to official data released Friday. Price gains are even steeper in the U.S., though data for August suggest they may have peaked.

Shell to Sell Permian Assets to ConocoPhillips for $9.5 Billion

Royal Dutch Shell PLC has agreed to sell all of its assets in the Permian basin, the most active U.S. oil field, to ConocoPhillips for around $9.5 billion in cash.

The deal, disclosed by both companies on Monday, comes as Shell is attempting to cut its carbon emissions and invest more in renewable energy. The sale is one of the largest recent transactions in the shale patch as large oil companies come under increasing pressure to diversify outside of fossil fuels.

AstraZeneca Breast Cancer Drug Found to Reduce Risk of Dying

AstraZeneca PLC said its breast cancer drug Enhertu significantly reduced the risk of dying or disease progression in women with advanced disease in a large clinical trial, the latest sign that its push into oncology is starting to pay off.

For women with metastatic breast cancer, an advanced form of the disease where tumors have spread to other parts of the body, Enhertu reduced the risk of death or tumor progression by 72% compared with Kadcyla, the current standard treatment, the trial found.

Pro-Putin Party Wins Control of Russia's Parliament

MOSCOW-Russia's ruling party won control of two-thirds of the seats in the Russian Parliament, a showing that will allow the government to enact changes to the constitution and bolsters the power of President Vladimir Putin.

The result also reflected the weakness of the opposition led by jailed Kremlin critic Alexei Navalny, which claimed that the vote was neither free nor fair. In the run-up to the three-day vote, which ended Sunday, the Kremlin has largely suppressed any opposition.

FedEx, UPS Rate Rises Are Making Online Shopping More Expensive

Shipping rates are going up faster than they have in nearly a decade, increasing pressure on merchants to raise prices or find other ways to offset higher costs.

FedEx Corp. on Monday said shipping rates would go up an average of 5.9% next year across most of its services, the first time in eight years that it or rival United Parcel Service Inc. has strayed above annual increases of 4.9%.

Write to sarka.halas@wsj.com

Expected Major Events for Tuesday

05:00/FIN: Aug Labour force survey, incl unemployment

06:00/SWI: Aug Trade Balance

06:00/UK: Aug Public sector finances

07:30/SWE: Aug Labour Force Survey

07:30/SWE: Swedish repo rate announcement

08:00/ICE: Aug Harmonized CPI

08:00/POL: Aug Retail Sales

10:00/UK: Sep CBI Industrial Trends Survey

12:00/HUN: Sep Hungarian interest rate decision

13:00/BEL: Sep Consumer Confidence Survey

22:00/NED: Aug House Price Index

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This article is a text version of a Wall Street Journal newsletter published earlier today.

(END) Dow Jones Newswires

September 21, 2021 00:14 ET (04:14 GMT)

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