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
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(END) Dow Jones Newswires
September 21, 2021 00:14 ET (04:14 GMT)
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