MARKET WRAPS

Stocks:

European markets gained as investors stayed upbeat after the latest U.S. Federal Reserve decision, with automotive and technology stocks among the biggest risers.

The Bank of England is expected to keep monetary policy on hold in the face of rising inflation when the central bank releases its latest decision at 7 a.m.

The BOE is expected to use up the latest round of quantitative easing in full and is unlikely to announce any changes when it announces a policy decision, said RBC Capital Markets.

"This meeting is probably the last opportunity to make any meaningful change to the current GBP150 billion programme, as by November it will be largely completed," analysts at the bank said.

They continue to think the central bank "will see the current round of QE out in full." They expect another unanimous vote to hold the bank rate at 0.1% and an 8-1 vote to maintain the government bond target at GBP875 billion.

Investors also were digesting the Fed's decision to tee up a reversal of its pandemic stimulus measures in November. New projections released at the end of the Fed's two-day policy meeting Wednesday showed half of 18 officials expect to raise interest rates by the end of 2022.

That has given money managers confidence the Fed won't allow the current bout of inflation to become entrenched, said John Roe, head of multiasset funds at Legal and General Investment Management.

"The most interesting thing about both the current statement and also the last couple of statements has almost been a rowing back on the idea they're really going to let inflation rip before they take action," he said.

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Norges Bank's 25 basis-point rate increase makes it the first in the G10 to begin a tightening cycle, said Capital Economics.

"Policymakers have all but confirmed that they will hike again in December, and we now expect them to raise rates back to the pre-virus level (1.50%) by the end of next year, which is faster than investors expect."

It added that the messaging was a bit more hawkish than expected, with the central bank arguing that increased activity and rising wage growth will help push inflation up towards the inflation target of 2%.

"We now expect the bank to raise rates once per quarter next year (we previously expected three rate rises), which we judge to be consistent with the 'gradual rise' that policymakers expect."

Data in focus:

September's flash purchasing managers index highlights an "unwelcome" combination of sharply slower economic growth and steeply rising prices, IHS Markit's chief business economist Chris Williamson said.

The eurozone flash composite PMI fell from 59.0 in August to 56.1 in September. According to IHS Markit, this decline reflects the peaking of demand in the second quarter, supply chain bottlenecks and concerns over the ongoing pandemic.

Firms' costs rose at the fastest rate in 21 years as demand again outstripped supply, IHS Markit said.

"Concerns over high prices, stressed supply chains and the resilience of demand in the ongoing pandemic environment has eroded business confidence, with expectations for the year ahead down to the lowest since January," Williamson said.

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The Spanish economy in the second quarter grew more slowly than previously thought, at less than half the pace of the initial estimate, signaling that the recovery from the Covid-19 pandemic has been weaker than expected.

Spain's gross domestic product rose 1.1% in the second quarter compared with the previous three-month period, according to a second estimate released by the country's statistics office INE on Thursday. This was down from the 2.8% initially estimated.

Lower growth in household spending, along with higher imports, prompted the big downward revision, the data showed.

U.S. Markets:

U.S. stock futures rose, pointing to gains for major indexes as investors remained upbeat that trouble with property giant China Evergrande Group can be contained.

Markets have been consumed this week with questions surrounding Evergrande, China's largest property developer. The heavily indebted company has issued billions of dollars of bonds to international investors, with many trading for a fraction of their face value.

However, fears around its possible collapse appear to have ebbed-at least temporarily. Evergrande has an $83.5 million coupon payment due Thursday on its U.S. dollar bonds and hadn't given an indication of whether it will miss the payment.

On Wednesday, the company's flagship property business said it would make an interest payment on an onshore bond, giving Evergrande more time to work out what investors expect will be a lengthy and complicated restructuring.

Weekly jobless claims data are due at 8:30 a.m. ET. Economists surveyed by The Wall Street Journal estimate that unemployment claims, a proxy for layoffs, declined to 320,000 in the week ended Sept. 18, from 332,000 the prior week.

Also coming, surveys of purchasing managers from a number of large economies will be scrutinized for signs of a further slowdown in global growth during September. IHS Markit is due to release figures for the U.S. service and manufacturing sectors at 9:45 a.m.

Forex:

The dollar should strengthen after the Fed signaled that it could start tapering asset purchases as early as November while interest rates could rise by the end of next year, MUFG said.

Although many in the market had anticipated a more cautious tone from the Fed, the dollar's reaction overnight was modest, as the currency had already risen in advance of the meeting, said MUFG currency analyst Lee Hardman.

"Overall the hawkish policy signals should encourage a stronger U.S. dollar especially against low yielding currencies like the euro," he said.

The BOE's policy decision later represents a major risk event for sterling, said Lukman Otunuga, senior research analyst at FXTM. Markets widely expect the central bank to leave monetary policy unchanged, with traders' focus likely to turn to bank officials' comments on inflation, he said.

Sustained weakness in GBP/USD below 1.3670 could open a path back down towards the July low at 1.3570, he said. Conversely, a solid move above 1.3670 could prompt an advance towards 1.3750.

The Norwegian krone rose to its highest level in three months against the euro after Norges Bank raised interest rates to 0.25% from 0%, as expected, and signaled further gradual rate rises to come.

The central bank said the policy rate would likely be raised further in December and it now projects rates at 1.7% toward the end of 2024. "The path implies that the policy rate will rise slightly faster and end at a slightly higher level than projected in the June Report," it said.

Activity is now higher than its pre-pandemic level and the economic upswing will likely continue through fall, Norges Bank said.

The Swiss franc edged lower after the Swiss National Bank held its policy rate at minus 0.75%, as expected, and reiterated that the currency "remains highly valued."

The euro rose 0.3% as it continued to recover after falls that took it briefly below $1.1700 following the Fed announcement. The currency shrugged off weaker provisional eurozone purchasing managers' indexes for September.

"There are increasing signs that the euro area economy will not be able to maintain the high pace of growth in the final quarter," said Commerzbank economist Christoph Weil. He notes, however, that price indexes point to "continued high inflationary pressure."

Bonds:

In the bond market, the yield on 10-year Treasury notes ticked down to 1.331% from 1.332% Wednesday.

Eurozone government bond yields were trading higher after the Fed announcement. "A hawkish Fed is moving 'ahead of the curve' and markets have little time to catch their breath," Christoph Rieger, head of rates and credit research at Commerzbank, said.

Commodities:

Oil prices rose thanks to rising equity markets and risk sentiment. Brent continued higher Thursday to around its highest since mid-July despite the release of what DNB Markets' Helge Andre Martinsen described as the EIA's release of bearish-to-mixed inventory data on Wednesday.

Despite those figures, API readings released Tuesday were remarkably more upbeat and broader context shouldn't be ignored, he said. "We started the year with total petroleum inventories above the five-year high and is now established below the five-year low, a remarkable transition," Martinsen said.

Gold weakened after the Fed annoucement. "The gold price--surprisingly, in our opinion--did not react much to the Fed's hawkish signals and statements. Presumably this was due in part to the fact that the U.S. dollar appreciated only slightly and bond yields hardly change," said Commerzbank.

Three-month copper on the LME wavered between gains and losses. The metal was last up 0.3% at $9,299 a metric ton.

EMEA HEADLINES

Norges Bank Lifts Key Rate, Sees a Further Raise in December

Norges Bank on Thursday became the first major central bank to raise interest rates after the Covid-19 pandemic, lifting its key rate to 0.25% from zero while suggesting a further raise later this year.

The raise marks the first move since the Norwegian central bank cut it to zero in May last year as the pandemic took hold.

Reckitt Benckiser Performance Since July 27 in Line With Views

Reckitt Benckiser Group PLC said on Thursday that its performance since July 27--when it published first-half results--has been in line with management expectations.

The London-listed consumer-goods company, which houses Dettol, Harpic and Durex among its brands, said that it continues to be confident in delivering like-for-like revenue growth of between 0% to 2% for 2021. It added that it expects adjusted operating profit margins of between 22.7% and 23.2% for the year.

Royal Mail Sees 1H Adj Operating Profit GBP395 Mln-GBP400 Mln

Royal Mail PLC said Thursday that its adjusted operating profit for the first half ending Sept. 30 is expected to be between 395 million and 400 million pounds ($537.9 million-$544.7 million).

The company said that both the adjusted operating profit and margin of its Royal Mail business are expected to be higher in the second half compared to the first half. As for the GLS business, which provides delivery services in Europe and North America, the group maintained its full-year outlook of low-single-digit percentage revenue growth, and 8% operating margin.

Europe Is Pumping Less Gas as Demand Rebounds, Leaving a Gap Russia Is Filling

A giant Dutch natural-gas field once pumped enough fuel to cover the current needs of Germany, Europe's largest economy. Next year the field is shutting down over environmental concerns.

Natural-gas supply shortfalls have led to record prices for the fuel and electricity, stoking fears of a shortage and spotlighting European efforts to cut greenhouse-gas emissions. The conflict is one economies world-wide face as they try to adopt cleaner energy sources.

FDA Clears Covid-19 Booster Shots From Pfizer for High-Risk People

U.S. health authorities cleared Covid-19 vaccine booster shots for people 65 and older and certain other adults at high risk of severe illness, a bid to help curb the pandemic and the dangerous Delta variant.

The Food and Drug Administration on Wednesday said it permitted a third dose of the shot from Pfizer Inc. and BioNTech SE for people who got two doses of the Pfizer-BioNTech messenger RNA vaccine and are 65 years and older or are at risk of severe disease and death, including because of their jobs or where they live.

London Stock Exchange to Close Unprofitable Interest-Rate Derivatives Venture

London Stock Exchange Group PLC is shutting its venture in interest-rate derivatives, CurveGlobal Ltd., after it failed to gain traction with traders over the past five years.

CurveGlobal will close in January, and some of its futures markets with zero activity are being suspended immediately, LSEG said in a notice to traders posted on its website Tuesday. A spokesperson for the U.K.-based exchange operator confirmed the move Wednesday.

Angela Merkel's International Legacy: Cooler Trans-Atlantic Relations

BERLIN-After moving into the White House in January, President Biden decided his first call to a foreign leader would go to Angela Merkel, signaling a return to trans-Atlantic normality after the turbulence of the Trump era, according to aides.

The German chancellor had other plans. She declined the offer of a call on that Friday afternoon because she would be at her country cottage near Berlin, where she spends some weekends tending to her vegetable garden and walking by the lake, people familiar with the discussion said.

Biden, Macron Vow to Work to Ease Diplomatic Spat

President Biden and France's President Emmanuel Macron, speaking for the first time since a diplomatic spat arose over a deal by the U.S. and United Kingdom to supply Australia with nuclear-powered submarines, vowed to seek ways to patch up an alliance that is part of American efforts to counter China's influence in the Pacific.

In a joint statement from the U.S. and France, both sides acknowledged the situation would have benefited from better communication. Mr. Biden also reaffirmed a commitment to discuss matters of strategic interest to France and European partners, it said. Mr. Macron said his ambassador, Philippe Etienne, would return to Washington next week after having been recalled for consultations, the joint statement said.

U.N. Climate Summit Attendees Push U.K. for Vaccines

Some 25,000 delegates from nearly every nation on Earth-including government officials, activists and journalists-will descend on Glasgow, Scotland, in November for a United Nations global climate summit.

The U.K. government is trying to make sure they have all had a chance to get vaccinated.

GLOBAL NEWS

U.S. Jobless Claims Are Expected to Hover Near Pandemic Low

Filings for unemployment benefits likely resumed a summer decline last week, as demand for workers keeps a lid on layoffs and the economic recovery shows signs it is holding up during the latest Covid-19 surge.

Economists surveyed by The Wall Street Journal estimate that weekly unemployment claims, a proxy for layoffs, declined to 320,000 in the week ended Sept. 18 from 332,000 the prior week. That would bring the four-week moving average for initial claims, which smooths out weekly volatility, to the lowest level since the Covid-19 crisis began last year.

Fed Officials See 'Transitory' Inflation Lasting Quite a While

All year the Federal Reserve's message on inflation has been consistent: This year's surge is transitory, and inflation will soon return close to the central bank's 2% target.

Yet look more closely, and it is clear officials are turning less sanguine-and that explains growing eagerness to start raising interest rates.

Taiwan Central Bank Leaves Rates Steady Amid Moderate Inflation, Uncertain Economic Recovery

Taiwan's central bank left its benchmark rate unchanged Thursday, saying moderate inflation and an uncertain economic recovery called for a continuation of its loose monetary policy.

The move came amid fears of slower economic growth in the second half of the year, after the island tightened pandemic restrictions in May, when local infections rose sharply.

New Platform Backed by Fidelity, Goldman Seeks to Bring IPO Market Into Digital World

A new technology platform backed by the biggest U.S. banks and money managers is aiming to bring the IPO market into the 21st century.

The syndicate desk-a longtime fixture at banks across Wall Street where IPOs and other large stock sales are priced and allocated to investors-has long clung to traditional ways of doing business like phone orders and scribbled pieces of paper, even as other businesses go digital.

Fed Tees Up Taper and Signals Rate Rises Possible Next Year

The Federal Reserve signaled it was ready to start reversing its pandemic stimulus programs in November and could raise interest rates next year amid risks of a lengthier-than-anticipated jump in inflation.

The Fed's rate-setting committee, at the end of a two-day gathering, indicated in its postmeeting statement Wednesday that it could start to reduce, or taper, its $120 billion in monthly asset purchases as soon as its next scheduled meeting, Nov. 2-3.

Iron-Ore Prices Buckle as Evergrande Adds to China Concerns

SYDNEY-The crisis engulfing property developer China Evergrande Group is causing iron-ore prices to buckle, as investors worry that pressure on China's huge property market will translate into lower appetite for steel.

Evergrande's difficulties are the most visible sign of the worsening climate for Chinese real-estate companies, and economic data point to a broader malaise in the sector, with home sales by value contracting nearly 20% year-over-year in August, and construction starts down this year.

Investors Bet Environmental Fears Will Crunch Commodity Supply, Lifting Prices

Investors are ramping up wagers that a global push to lower carbon emissions will hamper commodity production, pushing up prices for everything from natural gas to aluminum.

With producers such as Exxon Mobil Corp. and Chevron Corp. under pressure from investors to minimize environmental damage, many are limiting spending on new output. The caution comes after years of declining investments in production that were driven by lackluster commodity prices and a focus on returning money to shareholders, analysts say.

Supply-Chain Crunch, Chip Shortage Focus of White House Meeting

WASHINGTON-The Biden administration is seeking more information from companies struggling with the global shortage of semiconductors, an effort designed to increase transparency in supply chains and ease bottlenecks.

The request for information, which is voluntary for companies, will be made Thursday as the White House hosts a meeting of semiconductor producers and users. Administration officials said the objective is to get more information about supply and demand problems and identify ways the government can help.

FDA Clears Covid-19 Booster Shots From Pfizer for High-Risk People

U.S. health authorities cleared Covid-19 vaccine booster shots for people 65 and older and certain other adults at high risk of severe illness, a bid to help curb the pandemic and the dangerous Delta variant.

The Food and Drug Administration on Wednesday said it permitted a third dose of the shot from Pfizer Inc. and BioNTech SE for people who got two doses of the Pfizer-BioNTech messenger RNA vaccine and are 65 years and older or are at risk of severe disease and death, including because of their jobs or where they live.

Biden Pushes Democrats to Find Consensus on Budget Package

WASHINGTON-President Biden pressed lawmakers to reach a consensus on his sweeping $3.5 trillion spending proposal during a series of meetings at the White House on Wednesday, aiming to settle sharp intraparty differences that threaten to derail his legislative agenda.

During his sit-down with moderate Democrats, lawmakers discussed reducing the size of the package, which would expand access to healthcare, offer universal prekindergarten and reduce carbon emissions, among other measures, to below $3 trillion, according to two people familiar with the meeting. Progressives, meanwhile, continued to threaten to block passage of a separate, roughly $1 trillion infrastructure bill next week if it comes to the House floor before the larger package.

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(END) Dow Jones Newswires

September 23, 2021 06:36 ET (10:36 GMT)

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