MARKET WRAPS

Watch For:

Facebook Inc. 3Q results.

Opening Call:

Stock futures edged up ahead of a big week of earnings from major technology companies.

Facebook is scheduled to report third-quarter results Monday after markets close. Microsoft, Twitter and Alphabet, Google's parent company, are scheduled for Tuesday. Apple and Amazon.com are expected to report later in the week.

Strong earnings from banks, consumer companies and manufacturers have sent stocks higher over the past week and soothed investors' concerns that higher inflation and labor shortages could erode profits.

"One of the more notable takeaways from the earnings reports seen so far has been the ability of companies, for the most part, to pass on increases in prices onto their customers without seeing a drop in sales, " said Michael Hewson, chief markets analyst at CMC Markets.

Disappointing results last week from social-media company Snap, which warned that tougher privacy rules from Apple would likely crimp its advertising sales, could be a "canary in the coal mine for the rest of the tech sector," Mr. Hewson said. Should the tech giants reporting earnings this week also post dour outlooks, it "could see the mood sour quite quickly."

A key question remaining is how global central banks will respond to rising prices. Recent trading in short-dated U.K. gilts suggests investors think the British government may raise interest rates as soon as November. Investors await comments from the European Central Bank and the Bank of Japan, which both have meetings scheduled this week. The Federal Reserve has signaled a possible rate increase next year.

Money managers are also closely watching negotiations among U.S. lawmakers about the fate of President Joe Biden's sweeping social-policy spending package. House Speaker Nancy Pelosi said Sunday that she was optimistic an agreement could be reached this week on the framework for the legislation, and a vote on a separate infrastructure funding bill.

Government spending on that scale "will continue to support growth," said Esty Dwek, chief investment officer at Swiss online bank FlowBank. "The question now is more about taxes and how they will pay for it."

Overseas, the pan-continental Stoxx Europe 600 was relatively flat Monday. Among European equities, HSBC rose 0.8% after it reported a jump in third-quarter profit and said it would spend up to $2 billion on stock buybacks. UniCredit declined 2.2% after talks with the Italian government to acquire nationalized lender Monte dei Paschi collapsed. In Asia, major benchmarks were mixed.

Forex:

The dollar has derived little support from higher U.S. Treasury yields so far in October due to reduced safe-haven flows and a similar rise in yields in other G10 economies, MUFG Bank said.

"As a result yield spreads have not moved decisively in favor of the U.S. dollar," MUFG currency analyst Lee Hardman said. "The case for a stronger U.S. dollar is more compelling against the low yielding G10 currencies of the EUR, CHF and JPY where market participants are more comfortable that their domestic central banks will keep rates low despite higher inflation."

Bitcoin rose 1.9% Monday above its level at 5 p.m. ET Friday, trading around $61,900. The cryptocurrency has wavered after it cleared $66,000 to hit a new all-time high last week.

The Turkish lira depreciated 1.8% to its weakest level on record, trading at 9.8 lira to the dollar Monday, after President Recep Tayyip Erdogan threatened to expel the U.S. ambassador and top diplomats from nine other Western countries over the weekend.

Bonds:

The yield on the benchmark 10-year Treasury note ticked up to 1.661% Monday from 1.654% on Friday.

Pimco sees risks of central banks raising interest rates in the short term as economies continue to recover, said Joachim Fels, global economic advisor at the asset manager. Over a longer-term horizon, however, it expects interest rates to remain relatively low and range-bound, with lower but positive returns for core bond allocations.

"We think it makes sense to seek to maximize the opportunity in traditional fixed income strategies with flexible mandates," he said.

The European Central Bank is likely to use this week's meeting to cast doubt on the bond market's pricing of interest-rate rises before the end of 2022, said TD Securities.

President Christine Lagarde may echo recent comments by ECB chief economist Philip Lane that the ECB's forward guidance is clear and implies that interest-rate rises remain years away, said TD Securities.

"Thus President Lagarde is likely to use her podium to push back verbally on yields to the best of her ability," TD Securities said.

The question remains how much emphasis the ECB will put on pushing back against market interest-rate expectations, however, it said.

Commodities:

Oil prices rose, with comments from the Saudi energy minister that oil producers shouldn't take high energy prices for granted playing a role, according to DNB Markets's Helge Andre Martinsen.

The analyst added that similarly conservative comments from Nigeria and Azerbaijan are also having an effect, with the oil market "discounting diminishing chances of additional OPEC+ production."

On top of that Goldman Sachs said in a note that it estimates that "global oil demand has surpassed 99 million barrels a day and will shortly hit its pre-COVID level of 100 million barrels a day as Asia rebounds post the Delta wave," with gas-to-oil switching also contributing.

Gold prices rose despite higher bond yields as investors worry about inflation. A gauge of inflation expectations in the U.S. rose to a nine-year high last week, noted Daniel Briesemann, an analyst at Commerzbank, while a similar measure in the Eurozone is also rising.

"The markets are pricing higher inflation in more and more...and many market participants clearly believe that the current high level of inflation is no longer merely temporary," he said.

TODAY'S TOP HEADLINES

Facebook Expected to Post Slower Sales Growth With Apple Privacy Policy

Facebook Inc. is poised to post another quarter of record sales, though analysts expect changes in Apple Inc.'s app-privacy rules to have weighed on the social-media company's digital-advertising business.

Facebook's earnings, due Monday after market close, could show slower growth in ad sales, the company's primary source of revenue. It is the first full quarter since Apple, in April, required apps to ask users whether they want to be tracked. That change has made it harder for advertisers to target their ads at the right audience and get information regarding how well their ads performed.

HSBC Says It Will Buy Back $2 Billion in Stock as Profit Jumps

Global banking giant HSBC Holdings PLC said it would buy back up to $2 billion in stock after its third-quarter net profit jumped, as the lender released more provisions it had previously made for bad loans.

The London-based bank, which makes most of its profit in Hong Kong and mainland China, earned $3.54 billion in the three months to the end of September, up from $1.36 billion in the same period last year.

PayPal Says Not Pursuing Acquisition of Pinterest

U.S. payments giant PayPal Holdings Inc. said it isn't currently pursuing a deal for social-media platform Pinterest Inc., days after media reports that the companies were in early talks for a multibillion-dollar deal.

In a one-sentence statement dated Sunday on its website, PayPal said that "in response to market rumors regarding a potential acquisition of Pinterest by PayPal," the company "is not pursuing an acquisition of Pinterest at this time."

Tesla Supplier Shows Off More Powerful Battery

TOKYO-Tesla Inc. supplier Panasonic Corp. showed off for the first time a larger lithium-ion battery that it plans to supply to the U.S. electric-vehicle maker.

The 4680 cylindrical battery cell gets its name from being 46 millimeters in diameter and 80 millimeters high. It is larger than previous battery cells Panasonic has supplied to Tesla.

Francisco Partners Targets $2 Billion for New Fund Focused on Smaller Tech Deals

Private-equity firm Francisco Partners is targeting $2 billion for its third Agility fund, which will focus on smaller deals than the technology-focused firm's main vehicles, according to people familiar with the matter.

If Francisco Partners reaches its goal for the new fund it would be over 33% larger than its predecessor Agility fund, which closed with $1.5 billion last year. The San Francisco-based firm's maiden Agility fund collected $600 million in 2016.

Facebook's Internal Chat Boards Show Politics Often at Center of Decision Making

In June 2020, when America was rocked by protests over the death of George Floyd at the hands of a Minneapolis police officer, a Facebook employee posted a message on the company's racial-justice chat board: "Get Breitbart out of News Tab."

News Tab is a feature that aggregates and promotes articles from various publishers, chosen by Facebook. The employee's message included screenshots of headlines on Breitbart's website, such as "Minneapolis Mayhem: Riots in Masks," "Massive Looting, Buildings in Flames, Bonfires!" and "BLM Protesters Pummel Police Cars on 101."

Fed Prepares to Taper Stimulus Amid More Doubts on Inflation

Federal Reserve officials are set to wind down their $120 billion-a-month bond-purchase program in November, but questions over how soon inflation pressures will fade are creating more uneasiness inside the central bank.

Fed Chairman Jerome Powell and senior officials have played down worries this year that a surge in prices during the uneven pandemic recovery would lead to permanently higher inflation. The most notable price increases have been tied to items most affected by the shutdown and reopening of the economy, but there are signs that inflation is coming from a broader set of products and services.

Energy-Stock Surge Leaves Climate-Focused Investors Behind

A surge in energy stocks is challenging climate-conscious money managers who beat the market for years when the sector struggled but are now missing out on Wall Street's hottest trade.

The S&P 500 energy sector has rebounded 54% this year, outpacing the broad index's 21% climb and leading the second-best performing group by about 16 percentage points. That would mark the third-largest such gap between the top two sectors since 2000, according to Dow Jones Market Data.

Economy Week Ahead: Central Banks, GDP, Consumer Spending

Gross domestic product data from the U.S. and eurozone this week will show how sharply economic growth slowed in the third quarter.

German Business Sentiment Declined Again in October

German business sentiment worsened again in October, as supply bottlenecks clouded the short-term outlook.

The Ifo business-climate index decreased to 97.7 points in October from 98.9 points in September, data from the Ifo Institute showed Monday. This is the fourth consecutive decrease of the indicator after it peaked at 101.8 in June.

Powell Says Supply-Side Constraints Have Worsened, Creating More Inflation Risk

Federal Reserve Chairman Jerome Powell indicated he is now somewhat more concerned about higher inflation and said that the central bank would watch carefully for signs that households and businesses were expecting sustained price pressures to continue.

"Supply-side constraints have gotten worse," Mr. Powell said Friday at a virtual conference. "The risks are clearly now to longer and more-persistent bottlenecks, and thus to higher inflation."

Xi's 'Common Prosperity' in Theory and Practice

Investors had, over the past 30 years, grown so accustomed to ignoring rhetoric about communism from nominally-communist China that a leader firmly putting equality at the heart of his economic agenda has caused more than a little heartburn. The Oct. 15 release of a fuller transcript of President Xi Jinping's mid-August remarks on "common prosperity" therefore piqued considerable interest.

The publication in the party's theoretical journal, "Seeking Truth," appears partly aimed at reassuring investors and entrepreneurs spooked by novel language about "rationally adjusting" excessive incomes in the original mid-August readout of Mr. Xi's speech, which came at the height of Beijing's campaign to rein in its internet giants.

Tax on Billionaires' Unrealized Gains Will Likely Be in Budget Package, Democrats Say

WASHINGTON-A new annual tax on billionaires' unrealized capital gains is likely to be included to help pay for the vast social policy and climate package lawmakers hope to finalize this week, senior Democrats said Sunday.

"We probably will have a wealth tax," House Speaker Nancy Pelosi (D., Calif.) said Sunday on CNN, noting that Senate Democrats were still working on their proposal, which isn't technically a wealth tax but bears a strong resemblance to that idea.

Bitcoin ETF's Success Could Come at Fundholders' Expense

There are signs that the bitcoin futures market isn't big enough for a planned wave of crypto exchange-traded funds.

Since launching Tuesday, the ProShares Bitcoin Strategy ETF has amassed $1.2 billion in investor assets, the quickest billion-dollar fundraising on record.

U.S. Covid-19 Battle Turns a Corner as Borders Open to Foreign Travelers

When U.S. borders open to foreign travelers on Nov. 8, the country will have lifted one of the longest-standing restrictions imposed 19 months ago at the start of the pandemic, signaling a new phase of guarded optimism in the nation's battle with Covid-19.

With the Delta variant surge easing and vaccinations opening to more age groups, many places are dropping mask mandates or other restrictions on vaccinated people. The pullback represents a bet that the most recent surge could be the last.

SolarWinds Hackers Continue to Hit Technology Companies, Says Microsoft

The Russia-linked hackers behind last year's compromise of a wide swath of the U.S. government and scores of private companies, including SolarWinds Corp., have stepped up their attacks in recent months, breaking into technology companies in an effort to steal sensitive information, cybersecurity experts said.

Turkey's Erdogan Threatens to Expel 10 Western Ambassadors, Including U.S. Envoy

Turkey's President Recep Tayyip Erdogan threatened to expel the U.S. ambassador and the top envoys of nine other Western countries who called for the release of a jailed philanthropist, in a move that could further strain ties between the two NATO allies.

"These 10 ambassadors must be declared personae non gratae at once," Mr. Erdogan said at a rally on Saturday in the western Turkish city of Eskisehir. "I gave the necessary order to our foreign minister and said what must be done."

Sudanese Prime Minister Detained in Apparent Military Coup

Sudan's prime minister was detained following an apparent military coup of the transitional government that has been ruling the country since the ouster of longtime dictator Omar al-Bashir, the country's information ministry and several government officials said Monday.

Tensions between civilian officials and the generals who have been ruling Sudan under an uneasy power-sharing deal have been escalating for several weeks amid a spiraling economic crisis in the strategic nation on the Horn of Africa.

Biden Pares Back Policy Goals in Search of a Deal

WASHINGTON-With a series of deadlines approaching, President Biden's increased involvement in talks over his sweeping social-policy agenda shows the line he is walking between being a pragmatic deal maker, with hopes of delivering tangible political wins, and his desire to enact transformative, long-term progressive policies.

House Speaker Nancy Pelosi (D., Calif.) said Sunday she was optimistic lawmakers would be able to agree this week to a framework on the legislation and vote on a separate, roughly $1 trillion infrastructure package before current highway funding expires next Sunday. The administration hopes to have a deal in hand before the president heads overseas this week on a trip that includes climate talks in Scotland.

Australia Backs $1.6 Billion Buy of Pacific Mobile Networks

SYDNEY-Australia is backing the purchase of mobile networks in six Pacific countries, a move that foreign-policy experts say is designed to block a military rival from buying the strategically important assets.

The government said its export-finance arm agreed to provide $1.33 billion in funding to support the $1.6 billion purchase by Telstra Corp., Australia's biggest communications provider, of the networks in Papua New Guinea, Fiji, Nauru, Samoa, Tonga and Vanuatu. The networks, being bought from Jamaica-based Digicel Group, are adjacent to subsea cables that carry communications between Australia and its neighbors.

Write to sarka.halas@wsj.com

TODAY IN CANADA

Earnings:

Celestica Inc. CLS.T) 3Q

PrairieSky Royalty Ltd (PSK.T) 3Q

Restaurant Brands Intl Inc (QSR.T) 3Q

Economic Indicators (ET):

N/A Nunavut municipal elections in Canada

Stocks to Watch:

No items published

Other News:

No items published

Market Talk:

No items published

Expected Major Events for Monday

05:00/JPN: Aug Indexes of Business Conditions - Revision

05:30/JPN: Sep Tokyo area department store sales

05:30/JPN: Sep Nationwide department store sales

08:00/GER: Oct Ifo Business Climate Index

12:30/US: Sep CFNAI Chicago Fed National Activity Index

14:30/US: Oct Texas Manufacturing Outlook Survey

23:01/UK: Sep Zoopla House Price Index

23:50/JPN: Sep Services Producer Price Index

All times in GMT. Powered by Kantar Media and Dow Jones.

Expected Earnings for Monday

Adamis Pharmaceuticals Corp (ADMP) is expected to report $-0.04 for 2Q.

Alliance Resource Partners LP (ARLP) is expected to report $0.73 for 3Q.

Atlantic Union Bankshares Corp (AUB) is expected to report for 3Q.

BancorpSouth Bank (BXS) is expected to report $0.65 for 3Q.

Bank Of Marin Bancorp (BMRC) is expected to report $0.08 for 3Q.

Bank of Hawaii Corp (BOH) is expected to report $1.33 for 3Q.

CF Bankshares Inc (CFBK) is expected to report for 3Q.

CSB Bancorp Inc (CSBB) is expected to report for 3Q.

Cadence Design Systems (CDNS) is expected to report $0.51 for 3Q.

Calix (CALX) is expected to report $0.20 for 3Q.

Chemung Financial (CHMG) is expected to report $1.23 for 3Q.

Citizens Holding Co (CIZN) is expected to report for 3Q.

Community Bank System (CBU) is expected to report $0.81 for 3Q.

Community West Bancshares (CWBC) is expected to report for 3Q.

Consumer Portfolio Services Inc (CPSS) is expected to report $0.15 for 3Q.

Crown Holdings (CCK) is expected to report $1.87 for 3Q.

Dorman Products (DORM) is expected to report $1.31 for 3Q.

Enterprise Financial Services Corp (EFSC) is expected to report $1.01 for 3Q.

F&M Bank (FMBM) is expected to report for 3Q.

FS Bancorp (FSBW) is expected to report $0.89 for 3Q.

HBT Financial Inc (HBT) is expected to report for 3Q.

HMN Financial Inc (HMNF) is expected to report for 3Q.

HNI Corporation (HNI) is expected to report $0.44 for 3Q.

Hope Bancorp Inc (HOPE) is expected to report $0.42 for 3Q.

Kimberly-Clark Corp (KMB) is expected to report $1.54 for 3Q.

Lake Shore Bancorp (LSBK) is expected to report for 3Q.

Lakeland Financial (LKFN) is expected to report $0.93 for 3Q.

Ledyard Financial Group (LFGP) is expected to report for 3Q.

Lennox International Inc (LII) is expected to report $3.67 for 3Q.

Northwest Bancshares Inc (NWBI) is expected to report $0.22 for 3Q.

Otis Worldwide Corp (OTIS) is expected to report for 3Q.

Penns Woods Bancorp (PWOD) is expected to report for 3Q.

Peoples Bancorp of NC (PEBK) is expected to report for 3Q.

Restaurant Brands International (QSR,QSR.T) is expected to report $0.90 for 3Q.

SITE Centers Corp (SITC) is expected to report $0.04 for 3Q.

Sierra Bancorp (BSRR) is expected to report $0.63 for 3Q.

Travelzoo (TZOO) is expected to report for 3Q.

TriCo Bancshares (TCBK) is expected to report $0.93 for 3Q.

Washington Trust Bancorp Inc (WASH) is expected to report $0.96 for 3Q.

Wayne Savings Bancshares Inc (WAYN) is expected to report for 3Q.

Powered by Kantar Media and Dow Jones.

ANALYST RATINGS ACTIONS

Five9 Raised to Overweight From Sector Weight by Keybanc

Independent Bank MA Cut to Neutral From Overweight by Piper Sandler

Whirlpool Cut to Underperform From Sector Perform by RBC Capital

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

(END) Dow Jones Newswires

October 25, 2021 06:18 ET (10:18 GMT)

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