MARKET WRAPS

Stocks:

European stocks were broadly lower, led lower by shares of energy, travel and leisure companies.

Investors will pay attention to the European Central Bank's decision on asset purchases and interest rates.

President Christine Lagarde and most of the rest of the ECB are still in the inflation is transitory camp, at least for now. Of course, inflation isn't quite as red hot in the eurozone as it is in the U.S., with consumer prices up 3.4% year-over-year in September, compared to 5.4% in the U.S., but it still faster than what the ECB had said as recently as last month.

The bond market has reacted, pushing yields higher. A combination of surging energy prices and a solid rollout of vaccinations after a slow start is putting pressure on ECB policymakers.

"The question for the upcoming policy decision is just what the Governing Council and President Lagarde say or do to push back," said James Rossiter, head of global macro strategy at TD Securities. Already, there's been some pushback, with the ECB's chief economist, Philip Lane, saying "it's challenging to reconcile some of the market views with our pretty clear, straightforward forward guidance."

Ebrahim Rahbari, a currency strategist at Citi, also expects pushback, both to the rate rises priced into 2022 and 2023, as well as the idea of a reconsideration of the plan to end quantitative easing first and hike rates later. The ECB, Rahbari notes, is scarred by a history of premature rate hikes, and also is wary of raising risk for the periphery.

Shares on the move:

Shares in Shell were down 2.8% after the energy giant reported lower-than-expected earnings for the third quarter. Adjusted earnings of $4.14 billion are particularly disappointing and well below expectations of $5.42 billion, CMC Markets analyst Michael Hewson said.

"Given how much fossil fuel prices have risen this quarter, today's number are a particularly poor outcome, even if you factor in the disruptions from Hurricane Ida, which cost the business $400 million."

Shell has also noted higher costs elsewhere, but has said the fourth quarter would see a better performance due to lower maintenance costs, Hewson said.

Anheuser-Busch InBev, the world's largest brewer, reported a rise in revenue and profits, boosting shares 7.2%.

Data in focus:

Eurozone business and household confidence rose in October, beating forecasts of a decline.

The European Commission said Thursday that its economic sentiment indicator, an aggregate measure of business and consumer confidence, rose to 118.6 in October from 117.8 in September. The result is above a consensus forecast from economists polled by The Wall Street Journal, who expected the index to come in at 116.6.

The increase of the indicator in October resulted from improving confidence in services, construction and, to a lesser extent, retail trade, the European Commission said.

Sentiment rose in Spain, France, Italy, the Netherlands and Poland, while it weakened slightly in Germany.

German jobless claims fell much more than expected in October, the Federal Employment Agency said Thursday.

Jobless claims fell by 39,000 on month after declining by 31,000 in September. Economists polled by The Wall Street Journal had forecast a decline of 20,000.

The adjusted unemployment rate was at 5.4% in October, down from 5.5% in September and in line with the forecasts of economists polled by the Journal.

The number of registered job vacancies stood at 809,000 in October, up 206,000 on year, the agency said.

Spain's unemployment rate fell slightly in the third quarter of 2021 thanks to an easing of coronavirus-related restrictions that allowed the recovery of the services sector.

The country's unemployment rate declined to 14.57% in the third quarter from 15.26% in the previous quarter, Spanish statistics office INE said Thursday. Jobless claims fell by 127,100 in the quarter to a total of 3.42 million unemployed.

U.S. Markets:

Stocks headed for muted opening gains as investors awaited data on U.S. economic growth and earnings from Apple and Amazon.com, among other major companies.

Ahead of the bell, shares of Ford Motor jumped 9%. The car maker late Wednesday restored its dividend and raised guidance for profits in 2021. eBay shares slid more than 5% premarket after the online marketplace gave projections for earnings that fell short of Wall Street expectations.

Forecast-beating results have soothed worries that supply-chain difficulties would dent profits, sending stocks higher in October. Earnings season continues at pace, with private-equity firm Carlyle Group and chocolate maker Hershey among those due to file before the opening bell, followed by Amazon and Apple after markets close.

"Earnings growth has been very strong," said Kiran Ganesh, multiasset strategist at UBS Global Wealth Management, adding that investors had also taken succor from slow progress in Washington toward legislation that would raise taxes on companies and wealthy individuals.

Still, the market has remained jittery at times as investors, lawmakers and central banks navigate the uneven economic recovery from the pandemic. Stocks fell Wednesday, for example, after the Bank of Canada's decision to end quantitative easing sparked volatility in global bond markets.

Data on how fast the U.S. economy grew in the third quarter will be released at 8:30 a.m. ET. Growth likely cooled as households and businesses confronted supply-chain disruptions, labor-market mismatches and the Covid-19 Delta variant. There is a range of estimates as to how much the economy slowed.

Forex:

The dollar could fall in reaction to data later that are expected to show U.S. economic growth slowed in the third quarter, although only temporarily, ING said.

ING analysts said their forecasts are broadly in line with the consensus estimate of 2.6% quarter-on-quarter annualised growth for third quarter gross domestic product, compared to the second quarter's 6.7% growth, but they don't rule out a weaker number.

"Yet we are confident of the fourth-quarter U.S. rebound--the consumer and businesses are in good shape--such that any dollar weakness on the GDP data should find good buying interest," they said.

The euro edged lower as investors await the ECB's policy decision later. The ECB is likely to err on the side of caution and stick to its expansionary monetary policy so the market's expectations for the withdrawal of stimulus will be "disappointed," Commerzbank currency analyst Antje Praefcke said. "In my view the downside risks in EUR dominate today."

Sterling's appreciation potential looks limited as the Bank of England is likely to accept a "fairly significant" overshoot of its 2% inflation target given the headwinds facing the economy, Commerzbank said.

The 100 basis points of interest rate rises priced in by the market over the course of a year is unlikely, Commerzbank currency analyst Esther Reichelt said.

"The headwinds to be expected in the coming months from supply bottlenecks, the consequences of Brexit and the pandemic situation seem too substantial."

If the BOE doesn't counter rising price pressures with sufficient policy tightening, higher inflation will weigh on sterling's purchasing power, Reichelt said.

The Japanese yen seems "unattractive," particularly against the dollar, as the Bank of Japan is unlikely to change its loose policies any time soon, Commerzbank said after the central bank's interest rate decision.

Thursday's policy decision illustrated that the BOJ's "hands are tied" when it comes to monetary policy and that the market might be correct with its view that inflation will remain subdued, Commerzbank currency analyst Antje Praefcke said. The BOJ left its policies unchanged and cut its inflation and economic growth forecasts, while the central bank's governor Haruhiko Kuroda said the yen's recent weakness wasn't "bad" for the economy.

Bonds:

Pimco expects the ECB to reduce asset purchases gradually in the coming months, it said. Pimco forecasts a monthly asset purchase pace between EUR40 billion-EUR60 billion over the second quarter of next year, following the phasing out of the Pandemic Emergency Purchase Programme in March 2022, said portfolio manager Konstantin Veit.

The current pace is around EUR90 billion, with around EUR70 billion bought under the PEPP and EUR20 billion under the Asset Purchase Programme. The ECB is also likely to continue to review the asset purchases quarterly, with a view to gradually relegating them from a duration extraction tool to a pure policy rate signaling device over time, Veit said.

Santander Asset Management expects the first interest rate rise by the U.S. Federal Reserve by June 2023 and anticipates three rate hikes that year, with this outlook pulling U.S. Treasury yields higher, it said.

"We expect the 10-year [Treasury yield] to trade in the range 1.50%-1.70% in the coming months," the asset manager said. It also upgrades its view on U.S. government bonds slightly as yields have increased and closed part of the gap to its target.

That said, even after the upgrade, Santander AM views U.S. Treasurys as "underweight" versus "strong underweight" before.

Commodities:

Oil prices were lower, with both benchmarks extending this week's losses to between 2% and 3% after EIA inventory data showed a larger build up in U.S. crude inventories than either the market or Tuesday's API data predicted, said ING's Warren Patterson.

Also pressuring oil during the past couple of sessions has been the growing prospect that Iran and the EU could resurrect nuclear talks which have the potential to see oil export sanctions on Iran lifted.

European benchmark gas prices were down 11% after Russian President Putin told Gazprom to increase supplies to Europe once the country fills its own stocks in early November.

Metals prices were edging higher ahead of U.S. GDP and unemployment data. Investors are awaiting the U.S. economic data for insight into the strength of the economy.

The data could also inform how quickly the Fed moves to raise interest rates. Copper is often seen as a barometer for economic growth, while gold is highly sensitive to investors' interest rate expectations.

EMEA HEADLINES

Nokia 3Q Beats Forecasts But Component Shortages Cost Could Weigh on Margins Next Year

Nokia Corp. on Thursday posted a forecast-beating rise in third-quarter net profit and now expects full-year margins to land at the top of its guidance range. However, it cautioned that both the availability and "unprecendented" cost inflation of components could hurt margins next year.

The company's comparable net profit for the quarter rose to 454 million euros ($526.8 million) from EUR300 million a year earlier, as sales rose 2.0% to EUR5.4 billion.

UniCredit Lifts 2021 Guidance After Beating Expectations on 3Q

UniCredit SpA on Thursday reported a jump in third-quarter net profit and lifted its targets for the full year.

The Italian bank's net profit rose to 1.06 billion euros ($1.23 billion) from EUR680 million a year earlier. It was significantly ahead of analysts' median estimate of EUR825 million based on company-compiled consensus.

Lloyds 3Q Beat Expectations as Pretax Profit Nearly Doubled

Lloyds Banking Group PLC reported on Thursday a nearly doubled pretax profit for the third quarter of 2021, beating market views.

The FTSE 100 listed bank posted a pretax profit of 2.03 billion pounds ($2.79 billion) for the quarter, up from GBP1.04 billion for the same period a year earlier. Pretax profit was expected to reach GBP1.35 billion, according to the bank's compiled consensus.

Shell 3Q Adjusted Earnings Fell as Hurricane Ida Hurt Business -- Update

Royal Dutch Shell PLC on Thursday reported that its earnings fell 25% in the third quarter after Hurricane Ida hurt its operations in the Gulf of Mexico.

The Anglo-Dutch oil-and-gas major said its adjusted earnings were $4.13 billion for the period, down from $5.53 billion in the second quarter and below market expectations of $5.31 billion, provided by Vara Research and averaged from 22 analysts' estimates.

Volkswagen Backs Profit Target for 2021 After 3Q Hit by Chip Shortage

Volkswagen AG on Thursday confirmed its guidance for profitability for the year after third-quarter operating profit and revenue declined as the car maker was affected by the global semiconductor shortage.

The German car maker said quarterly operating profit came in at 2.60 billion euros ($3.02 billion), compared with EUR3.18 billion the same period a year earlier.

AB InBev 3Q Revenue, Headline Ebitda Rose; Raises FY Guidance

Anheuser-Busch InBev SA on Thursday reported a rise in both revenue and third-quarter headline Ebitda, and raised its full-year guidance.

The world's largest brewer--which also houses the Stella Artois and Budweiser brands among its portfolio--attributed its performance to "relentless execution, investment in our brands and accelerated digital transformation."

Sanofi 3Q Profit, Sales Grew; Raises 2021 Business EPS View

Sanofi SA on Thursday posted higher net profit and sales for the third quarter compared with the previous year, and raised its guidance for business earnings per share for the full year.

The French pharma major posted net profit of 2.32 billion euros ($2.69 billion) up from EUR1.95 billion in the same quarter a year prior, on sales which grew to EUR10.43 billion from EUR9.48 billion in 2020.

WPP 3Q Revenue Grew in All Regions and Markets; Lifts 2021 Guidance

WPP PLC said Thursday that its third-quarter revenue grew and raised its full-year guidance.

Total revenue for the quarter was 3.24 billion pounds ($4.45 billion), up 9.1% on a reported basis and 14.7% on a like-for-like basis on year.

More Travelers Are Heading to Europe in 2022 After the Pandemic Sank Vacation Plans

More travelers are starting to think big about vacations again.

After a long stretch of mainly short-term travel planning, inquiries are picking up for trips well into 2022, according to data from hotels and travel-industry analysts. The booking rates are starting to trend closer to pre-pandemic levels, analysts say.

GLOBAL NEWS

BOJ Lowers Outlook for Japan Growth, Inflation

TOKYO-The Bank of Japan lowered its growth forecast, reflecting supply-chain constraints that have weighed on exports and production, and said it didn't see significant inflation coming.

In its quarterly outlook report released Thursday, the bank's policy board projected the Japanese economy would expand 3.4% in the current fiscal year ending March 2022, compared with its previous projection of 3.8% released in July. It said it expects 2.9% growth in the year ending March 2023, up from a previous projection of 2.7% growth.

Iran to Return to Nuclear Deal Talks in Vienna Next Month

Iran will return to nuclear talks before the end of November, its chief negotiator said Wednesday, restoring the Biden administration's hopes that it can revive the 2015 nuclear deal.

Iran's return to the negotiations would end a five-month hiatus in talks that has enabled Tehran's new hardline government to press ahead with its nuclear program.

SEC Won't Approve Leveraged Bitcoin Fund

The Securities and Exchange Commission asked at least one asset manager not to proceed with plans for a leveraged bitcoin exchange-traded fund, according to a person familiar with the matter.

The SEC indicated it wants to limit new bitcoin-related products to those that provide unleveraged exposure to bitcoin futures contracts, such as the ProShares Bitcoin Strategy ETF, which was launched last week, the person said.

CFTC Chief Says Recent Crypto Cases Are 'Tip of the Iceberg'

WASHINGTON-The acting head of the Commodity Futures Trading Commission said Wednesday that he plans to continue aggressively policing cryptocurrency markets and called on Congress to consider expanding his agency's authority to do so.

Rostin Behnam, the CFTC's acting chairman, noted that the agency has settled two enforcement actions against cryptocurrency companies totaling $140 million. "But this is the tip of the iceberg," he said in a confirmation hearing before the Senate Agriculture Committee.

Antidepressant Significantly Reduces Covid-19 Hospitalization

A widely available antidepressant holds promise as a treatment for Covid-19, according to a new study.

Covid-19 patients who received fluvoxamine were significantly less likely to require hospitalization than those who didn't, in the largest clinical trial evaluating the antidepressant's effect on Covid-19 to date.

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(END) Dow Jones Newswires

October 28, 2021 06:17 ET (10:17 GMT)

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