MARKET WRAPS
Watch For:
ECB's Lagarde and de Guindos speak; EU Business and Consumer
Surveys; Germany Provisional CPI;
Opening Call:
European stocks to rise early Monday after Friday drops. U.S.
stock futures gain. Stocks markets in Asia are broadly lower. The
10-year U.S. Treasury yield rose to 1.54% from 1.484% on Friday.
Oil prices rebound, gold slightly higher.
Equities:
European stocks are set to rebound early Monday as investors
around the globe are looking to Monday's early trading for clues to
the scale of the threat posed by the emergence of a new Covid-19
variant.
U.S. stock-index futures rose, suggesting U.S. markets could
open higher later in the day.
"After Friday's ugly sell-off early indications would suggest
we're going to be in for a bumpy ride this week, as we come to the
end of November and beginning of December, with today's market open
set to be a positive one despite a slide in Asia markets, as
investors strive to understand what comes next," said Michael
Hewson at CMC Markets.
Though occasional sharp reversals have become commonplace during
the bull market that started last year after the lockdown-inspired
spring market rout, traders and portfolio managers were struck by
the ferocity of selling on Friday. U.S. stock trading volume hit
the highest level on the day after Thanksgiving in at least 14
years, with the Dow Jones Industrial Average and S&P 500
posting their largest-ever Black Friday declines.
While half-staffed trading desks on Black Friday may have
resulted in exaggerated market moves, some traders and portfolio
managers said they believe it may be some time before markets can
fully assess the risk of fresh Covid-related economic
disruption.
While some countries have moved quickly to manage the emerging
risk from the new variant, it could be weeks before Omicron's
actual transmissibility and severity is known, said Alvin Tan, head
of Asia FX Strategy at RBC Capital Markets in Hong Kong. "The
markets have already priced in a strong recovery, so this element
of uncertainty is negative. But it is unlikely to be a repeat of
the beginning of the pandemic," he said.
While the emergence of the recent Covid-19 variant is
"definitely scary, " Mr. Kerschner said, the market swoon may have
been an overreaction that could reverse when more traders are back
in the office.
On Black Friday, there were fewer people at their desks, said
Mr. Kerschner. "Whenever it happens on a low volume day, it seems
to get out of proportion...We'll see how things look on Monday," he
added.
Stocks to watch: the fast-spreading Omicron coronavirus variant
jeopardizes what was an increasingly positive near-term outlook for
mining stocks, said Jefferies.
"Regardless of whether this new variant is a real issue, the
sector is likely to be under short-term pressure as there is a
renewed risk of lockdowns, which would negatively impact demand and
push investors away from such a highly cyclical sector," Jefferies
said.
Still, the bank--which said the mining sector is otherwise
"underowned" and poised to benefit from higher metals
prices--reckons investors should buy mining stocks in bouts of
short-term weakness because the medium- to long-term fundamental
outlook is unchanged and still very positive.
Forex:
The U.S. dollar is likely to remain elevated this week,
particularly against commodity currencies, said CBA, even as
markets pare back Federal Reserve tightening expectations due to
Omicron uncertainty.
Some FOMC officials have recently suggested they are open to
upping the pace of tapering in December, but "the emergence of
omicron may delay such a policy change," the bank said.
The latest Covid-19 variant, Omicron, has injected a new dynamic
into foreign exchange markets and a key risk is that uncertainty
about the level of threat is not lifted quickly, which would
underpin volatility, said Bannockburn Global Forex.
It said there are three key changes since the middle of last
week: odds of a BoE rate increase next month have fallen further,
acceleration of Fed tapering seems unlikely, and prospects for
stronger world growth are diminished on the margins.
"This undermines risk appetites and weakens those currencies
that often appear to do better in robust growth phases, e.g.,
dollar bloc, Scandis, and most emerging market currencies,"
Bannockburn said.
The USD/JPY recoups some of big losses marked on Friday due to
concerns about the emerging Omicron variant of Covid-19 and new
travel restrictions. The market's focus is on any reports on
whether existing Covid-19 vaccines are effective against the
Omicron variant, IG said. The USD/JPY may rise back toward 115 this
week if reports suggest effectiveness, IG said.
Bonds:
U.S. Treasury yield rose to 1.54% from 1.484% on Friday.
Investors will remain risk-averse until they receive more
information about the new Covid-19 variant, said Larry Milstein,
head of treasury and agency trading at R.W. Pressprich & Co. He
expects to continue seeing investors move into safer assets like
government bonds at the start of the week.
"There's a lot of questions and markets don't like uncertainty,"
he said.
Friday's market moves in part reflect pushback against the
widespread confidence in the economic recovery that had propelled
benchmark bond yields higher in recent weeks and supported the rise
in stocks.
Energy:
Oil gained in early Asian trade after dropping sharply in
Friday's session as news of the highly contagious Omicron variant
spooked markets. Goldman Sachs thinks the sell-off looks overdone,
given that mobility restrictions will likely only lower global oil
demand by 0.5 million barrels a day, excluding jet fuel.
The investment bank will continue to eye further developments on
the spread of the Omicron variant before changing its supply and
demand forecasts.
Metals:
Gold was slightly higher in early Asian trade, supported by
safe-haven demand amid worries surrounding the global spread of the
Omicron variant, ANZ said.
Traders are also likely focusing on the timing of an expected
interest rate increase by the Fed, which could be delayed due to
the virus woes, it added.
Copper gains in Asian trade amid a general recovery in
industrial metals, thanks to stronger U.S. yields and a better
outlook for the greenback, said Jeffrey Halley, a senior market
analyst in Oanda.
The base metal rebounded from its declines in the previous
session caused by the emergence of the new Omicron coronavirus
variant, which raised concerns that China's economy could slow
further due to its zero-Covid strategy, ANZ said.
Rio Tinto faces the greatest risk to iron-ore production and
capex among major miners from Western Australia state's heritage
law changes, Goldman Sachs said.
The changes to the heritage laws are expected to pass by
year-end and will likely increase the time taken for permit
approvals, the bank said.
With a possible 17 "replacement" mines to be constructed from
2021-2027, Rio has the highest number of mines to build in the
years ahead, versus rivals BHP and Fortescue, as it seeks to
balance falling tonnages from maturing pits, Goldman Sachs
said.
TODAY'S TOP HEADLINES
Omicron Variant Is Reported in More Countries as Officials
Grapple With How to Respond
Countries around the world reported their first cases of the
Omicron variant over the weekend and some imposed new travel
restrictions, racing to protect themselves against the potentially
more contagious strain even as scientists cautioned they don't yet
know how severe it will prove to be.
Canada, Australia, the Netherlands and Austria on Sunday joined
a group of countries that have detected a strain first documented
in South Africa that authorities said could pose a greater risk of
people falling ill with Covid-19 a second time and could be more
transmissible than other variants.
Labor Talks to Start in 2022 at Congested West Coast Ports
U.S. shippers struggling with supply-chain gridlock on the West
Coast face new concerns in the coming year as dockworkers and
marine terminals gird for talks on a new labor contract.
Economy Week Ahead: Factories, Inflation, Jobs
The U.S. employment report for November highlights this week's
economic data. Economists, analysts and investors are also closely
tracking the fast-spreading Omicron variant of the coronavirus to
determine its impact on health and the broader economy.
Eurozone Inflation Likely Hit Record High in November
Consumer-price inflation in the eurozone likely hit a record
high in November, but many economists think that might mark a peak
for now, and therefore don't expect the European Central Bank to
raise its key interest rate next year.
As in the U.S., consumer prices in the eurozone have risen
faster over recent months than most economists and policy makers
had expected. The data have raised questions for investors,
businesses and households about the credibility of central bank
assertions that this period of high inflation is likely to prove
transitory.
RBNZ Chief Economist Doesn't See Omicron Derailing Rate
Increases
WELLINGTON, New Zealand-The new Covid-19 variant that has
unsettled financial markets would need to have a dramatic economic
impact to deter the Reserve Bank of New Zealand from continuing to
raise interest rates, its chief economist Yuong Ha said Monday.
New Zealand's central bank last week raised its cash rate for
the second time in two months, as it withdrew pandemic stimulus
that has driven consumer-price inflation to its highest point since
2010.
Omicron Variant Is Reported in More Countries as Officials
Grapple With How to Respond
Countries around the world reported their first cases of the
Omicron variant over the weekend and some imposed new travel
restrictions, racing to protect themselves against the potentially
more contagious strain even as scientists cautioned they don't yet
know how severe it will prove to be.
Canada, Australia, the Netherlands and Austria on Sunday joined
a group of countries that have detected a strain first documented
in South Africa that authorities said could pose a greater risk of
people falling ill with Covid-19 a second time and could be more
transmissible than other variants.
Omicron Variant Found on Flights Reveals Gaps in Covid-19 Travel
Rules
The probe into two flights from South Africa to the Netherlands,
on which more than a dozen people tested positive for the newly
discovered Omicron variant, reveal gaps in the patchwork of current
travel measures now in place to contain the coronavirus.
Of around 600 passengers on the two flights, 61 tested positive
for Covid-19 after being taken off the planes, held for hours in an
isolated part of Amsterdam's Schiphol airport and tested. Sunday
morning, Dutch health authorities said that at least 13 were
confirmed as the Omicron variant, a new strain first identified in
southern Africa.
Iran's Nuclear Advances Weigh on Renewed Talks
As negotiators gather in Vienna for talks aimed at reviving an
international nuclear agreement with Iran, one big question looms:
Has Tehran advanced its nuclear work so much in the past two years
that the 2015 deal can no longer be rescued?
Restoring the pact, which placed limits on Iran's nuclear
activities in exchange for relief from economic sanctions, is a top
foreign-policy goal of the Biden administration. Iran's new
president, however, has delayed restarting talks while pressing
ahead with nuclear work.
Eurozone Inflation Likely Hit Record High in November
Consumer-price inflation in the eurozone likely hit a record
high in November, but many economists think that might mark a peak
for now, and therefore don't expect the European Central Bank to
raise its key interest rate next year.
As in the U.S., consumer prices in the eurozone have risen
faster over recent months than most economists and policy makers
had expected. The data have raised questions for investors,
businesses and households about the credibility of central bank
assertions that this period of high inflation is likely to prove
transitory.
Taliban Covert Operatives Seized Kabul, Other Afghan Cities From
Within
KABUL-Undercover Taliban agents-often clean-shaven, dressed in
jeans and sporting sunglasses-spent years infiltrating Afghan
government ministries, universities, businesses and aid
organizations.
Then, as U.S. forces were completing their withdrawal in August,
these operatives stepped out of the shadows in Kabul and other big
cities across Afghanistan, surprising their neighbors and
colleagues. Pulling their weapons from hiding, they helped the
Taliban rapidly seize control from the inside.
U.K. Looks to Compete on Financial Regulation
London wants to regain the mantle of the world's busiest
financial center from New York by overhauling how banks and other
financial firms are regulated after Brexit.
The U.K. government said this month its top financial regulators
will be required to help boost growth and international
competitiveness in the financial sector, as secondary mandates to
existing tasks such as maintaining financial stability and consumer
protection.
Clearlake Capital to Buy Quest Software From Francisco
Partners
Clearlake Capital Group LP has struck a deal to buy Quest
Software Inc. from Francisco Partners in the latest sign of
private-equity firms' voracious appetite for software.
The deal, expected to be announced as soon as Monday, values
Quest at $5.4 billion including debt, according to people familiar
with the matter.
Nissan to Spend $17.6 Billion on Battery-Powered Vehicles Over
Five Years
TOKYO-Nissan Motor Co. said Monday it plans to spend $17.6
billion over the next five years as it adds 20 new battery-powered
vehicles to its lineup.
The company hopes to recapture a degree of the prominence it
held in the electric-vehicle race after its pioneering introduction
of the Leaf EV more than a decade ago. Investors have boosted the
share prices of car makers that are betting big on EVs, including
relative newcomers such as Tesla Inc. and industry stalwarts like
Ford Motor Co. and Volkswagen AG.
Covid-19 Vaccine Makers Assess Omicron Response
Vaccine makers will spend several weeks assessing the danger and
potential impact of the coronavirus's new Omicron variant.
But they are already racing to develop ways to combat it.
Activist Investor Ancora Urges Berry Global to Explore a
Sale
Activist investor Ancora Holdings Inc. is pushing Berry Global
Group Inc., a packaging manufacturer with a roughly $9 billion
market value, to explore a sale.
Ancora, which owns about 1% of Berry Global, is urging it to
explore strategic alternatives including a possible sale and make
other changes, according to a copy of a letter the activist sent to
the company's board Sunday that was viewed by The Wall Street
Journal.
Airlines Avoid Thanksgiving Pitfalls as Daily Passengers Top Two
Million
Travelers returning home Sunday after the Thanksgiving holiday
are encountering busy airports and full flights, but relatively few
of the problems that have plagued air travel in recent months.
The holiday week has been a test of whether U.S. airlines have
done enough to prevent the kinds of snafus that have resulted in
major meltdowns and thousands of canceled flights.
Write to sarka.halas@wsj.com
Expected Major Events for Monday
00:01/UK: Oct Zoopla House Price Index
05:30/NED: Nov Producer confidence survey
07:00/DEN: Nov Business tendency survey
07:00/TUR: Oct Foreign Trade
08:00/HUN: Oct Employment & unemployment
08:00/SVK: Nov Business tendency survey
08:00/SVK: Nov Economic sentiment indicator
08:00/SPN: Nov Flash Estimate CPI
08:30/SWE: Oct Foreign trade
08:30/SWE: 3Q GDP
09:00/ITA: Oct PPI
09:00/GER: Nov Bavaria CPI
09:00/GER: Nov Hesse CPI
09:00/GER: Nov Baden-Wuerttemberg CPI
09:30/GER: Nov North Rhine Westphalia CPI
09:30/UK: Oct Money and Credit - Lending to Individuals, Lending
to Businesses, Broad Money and Credit
09:30/UK: Oct Monetary & Financial Statistics
09:30/UK: Oct Bank of England effective interest rates
10:00/CYP: Sep Industrial Production Index
10:00/EU: Nov Business & Consumer Surveys - Business Climate
Indicator & Economic Sentiment Indicator
10:00/MLT: 3Q GDP
10:00/GER: Nov Saxony CPI
10:30/BEL: Nov CPI
11:00/IRL: Oct Retail Sales Index
13:00/GER: Nov Provisional CPI
16:59/SPN: Oct Budget deficit
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(END) Dow Jones Newswires
November 29, 2021 01:23 ET (06:23 GMT)
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