MARKET WRAPS

Stocks:

European stocks were flat Friday while oil prices continued to rise after OPEC and a group of Russia-led oil producers agreed to continue pumping more crude.

Investors are grappling with the unclear impact of Omicron for the global economy. The variant has triggered fresh restrictions around the world, throwing up new obstacles to overseas travel just as it was starting to bounce back from last year's Covid-19 measures. Scientists are trying to gauge how effective current vaccines will be against the variant.

"What we see now this week since we had the Omicron news is extremely high volatility and extreme nervousness in markets," said Carsten Brzeski, ING Groep's global head of macro research. He expects this to continue until more is known about Omicron.

Brent crude futures, the benchmark in global oil markets rose after OPEC and a group of Russia-led oil producers agreed Thursday to continue pumping more crude, betting that pent-up demand in a post-lockdown world would outweigh any hit to economic activity from the recent Covid-19 permutations. But the group said its session would remain open, a technical move that would allow it to reconvene quickly and change course if the Covid-19 situation changes dramatically.

Shares on the move:

Allianz's new midterm targets are a positive surprise, Jefferies said.

The German insurer is now targeting up to 7% annual growth in earnings per share from 5% previously, implying operating-capital generation of a total of EUR12 billion, Jefferies noted.

Meanwhile, a new dividend policy targeting a 5% increase on the previous year's level is also good news, Jefferies said.

"Having expected Allianz to largely reiterate the previous plans' targets, today's announcement has positively surprised in a number of material ways," said the bank, which has a buy rating and a EUR250 target on the stock.

Shares in Swedish Orphan Biovitrium fell sharply after Advent International Corporation and Aurora Investment Pte Ltd withdrew their offer to acquire the Swedish drugmaker for nearly $8 billion.

The two private-equity firms had offered 235 Swedish Krona ($26.0) a share to acquire Swedish Orphan Biovitrium, also known as Sobi. They said that about 87.3% of Sobi's shares were tendered in the offer, which was below a set threshold of 90%.

The offer was made through Agnafit Bidco, which represented the two investors.

Shares in Sobi were down 23% in opening trade.

Data in focus:

Having slowed since peaking in July, economic growth across the eurozone reaccelerated in November, according to the latest purchasing managers indexes.

The eurozone composite PMI rose to 55.4 in November from 54.2 in October, indicating a solid and accelerated rate of economic expansion.

But the improvement in economic growth signaled by the eurozone PMI looks likely to be short-lived, IHS Markit's chief business economist Chris Williamson said.

"Not only did demand growth weaken, but firms' expectations of future growth also sank lower as worries about the pandemic intensified again," Williamson said.

Prices have continued their rise, with rates of inflation in both companies' costs and average selling prices for goods and services hitting new highs in November, IHS Markit said.

Germany's services firms recorded another moderate rise in business activity in November following a similar result in October, with the sector's growth having slowed notably since the third quarter, IHS Markit said.

The services purchasing managers index rose to 52.7 in November from 52.4 in October. But the survey's forward-looking indicators gave reason for concern, IHS Markit's economics associate director Phil Smith said.

"Inflows of new work and business confidence were already in decline in November thanks to the fourth wave of coronavirus, and now the Omicron variant brings added uncertainty and a risk of tighter virus containment measures," Smith said.

U.K. services activity continued to recover in November, supported by a fast increase in new business, according to IHS Markit's survey of purchasing managers in the sector. The service PMI stood at 58.5 in November, down slightly from October's 59.1.

Export sales were a key factor supporting growth in November, with looser travel restrictions contributing to a steep upturn in new business, the report said.

"The overall speed of recovery looks to have accelerated in comparison to the third quarter of 2021," IHS Markit's Associate Director for Economic Indices Tim Moore said. However, the majority of survey responses were received prior to the news of the Omicron coronavirus variant, which has the potential to derail near-term growth prospects, he said.

U.S. Markets:

U.S. stock futures fell, as investors awaited November jobs data, at the end of a volatile week driven by headlines over the omicron coronavirus variant and hawkish comments from Federal Reserve Chair Jerome Powell.

Investors are awaiting data at 8:30 a.m. ET on how many jobs U.S. employers added in November. Employers say they are eager to hire from a depleted pool of workers, leading to increased bargaining power and rising wages for many employees.

A strong rebound in the labor market could impact the Federal Reserve's timeline for paring back some of its monetary policy support that has supported asset prices.

"After a week of mixed macro news, some stronger news would be good for the market," Mr. Brzeski said.

Forex:

The dollar could receive a further boost from U.S. nonfarm payrolls data, particularly after Federal Reserve Chair Jerome Powell said earlier this week that inflation no longer looks transitory, ING said.

Strong data would add to the view that the Fed could remove monetary stimulus more quickly, it said.

"Any sharper than expected drop in the unemployment rate (3.8% has been suggested as a metric for full employment and the start of tightening) or sharper rise in average hourly earnings (e.g. more than 0.4% month-on-month) could drive the dollar higher today."

The consensus in a WSJ poll is for nonfarm payrolls to rise by 573,000 and an unemployment rate of 4.5%.

The Turkish lira fell after ratings agency Fitch downgraded the country's outlook to "negative" from "stable" and following data that showed inflation accelerated.

Fitch said premature interest rate cuts and the prospect of further easing have weakened domestic confidence, reflected in the lira's sharp depreciation and rising inflation, which create risks to macroeconomic and financial stability and could re-ignite external financing pressures.

Data on Friday showed consumer prices jumped 21.31% year-on-year in November after rising 19.89% in October.

With no signs President Recep Tayyip Erdogan will permit large rate rises, the lira will struggle to recover and inflation will remain very high through most of the next six-to-nine months, Capital Economics economist Jason Tuvey said.

An overvalued pound could weaken against the Canadian dollar in 2022 on comparisons between the Bank of England and Bank of Canada's credibility, RBC Capital Markets said.

"GBP failed to benefit from a sharp rise in policy rate expectations in late-2021 in a way that suggests markets are starting to question the credibility of U.K. policy," RBC analysts said.

That's consistent with long-term breakeven inflation rates rising to more than 1% above the BOE's target, compared to Canada where breakevens are close to the BOC's target, they said.

The BOE could deliver fewer interest rate rises than expected and deemed necessary, whereas RBC has "high degree of confidence" in the BOC's policy tightening cycle, they said.

Bonds:

Within a year, the monetary policy environment changed from "QE infinity" and "lower interest rates for longer" to one characterized by a global, generalized and rapid rise in interest rates, said Gergely Majoros, member of Carmignac's investment committee.

With this backdrop, Carmignac remains "very cautious" on core sovereign bonds and very selective in corporate bonds, while it sees value niches in emerging-market bonds and equity markets, he said.

Majoros said that in an environment where inflation should persist longer, Carmignac's risk management focuses on an active management of duration exposure, cash and short-term instruments which are the most suited in episodes of volatility, and the USD given its safe-haven status and dynamics.

Pimco maintains a positive view on spread securities from the eurozone periphery, especially Italy, while focusing on receiving adequate compensation for policy uncertainty, Konstantin Veit, portfolio manager and head of European rates, said.

Given the euro area's unique institutional structure and uneven macroeconomic conditions, Pimco expects yields in the region to remain relatively more anchored than elsewhere in the world, and Pimco therefore is positioned rather independently from benchmark indexes with a view to overall duration, he said.

"While starting valuations offer limited room for spread tightening and the macroeconomic outlook remains highly risky, a less crisis-prone euro area generally bodes well for risky assets," he said.

German Bunds will close 2021 at expensive levels versus Citi's fair value estimate, rates strategist Jamie Searle said.. "Bunds are ending 2021 rich to our fair value of -0.15% [for the 10-year Bund yield] making us bearish, at least into 1Q, with Omicron the clear risk to the view," he said.

Citi expects the European Central Bank to be less forceful on asset purchases, but persistent on policy rates.

This likely means that core euro yields are anchored, while eurozone spreads are volatile, Searle said.

Citi's base case is that 10-year Bund yields will stay negative for all of 2022, albeit with a drift higher, especially in 1Q, subject to Omicron developments.

Citi expects more volatility in eurozone government bond yield spreads in 2022 but its spread forecasts aren't materially higher than current levels, largely because of recent rapid widening toward its targets, rates strategist Jamie Searle said.

For the 10-year Italian BTP-German Bund yield spread, Citi forecasts an average of 140-160 basis points; this compares with levels slightly below 138 bps at Thursday's close, according to Tradeweb.

Commodities:

Brent crude oil rose after OPEC+ pressed ahead with plans to raise oil production by 400,000 barrels a day in January despite the emergence of the Omicron coronavirus variant and the recent move by oil consuming nations to tap strategic reserves.

Prices fell after the decision on Thursday but then rebounded on the day and continue higher Friday.

Goldman Sachs's Damien Courvalin points to the alliance's promise to immediately adjust their plans should the situation require it. Similarly, while OPEC+ will raise production in January, the small increase exacerbates "the long-term deficit...[and] we believe current price levels offer compelling opportunities to reposition for the ongoing structural bull market," he added.

London gold prices were flat, with the selloff in the precious metal appearing to lose steam. The prospect of the Fed tapering its asset-buying program has boosted the U.S. dollar this week, putting pressure on gold.

That is despite the rising risk aversion and asset selloffs that have come with the emergence of the Omicron coronavirus variant, said Oanda's Jeffrey Halley.

LME three-month copper futures were, after gentle losses on Thursday, with most metals prices moving higher as well.

EMEA HEADLINES

Eurozone Retail Sales Rose in October, But Missed Expectations

Eurozone retail sales rose in October but failed to meet expectations, the European Union's statistics agency Eurostat said Friday.

The volume of retail sales increased 0.2% in October compared with the previous month, after a downwardly revised 0.4% decrease in September, Eurostat said. Economists polled by The Wall Street Journal had forecast a 0.3% increase for October.

Turkey Annual Inflation Rose to Three-Year High in November

Turkey's annual rate of inflation rose for the sixth consecutive month in November to a three-year high as a weaker lira and higher inflation expectations pushed prices up further.

The consumer price index rose 21.31% in November compared with the same period of 2020, the Turkish statistics office Turkstat said Friday.

Allianz Sets out Midterm Targets

Allianz SE on Friday set out higher financial targets for the next three years, as the German insurer looks to focus on its most profitable business lines.

Marking its capital-markets day, Allianz said it is aiming to book 5%-7% compounded average annual growth in earnings per share between 2022 and 2024. This will be driven by higher revenue, better profitability and efficient capital management, the company said.

Dassault Aviation, Airbus to Supply UAE With Military Aircraft in $19 Bln Deal

Dassault Aviation SA said Friday that it will supply the United Arab Emirates with 80 Rafale F4 fighter jets as part of wider deal with the French aerospace industry worth more than 17 billion euros ($19.21 billion).

At 1102 GMT, shares in the French manufacturer of military and business jets were up 7.3%.

Scientists Studying Omicron in South Africa See Rise in Covid-19 Reinfections

Scientists in South Africa tracking the spread of the Omicron variant said Thursday they are seeing a rise in reinfections in people who had recovered from Covid-19 as the country reported another sharp daily rise in new cases.

The scientists' conclusions suggest previous infection provides less protection against the new variant than against earlier versions. They also offer a possible explanation of why Omicron has been able to spread so quickly in the country, outpacing even the highly transmissible Delta variant, which is currently dominant in much of the rest of the world.

Germany Restricts Social Contact for Unvaccinated People

Germany is tightening restrictions aimed at curbing the spread of the coronavirus amid a recent surge in cases, including a ban for unvaccinated people from retail and social gathering venues.

During a joint conference with the heads of regional governments, incumbent chancellor Angela Merkel said the government would extend the so-called 2G rule--which grants access to venues only to the vaccinated or to people who have recently healed from the virus--to retail, excluding shops for basic needs. Ms. Merkel said that cultural events and leisure activities will only be open to people who are vaccinated or have recovered from Covid-19 independently of the incidence of new infections on the population.

Societe Generale Draws Line Under Two Legal Cases in the US

Societe Generale SA France said Friday that the U.S. Department of Justice has requested the dismissal of two cases involving the bank.

The legal proceedings ended after the bank complied with its obligations per the deferred prosecution agreements it struck with the U.S. authorities three years ago.

GLOBAL NEWS

November Likely Saw Strong Job Gains, but Omicron Threat Looms

Lower Covid-19 case numbers likely helped propel the U.S. economy and powered strong job gains in November, economists say, but the new Omicron variant could jeopardize that progress.

Economists surveyed by The Wall Street Journal estimate that employers added 573,000 jobs in November, roughly on par with October. The unemployment rate is expected to tick down to 4.5% from 4.6%. The Labor Department is schedule to release November employment figures at 8:30 a.m. Eastern time Friday.

Companies Cling to Libor as Key Deadline Nears

U.S. companies need to give up the London interbank offered rate for new debt at the end of December. Many want to close just one more deal before that.

Come Jan. 1, banks won't be able to issue new loans or other financial contracts using Libor, which underpins trillions of dollars in corporate loans, derivatives and home mortgages. They will, however, be able to keep referencing Libor for debt issued before the year-end deadline through June 2023.

Citigroup Applies for China Securities License

Citigroup Inc. has applied for a securities license in China, according to a person familiar with the matter, as the New York-based banking giant eyes a bigger presence in the world's second-largest economy.

The bank recently submitted its application to the China Securities and Regulatory Commission, the person said. Citigroup is also planning to apply for a futures license in the coming months and intends to hire around 100 people in mainland China in the next two years to support its expansion onshore, the person added.

A Couple Stored IRA Gold at Home. They Owe the IRS More Than $300,000.

It's official: Owners of individual retirement accounts with assets invested in gold and silver coins can't store them in a safe at their home.

So ruled the judge in a recent Tax Court case, Andrew McNulty et al. v. Commissioner. The decision will cost Mr. McNulty and his wife Donna dearly-taxes of nearly $270,000 on about $730,000 of IRA assets, plus penalties likely to exceed $50,000.

Asia-Pacific Nations Use Tougher Tactics to Combat Omicron Variant

Countries in the Asia-Pacific region are creating tougher rules for those infected with the Omicron Covid-19 variant, as governments move more aggressively than they have against all other previous iterations, including Delta.

The modifications come as Omicron begins to reach the Asia-Pacific region, with Australia, Hong Kong, India, Japan, South Korea, Singapore and Malaysia reporting confirmed cases. The initial moves focused on national travel restrictions and border tightenings.

Omicron's Severity Will Take More Time to Assess, Doctors Say

JOHANNESBURG-It is still too early to tell whether Covid-19 caused by the new Omicron variant is milder or more severe than that from other strains of the coronavirus, doctors tracking a rapidly growing outbreak in South Africa said Friday.

The country, which has more known Omicron cases than any other, is likely to be the first to deliver answers to the questions doctors and scientists have been grappling with since the World Health Organization declared the new strain a "variant of concern" a week ago. Key among those are whether Omicron makes those infected sicker, whether it is more transmissible and in how far current Covid-19 vaccines or a past infection protect against the variant.

U.S. to Lead Global Effort to Curb Authoritarians' Access to Surveillance Tools

WASHINGTON-The U.S. plans to work with other countries to limit exports of surveillance tools and other technologies that authoritarian governments can use to suppress human rights, an alleged practice in China.

The Biden administration said Thursday that it would launch an initiative with friendly nations to establish a code of conduct for coordinating export-licensing policies. The effort would also see participating nations share information on sensitive technologies used against political dissidents, journalists, foreign government officials and human rights activists, administration officials said.

Biden Administration Issues Cybersecurity Directives for Freight and Passenger Rail

WASHINGTON-Nearly all U.S. freight and passenger rail systems will be required to report certain cybersecurity incidents to the Department of Homeland Security within 24 hours of discovery under new directives published Thursday by the Biden administration.

The orders, issued under congressional authority given to the Transportation Security Administration, will affect about 90% of passenger rail systems in the U.S. and 80% of freight rail systems that are considered "higher risk," a senior Department of Homeland Security official said, meaning they are considered vital to economic and national security.

Write to sarka.halas@wsj.com

Write to us at newsletters@dowjones.com

We offer an enhanced version of this briefing that is optimized for viewing on mobile devices and sent directly to your email inbox. If you would like to sign up, please go to https://newsplus.wsj.com/subscriptions.

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

(END) Dow Jones Newswires

December 03, 2021 06:45 ET (11:45 GMT)

Copyright (c) 2021 Dow Jones & Company, Inc.