MARKET WRAPS
Watch For:
U.K. Halifax House Price Index; Germany Industrial Production
Index; EU Q3 GDP; EU Employment; Germany ZEW Indicator of Economic
Sentiment; EU ECOFIN meeting of EU finance ministers.
Opening Call:
European stocks should open higher, while London's FTSE 100 may
waver at the open. U.S. stock futures point to a higher open on
Wall Street. U.S. dollar strengthens. Oil and gold rise.
Equities:
European stocks are set to open higher, fueled by investors'
bets that the Omicron Covid-19 variant may cause milder illness
than previously feared, renewing confidence in consumer and travel
demand.
Scientists and vaccine makers have sent mixed signals regarding
the severity of Omicron and how well existing vaccines may work
against it. It still may be weeks before a more definitive picture
forms.
Investors are also weighing high inflation readouts and the
potential for the Federal Reserve to hasten the reduction of its
pandemic stimulus measures to combat the surge in consumer prices.
This could leave the door open to an interest-rate increase in the
first half of 2022
Reports from South Africa, where omicron first was spotted, that
hospitals haven't been overwhelmed "is fueling some optimism" among
traders who sold earlier, said Yeap Jun Rong of IG in a report.
Airlines, cruise lines and other travel companies that stand to
gain from avoiding more anti-coronavirus controls advanced after
Dr. Anthony Fauci said early indications suggested omicron may be
less dangerous than the earlier delta variant.
Meanwhile, travel to retail and recreation destinations,
restaurant bookings and flights have all declined in Europe in the
past few weeks as coronavirus restrictions have been tightened in
the face of rising hospital admissions, Capital Economics said.
Eurozone GDP growth will be lower than the 0.7% forecast by
Capital Economics in the fourth quarter, Capital Economics' Chief
Europe Economist Andrew Kenningham said. The Omicron coronavirus
variant has added to downside risks, he said.
Capital Economics also said eurozone inflation probably peaked
at nearly 5% in November. "If restrictions are tightened sharply,
energy inflation may fall more than we have assumed, pulling
headline inflation down a bit further and faster than we are
assuming," Kenningham added.
Read why Generali Insurance Asset Management said European
stocks look a better bet than U.S. stocks here.
Forex:
USD/JPY rose as concerns ease for now about the Omicron variant
of Covid-19. The pair's clear breach of the recent resistance
around 113.60 likely opens up upside toward 114.00. Investors
remain focused on Omicron developments, governments' responses to
it and U.S. economic data in coming sessions.
The dollar strengthened against the euro and against the yen,
and the WSJ Dollar Index inched higher. Friday's consumer-price
report is seen providing further justification for speeding up
asset-purchase reductions at the Fed's December meeting, suggesting
risks are tilted to the downside, Karl Schamotta at Cambridge
Global Payments said.
"If price growth shows evidence of moderation, investors could
push monetary tightening expectations out slightly--reducing upward
pressure on the dollar."
The chief market strategist is watching yield-curve dynamics,
saying last week's moves, in which rate-hike expectations were
brought forward even as long yields fell, weren't necessarily
dollar-supportive, "suggesting that the US economy might prove
unable to bear higher interest costs in the years ahead. If
expectations of lower terminal rates become more entrenched, the
dollar could lose some altitude."
The prospect of the Bank of England raising interest rates
before other central banks will offer limited support to sterling
in 2022 due to Brexit, Societe Generale said.
"We remain nervous that the U.K. inflation/growth trade-off has
been harmed by Brexit (i.e., U.K. supply-chain difficulties are
worse than elsewhere for an obvious reason), and this means the
support the currency gets from earlier rate rises will be limited,"
SocGen forex strategist Kit Juckes said.
By the fourth quarter of 2022, SocGen sees EUR/GBP little
changed at 0.85 and predicts GBP/USD will fall to 1.29, from 1.3247
currently, as the Federal Reserve is also expected to lift rates
while the European Central Bank leaves rates on hold.
Bonds:
The yield on 10-year German government bonds, or Bunds, will
"probably have room" to nudge towards the 0% mark in 2022, but it
is unlikely to move beyond that level, said Antonio Cavarero, head
of investments at Generali Insurance Asset Management, which
manages EUR470 billion worth of assets.
Employment and inflation data support faster monetary
tightening, Deutsche Bank said, noting last week's nonfarm payrolls
showed a declining headline unemployment rate alongside a falling
U-6 rate (which includes discouraged job seekers and the
underemployed) and rising labor-force participation.
"In addition, the metrics that Fed policymakers have focused on
with respect to their 'broad-based and inclusive' definition of
maximum employment showed steady improvement," DB said. Its
economists expect Friday's CPI to bring "sturdy gains," with
headline inflation rising to 6.9% and core CPI to 5.1%.
Read comments from Aegon AM on why fixed-income investors face a
challenging 2022 here.
Energy:
Oil gained in early Asian trade as concerns over the Covid-19
Omicron variant ease. Hopes that the new variant will have a less
damaging economic impact have been supported by reports from South
Africa that patients there showed only mild symptoms, Phillip
Securities said.
Oil is also supported by expectations of a quick return of
Iranian oil into the market easing, after the U.S. said that
chances of Iran rejoining the nuclear deal may be slipping, ANZ
said.
The CEO of Saudi Aramco presses the case for the continuance of
fossil-fuel investment at the World Petroleum Congress in Houston.
The predominant energy transition strategy "is deeply flawed,"
because "alternatives are nowhere near ready to carry a big enough
load," said Aramco CEO Amin Nasser, speaking to an audience made up
mostly of people from the oil and gas industry.
He warned of economic consequences from halting investment in
oil and gas. "I understand that publicly admitting oil and gas will
play an essential and significant role during the transition and
beyond will be hard for some," Nasser said. "But admitting this
reality will be easier than dealing with energy insecurity, rampant
inflation and social unrest if prices become intolerably high."
Metals:
Gold rose in early Asian trade, after declining overnight on a
higher U.S. dollar and U.S. Treasury yields. The precious metal may
consolidate in a $1,750-$1,800 trading range alongside growing
optimism that the Covid-19 Omicron variant is unlikely to lead to
widespread lockdowns. Early data on the variant suggests that cases
are mild, Oanda said.
Copper gained in Asian trading following China's move to ease
liquidity, ANZ said. Prices are also being supported by the
mounting supply risk in South America, ANZ noted.
The Las Bambas copper mine in Peru is planning to halt
production amid protests by community groups, it said.
TODAY'S TOP HEADLINES
China's Exports Stay Strong as Surplus Contracts in November
BEIJING-China's exports beat market expectations in November,
though the growth rate decelerated from October due to a higher
base compared with the same period a year earlier.
Outbound shipments rose 22% from a year earlier in November,
slowing from a 27% increase in October, the General Administration
of Customs said Tuesday. The result surpassed the 16.1% growth rate
expected by economists polled by The Wall Street Journal.
RBA Says Omicron Won't Derail Economic Recovery
SYDNEY-The Reserve Bank of Australia left its official cash rate
steady at 0.10% at its monthly policy meeting Tuesday, indicating
it will be some time before the required conditions for an increase
will be in place and addressing concerns about the Omicron variant
of the Covid-19 virus.
"The emergence of the Omicron strain is a new source of
uncertainty, but it is not expected to derail the recovery," RBA
Gov. Philip Lowe said in a statement. "The economy is expected to
return to its pre-Delta path in the first half of 2022."
Balmy Forecasts Send Natural Gas Prices Plunging
The threat of sky-high heating bills is melting away.
Unusually warm weather pushed U.S. natural gas futures down
11.5% on Monday to $3.657 per million British thermal units. That
is down more than 40% from October's peak, erasing a run-up that
stoked fears of exorbitant heating bills biting into household
budgets and manufacturers' balance sheets already stressed by broad
inflation.
Should Investors Ride Tech Founders to the Moon?
Twitter co-founder Jack Dorsey's resignation letter included
some parting words of caution: Being "founder-led," he wrote, can
be "severely limiting and a single point of failure" for a
business.
The advice probably fell on deaf ears. As Mr. Dorsey wrote:
"There aren't many founders who choose their company over their own
ego." And, in another sign that irony is dead, he remains chief
executive of payments company Square Inc., soon to be known as
Block, which he co-founded in 2009. But investors aren't bound by
the same hubris. Should they be cautious about buying into
companies where a founder might have stayed too long at the
party?
Supply Chains in Southeast Asia Are Less Vulnerable After
Delta-Driven Disruptions
SINGAPORE-The Delta-driven wave of infections wreaked havoc on
supply-chains when it tore across Southeast Asia this summer,
disrupting production of everything from semiconductors to sneakers
and raising prices for Western consumers.
But countries like Vietnam and Malaysia have learned from that
experience and are better prepared for fresh waves of the virus,
economists and factory operators say, as the new Omicron variant
spreads globally.
Saudi Aramco Sells Stake in Natural-Gas Pipeline Business
Saudi Aramco agreed to sell a 49% stake in its natural-gas
pipeline business to a consortium led by BlackRock Inc. and
Saudi-backed Hassana Investment Co. for $15.5 billion-the
state-owned oil giant's latest move to pull cash out of its vast
energy infrastructure.
The deal follows a pattern used when Aramco agreed to sell a
similar sized stake in its oil pipeline network in April for $12.4
billion to a group led by EIG Global Energy Partners. Aramco,
officially called the Saudi Arabian Oil Co., said Monday it had
formed a new subsidiary, Aramco Gas Pipelines Co., that will lease
usage rights in Aramco's gas-pipelines network. It agreed to sell
49% of the new company to the consortium led by BlackRock unit
BlackRock Real Assets and Hassana. Hassana is the asset-management
arm of Saudi Arabia's General Organization for Social
Insurance.
U.K. Retail Sales Rose in November on Black Friday Boost
Retail sales in the U.K. rose in November compared with the year
before, according to the latest report by KPMG and the British
Retail Consortium.
British retail sales between Oct. 31 and Nov. 27 rose 5.0%
compared with the same period a year before, the report found. This
was well above growth of 0.9% noted in November 2020, and exceeds
the three-month average growth rate of 2.2%.
CIA Chief Says Intelligence Agencies Haven't Concluded Russia
Will Invade Ukraine
WASHINGTON-U. S. intelligence agencies haven't concluded that
Russian President Vladimir Putin will invade Ukraine, but he has
assembled military forces that "could act in a very sweeping way"
and may see an opportunity to move this winter, CIA Director
William Burns said Monday.
"I would never underestimate President Putin's risk appetite on
Ukraine, " Mr. Burns said at The Wall Street Journal's CEO Council
Summit. He noted remarks Mr. Putin has made that Moscow should have
significant influence over Ukraine, a neighbor.
VW's CEO Likely to Survive Latest Clash With Labor
BERLIN-Volkswagen AG CEO Herbert Diess is likely to survive his
latest clash with labor representatives over the pace of the
company's transformation to an electric-vehicle maker after weeks
of negotiations produced a compromise that would strip the
outspoken executive of some of his duties, people familiar with the
talks said Monday.
Mr. Diess has been under fire for weeks since warning the
company's board of directors in the fall that unless VW greatly
accelerated its shift to electric vehicles it could lose up to
30,000 jobs at its main operations in Wolfsburg, Germany, around
half of the workforce at the plant.
Budweiser Tries to Make Beer Stocks Fashionable Again
Budweiser's new boss thinks beer has as bright a future as
liquor. Shareholders aren't swallowing it yet.
Michel Doukeris, who took over as chief executive of Anheuser
Busch InBev in July, set out his strategy for the world's biggest
brewer at an investor day Monday. He plans to grow earnings before
interest, taxes, depreciation and amortization by 4% to 8% a year
"over the medium term."
MTIP, a Swiss Healthtech Investor, Raises $250 Million for Its
Second Fund
Swiss healthtech private-equity firm MTIP AG has collected $250
million for its second investment fund, with the goal of backing
companies at the nexus of two expanding industry sectors.
Based in Basel, the firm said it closed the fund above its $225
million target. The first fund-a "proof of concept"
vehicle-collected $65 million in 2016, according to Christoph
Kausch, managing partner of the firm.
Biden to Warn Putin Off Invasion of Ukraine
WASHINGTON-President Biden spoke Monday with European allies
ahead of a call with Vladimir Putin in which he will warn the
Russian president not to invade Ukraine, officials said.
Mr. Biden "will make clear that there will be very real costs
should Russia choose to proceed, but he will also make clear that
there is an effective way forward with respect to diplomacy," a
senior administration official said about the call with Mr. Putin
scheduled for Tuesday.
Elon Musk Comes Out Against Federal Electric-Vehicle
Spending
Elon Musk took aim at a signature Biden administration
legislative proposal and said China is adjusting to its growing
position as a dominant world power in an interview with The Wall
Street Journal.
The Tesla Inc. chief executive criticized federal efforts meant
to spur electric-vehicle adoption, including a bill that would
boost incentives for buying battery-powered cars.
Samsung Replaces CEOs, Merges Mobile and Consumer Electronics
Businesses
SEOUL-Samsung Electronics Co., in a surprise move, replaced the
heads of its three major business units and merged the company's
mobile and consumer electronics businesses into a single unit.
The shake-up leaves two co-CEOs atop the world's largest maker
of smartphones, televisions and semiconductors. Samsung has
ambitious investment plans to compete against Taiwan Semiconductor
Manufacturing Co. on advanced chipmaking, while striving to fend
off Chinese rivals with phones and other gadgets.
Intel to List Shares in Mobileye Unit
Intel Corp. is planning to publicly list shares in its Mobileye
self-driving-car unit, the latest move by Chief Executive Pat
Gelsinger to revive the semiconductor giant's fortunes.
Intel said it would take the unit public in the U.S. in mid-2022
through an initial public offering of new Mobileye stock. The move,
earlier reported by The Wall Street Journal, could value Mobileye
at north of $50 billion, according to people familiar with the
matter.
SEC Opens Probe Into Tesla Involving Solar-Cell Activity
The U.S. Securities and Exchange Commission has opened an
investigation into Tesla Inc. that touches at least in part on the
company's solar-cell activity.
The SEC acknowledged the probe in response to a Freedom of
Information Act request filed by a former Tesla employee who
previously filed a complaint with the SEC, according to documents
viewed by The Wall Street Journal. The person alleged in the
complaint to the regulator back in 2019 that Tesla and SolarCity,
the solar-cell business it acquired, failed to properly notify
shareholders and the public of fire risks associated with its
equipment, according to one of the documents.
Write to sarka.halas@wsj.com
Expected Major Events for Tuesday
00:01/UK: Nov BRC-KPMG Retail Sales Monitor
05:30/NED: Nov CPI
06:45/SWI: Nov Unemployment
07:00/GER: Oct Industrial Production Index
07:00/DEN: Oct Industrial production & new orders
07:00/NOR: Oct Industrial Production Index
07:00/ROM: 3Q GDP
07:00/UK: Nov Halifax House Price Index
07:45/FRA: Oct Foreign trade
07:45/FRA: Oct Balance of Payments
08:00/HUN: Oct Preliminary Industrial Production
08:00/SWI: Nov SNB foreign currency reserves
08:00/CZE: Oct Industry, Construction
08:00/CZE: Oct External trade
08:00/AUT: Sep Foreign Trade
08:30/SWE: Oct New orders & deliveries in industry
08:30/SWE: Oct Industrial Production Index
09:00/BUL: 3Q GDP - preliminary data
09:00/ICE: Nov External trade, preliminary figures
10:00/EU: 3Q GDP and Main Aggregates Estimate
10:00/EU: 3Q Employment
10:00/GER: Dec ZEW Indicator of Economic Sentiment
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(END) Dow Jones Newswires
December 07, 2021 00:26 ET (05:26 GMT)
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