MARKET WRAPS
Watch For:
OECD Harmonised Unemployment Rates.
Opening Call:
European stocks could waver at the open, while U.S. stock
futures point to extended gains on Wall Street. The dollar
strengthens against the euro and yen. Treasury yields rise. Oil is
mixed and gold prices are down.
Equities:
European stocks could waver at the open after another broad
rally on Wall Street as investors wagered that the new variant of
the COVID-19 virus won't pose a big threat to the economy.
The balance of the latest Omicron updates appears to indicate
that another major economic shock isn't coming, which has sparked
short covering and a scramble to buy after a few weeks of losses,
said ThinkMarkets analyst Fawad Razaqzada. "It's a relief rally,"
he said.
Eventually, though, investors will likely refocus on monetary
policy and the pace of the Federal Reserve's tapering program, said
Mr. Razaqzada. "That's going to be the next big thing for the
market," he said.
The Fed is scheduled to hold a two-day meeting of policymakers
next week.
Uncertainty over Covid and Fed policy, however, may challenge
the usual holiday cheer. Additionally, lower trading volumes in the
lead-up to the holidays are likely to cause exaggerated moves in
either direction, analysts say.
"We're in this period where investors are grappling for any news
they can find and that, coupled with low liquidity, is leading to
some big moves," said Hugh Gimber, a strategist at J.P. Morgan
Asset Management.
Stocks advanced in Asia, while Japan downgraded its growth
estimate for the last quarter to minus-3.6% from an earlier
reported contraction of 3.0%.
Stocks to watch: TUI looks set to report a pandemic-driven
revenue hit in full-year results due Wednesday, Numis Securities
said. In August, management guided to lower FY21 revenue on-year,
Numis said.
"Like the rest of the sector, TUI has had a challenging Covid
period, requiring capital injection via equity, debt and
disposals," Numis analyst Richard Stuber said. TUI is also more
asset-heavy than rivals, he added.
"Conversely, its wider geographical customer base has benefited
from less-stringent travel restrictions over summer '21 and may
possibly also [do so] during FY22," he said.
"Nevertheless, with low near-term visibility for trading and a
less-robust balance sheet, our preference remains with Jet2 and On
The Beach."
The outlook for European chemical stocks is strong, and recent
falling share prices across the sector provide an attractive entry
point on multiple stocks, JPMorgan said.
Most companies are also seeing good pricing power, offsetting
the impact from raw-material and energy-price inflation on
earnings, the U.S. bank said.
Commodity chemical prices could dip as temporary outages and
shipping constraints ease, while, longer-term, companies are
benefiting from trends like the switch to e-vehicles,
decarbonization and developing more sustainable products, JPM
said.
The bank has Air Liquide and Solvay as top picks, upgrades BASF
to stock overweight, and Covestro and Clariant to neutral. However,
it downgraded Arkema stock to neutral.
Forex:
USD/JPY may be supported for now by gains in the stock markets
and easing of concerns about the Omicron variant. Strong U.S.
economic data are likely to increase expectations for Fed's faster
shift to policy tightening, leading to the pair's further
advance.
U.S. weekly jobless claims due Thursday and consumer-price index
figures on Friday are in focus ahead of Fed's policy meeting next
week.
The dollar strengthens against the euro and firms slightly
against the yen. The WSJ Dollar Index was flat. Bank of America
said it's still bullish on the dollar versus the euro and yen for
2022.
"Leading indicators suggest the US is on track to meet the
consensus forecast target for the next two quarters," while the EU
and Japan show material downside risk to the current 4Q consensus
growth forecast, the firm said.
"Historical analysis shows the USD could broadly appreciate on
the back of a positive surprise to the advanced US GDP data, while
the EUR is at risk versus the USD and JPY in the scenario of a
negative Q4 2021 advanced EU GDP surprise. The JPY historically has
had negative correlation with JP GDP data surprise on preliminary
JP GDP release dates."
Bonds:
Treasury yields rose as Omicron fears recede and investors
embrace a little more risk. "The covid data in South Africa is so
far consistent with the assessment that Omicron is more
transmissible, but less virulent," Deutsche Bank said, noting that
"data are subject to revisions and it is early days."
Investors also adjust to an expected acceleration of the
reduction in bond purchases by the Fed, which will sap a major
source of demand for government debt.
Energy:
Oil was mixed in early Asian trade after rising on eased
concerns over the Covid-19 Omicron variant. Oil may be supported by
some near-term positive sentiment, thanks to signs of stronger
demand, ANZ said.
China's oil imports rose to a three month high in November, as
new quotas for refiners were allocated, it noted. The country is
one of the world's largest importers of oil.
Metals:
Gold was slightly higher in early Asian trade, as investors
continue to weigh current geopolitical tensions against easing
concerns over the Omicron variant, ANZ said.
Gold may be pressured in the near term. Rising expectations that
the U.S. Fed could reduce its asset purchases at a faster pace, and
raise interest rates in the next year amid signs of higher
inflation, could make the precious metal more expensive for holders
of other currencies, ICICI Securities said.
Copper prices were lower, extending recent fluctuations amid a
mix of favorable and unfavorable factors. Demand in China is likely
to pick up in the coming months as the country's power usage
restrictions ease and property construction recovers, Huatai
Futures said.
However, upward momentum in prices may be capped by ample
supplies. "Copper prices will likely remain volatile for now," it
said.
TODAY'S TOP HEADLINES
Japan's Economy Shrank More Than Estimated in Third Quarter
Japan's economy shrank more than initially estimated in the
July-September quarter due to weaker spending by consumers and the
government, revised data showed Wednesday.
The world's third-largest economy after the U.S. and China
contracted 3.6% on an annualized basis, which reflects what would
happen if the third-quarter pace continued for a full year.
House Votes to Approve Bill Setting Up Process for Lifting Debt
Limit
WASHINGTON-Top Republicans and Democrats struck a deal for a
process to raise the debt ceiling in the Senate, with the House
passing a bill late Tuesday that paves the way for Congress to
prevent a calamitous default.
The bill, which also prevents cuts to Medicare and other
programs that threatened to kick in at the end of the year, is the
product of weeks of talks between Senate Majority Leader Chuck
Schumer (D., N.Y.) and Senate Minority Leader Mitch McConnell (R.,
Ky.). It doesn't itself raise the debt ceiling. Instead, it sets up
a procedure for an additional vote on the issue that would require
a simple majority in the Senate rather than the 60 votes needed for
most legislation.
Early Lab Test Shows Omicron Weakening Vaccine Effectiveness
The Omicron variant of coronavirus can partially evade the
protection afforded by vaccines, according to laboratory tests
conducted in South Africa that give one of the first indications of
vaccine effectiveness against the variant, but scientists say the
shots should still defend those inoculated from severe disease.
Scientists at the Africa Health Research Institute in South
Africa tested the blood of 12 people vaccinated with the shot
developed by Pfizer Inc. and Germany's BioNTech SA against the
Omicron variant to determine how effectively it neutralized the
virus.
EPA Trims Ethanol Mandate for Gasoline as Biofuel Pressures Pump
Prices
WASHINGTON-The Environmental Protection Agency on Tuesday
proposed reducing the amount of ethanol and other biofuels that
must be blended into gasoline this year and retroactively lowered
last year's mandate, in a win for refiners who warned that raising
the requirement would lift prices at the pump.
The decision comes as the price of ethanol, the most-dominant
biofuel, has risen to its highest level in a decade. While U.S. gas
prices are driven by the price of crude oil, refiners say ethanol
prices have contributed to higher prices at the pump, though
gasoline has dipped from recent highs.
Companies Plan Big Raises for Workers in 2022
Companies are planning for steeper wage increases next year than
at any point since the 2007-2009 recession, according to a new
report, amid a tight labor market and the highest inflation in
three decades.
A survey by the Conference Board set for release Wednesday finds
that companies are setting aside an average 3.9% of total payroll
for wage increases next year, the most since 2008.
Biden Warns Putin Invasion of Ukraine to Be Met With Economic
Response and More
President Biden warned Russian President Vladimir Putin that the
U.S. and its allies would meet a military invasion of Ukraine with
strong economic penalties, moves to bolster Ukrainian defenses and
fortify support for Eastern European nations.
For two hours Tuesday, the two leaders held a secure video call
to address what the U.S. has described as large and unusual troop
movements near Russia's border with Ukraine in recent weeks.
Early Lab Test Shows Omicron Weakening Vaccine Effectiveness
The Omicron variant of coronavirus can partially evade the
protection afforded by vaccines, according to laboratory tests
conducted in South Africa that give one of the first indications of
vaccine effectiveness against the variant, but scientists say the
shots should still defend those inoculated from severe disease.
Scientists at the Africa Health Research Institute in South
Africa tested the blood of 12 people vaccinated with the shot
developed by Pfizer Inc. and Germany's BioNTech SA against the
Omicron variant to determine how effectively it neutralized the
virus.
'The List,' One of the World's Oldest Business Newspapers, Is
for Sale
Lloyd's List, one of the world's longest-running business
newspapers, is up for sale.
Informa PLC, an events-planning company listed in London as a
component of the FTSE 100, offered the niche publication for sale
on Tuesday as part of its plans to divest itself of a data and
consultancy division and focus on its events and academic
businesses.
Glaxo Says Its Covid-19 Antibody Drug Works Against Omicron
GlaxoSmithKline PLC and Vir Biotechnology Inc. said their
Covid-19 antibody treatment retained effectiveness against the
Omicron variant in laboratory studies, even as early data suggests
that similar treatments work less well against the highly mutated
strain.
The results provide hope that at least one monoclonal antibody
therapy-a form of treatment that has proven useful in blunting
severe disease-will remain effective against Omicron, which has
been detected in dozens of countries including the U.S. since it
was identified by scientists in South Africa two weeks ago.
Jeep Maker Stellantis Bets on Software to Boost Revenue
Stellantis NV Chief Executive Carlos Tavares is looking to give
the global auto manufacturer a major tech upgrade.
In a presentation Tuesday, Mr. Tavares outlined plans to hire
thousands of software engineers and collaborate with Foxconn
Technology Group on developing semiconductors for its vehicles. The
goal is to deliver a new generation of technology-packed models
that can be updated throughout their life cycle using downloadable
software and with customizable features unique to each of the
company's 14 brands, executives said.
Blinken Calls China, Russia Efforts to Disrupt Global Order
Serious Mistakes
Attempts by China or Russia to expand their territory by
invasions of Taiwan or Ukraine, respectively, would be serious
mistakes with severe consequences, Secretary of State Antony
Blinken said Tuesday at The Wall Street Journal's CEO Council
Summit.
President Biden's warning to Russian President Vladimir Putin on
a secure video call Tuesday about the consequences of a potential
invasion of Ukraine should "affect President Putin's calculus going
forward," Mr. Blinken said.
Why the Turkish Lira Is Falling Like a Rock
The Turkish lira has shed nearly half of its value against the
dollar this year and inflation is spiraling skyward. For Turkey's
embattled economy, investors and economists fear it could get a lot
worse before it gets better.
At the center of Turkey's troubles are years of unorthodox
economic policies championed by Turkish President Recep Tayyip
Erdogan. Mr. Erdogan argues that higher interest rates stoke
inflation and lower rates will cause inflation to ebb. This is the
opposite of what economies around the world have experienced
through history.
Supply-Chain Problems Will Last Through 2023, Intel Chief
Says
The supply-chain problems rippling across the U.S. economy are
improving for some companies, but long-term fixes might take much
longer, the heads of Intel Corp., Wayfair Inc. and Accenture PLC
said at The Wall Street Journal CEO Council Summit on Tuesday.
"The bottom was this past summer, but it's recovering slowly,"
said Niraj Shah, chief executive officer and co-founder of online
retailer Wayfair.
Facebook Parent to Allow Employees to Delay Return to
Offices
The parent company of Facebook said Tuesday it will fully reopen
its U.S. offices at the end of January, but will give workers a
chance to delay their scheduled return as late as June.
Meta Platforms Inc.'s new "office deferral program" is designed
to give employees flexibility in coming back to offices and
determining how they work, a spokesman said. The company previously
offered most of its employees the option to work remotely
full-time.
BlackRock to Pull $2 Trillion in Assets From State Street
BlackRock Inc. is pulling some $2 trillion of assets out of
State Street Corp.'s safekeeping, a move that will reduce the
investing firm's reliance on a small number of parties and lower
the fees it pays for back-office work.
For more than a decade, State Street served as the sole
custodian to BlackRock's U.S. exchange-traded funds-low-cost
investment vehicles that have exploded in popularity in recent
years. State Street services all of the roughly $2.3 trillion
across those BlackRock funds.
Weibo Shares Fall in Hong Kong Trading Debut
Shares of Chinese social-media company Weibo Corp. fell in their
trading debut in Hong Kong on Wednesday morning amid a challenging
environment for Chinese technology stocks.
Shares of the Beijing-based company dropped as much as 7.2%
compared with its offering price of HK$272.80. They were last down
6.2% at HK$256.00.
Write to sarka.halas@wsj.com
Expected Major Events for Wednesday
06:30/FRA: 3Q Job creation
07:00/DEN: 3Q Labour force survey
07:00/FIN: Oct Foreign trade
08:00/CZE: Nov Unemployment data
08:00/HUN: Nov CPI
10:00/GRE: Oct External Trade (provisional data)
10:00/LUX: Nov CPI
10:00/CRO: Nov PPI
11:00/FRA: Oct OECD Harmonised Unemployment Rates
16:59/POL: Polish interest rate decision
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(END) Dow Jones Newswires
December 08, 2021 00:27 ET (05:27 GMT)
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