MARKET WRAPS

Stocks:

Global stocks moved slightly Monday in what is expected to be a quiet trading session, with U.S. markets closed in observance of the Martin Luther King Jr. Day holiday.

China's economy and central-bank policy and what this means for global growth is a key driver of market sentiment, said Florian Ielpo, head of macro at Lombard Odier Investment Managers.

"China is on a very different path than the rest of the world, it is a striking difference," Mr. Ielpo said. "We are nervous about what's happening in China right now."

Other analysts saw the rate cuts in a more positive light. Chinese authorities are likely to step up policy support, both monetary and fiscal, said Dong Chen, head of Asia macroeconomic research at Pictet Wealth Management.

Shares on the move: Unilever shares tumbled over 6% after the consumer-goods giant said over the weekend that it had approached GlaxoSmithKline and Pfizer about buying their consumer-health joint venture.

Its latest proposal valued the unit at $68.4 billion. U.K.-listed GlaxoSmithKline shares rose 5.5%. Track what the analysts are saying here .

Credit Suisse shares declined 1.5% after the bank's chairman resigned following an investigation into his personal use of a corporate jet and breaching of Covid-19 quarantine rules.

Credit Suisse Chairman Antonio Horta-Osorio's departure leaves the company with a lack of strong characters at the top and could prompt leadership questions, Citi analysts say as shares in the Swiss bank slip.

The scandal-ridden bank has named Axel Lehmann, who only joined the bank in November to chair the risk committee, as its new chairman. Lehmann has already backed the strategic course set by his predecessor, "which we understand, as a period of continuity is now a must for the bank," Citi said.

The U.S. bank expects Lehmann to adopt a more traditional, less hands-on approach to his role, in contrast with Horta-Osorio.

Data in focus: Strong industrial production numbers for the eurozone in November offer some hope the worst is over, supporting Oxford Economics' view of a gradual resolution of supply-side issues.

Moreover, the strong gains in Spain and Italy could very likely result in some positive surprises for fourth quarter GDP, Oxford Economics' chief Italian economist Nicola Nobile said.

But the bigger picture is of a slowing eurozone economy in 1Q, with a series of downside risks to Oxford Economics' call of pick-up from 2Q. "In particular, a big chunk of our forecast for 2022 continues to rest heavily on the shoulders of consumers and specifically on normalizing saving ratio," Nobile says.

The Covid-19 pandemic's drag on economic activity has lessened from wave to wave, Berenberg said.

Even if most people who are infected don't fall seriously ill, they still need to be in quarantine. Against the backdrop of the Omicron variant, staff shortages may be a major factor for about four to six weeks, shaving around 0.5 percentage point off 1Q GDP in the U.K. and the eurozone, according to Berenberg's estimates.

Together with restrictions and more-cautious consumer behavior, this suggests that economies may roughly stagnate in 1Q, Berenberg said.

However, if supply shortages start to ease in early 2022, gains in manufacturing output could still underpin GDP growth of around 0.7% in 1Q in both the U.K. and the eurozone, Berenberg forecasts.

Norges Bank will keep the key rate unchanged at 0.5% this week and confirm that it will rise further in March, said Nordea. The central bank announces a decision on Thursday and will only describe the main developments since the previous meeting in relation to their expectations from December, without concluding on the effects on the rate path, Nordea said.

Overall, the developments since December have so far been better than expected by the central bank, while the Norwegian krone is in line, it said.

"Although Norges Bank will not conclude on the effects on the rate path, our own assessment is that the sum of news warrants a higher rate path vis-a-vis the rate path from December."

U.S. Markets:

The New York Stock Exchange and Nasdaq are closed Monday for the holiday that honors King's Jan. 15 birthday, with U.S. bond markets similarly shut. CME Group, which overseas commodities markets including Nymex-traded crude and Comex-traded gold, said there will be no regular trading or settlements Monday.

Investors are gearing up for another big week of U.S. corporate earnings, with Goldman Sachs scheduled to report Tuesday and Bank of America and Morgan Stanley on Wednesday. Household names such as Procter & Gamble and UnitedHealth are slated to post results Wednesday, followed by American Airlines and Netflix on Thursday.

"One of our major calls for 2022 is that banks will surprise to the upside," said Lale Akoner, a market strategist at BNY Mellon Investment Management.

More broadly, "wages are going higher, energy costs are still very elevated so inflation overall is going to pressure margins. This will definitely show in earnings in 2022," Ms. Akoner said. "Large-caps usually weather this better than small-caps."

Forex:

The dollar recovered some ground Friday after a rough week and there is some room for further gains this week, ING said.

The dollar will be supported by the prospect of imminent monetary policy tightening by the Federal Reserve and a positive U.S. economic growth narrative, possibly combined with more balanced positioning after a recent trimming of speculative bets on the dollar rising, ING analysts said.

"We expect [the DXY dollar index] to rise back to the 96.00 level as we approach the 26 January Fed meeting."

Sterling has been little moved by U.K. political uncertainty amid calls for Prime Minister Boris Johnson to resign and that is unlikely to change, ING said.

"We think that even in the event of a change in leadership, the downside risks for the pound (which is currently being supported by aggressive Bank of England tightening expectations) should be contained," ING analysts said.

Meanwhile, a slew of U.K. economic data this week including labor market figures on Tuesday and inflation on Wednesday should support sterling, although mostly against non-dollar currencies as the U.S. currency is likely to rise, they said.

Bitcoin fell 1.2% from its level at 5 p.m. Friday and traded at around $42,800. It has declined 38% from the all-time high it notched in November.

Bonds:

It should only be a matter of time for 10-year German Bund yields to bounce to positive territory, for the first time in nearly three years, LBBW's senior fixed-income analyst Elmar Voelker said.

Bonds' weak start to 2022 points the way for this, he said. "Under the assumption that weakness will remain valid overall for the month of January, the ideal historical progression over the year...suggests that yields will increase further over the following months," he said.

The 10-year Bund yield last traded in positive territory in May 2019, according to Tradeweb.

LBBW raises its forecasts for the year-end level of the 10-year Bund and 10-year U.S. Treasury yields, seeing them at 0.20% and 2.25% at the end of 2022, versus the 0% and 1.90% it previously expected, senior fixed income analyst Elmar Voelker said.

Ten-year UST yield levels above 2% "may well serve as an additional incentive to buy for foreign investors and could therefore slow the upward yield trend more sustainably," he said.

As for Bund yields above zero, LBBW remains of the view that yield levels significantly above zero will not be maintained over longer stretches of time, "since investors with long-term horizons will likely take advantage of this yield level to top up their long-term bond positions to an increased extent."

Commodities:

Oil wavered as traders weigh signs of new supply against robust demand. Data from Baker Hughes late Friday showed that active rigs in the U.S. rose by 11 last week.

Meanwhile, U.S. fracking crews rose by 10. Both figures suggest a steady increase in supply, though analysts are expecting supply will remain tight as OPEC struggles to meet its production quotas and the Omicron variant of Covid-19 has a limited impact on demand.

"What the market is focused on right now is the potential lack of spare [OPEC] capacity because of underinvestment for years," said Helge Andre Martinsen, oil analyst at DNB Markets.

Base metals prices weakened after mixed signals on the health of China's economy.

EMEA HEADLINES

Credit Suisse Chairman to Leave After Breaking Covid Travel Rules

Credit Suisse Group AG Chairman António Horta-Osório is leaving the global bank following a board investigation into his travel and personal conduct, according to people familiar with the bank.

Credit Suisse said late Sunday that Mr. Horta-Osório had resigned following an investigation commissioned by the board. The people said the investigation examined his conduct, including travel that breached Covid-related government rules and his personal use of corporate aircraft. He joined the Credit Suisse board less than a year ago.

Unilever Makes Approach for Glaxo's Consumer-Healthcare Business

LONDON-Unilever PLC said it had approached GlaxoSmithKline PLC and Pfizer Inc. about an acquisition of their consumer-healthcare joint venture, a potential $68 billion deal that would reshape the consumer-products giant's portfolio at a time when it is under pressure to accelerate growth.

Unilever said in a statement Saturday that the business, known as GSK Consumer Healthcare, was "a leader in the attractive consumer health space" and would be a "strong strategic fit," though cautioned there was no certainty that any agreement would be reached.

Unilever Sets Out Ambition to Expand in Health Products

Unilever PLC said it wants to significantly expand its footprint in health, beauty and hygiene, and plans to sell off slower-growing parts of its ice cream-to-soap consumer brands empire to fund major acquisitions.

The strategic update Monday came days after Unilever said it had approached GlaxoSmithKline PLC and Pfizer Inc. about buying their consumer-healthcare joint venture, GSK Consumer Healthcare. A successful acquisition of the business, which sells everything from Aquafresh toothpaste to Advil painkillers, would greatly expand Unilever's presence in categories such as oral care and vitamins.

Supply-Chain Constraints Might Have Peaked, But Will Continue Damping Growth -- Analysis

The combination of pandemic-related supply constraints and strong global demand for goods has led to bottlenecks and disrupted supply chains. Supply issues should continue to damp growth and boost inflation in the near term, Commerzbank says.

In recent weeks, overall supply bottlenecks haven't changed much on balance, economists at the German bank say. In maritime transport, congestion remains a problem and freight rates remain high. While prices for wood have fallen, memory chips and aluminum have become more expensive, they say. In all, supply issues are likely to continue to damp growth, Commerzbank says.

London Stock Exchange Proposes Special Listings for Private Companies

The London Stock Exchange Group is seeking to blur the line between public and private companies, part of a plan to attract fast-growing technology firms to list in the U.K. in the wake of Brexit.

The LSE has proposed the creation of a special market for private companies to trade their shares publicly on the exchange on certain days, according to a person familiar with the matter and proposals from the LSE to its regulators, the Financial Conduct Authority, and the U.K. Treasury, seen by The Wall Street Journal.

Putin Wants NATO to Back Off but Is Achieving 'Exactly the Opposite,' Says Alliance Chief

BRUSSELS-Russian President Vladimir Putin has said he wants NATO to reduce its presence in Eastern European countries that were once part of the Soviet bloc but his actions are achieving the opposite, said NATO's chief.

If Russia attacks Ukraine, as it is threatening with a deployment of almost 100,000 troops, the North Atlantic Treaty Organization will further expand its presence near Russia, Secretary-General Jens Stoltenberg said in an interview. He said the alliance is assessing how it could do so.

Russia's European Neighbors Rattled by Putin's Moves

BERLIN-Europe's relations with Russia are sinking to depths unprecedented in the three decades since the collapse of the Soviet Union.

After more than 20 years in power, President Vladimir Putin is rattling his European neighbors more than ever, signaling that he might invade Ukraine, deploying troops to shore up the autocracy in Kazakhstan, weaponizing his country's natural-gas exports and demanding sweeping security concessions from the West.

Behind United Front, U.S. Approach on Russia Unsettles Some Allies

BRUSSELS-In public, the U.S. and its allies this week presented a united front in rejecting Russian demands that they rule out NATO enlargement and pull military forces back from the alliance's eastern flank.

Behind the scenes, some allies-particularly those close to Russia-are perturbed by several ideas floated by U.S. officials at talks with Russian counterparts before they were aired with allies, according to diplomats at the North Atlantic Treaty Organization.

Yemen's Houthi Rebels Claim Suspected Drone Strikes on U.A.E. Capital

Yemen's Houthi rebels claimed Monday to have carried out suspected drone attacks on two locations in the United Arab Emirates that caused an explosion involving three fuel trucks and a fire at a construction site at Abu Dhabi's airport, in a rare attack on the neighboring Gulf state which recently intensified its role in the Yemeni war.

The Iran-backed Houthis said they had targeted the U.A.E. in a "military operation" in retaliation for its recent escalation in Yemen, where Emirati-backed rebels last week dealt the Houthis an unexpected defeat in the oil-rich province of Shabwa.

U.K. National Average House Prices Rose Again in January

U.K. house prices rose in January in the busiest start to the year on record, according to new data from property portal Rightmove PLC.

The average price of property coming to the market rose by 852 pounds ($1,168) in January, an increase of 0.3% and bringing the national average to GBP341,019. First-time buyer asking prices hit a record GBP214,176 after climbing 1.4% in a month. The portal measured 53,813 prices across the U.K over the period from Dec. 5 to Jan. 8.

Loop, Suez to Build $285 Million Recycled-Plastic Factory in France

Plastic-recycling startup Loop Industries Inc. plans to build a factory in France with waste-management company Suez SA, aiming to tap demand from businesses that want to reduce their plastic waste.

The Normandy plant, which will produce recycled plastic resin, is expected to begin operating in 2025 and construction is scheduled to start next year, Loop said Sunday.

U.S. Businesses Sour on Saudi Arabia in Blow to Crown Prince's Growth Plans

RIYADH-Saudi Arabia courted the world's top companies to modernize its economy. Instead, the business environment has grown more hostile and investors are souring on the oil-rich kingdom.

Uber Technologies Inc., General Electric Co. and other foreign firms were hit by surprise tax assessments often totaling tens of millions of dollars.

GLOBAL NEWS

China Cuts Two Key Rates to Support Slowing Economy

China's central bank on Monday cut two key interest rates that would likely translate into lower benchmark lending rates, in a bid to provide more support for the slowing economy.

The People's Bank of China lowered rates on the one-year medium-term lending facility and seven-day reverse repurchase agreements by 10 basis points each, according to an official statement.

China GDP Grew 8.1% in 2021, Though Momentum Slowed in Fourth Quarter

BEIJING-China's economy expanded 8.1% last year as a pandemic-plagued world snapped up its goods, though slowing growth in the final months of the year points to challenges ahead for its economy.

As expected, the annual gross domestic product figure easily topped Beijing's official growth target of 6% or more, as exports surged to a record high. The 8.1% growth figure for 2021, which matched economists' forecasts, adds to the country's post-pandemic recovery, after China eked out a 2.2% expansion in coronavirus-ravaged 2020.

Economy Week Ahead: China GDP, U.S. Housing

Supply-Chain Constraints Might Have Peaked, But Will Continue Damping Growth -- Analysis

The combination of pandemic-related supply constraints and strong global demand for goods has led to bottlenecks and disrupted supply chains. Supply issues should continue to damp growth and boost inflation in the near term, Commerzbank says.

In recent weeks, overall supply bottlenecks haven't changed much on balance, economists at the German bank say. In maritime transport, congestion remains a problem and freight rates remain high. While prices for wood have fallen, memory chips and aluminum have become more expensive, they say. In all, supply issues are likely to continue to damp growth, Commerzbank says.

China's Property Market Cooled in 2021 as Beijing Reined in Developers

BEIJING-Property investment and new construction starts slumped in China in 2021 as the government's move to rein in developers' debt hobbled an important pillar of growth for the country.

Overall investment in China's property sector increased 4.4% in 2021, down from the 7.0% growth rate marked in 2020, the country's National Bureau of Statistics said Monday. The result was weaker than the 6.0% year-over-year gain recorded over the first 11 months of 2021.

Big Tech Braces for a Wave of Regulation

Big tech companies are facing the biggest expansion in potential technology regulation in a generation. And while the jury is out on whether all that sound and fury will signify anything, for the first time there are signs that the big-tech backlash could have a substantive impact.

New laws under consideration in Europe, Asia and the U.S. could put sharp limits on how big tech companies can treat smaller competitors and restrict their use of artificial intelligence like facial recognition. Some proposals could ban common practices such as companies giving their own products a boost in their own rankings, something that could have an operational impact, executives and analysts say.

Day Traders as 'Dumb Money'? The Pros Are Now Paying Attention

Last year, amateur investors took financial markets by storm. This year, Wall Street professionals are watching them closely.

Fund managers who might have once derided small-time day traders as "dumb money" are scouring social-media posts for clues about where the herd might veer next. Some 85% of hedge funds and 42% of asset managers are now tracking retail-trading message boards, according to a survey by Bloomberg Intelligence.

Why Has the U.S. Stock Market Done So Well? And Can It Continue?

The U.S. is on a winning streak. Four years running, through political turmoil and Covid-19, American stock markets have beaten the world. As we hit the second anniversary of the pandemic, investors should be asking whether it can continue.

North Korea Fires Two Suspected Ballistic Missiles From Airfield, South Korea Says

SEOUL-North Korea test-fired two suspected short-range ballistic missiles off its east coast on Monday, South Korean and Japanese militaries said, in what is Pyongyang's fourth weapons launch of the month.

The missiles were fired at 8:50 a.m. and 8:54 a.m. from the Sunan airfield, which is located in the northern outskirts of Pyongyang near the country's main international airport, South Korea's military said. They flew about 235 miles and at an altitude of about 26 miles before splashing into the waters between Korea and Japan, it said.

Omicron Surge Pressures U.S. Hospitals

Americans shouldn't expect the Omicron variant to peak nationwide in coming days, the U.S. surgeon general warned Sunday, as Covid-19 cases continue to rise and put more pressure on hospitals.

"The next few weeks will be tough," Dr. Vivek Murthy said during an appearance on CNN's "State of the Union."

Tonga Left Largely Cut Off After Volcanic Eruption, Tsunami

WELLINGTON, New Zealand-When an underwater volcanic eruption off Tonga triggered tsunami waves at least a meter high on Saturday, the managers of the Ha'atafu Beach Resort and their children sprinted through bushes in a desperate scramble to safety.

They have since returned to a changed landscape. The tropical coastline popular with surfers and snorkelers, was ravaged by the tsunami, which caused ocean swells as far away as the U.S. West Coast and Japan. The nearby Kanokupolu village was severely damaged.

China's Population Stalls With Births in 2021 the Lowest in Modern History

The number of newborns in China fell for a fifth straight year to the lowest in modern Chinese history, despite Beijing's increasing emphasis on encouraging births.

Last year's 10.62 million births, down from 12.02 million in 2020, barely outnumbered the 10.14 million deaths, the National Bureau of Statistics said Monday, suggesting the day may be near when China's population starts to shrink. Some analysts believe the population may have already peaked.

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

January 17, 2022 06:27 ET (11:27 GMT)

Copyright (c) 2022 Dow Jones & Company, Inc.