UKX FTSE 100 Index

MARKET WRAPS

Watch For:

Eurozone Flash PMI; UK Flash PMI; Germany Bundesbank monthly report; results from Philips.

Opening Call:

European shares could fall at the open Monday, as U.S. stock futures point for a higher open on Wall Street. Dollar rises slightly. Treasury yields steady after a pull back on Friday. Oil gains and gold remains unchanged.

Equities:

European stocks are set to start the week lower after a sell-off on Wall Street that saw the S&P 500 and Nasdaq Composite Index wrap up their worst weeks since March 2020.

The S&P 500 and Nasdaq Composite Index wrapped up their worst weeks since March 2020; the Nasdaq has fallen for four weeks in a row. The Dow Jones Industrial Average finished its worst weekly performance since October 2020.

Meanwhile, U.S. stock-index futures made solid gains Sunday, following the worst week on Wall Street since March 2020.

The upcoming week will see a number of quarterly earnings reports from big-name companies, including IBM, Microsoft, Tesla and Apple. The Federal Reserve will also meet Tuesday and Wednesday, where policy makers are expected to lay the groundwork for raising interest rates, likely in March.

Up ahead surveys of purchasing managers in Europe and the U.S. will be closely watched for fallout from the Omicron wave of Covid-19 in the opening weeks of January. The indicators, some of the first big data points for the month, should offer insight on whether efforts to contain the variant as well its impact on worker health are affecting demand, supply chains and prices-all key gauges during the pandemic.

Investors have been growing increasingly worried about how aggressively the Federal Reserve, which holds a policy meeting this week, might act to cool rising inflation.

"The FOMC (Fed) meeting dominates the macro calendar this week and is likely to keep risk sentiment on the hesitant side with an end to QE and imminent rates hikes likely to be announced," economists Nicholas Mapa and Robert Carnell of ING said in a commentary.

In Asia, shares were mostly lower.

Forex:

The dollar rose in Asia after ending last week a bit higher, reversing some of its recent declines.

"But dollar strength has mostly been against G10 currencies, said Capital Economics' Jonathan Petersen. "Despite a fall in US equities last week, the 'riskier' emerging market (EM) currencies have generally risen."

Petersen doubts this will last because he expects financial conditions from rising US Treasury yields to put pressure on EM currencies. "Indeed, we expect the Fed to signal a rate hike in March and an accelerated pace of quantitative tightening when it announces policy next Wednesday, which could prove the next catalyst for a stronger greenback."

Asian currencies were mixed against USD in the morning Asian session amid ongoing worries over Fed tightening.

Bitcoin prices slumped further over the weekend to levels not seen since last August, as a selloff of riskier assets like stocks spread to cryptocurrencies. Bitcoin has now shed about 50% from its record high in November.

Bitcoin fell as low as $34,042.78 Saturday, a drop of 7.2%, before paring losses. The world's largest cryptocurrency by value stabilized late Sunday, at one point back crawling back above the $36,000 level.

Bonds:

The yield on the 10-year Treasury was steady Monday at 1.78%. The Fed's benchmark short-term interest rate is currently in a range of 0% to 0.25%. Investors now see a nearly 70% chance that the Fed will raise the rate by at least one percentage point by the end of the year, according to CME Group's Fed Watch tool.

Treasury yields remain up sharply in 2022, the selloff in Treasurys that has driven yields sharply higher to begin the new year took a pause on Friday. The move higher in yields has been driven by signals the Fed will be much more aggressive than previously expected in raising interest rates and otherwise tightening monetary policy in response to persistently high inflation.

The Fed meets on Tuesday and Wednesday and is expected to lay the groundwork for delivering a rate increase in March, with some investors even penciling in the prospect of a half percentage point rise in the fed-funds rate target rather than a quarter-point increase.

Energy:

Oil rose in early Asian trading on signs of tight supply, with OPEC under-producing oil by 747,000 barrels a day in December compared with its own monthly target, ANZ said.

This brings the group's compliance rate to 120% in December, it said. Demand is also high, defying earlier expectations that oil consumption would waver due to high Omicron infection rates globally, the bank added.

"Despite reaching record levels in many parts of the world, infection rates haven't impacted demand for oil as much as the market had been expected," ANZ said.

High natural gas prices could persist even after the peak winter heating season ends in February, Goldman Sachs said. European gas markets were in focus, the investment bank said; while storage levels there look sufficient, "we estimate that a one-standard-deviation colder-than-average Feb-Mar would lead end-winter inventories below the record lows of 2018, with electricity blackouts likely," Goldman said.

A wider, global economic impact is also probable, it said. Not only is gas one of the most important commodities for winter heating and power generation, but large swathes of industry rely on the fuel for manufacturing.

Earnings of companies in energy-intensive sectors could also take a hit, it said.

Metals:

Gold was little changed in early Asian trading, but rising real yields on U.S. ten-year Treasuries could weigh on the precious metal, Commonwealth Bank of Australia said. U.S. yields are rising due to expectations that the FOMC will raise Fed fund rates earlier and faster than previously expected.

"Markets are pricing in around 4 rate hikes this year, implying a target Fed Fund rates of 1.00%-1.25% by the beginning of next year," CBA said. This may drag on prices of the non-interest-bearing asset, it said.

The price of nickel fell in early Asian trade amid profit-taking and as China's Lunar New Year holidays poses a near-term demand risk, ANZ said.

However, the bank thinks that the price of the commodity could remain supported due to dwindling inventories and supply disruptions as major exporter Indonesia mulls a tax on the metal. The three-month forward nickel contract on the LME fell 0.2%.

Iron ore was slightly lower in Asia morning trade, declining after a strong upturn in the past week when sentiment was buoyed by China's rate cut and industry data from Mysteel showing lower-than-usual inventory.

Huatai Futures thinks the steel-making material's outlook in the longer run seems promising, especially with the upcoming Lunar New Year holidays in China, when steel producers are expected to accelerate production, boosting demand for iron ore. The most-traded benchmark May iron-ore contract on the Dalian Commodity Exchange edges down 0.1%.

TODAY'S TOP HEADLINES

Economy Week Ahead: Fed, GDP, Consumer Spending

The Federal Reserve's policy meeting highlights a full week of economic news.

Inflation Poses Risks of Faster, Less Predictable Fed Rate Increases

The Federal Reserve is entering an unfamiliar environment at the start of 2022. For the first time in decades, officials are preparing to raise interest rates when inflation is uncomfortably high rather than very low.

The last time the Fed lifted rates from near zero, at the end of 2015, inflation was running below its 2% target and the unemployment rate-a measure of labor slack-was declining gently.

Rising Interest Rates Hit Municipal-Bonds Market

Municipal bonds are off to their worst start since 2011.

The early-year bond rout has dragged returns on the S&P Municipal Bond Index to minus 1.1% through Jan. 20, counting price changes and interest payments. The loss is an early sign that rising interest rates could make 2022 rockier than last year, when federal stimulus and elevated demand from homebound savers led to record low volatility and historically high prices.

U.S. Food Supply Is Under Pressure, From Plants to Store Shelves

The U.S. food system is under renewed strain as Covid-19's Omicron variant stretches workforces from processing plants to grocery stores, leaving gaps on supermarket shelves.

In Arizona, one in 10 processing plant and distribution workers at a major produce company were recently out sick. In Massachusetts, employee illnesses have slowed the flow of fish to supermarkets and restaurants. A grocery chain in the U.S. Southeast had to hire temporary workers after roughly one-third of employees at its distribution centers fell ill.

Tech Rout Fueled by Bond-Market Turn

Shifts within the bond market are removing a key pillar of support for Wall Street's more speculative bets, dragging down major stock indexes as investors flee everything from tech stocks to cryptocurrencies.

Spooked in large part by rising bond yields, investors continued to dump stocks last week, extending early-year losses that have taken many off guard with their speed and severity. Once again, tech shares were at the forefront. Selling also broadened to include sectors such as banking and energy, sending the S&P 500 to its worst stretch of declines since the onset of the Covid-19 pandemic.

Republicans Focus on Effects, Not Causes, of Climate Change

MIAMI-Florida Gov. Ron DeSantis visited the coastal city of Oldsmar recently to unveil projects including sea walls and drainage systems intended to address flooding. The state is seeing rising sea levels, and Florida's environmental and economic successes are intertwined, Mr. DeSantis and other speakers said.

The Republican governor, unlike many of his Democratic counterparts, didn't use the term "climate change" or endorse specific policies aimed at combating factors that most climate scientists say are driving warming, such as greenhouse-gas emissions. He focused on responding to the effects of a warming climate.

Apple, Microsoft and Tesla Headline Key Earnings Week Amid Nasdaq's Slide

Tech giants including Microsoft Corp., Apple Inc. and Tesla Inc. are among the companies headlining a busy earnings week that comes as investors look for reassurance after the Nasdaq notched a 12% decline to start the year.

Overall, about a fifth of the S&P 500 and nearly half of the Dow Jones Industrial Average are expected to provide their quarterly updates during the week starting Monday, according to FactSet.

Activist Investor Nelson Peltz Buys Stake in Unilever

LONDON-Trian Fund Management LP, the activist hedge fund run by Nelson Peltz, has acquired a stake in Unilever PLC, according to people familiar with the matter, adding pressure to the packaged food and consumer goods giant in the wake of its failed $68-billion bid for GlaxoSmithKline PLC's consumer-health business.

The size of the stake couldn't be learned. Trian started buying Unilever shares well before its bids for the GSK unit surfaced earlier this month, one of the people said.

Empty Private Jet Flights Hastened Credit Suisse Chairman António Horta-Osório's Downfall

After relocating to Zurich last spring to run Credit Suisse Group AG as chairman, António Horta-Osório flew to London and Lisbon for work meetings and business events, then spent time with his family at homes there.

On multiple occasions, a private plane paid for by Credit Suisse dropped him off on a Thursday and returned empty to Switzerland, according to people familiar with the travel. By Monday, a plane picked Mr. Horta-Osório up for work in Zurich.

State Department Tells Families of U.S. Diplomats in Ukraine to Leave

The State Department instructed the families of U.S. diplomats in Ukraine to leave the country and authorized some embassy staff members to also depart, while the Biden administration considers sending several thousand troops to Europe amid a Russian military buildup.

The State Department decision, announced Sunday, comes as U.S. officials have warned that an attack could come at any time.

Germany's Reliance on Russian Gas Limits Europe's Options in Ukraine Crisis

BERLIN-Germany's dependence on Russian gas has left Europe short of options to sanction Moscow if it invades Ukraine-and itself vulnerable should Russia stop gas exports to the West.

A two-decade-old decision to phase out nuclear power and more recent moves to cut reliance on coal in an effort to bring down CO2 emissions mean Germany is now more reliant on Russian gas than most of its neighbors, not just for heating but also for power generation.

Judge Rules Banks Must Stand Trial Over $7 Billion R. Allen Stanford Fraud Claims

Toronto-Dominion Bank, HSBC Bank PLC and other banks linked to convicted fraudster R. Allen Stanford must stand trial over claims they supported his $7 billion Ponzi scheme and should repay defrauded investors, a federal judge ruled.

Judge David Godbey of the U.S. District Court in Dallas on Thursday denied a request by the banks to avoid trial in a lawsuit brought on behalf of investors bilked by Mr. Stanford, citing evidence the banks knew his operation wasn't on the level but still did business with him.

U.S.-Backed Forces Struggle to Contain Islamic State in Battle Over Syrian Prison

Syrian fighters backed by American airstrikes struggled to retake control of a prison attacked by Islamic State in northeastern Syria on Sunday, as the militant group's attempt to replenish its ranks with freed prisoners sparked the area's worst sustained fighting in years.

The prison attack, which began last week, was one of the most complex and brazen Islamic State operations in Syria and Iraq in the past three years. It involved sleeper cells, suicide bombers and an insurrection inside the prison, said the Syrian Democratic Forces, the U.S.-backed, Kurdish-led militia that controls a section of northeastern Syria that is autonomous from the regime in Damascus.

Activist Investor to Call on Peloton to Fire Its CEO

An activist investor wants Peloton Interactive Inc. to fire its chief executive and explore a sale after the stationary-bike maker's stock plummeted more than 80% from its high, as growth slowed.

Blackwells Capital LLC has a significant stake of less than 5% in Peloton and is preparing to push the company's board to fire CEO John Foley and pursue a sale, according to people familiar with the matter. The firm believes Peloton could be an attractive acquisition target for larger technology or fitness-oriented companies, the people said.

China Evergrande Shares Jump After Appointing China Cinda Executive

Shares of China Evergrande Group soared on Monday after it appointed an executive at the state-owned China Cinda Asset Management Co. to its board, a sign that the struggling developer is making some progress toward resolving its liquidity crisis.

The Hong Kong-listed stock gained as much as 13% within a few hours of trading, and was last up 5.6% at HK$1.89. The shares are 88% lower from a year ago.

Kohl's Can't Find Relief From Investor Pressure

Since taking the helm of Kohl's Corp. in May 2018, Chief Executive Michelle Gass has forged partnerships with Amazon.com Inc. and Sephora, brought in new brands and beefed up its loyalty program. Yet, the retailer's stock is worth less today than it was two decades ago.

On Friday, a group backed by activist hedge fund Starboard Value LP offered roughly $9 billion to buy the department store chain, The Wall Street Journal reported, following a renewed push by a different activist to shake up its board and consider a sale.

Software Provider Globalization Partners Gets Vista Equity Backing at $4.2 Billion Valuation

Globalization Partners, a software provider that helps businesses streamline the process of hiring employees internationally, has landed new backing from Vista Equity Partners that values the company at $4.2 billion.

Boston-based Globalization Partners helps businesses outsource tasks associated with hiring people abroad, including tax, legal, accounting and administrative duties, through artificial intelligence-powered software. The company said it experienced a boom in business due partly to the movement of global workforces throughout the Covid-19 pandemic.

Winter Olympics Sponsors Caught Between Beijing, U.S.

With less than two weeks to go before the start of the Winter Games in Beijing, several Olympics sponsors are skipping what is usually an Olympics-themed advertising blitz.

In 2018, Visa Inc. revved up its Olympic marketing campaign months before the Winter Olympics in Pyeongchang, South Korea. It marked the 100-day countdown to the torch lighting on Twitter. It highlighted its Team Visa athletes, and it promoted wearable payment devices used at the event.

Write to sarka.halas@wsj.com

Expected Major Events for Monday

06:00/FIN: Dec PPI

08:00/CZE: Jan Business cycle survey (consumer/business confidence)

08:15/FRA: Jan France Flash PMI

08:30/GER: Jan Germany Flash PMI

09:00/ICE: Dec Harmonized CPI

09:00/POL: Dec Retail Sales

09:00/EU: Jan Eurozone Flash PMI

09:30/UK: Jan Flash UK PMI

10:00/MLT: Dec RPI

15:00/DEN: Dec Central Government Finance & Debt

All times in GMT. Powered by Kantar Media and Dow Jones.

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

(END) Dow Jones Newswires

January 24, 2022 00:47 ET (05:47 GMT)

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