MARKET WRAPS

Watch For:

UK monthly retail sales figures; Euro area balance of payments; EU Construction output; EU Harmonised CPI.

Opening Call:

Stocks could open higher at open, but uncertainty about economic growth and the impact of the Delta variant continue to weigh on investors. Stocks in Asia mixed, with Chinese stocks down. Dollar rises. Oil declines while gold edges higher.

Equities:

European stocks are set to open higher as investors weighed mixed signals in the latest U.S. economic data and a stock-market pullback in China.

Chinese stocks are broadly lower in early trade, tracking overall declines in other Asian equity markets. Although China's near-term economic prospects appear to be more challenged, partly due to Covid-19 outbreaks in some provinces, Aberdeen Standard Investments expects to see more support for growth via local government bond issuance and fixed asset investment.

Japan's Nikkei was higher as gains in tech and shipping stocks offset losses in steel and energy stocks. Investors are closely watching any developments regarding the ruling-party chief's election set for later this month as another female candidate Seiko Noda joins the race.

In the U.S., major indexes have lost ground this month as investors worry that stocks may be due for a setback after climbing throughout 2021. Analysts also are considering how the spread of the Delta variant of Covid-19 could damp economic growth.

"It can make consumers less confident to spend, for example, if they have some uncertainty about where the economy is headed based on what happens with case loads," said Lisa Erickson, co-head of the public markets group at U.S. Bank Wealth Management.

While many recent sessions have seen losses for stocks, they haven't been large ones: The S&P 500 on Thursday notched its 20th consecutive trading day without a 1% move-its longest stretch without a move of that size since a span from October 2019 to January 2020, according to Dow Jones Market Data.

New data added to the cloudy forecast for the economy. The number of Americans who applied for first-time unemployment benefits rose in the week ended Sept. 11 to 332,000, up from 312,000 in the week prior.

Meanwhile, retail sales rose 0.7% in August, a sign of resilience despite the Delta-driven surge in Covid-19. Economists surveyed by The Wall Street Journal had expected retail sales to decline.

"This summer and then into the fall, it's all been about Delta," said Jim Smigiel, chief investment officer at asset management firm SEI. "We've been in this back and forth and back and forth, and we're seeing more of that today."

In equities, Danish boxship giant AP Moller-Maersk added $4B to its 2021 profit guidance on the back of record volumes and surging container freight rates. Maersk, the world's biggest container ship operator, said it expects a full year Ebitda of $22B to $23B from $18B to 19B previously.

"The strong result is driven by the continuation of the exceptional market situation, which has led to further increases in both long and short-term container freight rates," Maersk said, adding that it upped its guidance because its performance in the first two months of the third quarter was "significantly ahead" of previous expectations

Forex:

The dollar rose after data showed an unexpected rise in U.S. retail sales during August, but Capital Economics says the details of the data "were far less positive."

Senior U.S. economist Michael Pearce notes there were "big downward revisions" to previous months, while a rise in online and grocery store spending suggests "Delta fears are playing a role."

Spending at bars and restaurants was "stagnant," while a pick-up in spending on goods ex-autos could add to widespread shortages in recent months and add to inflationary pressure, he said.

Soaring gas prices could worsen the U.K.'s current account deficit and stop the pound from rising in line with U.K. bond-market trends, Deutsche Bank strategist Shreyas Gopal said.

The U.K. runs a small surplus in oil and a slightly larger deficit in natural gas, and this composition is causing "a larger deterioration in the UK's terms of trade compared to European peers," he said.

High gas prices would feed into inflation, which may increase the likelihood of earlier Bank of England interest-rate rises but supply-linked inflation could concern sterling investors as it would hurt growth, he said. "Any hawkish BOE reaction is only likely to dampen trend-growth and weigh on the UK's terminal rate," Gopal said.

Bonds:

Treasury yields rose to 1.337% from 1.302% Wednesday as August retail sales rose. Inflation concerns remain one of the forces driving investors away from US government debt, according to some economists, amid high expectations of taper discussion in the Fed's meeting next week.

Energy:

Oil declined in early Asia trade, pulling back after the global crude benchmark eked out a fresh, roughly seven-week high. The market appears to be undersupplied now, partly due to still existing OPEC+ production restrictions, Commerzbank said.

There are also lingering concerns over supply disruptions in the Gulf of Mexico in the wake of Hurricane Ida. Commerzbank expects the tight market situation to remain until year's end, despite planned production increases from OPEC+.

It expects Brent crude to end the year at $75/barrel and to fall slightly to $70/barrel next year.

Metals:

Gold nudged higher in a likely technical rebound after suffering its sharpest daily drop in nearly six weeks overnight. The overnight move in gold is short-term oversold, said Pepperstone.

However, the question is whether this gives a signal for trading long gold positions or will rallies be short-lived, where strength of the precious metal could offer entry points for short positions on hopes of a bear-trending market into next week's FOMC meeting, Pepperstone added.

Copper and aluminum were higher in early Asian trade, as supply-chain disruptions exacerbate low base metal inventories, Goldman Sachs said.

"Both aluminum and copper are now seeing synchronized inventory draws both onshore and in the ex-China market, reducing stock buffers just as supply frictions are starting to escalate," the investment bank said, noting that the global copper and aluminum markets are already in deficit.

Prices are therefore likely to remain elevated. The three-month LME copper and aluminum contracts were both 0.4% higher, at $9,400 a ton and $2,890 a ton, respectively.

   
 
 

TODAY'S TOP HEADLINES

Biden Steps Up Efforts to Advance $3.5 Trillion Spending Bill

WASHINGTON-President Biden is taking a more public role in the negotiations around Democrats' roughly $3.5 trillion social welfare and climate bill, as lawmakers work through thorny policy debates.

At the White House Thursday, he touted proposals to increase taxes on high-income households and U.S. companies to finance the plan, saying, "Big corporations and the super wealthy have to start paying their fair share of taxes."

   
 
 

U.S., China Jockey for Position in Pacific With Moves on Security, Trade

China on Thursday moved quickly to counter an effort by the U.S., U.K. and Australia to contain its ambitions in the Pacific, saying it would apply to join a regional economic pact the U.S. had eschewed, as Washington and Beijing maneuvered for economic and military position in the theater that will define their great power competition.

The U.S. has been amassing a network of alliances, including India and Japan. The latest among the three English-speaking allies will be an effort to provide Australia with nuclear submarines to strengthen deterrence in the Indo-Pacific region, White House officials said. Australia scrapped a multibillion-dollar submarine deal with France as a result, prompting Paris to accuse the three of betrayal.

   
 
 

Fed to Review Financial Trading Rules for Officials

The Federal Reserve is launching a review of its internal rules governing the financial activities of its officials in the wake of news last week that the leaders of the Dallas and Boston regional Fed banks actively traded in financial markets.

"Because the trust of the American people is essential for the Federal Reserve to effectively carry out our important mission, Chair [Jerome] Powell late last week directed Board staff to take a fresh and comprehensive look at the ethics rules around permissible financial holdings and activities by senior Fed officials," a Fed spokesperson said Thursday.

   
 
 

MassMutual Fined for Failing to Oversee GameStop Trader Keith Gill, Others

A Massachusetts Mutual Life Insurance Co. subsidiary agreed to pay a $4 million fine to settle an inquiry from Massachusetts securities regulators into the social-media and trading activity of its employees, including well-known GameStop Corp. investor Keith Gill.

Mr. Gill, known as "Roaring Kitty" on YouTube and "DeepF-ingValue" on Reddit, became an Internet folk hero in January, thanks to his prescient bets on GameStop stock. For months leading up to the GameStop trading frenzy in January-during which nonprofessional traders sent the company's shares soaring to a record high-Mr. Gill posted videos and messages discussing why he was putting large sums of money into the stock.

   
 
 

Glynn's Take: Review of RBA Is Something for Post-Covid Era

SYDNEY--Calls for a thorough review of the Reserve Bank of Australia's practices reached fever pitch this week amid suggestions that it is failing in key areas of its policy remit.

It seems that the central bank, which controls interest rates and has deployed unconventional policy to battle the pandemic and avoid recession, is being singled out as the root cause of Australia's economic woes.

   
 
 

Surging Energy Prices Close U.K. Factories, Another Bottleneck in a World Full of Them

Soaring natural-gas prices in Britain have prompted U.S. fertilizer maker CF Industries Holdings Inc. to close two U.K. plants, in a sign that Europe's energy crunch is affecting industry as the economy struggles with several other disruptions amid the recovery from the pandemic.

Businesses across Britain are complaining about high energy costs, with some steelmakers forced to halt production for periods during the day as the price of electricity rises almost seven times higher than at the same point last year. Power markets have also jumped in France, the Netherlands and Germany, ahead of anticipated higher demand in the winter.

   
 
 

China Casts Itself as Ally to Workers in Battle With Big Tech

HONG KONG-China's communist state has made a show in recent months of supporting the lowest-level workers in the country's bare-knuckle tech industry, an emerging plank in leader Xi Jinping's campaign to shrink the country's wealth gap and usher in a new era of "common prosperity."

The moves also bolster a sweeping effort by Mr. Xi to exert more control over one of the nation's few strategic sectors that is dominated by private capital.

   
 
 

U.S. Economy Shows Resilience During Delta Surge

The U.S. economy is proving resilient in the face of the Delta variant.

Americans briskly increased spending at retailers last month, while employers have largely resisted the urge to lay off workers, the government reported Thursday, both signs of strong demand in the economy.

   
 
 

U.S. Jobless Claims Remained Near Pandemic Low Last Week

Jobless claims rose slightly last week but remained near a pandemic low, as layoffs stabilize amid an economic slowdown tied to rising coronavirus cases.

Initial unemployment claims rose to 332,000 last week from a pandemic low of 312,000 a week earlier, the Labor Department reported Thursday. Layoffs due to Hurricane Ida, which hit Louisiana at the end of August, appeared to contribute to the small claims increase, economists said.

   
 
 

Italy to Impose Strict Covid-19 Health Pass for All Workers

ROME-Italy is making Covid-19 health passes mandatory for all workers in the private and public sectors, in one of the toughest vaccine-promoting measures adopted by any major Western country.

Prime Minister Mario Draghi's government passed a decree Thursday requiring workers, including those who are self-employed, to have a digital certificate known as a green pass. This shows a person has been fully vaccinated, has recently recovered from Covid-19 or has freshly tested negative for the virus.

   
 
 

Hezbollah Brings Iranian Fuel to Lebanon as Shortages Deepen Crisis

BEIRUT-A convoy of trucks carrying Iranian fuel rolled into Lebanon from Syria on Thursday, a delivery arranged by Tehran-allied Hezbollah to help alleviate a domestic energy crisis and contain growing public anger against the ruling elite over the country's economic collapse.

The powerful militant and political group brought the fuel in via Syria in a likely effort to avoid embroiling Lebanon in U.S. sanctions targeting Iranian oil exports.

   
 
 

France Calls U.S.-Australia Submarine Deal a Betrayal

France said it had been betrayed by the U.S. after being pushed out of a multibillion-dollar deal to supply submarines to Australia, in a public rupture between NATO allies that is shaping up to be among the most bitter trans-Atlantic disputes of the Biden administration's first year.

French Foreign Minister Jean-Yves Le Drian on Thursday called the U.S.-backed deal a "stab in the back." President Biden on Wednesday announced a new security pact with Australia and the U.K. that would include a long-term agreement to build nuclear-powered submarines for Australia. Australia on Thursday confirmed it was withdrawing from the French contract.

   
 
 

France Says It Has Killed Islamic State Leader Responsible for Deaths of U.S. Soldiers

France said Thursday it had killed Adnan Abu Walid al-Sahrawi, the Islamic State leader who led the killing of four U.S. servicemen in Niger in 2017 and was the architect of one of the terrorist outfit's most successful franchises following the group's loss of its Middle East territories.

"This is another major success in our fight against terrorist groups in the Sahel," French President Emmanuel Macron said, referring to the vast semiarid region south of the Sahara that has become home to some of the world's most deadly jihadist cells.

   
 
 

Without Angela Merkel, Germany's Conservatives Face Possible Election Rout

This is Germany's first general election without Angela Merkel running for chancellor since 2002. For her conservative bloc, it is shaping up as a debacle.

A gaffe-prone new candidate, the popular chancellor's almost complete absence from the campaign, and voter fatigue after 16 years of conservative rule could converge to deliver the bloc's worst national electoral result ever, according to pollsters and analysts.

   
 
 

Former Boeing Pilot Expected to Face Prosecution in 737 MAX Probe

Federal prosecutors plan to criminally charge a former Boeing Co. pilot they suspect of misleading aviation regulators about safety issues blamed for two fatal crashes of the 737 MAX, according to people familiar with the matter.

Mark Forkner, who was Boeing's 737 MAX chief technical pilot during the aircraft's development, is likely to face prosecution in the coming weeks, these people said. In his former role, Mr. Forkner served as the plane maker's lead contact with the Federal Aviation Administration for how airline pilots should be trained to fly the new jet.

   
 
 

Invesco in Talks to Merge With State Street's Asset-Management Business

Invesco Ltd. is in talks to merge with State Street Corp.'s asset-management business, people familiar with the matter said.

A deal isn't imminent, and the discussions might not result in an agreement, the people said. It isn't clear what the terms of a potential deal would look like, but it would likely be one of the industry's biggest in recent memory, given State Street's asset-management unit manages nearly $4 trillion in assets.

   
 
 

U.S. Steel Plans New U.S. Mill as Prices Surge

United States Steel Corp. said it plans to begin construction of a new steel mill in the U.S. next year, as the company chases rising demand from a rebounding manufacturing sector.

The Pittsburgh-based company said Thursday the new mill will have the capacity to produce three million tons of sheet steel annually, boosting its sheet-steel capacity by about 20% and helping to alleviate tight supplies of steel in the domestic market. The U.S. Steel mill would increase new production capacity under construction or planned in the U.S. to about 12 million tons annually, or almost 21% of sheet-steel consumption in 2019.

   
 
 

GM Plans to Idle Factories Longer Amid Chip Shortage

General Motors Co. is extending its plans to idle some of its North American factories, compounding the effects of the world-wide semiconductor shortage on the auto maker's production.

The company said Thursday it will add to scheduled downtime at seven plants in the U.S., Canada and Mexico. The move builds upon curtailments that have slammed GM and the broader auto industry throughout the year as supply constraints on computer chips continue to hold back car production.

   
 
 

Facebook Employees Flag Drug Cartels and Human Traffickers. The Company's Response Is Weak, Documents Show.

In January, a former cop turned Facebook Inc. investigator posted an all-staff memo on the company's internal message board. It began "Happy 2021 to everyone!!" and then proceeded to detail a new set of what he called "learnings." The biggest one: A Mexican drug cartel was using Facebook to recruit, train and pay hit men.

The behavior was shocking and in clear violation of Facebook's rules. But the company didn't stop the cartel from posting on Facebook or Instagram, the company's photo-sharing site.

   
 
 

SpaceX Inspiration4 Crew Wraps Up First Day in Space

The first all-civilian crew to orbit the Earth traveled nearly six times around the planet during the mission of Elon Musk's company, SpaceX.

The four-person crew aboard the Crew Dragon space capsule made history Wednesday evening when a Falcon 9 rocket lifted off from Kennedy Space Center in Florida.

   
 
 

Write to sarka.halas@wsj.com

   
 
 

Expected Major Events for Friday

06:00/UK: Aug UK monthly retail sales figures

06:00/ROM: 2Q Employment and unemployment

07:00/SVK: Aug Harmonized CPI

07:00/AUT: Aug CPI

08:00/POL: Aug Average gross wages

08:00/EU: Jul Euro area balance of payments

08:30/UK: Aug Bank of England/Kantar Inflation Attitudes Survey

08:30/UK: 2Q Bank of England statistics on UK banks' external claims

09:00/CRO: Aug CPI

09:00/MLT: Aug Harmonised CPI

09:00/CYP: Aug Harmonised CPI

09:00/EU: Aug Harmonised CPI

09:00/EU: Jul Construction output

09:00/ITA: Jul Balance of Payments

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

September 17, 2021 00:15 ET (04:15 GMT)

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