MARKET WRAPS

Watch For:

U.S. Industrial Production and Capacity Utilization for September; Canada Housing Starts for September.

Opening Call:

Stock futures edged lower after data showed that China's economic growth slowed sharply in the third quarter, and investors weighed the risk to global growth from stickier-than-anticipated inflation, supply-chain problems and heightened demand for energy.

Data out Monday showed China's economy grew 4.9% in the third quarter from a year prior, a slowdown from the second quarter's 7.9% rate. Power shortages and supply-chain problems added to the impact of Beijing's efforts to rein in its property and technology sectors.

The slower growth data are "a reminder that China is expected to lose some of its momentum, but also how these global issues like the energy crisis and supply chain issues will filter through to global growth," said Edward Park, chief investment officer at U.K. investment firm Brooks Macdonald. "There's just a bit of rebasing of expectations for China and the rest of the world."

"We're in a mid-cycle slowdown," said David Chao, global market strategist for the Asia Pacific ex-Japan region at Invesco, adding that Chinese markets were in for continued uncertainty and volatility in the near term. Still, he added: "Keep in mind the government has many tools to propel the economy forward."

A strong start to earnings season has underpinned hopes that companies can weather mounting challenges. Albertsons and State Street are set to report quarterly results before the market opens.

U.S. industrial production data for September, due at 9:15 a.m. ET, is expected to show a seventh consecutive monthly increase. The measure of output at factories, mines and utilities has been buoyed by strong consumer demand for manufactured goods, though supply-chain disruptions and a semiconductor shortage could curtail auto production and drag down headline figures.

Forex:

Investors have raised their expectations on the Fed lifting interest rates following better-than-expected U.S. retail sales data on Friday, and this should continue to support the dollar, ING said.

"The strong release prompted one of our preferred metrics of Fed tightening expectations--the 1m USD overnight index swap priced three years' forward--to jump to a new high for the year," ING analysts said.

"This is a dollar positive, especially against low-yielding currencies with dovish central banks and against energy importers," they said. The Dutch bank expects the DXY dollar index to remain higher on Monday, trading in the range of 94.00 to 94.50.

Bitcoin, the world's largest cryptocurrency by market value, gained 4.1% from its 5 p.m. ET level Sunday to trade at $61,932.69. The U.S.'s first bitcoin exchange-traded fund is expected to start trading Tuesday.

The different policy paths that the Bank of England and the European Central Bank seem to be taking point to moderate strength for the pound against the euro, said Commerzbank.

"If ECB and BOE deliver what their governors are promising--i.e. rate hikes in the UK and at least a gradually expansionary monetary policy on the Continent--,what will matter going forward is which point of view seems more plausible over the coming months," said Commerzbank's Ulrich Leuchtmann.

The longer the accelerated inflation level persists, the more attractive the BOE's stance is likely to seem, he said.

The Turkish lira fell to a record low versus the dollar as the country's central bank is expected to cut interest rates further at Thursday's meeting despite elevated inflation.

The lira's recent slump is unlikely to prevent Turkey's central bank from lowering its policy rate again on Thursday after last month's 100 basis points cut, Commerzbank's Ulrich Leuchtmann said.

"The bank is no longer interested in the effects of its interest rate policy on exchange rates, inflation and in the end the stability of the Turkish economy." Ultimately the bank's decisions are taken by President Recep Tayyip Erdogan, who wants lower rates, Leuchtmann said.

Bonds:

In bond markets, the yield on the 10-year Treasury note ticked up to 1.603% Monday, from 1.574% Friday.

European core government bonds sold off early Monday on what KBC Bank attributes to the fact that high inflation readings continue to weigh on sentiment. "Core bonds remain in sell-off mode this morning as you can't look beyond the uncomfortably high inflation stories," KBC said.

It added that European money markets continue to pull forward a first interest rate rise by the ECB towards the end of 2022 or early 2023.

Commodities:

Brent crude oil rose with prices having begun their rise during Asian trading hours with coal prices rising there too. That suggests the Asian power crunch is back on investors' minds, said OANDA's Jeffrey Hally.

"With no signs of the China energy crunch alleviating soon, and with the rest of Northern Asia and Europe competing for scarce energy supplies, particularly gas, the price environment for oil remains constructive," he added.

European benchmark gas prices were down 2.5% at EUR91.31 per megawatt hour, after slipping on Friday in a move that "suggests the market has started to price in an expected normalization of Russian flows," said Goldman Sachs's Samantha Dart.

Copper prices rose to their highest level in five months as stockpiles dwindled and the energy crunch raises concerns about supply.

LME copper stock levels have been dropping almost constantly since August and currently stand at their lowest level since June.

"Focus remained on the tightening spreads as traders scramble for metals, " said brokerage Marex. Concerns about energy-related production shutdowns are also pushing investors to bet on higher prices still to come.

Speculators increased their net-long bets on all LME base metals except nickel last week, with the net long in zinc jumping 30% last week, the brokerage said.

   
 
 

TODAY'S TOP HEADLINES

Goldman Sachs Cleared to Own All of China Unit

Chinese regulators approved Goldman Sachs Group Inc.'s application to take full ownership of a key local unit, another step in China's gradual opening of its financial system to major players from the U.S. and elsewhere.

Goldman in December 2020 sought approval to increase its stake in a domestic Chinese business that it has co-owned since 2004. The New York-based bank said Sunday that China's financial markets regulator, the China Securities Regulatory Commission, had given its assent.

Read More ->

Facebook to Hire 10,000 Workers in EU to Build Up 'Metaverse'

Facebook Inc. is planning to create 10,000 jobs in the European Union over the next five years to build a virtual realm it sees as a key component of its future and a major driver of new technology investment.

The U.S. social-media giant said Sunday it would embark on a recruiting drive for highly skilled workers in the region to help build a "metaverse," an online realm where users engage with one another using technologies including virtual and augmented reality. The company said it would focus on hiring in Germany, France, Italy, Spain, Poland, the Netherlands and Ireland.

Read More ->

Saks E-Commerce Unit Begins IPO Preparations

The fast-growing e-commerce business of luxury retailer Saks Fifth Avenue is aiming to go public soon at a valuation roughly triple what it was pegged at earlier this year, in a sign of the boom times for online department-store sales.

Saks is interviewing potential underwriters this week for an initial public offering that could take place in the first half of 2022 and targets a valuation of around $6 billion, people familiar with the matter said. It was last valued at $2 billion in March.

Read More ->

Amtrak Hopes Infrastructure Bill Will Help Fund a Tunnel to Ease Delays on Northeast Corridor

BALTIMORE-When the Baltimore and Potomac Railroad completed its 1.4-mile tunnel in 1873, a local newspaper hailed it as "one of the greatest enterprises of the kind that has ever been executed."

Today, it is Amtrak's worst bottleneck on its most-traveled corridor between Washington and New Jersey. The passenger railroad plans to construct a new 2-mile tunnel several blocks away, and it is counting on funding in the roughly $1 trillion infrastructure bill to cover much of the project's $4 billion tab.

Read More ->

Facebook Says AI Will Clean Up the Platform. Its Own Engineers Have Doubts.

Facebook Inc. executives have long said that artificial intelligence would address the company's chronic problems keeping what it deems hate speech and excessive violence as well as underage users off its platforms.

That future is farther away than those executives suggest, according to internal documents reviewed by The Wall Street Journal. Facebook's AI can't consistently identify first-person shooting videos, racist rants and even, in one notable episode that puzzled internal researchers for weeks, the difference between cockfighting and car crashes.

Read More ->

Alibaba Faces New Threat: an Evolving Chinese Shopper

TAIPEI-Alibaba Group Holding Ltd., challenged by Beijing's yearlong clampdown on private enterprise, is facing another problem: growing competition.

For more than 15 years, Alibaba was China's unassailable e-commerce champion. The company founded by Jack Ma rose to become one of the world's biggest and most valuable businesses, using hard-knuckle tactics to muscle out challengers.

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Hollywood Workers Reach Agreement With Studios, Averting Strike

LOS ANGELES-The film and television industry avoided a shutdown of production on Saturday evening after the International Alliance of Theatrical Stage Employees reached a last-minute, tentative agreement with studios and streaming services over worker demands.

IATSE leaders had been in talks for weeks with the organization representing studios and streaming services, the Alliance of Motion Picture and Television Producers. IATSE leaders had set a strike deadline of 12:01 a.m. PT on Monday.

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Some Investors Say Bank Pledges to Cut Funding for Arctic Drilling Contain Loopholes

Some of the world's largest banks, including Goldman Sachs Group Inc., HSBC Holdings PLC and BNP Paribas SA, pledged in recent years to stop direct financing of Arctic oil exploration. The idea was to choke off money for fossil-fuel extraction in a pristine natural environment.

A battle has broken out among investors, environmentalists and banks over those pledges. Some investors and environmentalists say they contain loopholes, and money has continued to flow from big banks to companies active in areas of Norway, Russia, Canada and Alaska rich in oil and gas. Under pressure, two of the banks, BNP and HSBC, say they are reviewing their pledges to make them stronger.

Read More ->

China's Third-Quarter Economic Growth Slows Sharply to 4.9%

BEIJING-China's economy grew 4.9% in the third quarter from a year earlier, slowing sharply from the previous quarter's 7.9% growth rate, as power shortages and supply-chain problems added to the impact from Beijing's efforts to rein in the real estate and technology sectors.

While many economists expected China's year-over-year growth to trend lower in the second half of 2021, based in part on statistical comparisons to last year, the scale of the third-quarter slowdown was sharper than expected, falling short of the 5.1% growth forecast by economists polled last week by The Wall Street Journal.

Read More ->

Supply-Chain Bottlenecks, Elevated Inflation to Last Well Into Next Year, Survey Finds

Uncomfortably high inflation will grip the U.S. economy well into 2022, as constrained supply chains keep upward pressure on prices and, increasingly, curb output, according to economists surveyed this month by The Wall Street Journal.

The economists' inflation projections are up dramatically from July, while short-term growth outlooks are lower.

Read More ->

GOP Sees Opening as Biden Copes With Pre-Christmas Inflation, Supply-Chain Issues

The White House is wrestling with supply-chain issues and elevated inflation ahead of the winter holiday shopping season-two economic problems that Republicans say the administration's own policies would exacerbate, driving up the risk of empty store shelves and higher holiday prices.

With just over a month to go before the holiday shopping season unofficially starts the day after Thanksgiving, the Biden administration is seeking ways to ease the bottlenecks in the strained supply chain, while acknowledging that they might not be able resolve all those pressures immediately.

Read More ->

Green Investing Looks to Clean Up the Maritime Industry

First bonds went green. Now they are going blue.

Seaspan Corp., the world's largest containership lessor by cargo-carrying capacity, sold nearly $1 billion of so-called blue bonds earlier this year that sought to entice new investors by promising to fund vessels that will lower emissions and pollution at sea.

Read More ->

'Crazy' Bets on $200 Oil Invade the Options Market

A roaring trade in bullish crude-oil options says the 2021 energy rally is far from over.

Traders once again are betting that the U.S. oil benchmark will surge above $100 a barrel, from a recent $82, as early as December. U.S. crude, known as West Texas Intermediate or WTI, is up 10% this month, and 70% this year, but it hasn't hit $100 since the oil crash of 2014.

Read More ->

Global Investors Gain a New Way to Bet on Stocks in China

Hong Kong started trading in futures tied to an index of stocks from mainland China, giving global investors a new tool for betting on Chinese markets.

The futures are linked to the MSCI China A 50 Connect Index, which was launched in August. The benchmark covers major A shares-as stocks listed in either Shanghai or Shenzhen are known-that are accessible to international investors through the Stock Connect system that links onshore markets with Hong Kong.

Read More ->

Behind the Energy Crisis: Fossil Fuel Investment Drops, and Renewables Aren't Ready

An energy price shock is serving as a reminder of the world's continued dependency on fossil fuels-even amid efforts to shift to renewable sources of energy.

Demand for oil, coal and natural gas has skyrocketed world-wide in recent weeks as unusual weather conditions and resurgent economies emerging from the pandemic combine to create energy shortages from China to Brazil to the U.K.

Read More ->

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

The latest snapshot of China's economic growth, U.S. industrial production and the housing market highlight this week's economic data.

Read More ->

Cars Are Making Money Like Homes-For Now

Financially, your car is behaving more like your home right now, bringing new opportunities and hard-to-foresee risks.

Used-vehicle values have broken records over the past year, with inflation running at an unprecedented 24%, according to the latest official data. This is painful for car buyers, but there is a less-discussed flip side: It is a great time to be a car owner.

Read More ->

Democrats Face a Deadline on Benefits and Climate Bill Consensus

WASHINGTON-Democrats still tussling over how to scale back their ambitions to expand the country's social benefits and overhaul its climate-change policy face dwindling time to reach an agreement as both the House and Senate return to Washington this week.

One major element related to climate change-a $150 billion program aimed at pushing utilities to draw more power from clean-energy sources-could be cut from the bill, according to people familiar with the negotiations, as it has drawn objections from the centrist Democrat Sen. Joe Manchin of West Virginia.

Read More ->

Group of 16 Americans and a Canadian, Including Five Children, Kidnapped in Haiti

A group of American missionaries working in Haiti was kidnapped by a notorious gang amid a sharp rise in abductions and political turmoil in the Caribbean nation, a spokesman for the Haitian Justice Ministry said.

Ohio-based Christian Aid Ministries said in a statement Sunday that a group that included 16 Americans and one Canadian was kidnapped Saturday morning during a trip to an orphanage. The organization said that five of those who were abducted are children. An aide to Prime Minister Ariel Henry said the missionaries were taken hostage after being ambushed by heavily armed men on a road outside the Haitian capital, Port-au-Prince.

Read More ->

U.S. Afghan Resettlements Slowed by Housing Shortage, Old Technology

The push to resettle the first wave of Afghan evacuees brought to the U.S. is expected to take months longer than first anticipated as a measles scare, a nationwide housing shortage and paperwork delays have slowed the process, according to government and resettlement officials familiar with the effort.

According to Defense Department officials and volunteers involved in operations, the goal originally was to resettle the evacuees by the end of the year if not sooner. But earlier this month officials began telling volunteer groups they would likely be needed through March or longer. "There is no way we are done by Christmas," said one defense official.

Read More ->

Democrats Bet on Raising Taxes on High-Income People, Big Businesses

WASHINGTON-Many Democrats are willing-even eager-to enact tax increases on high-income households and big businesses and campaign on them in next year's midterm elections, embracing a stance that the party has struggled with in the past.

Although Democrats' slim majorities have forced them to abandon some of their most sweeping tax proposals, President Biden and congressional Democrats are still seeking to raise about $2 trillion over a decade from businesses and high-income households.

Read More ->

California Scrambles to Find Electricity to Offset Plant Closures

California is racing to secure large amounts of power in the next few years to make up for the impending closure of fossil-fuel power plants and a nuclear facility that provides nearly 10% of the electricity generated in the state.

The California Public Utilities Commission has ordered utilities to buy an unprecedented amount of renewable energy and battery storage as the state phases out four natural-gas-fired power plants and retires Diablo Canyon, the state's last nuclear plant, starting in 2024.

Read More ->

Write to sarka.halas@wsj.com

TODAY IN CANADA

Earnings:

- Nothing major scheduled

Economic Indicators (ET):

0815 Sep Housing Starts

0830 Aug International transactions in securities

1030 Bank of Canada Business Outlook Survey

N/A Alberta and Northwest Territories municipal elections in Canada

Stocks to Watch:

No items published

Other News:

*BOC's Macklem: Supply Bottlenecks Look More Complicated, Persistent Than Expected

Group of 16 Americans and a Canadian Kidnapped in Haiti

A group of American missionaries working in Haiti was kidnapped by a notorious gang amid a sharp rise in abductions and political turmoil in the Caribbean nation, a spokesman for the Haitian Justice Ministry said.

Ohio-based Christian Aid Ministries said in a statement Sunday that a group that included 16 Americans and one Canadian was kidnapped Saturday morning during a trip to an orphanage.

The organization said that five of those who were abducted are children. An aide to Prime Minister Ariel Henry said the missionaries were taken hostage after being ambushed by heavily armed men on a road outside the Haitian capital, Port-au-Prince.

"Join us in praying for those who are being held hostage, the kidnappers, and the families, friends, and churches of those affected," Christian Aid Ministries said.

Gédéon Jean of the Center for Analysis and Research in Human Rights, a Port-au-Prince-based organization that tracks kidnappings in Haiti, said the kidnapping was carried out by members of the 400 Mawozo gang.

Market Talk:

Bank of Canada's Business Outlook Survey Could Lift Canadian Dollar

The Canadian dollar could strengthen if the Bank of Canada's third-quarter Business Outlook Survey prompts investors to bring forward expectations for the first post-pandemic interest rate rise, ING said.

"This survey of 100 firms on their sales, investment and pricing expectations/intentions is an important input for the BOC ahead of its October 27 policy meeting," analysts at the Dutch bank said.

The BOC's meeting next week is key as it releases its quarterly monetary policy report, which includes the latest projections for inflation and economic growth, they say. EUR/CAD could fall toward 1.4250, they said.

   
 
 

Expected Major Events for Monday

08:30/UK: Jul Card Spending statistics

12:15/CAN: Sep Housing Starts

12:30/CAN: Aug International transactions in securities

13:15/US: Sep Industrial Production & Capacity Utilization

14:00/US: Oct NAHB Housing Market Index

14:30/CAN: Bank of Canada Business Outlook Survey

20:00/US: Aug Treasury International Capital Data

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

   
 
 

Expected Earnings for Monday

ARC Group Worldwide Inc (ARCW) is expected to report for 4Q.

Adamis Pharmaceuticals Corp (ADMP) is expected to report $-0.04 for 2Q.

Albertsons Companies Inc (ACI) is expected to report $0.46 for 2Q.

CSB Bancorp Inc (CSBB) is expected to report for 3Q.

Chemung Financial (CHMG) is expected to report $1.20 for 3Q.

Consumer Portfolio Services Inc (CPSS) is expected to report $0.15 for 3Q.

CrossFirst Bankshares Inc (CFB) is expected to report for 3Q.

Equity Lifestyle Properties Inc (ELS) is expected to report for 3Q.

FB Financial Corp (FBK) is expected to report $0.81 for 3Q.

FNB Corp (FNB) is expected to report $0.30 for 3Q.

Guaranty Bancshares Inc (GNTY) is expected to report $0.77 for 3Q.

HMN Financial Inc (HMNF) is expected to report for 3Q.

Hexcel Corp (HXL) is expected to report $0.07 for 3Q.

PacWest Bancorp (PACW) is expected to report $1.03 for 3Q.

Peoples Bancorp of NC (PEBK) is expected to report for 3Q.

ServisFirst Bancshares Inc (SFBS) is expected to report $0.96 for 3Q.

State Street Corp (STT) is expected to report $1.89 for 3Q.

Steel Dynamics (STLD) is expected to report $4.74 for 3Q.

Zions Bancorp (ZION) is expected to report $1.35 for 3Q.

Powered by Kantar Media and Dow Jones.

   
 
 

ANALYST RATINGS ACTIONS

CatchMark Timber Trust Cut to Underperform From Outperform by Raymond James

Disney Cut to Equal-Weight From Overweight by Barclays

NetApp Cut to Sell From Neutral by Goldman Sachs

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

 

(END) Dow Jones Newswires

October 18, 2021 06:07 ET (10:07 GMT)

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