European stocks were broadly flat despite a rebound in Asian
markets as investors eye U.S. earnings later.
The Stoxx Europe 600 rose 0.1% while the FTSE 100, CAC 40 and
DAX were largely unchanged.
"While most European indices started the week with uncertainty
after Chinese GDP and industrial production data over the weekend
came in below expectations, U.S. indices have managed to extend the
upward move and are once again approaching recent highs," XTB
Market Analyst Walid Koudmani said.
As macro concerns such as inflation and central bank stimulus
remain, investors looked ready Tuesday to focus on the wave of
corporate earnings coming down the pipeline. In the spotlight will
be how supply-chain disruptions have weighed on profits, as well as
company outlooks for the year ahead.
Meanwhile, the European Commission will officially start the
consultation process for the discussion on whether and how to
reform the eurozone's fiscal rule but any quick agreement amongst
member states looks highly unlikely, ING said. The European
Commission will present possible ways forward for the Stability and
Growth Pact, or SGP, and will start a public consultation
"The current positions are simply too different," ING's
economists said. But with or without official changes to the fiscal
rules, ING expects fiscal policies in the eurozone to remain
accommodative for some years to come. However, reforming the SGP
doesn't necessarily imply that fiscal consolidation should be
delayed eternally, ING said.
Shares on the move: Ericsson shares fell 3.5%. Citi said
Ericsson 3Q 2021 revenues missed consensus by around 3% as strong
underlying demand excluding China and a higher intellectual
property contribution was offset by supply chain constraints (Citi
estimates a 2-3 percentage point impact).
Third quarter adjusted Ebit came in 18% ahead, of which Citi
estimates 6 percentage points was down to disciplined operational
execution and product competitiveness offsetting the supply chain
"In terms of consensus, we expect overall 2021 adjusted Ebit
moving around 2%-4% higher on better operational profitability
despite assuming around 5% cut to 4Q21 revenues on supply chain
Citi said it also believes that the supply chain constraints
could translate into potential upside for FY22, as underlying
demand trends remain supportive.
Shares of TeamViewer fell 6.2% after Berenberg analysts
downgraded their recommendation on the Germany-listed software
maker to hold from buy.
Stock futures ticked up ahead of a slew of earnings that
investors will parse for insight into how companies are faring with
inflation and supply-chain disruptions.
A spate of companies are due to report quarterly earnings ahead
of the market open, including Johnson & Johnson, Bank of New
York Mellon, Travelers, Procter & Gamble and Philip Morris
International. Netflix will report earnings after the closing
Investors are using earnings and companies' guidance for the
future to assess how corporations are faring with a number of
issues. Inflation is expected to be stickier than originally
anticipated by central-bank officials, exacerbated by continued
supply-chain disruptions, higher energy costs and labor
About 81% of S&P 500 companies that have reported so far
have beat earnings-per-share expectations, according to FactSet
data through early Monday.
"It is a market now where you're going to see more
differentiation because it is a more challenging environment," said
Daniel Morris, chief market strategist at BNP Paribas Asset
Management. "If you look at earnings so far, ex-financials, it's
been very good."
U.S. housing starts, which are due at 8:30 a.m. ET, are expected
to have moderated in September. Builders have been caught between
strong demand from buyers-spurred in part by low interest rates-and
shortages of materials, labor and lots.
The dollar fell broadly, with the DXY dollar index dropping 0.4%
to a three-week low of 93.5850, as risk appetite improves and amid
uncertainty over whether U.S. President Joe Biden will give Federal
Reserve Chairman Jerome Powell a second term, MUFG said.
Although Powell remains favorite to keep the job, questionable
trading activities by two Fed bank presidents cast a cloud over his
prospects, The Wall Street Journal reported last week.
"The decision does not appear as much as a done deal as before
which has increased uncertainty and downside risks for the U.S.
dollar," MUFG currency analyst Lee Hardman said. He added that
recent dollar weakness has coincided with a rebound in global
The Bank of England could start raising interest rates in
November but the pound is still likely to depreciate in coming
months, MUFG Bank said.
"GBP is more likely to weaken heading into year-end given the
more challenging backdrop of slowing global growth, higher
inflation and tightening liquidity conditions, which should be less
supportive for risk assets and high beta currencies like the
pound," MUFG currency analyst Lee Hardman said.
BOE policy tightening could also be viewed as a policy mistake
if the U.K. economy slows more notably, which would dent sterling,
Inflation pressures are persistent but are likely to ease, said
BlackRock, which doesn't consider the current situation as
The asset manager keeps its moderately pro-risk investment
stance on a tactical basis, even as it sees a narrower path for
risk assets to rise. It attributes inflationary pressures to the
economic restart after the pandemic rather than to rising energy
prices and it expects the near-term supply-demand imbalances to
"We see the restart price pressures eventually resolving
themselves, and believe central banks with credible policy
frameworks will look through most of them," BlackRock said.
The European Central Bank will have to raise inflation
projections significantly at the Dec. 16 meeting, said NordLB's
chief economist Christian Lips and economist Bernd Krampen, adding
that this could challenge the ECB's forward guidance.
"This could provoke a test of the forward guidance on the key
interest rates," the economists said. NordLB sees concerns over
stagflation exaggerated for now, nonetheless, they envisage the ECB
to act "very cautiously" when exiting the Pandemic Emergency
Purchase Programme and otherwise maintain its accommodative
monetary policy for some time.
The ECB's next monetary policy meeting is on Oct. 28, but the
next review of staff forecasts is due at the December meeting.
J.P.Morgan expects the ECB's monetary policy meeting to provide
some clarity on the form of monetary policy accommodation for the
era after the Pandemic Emergency Purchase Programme, said rates
strategists Fabio Bassi and Sampathh Vijay. In the short term,
European rates will face uncertainty around the Bank of England's
delivery in early November, they said.
However, JPM remains confident in fading the amount of excessive
tightening expectations that are currently priced at the short end
of the EUR curve.
Eurozone government bonds sold off heavily Monday, causing
yields to rise, amid inflation fears and some spillover from U.K.
rate-rise expectations, but yields trade lower Tuesday.
Eurozone government bond yields dropped in early trade after the
massive yield rise Monday caused by inflation fears and spillover
from rate rise expectations in the U.K, analysts said.
"The dramatic repricing of short Sterling is leaving massive
traces on the EUR curve," said Christoph Rieger, head of rates and
credit research at Commerzbank.
He added that contagion into other markets cannot be avoided,
with euro money markets now pricing in the first 10-basis-point
interest-rate rise by the European Central Bank one year from now,
even as the ultralong end of the euro curve remains shielded.
DZ Bank forecasts the 10-year German Bund yield will stabilize
around -0.20% on a three-month horizon, said analyst Christian
"As inflation fears are heavily priced into Bund yields in our
view, the scope for a further rise in yields is relatively
limited," he said.
For 2022, DZ Bank expects the 10-year Bund yield to trend up
moderately, reaching 0.10% on a six-month horizon and 0% in 12
Oil prices were higher, with both benchmarks paring most of
their gentle Monday losses that came with the news of a fall in U.S
industrial production and weaker GDP numbers out of China according
to ING's Warren Patterson.
Markets were generally calm Tuesday, though investors are
awaiting the release of the API's weekly inventory figures later in
the day and the EIA's inventory data due Wednesday.
Benchmark European gas prices were down 2.3% after a volatile
Monday during which worries that Russian producers won't follow
through with more supply caused temporary price spikes.
Gold gained as the dollar slipped and investors worry about the
impact of the energy crunch on inflation. Expectations that central
banks will raise interest rates to tamp down inflation are keeping
the precious metal in check, said TD Securities.
However, investors are likely overestimating how quickly the Fed
will move to raise rates. The Fed is likely to look through
inflation driven by the energy shock, they said. "This suggests
gold is an ideal hedge against rising stagflationary winds, and
reasons to own the yellow metal are growing more compelling," the
Copper prices rose on a weaker dollar and worries about supply
disruptions in major producer Peru. A Peruvian community said
they'd block a key road used by mining companies in protest over
pollution and poverty.
Analysts said that even without those disruptions, the
background for copper is bullish. Inventories are dwindling while
demand remains strong, says Anna Stablum, at the brokerage
"Focus was still on the tightening of spreads as traders
scrambled to get hold of available metals and scrap markets were
tight," she said.
Ericsson Net Profit Beats Despite China Sales Drop and
Ericsson AB on Tuesday posted a third-quarter net profit that
beat expectations, as strong sales of 5G equipment in North
America, Europe and Latin America helped offset a hefty sales
decline in mainland China.
The telecommunications-equipment company reported second-quarter
net profit attributable to shareholders of 5.75 billion kronor
($665 million) compared with SEK5.35 billion for the year-earlier
Danone 3Q Sales Rose; Reiterates 2021 Guidance
Danone SA said Tuesday that sales rose in the third quarter,
with strong growth across geographies, and reiterated guidance for
the full year.
The French food company said quarterly sales came in at 6.16
billion euros ($7.14 billion) compared with EUR5.82 billion for the
previous-year period. An analysts' consensus compiled by the
company had forecast the figure at EUR6.06 billion.
BHP First-Quarter Iron Ore, Copper Output Falls
BHP Group Ltd. produced less iron ore, copper and steelmaking
coal in its first fiscal quarter mostly because of planned
maintenance work at its operations.
The world's biggest mining company by market value said it
produced 63.3 million metric tons of iron ore in the three months
through September, down 4% year-over-year and 3% lower than the
quarter immediately prior.
Iberdrola to Invest $8.2 Bln in UK Offshore Wind Farms
Iberdrola SA on Tuesday said that it plans to invest 6 billion
pounds ($8.24 billion) in offshore wind farms through
ScottishPower's hub off the east cost of England, its largest
project investment globally.
"Our GBP6 billion planned investment in East Anglia hub will be
a significant step towards ensuring offshore wind produces enough
clean electricity to power every U.K. home by 2030," Chief
Executive Ignacio Galan said. "The hub is testament to how business
can support the government's net-zero ambitions."
UK Govt to Investigate Parker Hannifin's $8.65 Bln Planned
Takeover of Meggitt
The U.K. Government said late Monday that it was investigating
Parker Hannifin Corp.'s planned 6.3 billion pound ($8.65 billion)
takeover of Meggitt PLC on national security grounds.
The Secretary of State for Business, Energy and Industrial
Strategy on Monday issued a public interest intervention notice on
the deal and asked the U.K. Competition and Markets Authority to
report on it by March 18.
Chip-Designer Arm Sees Chip Shortage Lasting Through Next
The boss of chip-design specialist Arm Holdings says the
semiconductor shortage will persist through next year, joining the
growing list of executives forecasting that crippling supply
pressures won't disappear soon.
"What we're seeing from our licensees is that they could all be
selling more, if only...there was more capacity to go around.
Everyone is seeing huge demand," Arm Chief Executive Simon Segars
said Monday at The Wall Street Journal's Tech Live conference.
Tele2 Backs FY Guidance After Posting 3Q Net Profit Beat
Tele2 AB on Tuesday reported a forecast-beating third-quarter
net profit and backed full-year guidance.
The Sweden-based telecom company posted a net profit for the
quarter of 1.04 billion kronor ($120.2 million) down from SEK1.14
billion a year earlier.
European Life Sciences Investor Sofinnova Partners Raises $548
European venture-capital firm Sofinnova Partners has raised
EUR472 million, equivalent to $548 million, to invest in life
sciences startups, the latest in a series of healthcare funds the
firm has closed recently.
Sofinnova, based in Paris, London and Milan, raised this latest
fund, Sofinnova Capital X, to invest in early-stage biotechnology
and medical-device companies. In July, Sofinnova said it had raised
a EUR63 million pool to launch medical-technology startups, and in
March, it disclosed a EUR445 million crossover fund targeting
Springer Replaces Bild Editor
BERLIN-German publisher Axel Springer SE on Monday said it had
replaced the editor in chief of its Bild tabloid, Europe's
largest-circulation newspaper, over allegations that the man had
intimate relations with junior employees even after the completion
of an internal investigation into his behavior.
The move comes days before Axel Springer's $1 billion takeover
of Washington, D.C.-based digital publisher Politico, the latest
step in its ambitious U.S. expansion plan, is set to be
German Fintech N26, Newly Valued at $9 Billion, Again Draws
N26 Bank GmbH, a Berlin-based digital bank that is now as
valuable as the country's second-largest lender, said Germany's
financial regulator had temporarily capped the number of new
customers it can sign up, the third regulatory action in six months
aimed at improving controls at the startup.
N26 on Monday said the regulator, BaFin, had ordered it to limit
new European customers to 70,000 a month. A spokeswoman declined to
disclose its monthly sign-up numbers, though N26 said it has added
more than 2 million customers in the past year.
Toyota, Stellantis to Build EV-Battery Factories in North
Toyota Motor Corp. and Jeep parent Stellantis NV said separately
Monday they would build battery factories in North America, the
latest in a string of big-ticket investments by auto makers looking
to sell more electric cars.
Stricter fuel-efficiency targets set by the Biden
administration, combined with broader efforts around the globe, are
pushing car companies to spend tens of billions of dollars
collectively on new factories for electric vehicles and the
batteries to power them.
U.S. Afghan Envoy Stepping Down After Failure of Talks
Zalmay Khalilzad, the Biden administration's special
representative for Afghanistan, who for nearly two years tried
unsuccessfully to negotiate a peace deal with Taliban officials
before the group seized control of the country in August, is
stepping down from the role, the State Department said Monday.
Mr. Khalilzad, who has held a range of roles under several
administrations, including U.S. ambassador to Afghanistan and Iraq,
said in a letter viewed by The Wall Street Journal that "the
political arrangement between the Afghan government and the Taliban
did not go forward as envisaged."
U.S. Lawmakers Step Up Pressure to Adopt Tougher Tech Laws
WASHINGTON-Legislation to curb the influence of big technology
companies, including putting new restrictions on online content, is
starting to gain traction in Congress as lawmakers narrow their
targets and seek to build on public attention.
A bipartisan group of senators including Amy Klobuchar (D.,
Minn.) and Chuck Grassley (R., Iowa) came out last week in favor of
legislation that would prohibit dominant platforms from favoring
their own products or services, boosting similar efforts already
under way in the House.
Yellen Says Debt-Limit Deal Will Keep Government Funded Through
Treasury Secretary Janet Yellen on Monday said the debt-limit
deal enacted by Congress last week will allow the government to
keep paying its bills through Dec. 3.
In a letter to Capitol Hill leaders, Ms. Yellen said the deal
"provides only a temporary reprieve" and urged lawmakers to take
further action to ensure that the government can continue to borrow
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.
Global Climate Finance Falling Short of What Is Needed, Report
Global investment in climate-change-related projects rose in
2019 and 2020, but remained far below the level that would be
needed to finance the transition to a low-carbon economy and
minimize the impacts of climate change, new data showed.
The Climate Policy Initiative, a nonprofit research group that
publishes a survey of climate finance every two years, identified
$623 billion of climate-related investment in 2019 and $640 billion
in 2020. Those were record figures, but growth has slowed,
according to the CPI. It monitors a broad spectrum of public and
private spending, spanning areas such as electric-car purchases and
North Korea Fires Ballistic Missile off East Coast, South Korea
SEOUL-North Korea fired what was suspected to be a
submarine-launched ballistic missile off its east coast on Tuesday,
Seoul's military said, the first test of its kind in two years.
Photos or video of the weapons test-the Kim regime's eighth of
the year-weren't immediately released by North Korean state media.
But at a January military parade, North Korea unveiled a new
submarine-launched ballistic missile that it called "the world's
most powerful weapon."
Biden Administration to Constrain Use of Sanctions in
WASHINGTON-The Biden administration plans to limit the use of
economic and financial sanctions in a shift that Treasury
Department officials said should strengthen the impact of a tactic
that U.S. foreign policy has relied on in recent years.
After a nine-month Treasury-led audit of sanctions policy, the
officials said Monday that sanctions will remain a critical policy
tool but need to be better calibrated. To that end, the officials
said, the interagency vetting process for sanctions will be
refocused to more heavily weigh the potential for unintended harm
to vulnerable groups, resistance from allies and other economic and
FDA Nearing Approval for Mixing and Matching Covid-19 Booster
The Food and Drug Administration is moving to soon allow people
to receive booster shots that are different from their first
Covid-19 vaccine doses, people familiar with the matter said.
The FDA won't recommend any booster over the others but will
permit people to get a booster shot that is different from the shot
they first received, one of the people familiar with the matter
Donald Trump Sues to Prevent Records From Being Disclosed to
Jan. 6 Committee
WASHINGTON-Former President Donald Trump filed suit Monday to
block records from his time in the White House from being turned
over to the House committee investigating the Jan. 6 assault on the
In a lawsuit filed in federal court in Washington, D.C., an
attorney representing the former president asked a federal judge to
stop the National Archives from turning over records from Mr.
Trump's time in office to Capitol Hill investigators, alleging that
the requests were improper and the documents contained privileged
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(END) Dow Jones Newswires
October 19, 2021 06:39 ET (10:39 GMT)
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