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 process.

"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 headwinds.

"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 constraints."

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.

U.S. Markets:

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 bell.

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 shortages.

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 equity markets.

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, he said.


Inflation pressures are persistent but are likely to ease, said BlackRock, which doesn't consider the current situation as stagflation.

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 ease.

"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 Reicherter.

"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 months' time.


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 bank said.

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 Marex.

"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 Supply-Chain Issues

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 period.


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 Year

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 Million

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 later-stage companies.


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 completed.


German Fintech N26, Newly Valued at $9 Billion, Again Draws Regulator's Eye

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 America

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 Dec. 3

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 money.


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 Suggests

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 infrastructure funding.


North Korea Fires Ballistic Missile off East Coast, South Korea Says

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 Foreign-Policy Shift

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 geopolitical fallout.


FDA Nearing Approval for Mixing and Matching Covid-19 Booster Shots

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 said.


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 U.S. Capitol.

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 material.


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(END) Dow Jones Newswires

October 19, 2021 06:39 ET (10:39 GMT)

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