European stocks struggled for direction on Wednesday as investors reacted to results from some of the region's biggest companies.

Global concerns on rising inflation were in focus, with Germany reporting a 14.2% surge in annual producer prices for September, the highest annual gain since October 1974, said statistics office Destatis.

The mining sector was among the weakest in Europe, with shares of Antofagasta dropping over 3% after the mining group reported weak copper production for the third quarter and forecast lower output for next year, due to drought conditions in Chile.

In other news, Jens Weidmann, the president of the Bundesbank and one of the more hawkish European Central Bank voters, announced his resignation on Wednesday, which he said was for personal reasons.

Weidmann said he will leave at the end of the year. "I have come to the conclusion that more than 10 years is a good measure of time to turn over a new leaf - for the Bundesbank, but also for me personally," Weidmann said.

Shares on the move:

Among a raft of companies reporting financial results, Nestle was a leading gainer with a rise of over 3% as the Swiss food and drink conglomerate reported higher sales for the first nine months of the year that also beat forecasts. Nestle also lifted its full-year guidance for organic sales growth.

"Nestle appears well-positioned to weather the current environment of rising input costs," said a team of analysts at Morgan Stanley. The company's valuation of 22 times 2022 earnings, excluding its L'Oréal holding, "looks undemanding to us."


Another gainer was Deliveroo, with shares of the delivery service also rising above 3% after reporting a rise in third quarter orders and gross transaction value and lifting guidance on the latter for the year.


Vinci stock rose 2.9% after it delivered a solid top-line third-quarter update, according to Deutsche Bank, with revenue at EUR13.24 billion, a slight beat to the bank's expectations.

The French infrastructure company confirmed its full-year guidance for its energies and contracting businesses to grow above 2019's levels and now guided for its autoroutes segment to reach close to last year's levels, Deutsche Bank said.

But the biggest surprise is Vinci's falling net debt, which dropped to EUR16.9 billion in the third quarter from EUR18.6 billion in the first half. The results show why Vinci remains a top infrastructure pick for Deutsche Bank, which confirmed its buy rating and a EUR107 target price.


On the downside, shares of ASML fell over 1% even after the Dutch chip equipment maker reported a 64% gain in third-quarter net profit that beat forecasts. Amid a continuing industry chip shortage, ASML said it would need to boost capacity to meet demand for memory and logic modes.


Akzo Nobel shares also fell over 1% after the Dutch paints and coating company reported a third-quarter fall in net profit, missing consensus and said its performance was hit by high raw-material costs and supply-chain disruptions.

"Despite the well flagged near-term raw mat headwinds, the underlying demand across the division remains strong and Akzo continues to benefit from the strong coatings demand as many of the end-markets move toward normalization, said Citi analysts.

"Sustainability of volume and measures to combat impacts of raw material headwinds into 2022 should be a key debate point going forwards; however, shareholder returns and significant balance sheet firepower support our positive stance on the name, said Citi, which has a buy rating on the Akzo Nobel.


Kering stock fell over 3% after the French luxury goods group reported late Tuesday third-quarter revenue above expectations, but a miss at its flagship Gucci label.

Equita analyst Paola Carboni said in a note that any negative share reaction was "an opportunity in view of the acceleration from the fourth quarter" and considering such factors as momentum of other brands, and discounted valuation.

Read a roundup of analysts' comments here.

Stocks to watch:

Barclays, NatWest Group and Lloyds Banking should be the U.K. banks to benefit the most from a benign backdrop when posting their results for the third quarter, said Jefferies.

The FTSE 100 lenders are not expected to bring material negative margin surprises, Jefferies added, noting that updates on rate sensitivity should show scope for positive earnings revisions.

Material credit write backs also create capacity for buybacks, which could be announced either at the third quarter or at the end of 2021, said Jefferies. Barclays and Lloyds are the top buys among the major U.K. lenders, Jefferies added.


Southern European banks face a short-term negative risk from a possible non-extension of the European Central Bank's bonus rate on targeted long-term refinancing operations funds, said Jefferies analysts.

France's central bank governor recently suggested the ECB shouldn't extend the measures past June 2022. The current measures contribute about 10% to Southern European banks' domestic profits, so a non-extension would be a downside in the near term.

"However, a step towards policy normalization from the ECB [and associated implications for rates/EURIBOR] should still be seen as more positive than negative medium-term." Jefferies sees Sabadell as most at risk from a non-extension of the measure and prefers UniCredit for its good risk-reward balance.

U.S. Markets:

Stock futures wobbled ahead of corporate results that will provide insight into the effects on the technology industry of inflation and supply-chain disruptions, including from the global chip shortage.

Telecommunications giant Verizon is scheduled to post earnings before the opening bell. Tesla and IBM are expected to report after markets close.

Stocks have climbed in recent days as investors parsed strong earnings. Major companies have said that labor shortages, higher raw-materials prices and supply-chain issues haven't eroded profits substantially, reassuring investors.

For tech companies like the ones reporting Wednesday, investors will be watching for an update on disruptions in the semiconductor space and the ability of large firms to increase prices to consumers, according to Kiran Ganesh, a multiasset strategist at UBS Global Wealth Management.

"Markets are taking a bit of a breather after a very strong run. Earnings are very good so far, across a pretty broad range. We're looking out for margins, and comments on input costs, and we haven't really seen too much concern on that," he said. "This is what's really been supporting the rally."

Netflix shares slipped 1.3% in after hours trading. The company said it added more new users than expected in the last quarter, but its co-chief executive also apologized for defending a controversial comedy special by Dave Chappelle.

Investors are awaiting a Federal Reserve report about economic conditions known as the Beige Book.


Sterling steadied after briefly edging lower following data that showed U.K. annual CPI slowed slightly to 3.1% in September from 3.2% in August. This fall shouldn't alter the likelihood that interest rates will rise soon, analysts said.

"The bigger picture emains that inflation is causing the Bank of England a headache, especially coupled with no sign of an easing in the energy price surge," said Richard Carter, head of fixed-interest research at Quilter Cheviot. It looks likely an interest rate increase will happen soon, although the BOE will avoid tightening too aggressively, he added.

Pantheon Macroeconomics said the slight decline in inflation won't settle the debate on when the BOE should raise interest rates.

"Hawks will be able to continue to warn of the dangers that high inflation poses to inflation expectations, while the doves will be able to point out that the above-target rate is primarily due to rising prices for oil and some goods affected by global supply chain problems," said Pantheon's chief U.K. economist Samuel Tombs.

Looking ahead, the recent surge in energy prices looks set to drive up U.K. inflation to a peak of about 4.7% in April, Pantheon forecasts.

Track the views of the analysts and the market's reaction to inflation dip here.

The dollar was little changed, despite the slightly weaker sentiment in most stock markets.

Healthier risk conditions and the repricing of expectations for central banks' monetary policies worldwide could send the dollar lower in coming days, although any losses might ultimately prove modest, said Westpac.

The European Central Bank is likely to underscore its dovish guidance next week, while the Federal Reserve is expected to announce QE tapering at its Nov. 2-3 meeting, a backdrop that should underpin the dollar, Westpac added.

Commerzbank said the dollar is unlikely to suffer a sustained downward correction in the near term as elevated U.S. inflation forecasts support the market's expectations for interest-rate rises by the Fed.

The foundation for the dollar's strength is "anything but secure" as inflation could fall more rapidly and sharply than the market expects next year, said Commerzbank currency analyst Thu Lan Nguyen.

"But there is still no reason for the market to massively revise its inflation and thus interest rate expectations--at least as long as there are no clear signs that the global supply bottlenecks are starting to ease."


Eurozone government bond yields rose in early trade as inflation fears continued to weigh on market sentiment, said analysts.

"It appears that market participants are getting cold feet as the European Central Bank's determination to look through current inflation pressures appears half-hearted," said Christoph Rieger, head of rates and credit research at Commerzbank.

The bank's analysts still view current levels as a better opportunity to increase duration over the medium term but they acknowledge the multiple rising headwinds and adverse price action, "which argue against larger risk taking in the current environment," said Rieger.

The weaker sentiment in stock markets Wednesday is likely to ripple through the credit market, pausing recent gains as spreads tightened, said UniCredit.

"The softer tone in major equity markets this morning is likely to lead to a pause [in] the tightening that we have seen in European corporate credit risk premiums."

Losses are unlikely, however, since the economic calendar doesn't contain pivotal data releases and technical factors remain supportive. "We do not see scope for noteworthy spread widening at this stage."


Crude oil futures were down around 1% in Europe after the latest API data showed a bearish reading on U.S. inventories, according to DNB Markets' Helge Andre Martinsen.

While the market had expected a build of 1.3 million barrels in the most recent reporting week, crude stocks actually rose by 3.3 million barrels. Investors will be keeping an eye out to see whether Department of Energy data, released later Wednesday, back up those API figures, Martinsen added.

Base metals prices were lower after China said it was looking to intervene in energy markets.

China's National Development and Reform Commission suggested it was looking at ways to bring down soaring coal prices, a move that could ease pressure on metals makers and has already prompted a sharp drop in Chinese coal futures.

Rising energy prices have been driving production curtailments at smelters and pushing base metals prices higher.




Bundesbank President Jens Weidmann to Step Down

FRANKFURT-German Bundesbank President Jens Weidmann, a prominent critic of the European Central Bank's easy-money policies as a member of the ECB's rate-setting committee, will leave the Bundesbank at the end of the year, five years before his term was due to end.

The Bundesbank said in a statement that Mr. Weidmann is leaving for personal reasons, without elaborating.


German Producer Prices Rise at Fastest Annual Pace in More Than 46 Years

The index of producer prices for industrial products in Germany rose 14.2% in September compared with the prior year, the German statistics office Destatis said Wednesday.

This was the highest year-on-year increase since October 1974, when prices rose strongly during the first oil crisis, Destatis said.


UK Annual Inflation Eased in September

Annual inflation in the U.K. eased in September, ahead of an anticipated pickup in consumer prices later in the year.

Consumer prices rose 3.1% on the year in September, the Office for National Statistics said Wednesday, slightly slower than the 3.2% rise recorded in August.


Nestlé Sales Buoyed by Coffee, Pet Food

Nestlé SA raised its full-year sales guidance for the second straight quarter, buoyed by strong demand for coffee and pet food, despite the continuing challenges of rising input costs and supply-chain snags.

The world's largest packaged-food company on Wednesday reported a 6.5% rise in third-quarter organic sales growth, with revenue for the first nine months of the year coming in at 63.29 billion Swiss francs, equivalent to $68.60 billion. Nestlé said it now expected full-year growth between 6% and 7%, up from its previous guidance of between 5% and 6%.


Roche 3Q Sales Grew; Raises Outlook

Roche Holding AG said Wednesday that sales for the third quarter rose on year and raised its outlook for the full year.

The Swiss pharma major posted sales of 15.97 billion Swiss francs ($17.31 billion) for the third quarter, up from CHF14.70 billion in the same period in 2020.


Nippon Paint Plans to Buy French Paint Maker Cromology

Nippon Paint Holdings Co. said Wednesday that it plans to acquire French construction paint maker Cromology Holding SAS for 1.15 billion euros ($1.34 billion), in a move to expand its business in Europe.

The Japanese paint company plans to buy the French paint maker from Wendel SE and other shareholders after Cromology holds talks with labor representatives.


Rio Tinto Accelerates Carbon Targets While Pivoting Toward Growth

Rio Tinto PLC accelerated plans to shrink its carbon footprint and said it intends to spend more on projects to mine commodities needed for a global energy transition.

With investor and public pressure mounting for resources companies to respond to climate change, the world's second-biggest miner by market value on Wednesday more than tripled a 2030 emissions reduction target and said it will lift annual capital spending with a focus on increasing its output of materials needed for a lower-carbon and more electrified economy.


ASML Holding 3Q Net Profit Rose 64% on High Demand

ASML Holding NV on Wednesday reported a 64% rise in third-quarter net profit, beating analysts' consensus, and said that demand continues to be high.

The Dutch semiconductor-equipment maker said it needs to increase capacity to meet demand for memory and logic modes given the current chip shortage.


SEB Proposes Further Dividend, Buyback After 3Q Earnings Beat

Skandinaviska Enskilda Banken AB on Wednesday posted a better-than-expected third-quarter net profit amid lower loan losses and high activity in its large corporates business, prompting the bank to propose a further dividend and buyback.

The Sweden-based bank posted a net profit of 6.63 billion krona ($769 million) for the quarter, up from SEK4.77 billion a year earlier and above the SEK5.7 billion forecast from analysts polled by FactSet.


Akzo Nobel 3Q Net Profit Fell Amid High Raw-Material Costs

Akzo Nobel NV on Wednesday reported a decline in net profit for the third quarter of 2021, and said that its performance was mainly hit by high raw-material costs and supply-chain disruptions.

The Dutch paints and coatings company posted a net profit of 164 million euros ($190.8 million) compared with EUR220 million for the same period a year earlier. Net profit was expected to decline to EUR160 million, according to the company's compiled consensus.


Deliveroo 3Q Orders, Gross Transaction Value Rose; Raises Full-Year Transaction Value Guidance

Deliveroo PLC said Wednesday that it saw a rise in orders and gross transaction value in the third quarter of 2021, and raised its guidance for gross transaction value for the year.

The London-listed food delivery company said it processed 74.6 million orders in the three months ended Sept. 30, up from 45.4 million a year prior.


Credit Suisse to Pay $475 Million, Admits Defrauding Investors to Settle Mozambique Charges

Credit Suisse Group AG agreed to pay $475 million and forgive $200 million Mozambique owes to investors in coordinated settlements with U.S. and European authorities over loans the bank made in the country.

A subsidiary of the Swiss bank pleaded guilty to wire fraud conspiracy charges in New York federal court Tuesday. Credit Suisse, which previously had maintained it was a victim of rogue employees, admitted to defrauding investors who bought some of the debt and agreed to pay $275 million to resolve both a criminal probe by the Justice Department and a civil investigation by the Securities and Exchange Commission.


Russia Faces Difficult Balancing Act as It Hosts Taliban in Moscow

MOSCOW-Russia has a fine line to tread when it hosts a Taliban delegation at international talks in Moscow on Wednesday: staying on good terms with the new regime in Kabul while preventing an influx of refugees and a broader Islamist movement gaining ground in what used to be the Soviet Union.

From Eastern Europe to the Central Asian republics to its south, Russia has long tried to exert its influence over the former Soviet space.


FBI Raids Homes Owned by Relatives of Russian Oligarch Oleg Deripaska

The Federal Bureau of Investigation on Tuesday conducted raids of residences in Washington and New York owned by the family of Russian metals tycoon Oleg Deripaska, who figured prominently in the post-2016 investigations of Trump campaign officials, FBI spokeswomen and a spokesman for Mr. Deripaska said.

Mr. Deripaska's spokesman confirmed the raids of the residences, saying the searches were carried out pursuant to court orders stemming from U.S. sanctions. The spokesman said both properties are owned by Mr. Deripaska's relatives.


U.K., Joining Trend, Sees Nuclear as Key to Cut Carbon Emissions

The U.K. said Tuesday that nuclear power would play an important role in underpinning its plan to cut greenhouse-gas emissions, joining a growing group of countries turning back to atomic energy as they consider how to wean themselves off fossil fuels.

The announcement comes as the country faces a winter of high energy prices and worries over shortages of natural gas. It plans to take coal-fired power stations offline by 2024 and hasn't spelled out plans to fully replace its existing fleet of old nuclear power stations.



Derby's Take: Waller Flags Inflation Expectations as Key to Fed Rate Outlook

The Federal Reserve's newest governor said the monetary policy outlook depends crucially on what financial markets expect for the future path of inflation.

In a speech Tuesday, Christopher Waller offered a clear warning about what inflation might do to the monetary policy outlook. Mr. Waller, who became a central bank governor late last year after serving as research director at the St. Louis Fed, said if currently high levels of inflation do not show clear signs of moderation by year's end, he would move forward into next year his expectation of central bank rate rises.


UK Annual Inflation Eased in September

Annual inflation in the U.K. eased in September, ahead of an anticipated pickup in consumer prices later in the year.

Consumer prices rose 3.1% on the year in September, the Office for National Statistics said Wednesday, slightly slower than the 3.2% rise recorded in August.


Chinese Coal Companies Fall as Beijing Signals Intervention

Shares of Chinese coal companies were weaker Wednesday after Beijing said it would intervene to boost coal supply and cool prices in the wake of shortages that have forced blackouts in parts of the country and weighed on economic growth.

Hong Kong-listed shares of Yanzhou Coal Mining dropped 10%, China Coal Energy lost 9.9% and China Shenhua Energy fell 4.8% on concerns that lower coal prices could weigh on revenues. The companies' Shanghai-listed shares fell by 10%, 9.9% and 6.7%, respectively, by the midday break.


China PBOC Keeps Loan Prime Rate Unchanged

China's central bank kept its benchmark loan prime rate unchanged on Wednesday.

The one-year LPR remained at 3.85% and five-year LPR at 4.65%, the bank said.


China's New Home Prices Fall for First Time in Six Years as Rules Bite

BEIJING-New home prices in China fell on a monthly basis for the first time in more than six years in September, new official data showed, as Beijing's measures to curb housing speculation and cool the property sector begin to bite.

Average new home prices in 70 major cities edged down 0.08% in September from the previous month, China's National Bureau of Statistics said Wednesday. Though small, it is the first such month-on-month decline since March 2015, and follows August's 0.16% increase.


Waller: If Inflation Doesn't Cool by Year-End, Fed Could Bring Rate Increases Forward

Federal Reserve Gov. Christopher Waller said the central bank could move forward the timeline for raising short-term interest rates to restore price stability if high levels of inflation don't start cooling soon, adding that he supports the Fed slowing its asset buying stimulus effort starting next month.

Mr. Waller said in a virtual appearance Tuesday that when it comes to moving up what is now a near zero federal-funds rate target range, "the pace of continued improvement in the labor market will be gradual, and I expect inflation will moderate, which means liftoff is still some time off." But he also said there is some amount of flux in the path forward for interest rate policy amid unexpectedly high inflation readings.


U.S. Lawmakers Turn Spotlight on Private Equity

U.S. lawmakers this week will subject the private-equity industry to fresh scrutiny over its practices, and some members of Congress plan to revive a bill to increase federal regulation of buyout firms.

A group of lawmakers led by Sen. Elizabeth Warren (D., Mass.) plans this week to reintroduce a modified version of the Stop Wall Street Looting Act, a two-year-old proposal to rein in the private-equity industry, according to people familiar with the matter.


First Bitcoin Futures ETF Rises in Trading Debut

The first bitcoin-focused exchange-traded fund rose in its trading debut Tuesday after getting a warm reception from investors.

The ProShares Bitcoin Strategy ETF climbed most of the day, gaining nearly 5% to settle at $41.94. About $981 million of shares changed hands over the session, making it the second-most highly-traded ETF debut ever, according to Elisabeth Kashner, director of ETF research at FactSet.


Covid-19 Safety Fight Heats Up Between Biden Administration and States

The Labor Department is moving to strip three Republican-led states of workplace safety oversight, saying they have failed to adopt more-rigorous Covid-19 safety standards. It is the latest development in a fight between the Biden administration and some states over federal coronavirus rules.

Officials at the Labor Department said Tuesday that it is starting the process of revoking state-level oversight of workforce-safety programs in Utah, Arizona and South Carolina. The federal government said it began taking steps after the three states didn't adopt, at minimum, the federal Covid-19 safety plans for healthcare workers, which the Occupational Safety and Health Administration, part of the Labor Department, released in June.


Congress Is Losing Patience With Big-Tech Resistance, Klobuchar Says

WASHINGTON-Congress is growing impatient with big technology companies for resisting legislative remedies aimed at addressing social harms from internet platforms, Sen. Amy Klobuchar said Tuesday.

"Every single thing we propose, they are against," Ms. Klobuchar (D., Minn.) said at The Wall Street Journal's Tech Live conference. "The more that time goes on, I'm not the only one that starts wondering if we should not just have the narrow changes" and start aiming for more ambitious legislation, she said.


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(END) Dow Jones Newswires

October 20, 2021 05:52 ET (09:52 GMT)

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