Most major European stock benchmarks, with the exception of
London's FTSE 100, were moderately lower Wednesday, as investors
continued to weigh the effectiveness of existing vaccines against
the Omicron coronavirus variant.
"The headlong rally in global markets has stalled, but the
overall outlook for equities remains firmly positive," wrote Chris
Beauchamp, Chief Market Analyst at IG.
"Despite some worrying data on vaccine efficacy against the new
variant the overall impression is that markets have now done their
best to price in the variant and any potential new
Bryan Garnier said that although governments are likely to
enforce booster campaigns with the current versions of vaccines,
it's likely that companies will initiate work on an Omicron-adapted
version of the shots. Depending on regulatory processes, this could
be available in the first half of 2022.
"In our view, this news underlines continuity of Covid market
potential and bodes well for vaccine makers," said Bryan
Shares on the Move:
Ceconomy shares fell almost 10% as analysts warned that
coronavirus-related restrictions in key markets will weigh on the
retailer's most important trading season.
At fiscal 2021 results next week, Ceconomy management is likely
to indicate major headwinds to current trading from business
restrictions in Germany and Austria, said Baader Helvea analysts.
The current fiscal first quarter is Ceconomy's most important,
Warburg said, adding that while e-commerce can to some extent
offset lower sales at physical stores, the gross margin will be
dragged by lower revenue from the service & solutions
Baader and Warburg both lowered fiscal 2022 estimates as a
result, while Baader cut its rating to reduce from buy.
TUI shares fell 3.6% after the tour operator reported a
worse-than-expected annual net loss and warned over the potential
effects on bookings of Omicron. While TUI's revenue has recovered
and it has cut debt, it's warning of weakness in sales momentum
thanks to the new virus strain, said trading firm eToro.
"January and the early months of the year tend to be really
important for travel firms in terms of bookings for the year ahead,
so it couldn't really have come at a much worse time," said eToro
analyst Adam Vettese. "To add insult to injury, booking numbers are
still way behind pre-pandemic levels. TUI could find itself soon
having another mountain to climb."
Umicore stock fell 5% after it warned on profits at its
cathode-materials unit, overshadowing the announcement of a joint
venture with Volkswagen, said ING.
The Belgian company now expects lower-than-anticipated cathode
material sales for 2022 and 2023, below market growth and beyond
the already negative impact from semiconductor shortages. Umicore
flagged its exposure to mid-nickel platforms which is less in
demand than high nickel in the auto industry's shift to
Combined with increased fixed costs due to a ramp-up in new
capacity, earnings at Umicore's Energy & Surface Technologies
segment won't show uplift before 2023 after a strong performance in
2021, ING adds.
ING has kept its hold rating on the stock and EUR44 target
Valneva shares gained almost 8% after reaching a Covid-19
vaccine supply deal with Bahrain. Bryan Garnier said more countries
could make deals with the French biotech.
"We believe that some countries are waiting for the approval by
EMA [European Medicines Agency] before signing any agreement," the
broker said. Valneva could start supplying the one million doses in
the first quarter of 2022 if approved by the Bahraini health
Stock futures edged higher, but the session hinted at more
subdued gains following two powerful sessions driven by fading
worries over Omicron.
The Dow industrials have rallied over 1,100 points in the last
two sessions, as investors have cheered up and hunted for bargains
in the wake of selling after the new variant in South Africa just
"In theory, such strong gains are sign of instability and should
be taken with caution, however the good news is that the volatility
is easing, and the VIX index dropped 20% yesterday, meaning that
the latest fears could slowly begin fading," said Ipek
Ozkardeskaya, senior analyst at Swissquote in a note to
Also lifting markets lately is the perception that the Federal
Reserve's more hawkish tilt has been digested and priced in, said
Ozkardeskaya, but the analyst and others remain wary.
"While the buy-everything trade will have its day in the sun for
the rest of this week, some serious non-virus risk points are
looming," Jeffrey Halley, senior market analyst at OANDA, told
clients in a note. "Friday sees U.S. CPI and a print at or above
7.0% is going to raise the heat at next week's FOMC."
Economists polled by Dow Jones Newswires and The Wall Street
Journal are forecasting a CPI rise of 0.7%. That data comes ahead
of Wednesday's JOLTS job openings for October, which are expected
to rise to 10.6 million from 10.4 million.
The dollar dipped, but UniCredit said positive sentiment, as
reflected in strong global stock market gains hasn't weakened the
buck as much as it has in the past, as the currency becomes less
appealing as a safe haven.
"This represents an important change, which is mostly caused by
the increased importance of higher interest rates in the U.S. and
widening interest rate differentials with respect to the rest of
the world in driving the FX market."
Poland's central bank is likely to raise interest rates further
in a policy decision on Wednesday, which should lift the zloty,
said ING. "Another 50-75 basis points hike should keep the zloty
relatively well supported and continue to drive cross rates like
PLN/HUF higher still."
ING said a rate rise is justified by high inflation pressures
and a need to prevent a wage-inflation spiral, and the emergence of
Omicron is unlikely to impinge on the decision. The rate decision
is expected at 1200 GMT. EUR/PLN was around 0.1% higher after
earlier hitting a one-month low of 4.5777.
Fitch said global interest rates may rise sooner than expected
as inflation risk looms. "The scale and longevity of the global
inflation shock has taken most forecasters and central banks by
surprise and is bringing forward the start of global monetary
It now expects the Fed to raise interest rates in September 2022
and the Bank of England to do so later this month. It also thinks
China's central bank will cut interest rates in 2022, but reckons
the European Central Bank will hold rates steady through 2023.
Goldman Sachs said China could cut its reserve requirement ratio
again in the first quarter of 2022. This would imply a total of
three RRR cuts including the July and December reductions, which is
on the lower end of historical precedents. It noted the 2015-2016
downturn saw five rounds of RRR cuts in total.
"Policymakers appear to be in the 'do just enough' mentality in
managing the balance between cyclical growth and structural
reforms," said Goldman Sachs. It said a first-quarter timing seems
likely because large numbers of USD bonds are due in January and
March, so there could be greater financial risks then.
Indications of a milder course of Omicron virus infections and
hopes of drug treatment successes give room for a mild risk-on mood
in markets, slightly reducing the need for safe-haven government
bonds, said Helaba. "Increased risk appetite and rising stock
markets have weighed on the bond markets, but losses have been
In terms of issuance, Germany will conduct its last government
bond auction this year, offering EUR3 billion in the 0% August 2031
Bund. Helaba doesn't envisage any problems with the takedown of the
supply due to the low offer volume and high redemptions, but it
acknowledges that the -0.37% yield--the current level in
markets--doesn't seem very attractive.
Against the backdrop of restrictions in Norway in response to
rising coronavirus infection rates, the spread of Omicron and
pressured hospital capacity, the market reduced its expectations of
an interest rate rise in Norway, said SEB.
"The market has revised its rate hiking expectations lower over
the past week and now discount an 80% likelihood for a December
hike [previously 100%] and a key rate at 1.10% by end-2022," said
SEB's chief Norway strategist Erica Blomgren Dalsto.
This has proved supportive for the short end of the Norwegian
government bond curve, while general growth uncertainties and lower
international bond yields have pushed long-end Norwegian yields
lower, she said.
Oil prices nudged higher after strong early week gains. "Around
two thirds of the previous price slide has been corrected, a
downswing that had been brought about by demand concerns sparked by
the new Omicron variant," said Commerzbank.
And while concerns over the newly-discovered strain appear to be
overstated and investors wait for a more solid assessment on
potential risks, the market also focuses on growing fears of a
Russian invasion of Ukraine.
European natural-gas prices rose after news reports that Nord
Stream 2 could be shut down if Russia invades Ukraine. The
controversial pipeline linking Russia and Germany had been expected
to start operations in 2022, helping to ease Europe's gas
Gold edged higher, helped by a slightly weaker dollar. According
to Commerzbank, the precious metal is currently benefiting from
escalating Russia, Ukraine tensions. Analysts at the bank expect
prices to move moderately until Friday, when the inflation data for
November is released.
DOW JONES NEWSPLUS
Italy, Recovering Under Draghi, Debates His Premiership
ROME-Italy faces a dilemma at a critical moment for its economy
and the fight against Covid-19: Should Mario Draghi remain prime
minister for another year or become the country's largely
ceremonial president for the next seven?
Mr. Draghi has presided over a robust economic rebound in Italy
this year and launched a number of structural overhauls. Many
Italians would prefer him to go on running the government until the
end of his mandate in early 2023, amid rising economic uncertainty
and the globally spreading Omicron variant of the virus.
Turkey's Woes Haven't Spread to Broader Emerging Markets
The world's biggest emerging markets have dodged contagion from
Turkey's currency implosion, but there are other threats looming on
Emerging markets such as Russia, Mexico and Brazil are
notoriously volatile and prone to getting hit when one of them
wobbles. So far, however, Turkey's problems have been contained. An
unorthodox series of rate increases has plunged its economy into a
spiral without causing much damage elsewhere.
Trafigura Scores $3 Billion Profit on Commodities Rebound
Trading house Trafigura Group Pte. Ltd. rode rising commodity
prices to post record profit, making it a big winner from the
pandemic economic rebound.
Trafigura reported $3.1 billion in net profit on $231.3 billion
in revenue in the 12 months through September. Wednesday's results
made the 2021 financial year the most profitable for the company
since it was founded in 1993.
Nestlé Cuts Stake in L'Oréal With $10 Billion Deal
Nestle SA has agreed to cut its stake in L'Oreal SA by selling
$10.0 billion of shares back to the French cosmetics maker, the
latest development toward a long-speculated decoupling of two of
the world's biggest consumer-goods companies.
Under the agreement, Nestle will sell 22.26 million L'Oreal
shares for a total consideration of 8.9 billion euros, the two
companies said late Tuesday. L'Oreal will fund the deal with cash
and debt, and cancel the repurchased shares. The transaction will
have an accretive effect on its earnings per share of more than 4%
in a full year, L'Oreal said.
TUI FY 2021 Pretax Loss Narrowed, Missing Market Views
Shares in TUI AG fell Wednesday after the company reported a
narrowed net loss for fiscal 2021, which missed full-year market
views, and warned over the potential effects of the new Covid-19
Omicron variant on bookings.
Shares in London at 0910 GMT were down 3.5% at 210.20 pence.
HelloFresh Expects 2022 Earnings Below Expectations Despite
Strong Revenue Growth
HelloFresh SE said late Tuesday that it expects to post 2022
earnings that are lower than currently expected, despite a
consensus-beating revenue-growth outlook.
The German meal-kit company said 2022 adjusted earnings before
interest, taxes, depreciation and amortization would be between 500
million euros ($563.4 million) and EUR580 million, below brokers'
estimates provided by the company of EUR647 million.
Centrica to Sell Spirit Energy's Oil & Gas Assets in
Centrica PLC said Wednesday that it has agreed to the sale of
Spirit Energy's oil-and-gas assets in Norway to Equinor ASA and
Sval Energi AS for $1.08 billion.
Centrica, which owns 69% of Spirit Energy, said that the deal
will also include a deferred commodity price-linked payment, and
that the buyers will be transferred all 830 million pounds ($1.10
million) of decommissioning liabilities. The share of headline
proceeds for Centrica is expected to be around GBP560 million.
Umicore, Volkswagen Set Up Joint Venture for Battery-Cell
Umicore SA and Volkswagen AG are setting up a joint venture to
supply the car maker's European battery-cell production with
cathode materials, the companies said on Wednesday.
The deal "aims at jointly building up precursor and cathode
material production capacities in Europe, and sustainably securing
responsibly sourced raw material capacities at competitive prices,"
Berkeley Group 1H Profit, Revenue Increased; Raises FY 2022
Berkeley Group Holdings PLC said Wednesday that pretax profit
and revenue increased for the first half of fiscal 2022, and raised
its full-year earnings expectations.
The U.K. house builder posted a pretax profit of 290.7 million
pounds ($385 million) for the six months ended Oct. 31 up from
GBP230.8 million a year earlier.
Getlink Says Passenger Traffic Rose 89% in November
Getlink SE said Wednesday that November passenger traffic rose
sharply from a year earlier due to Covid-19 restrictions being less
strict than the same month in 2020.
The French operator of the Channel Tunnel between the U.K. and
France reported a 89% rise in passenger vehicles for last month to
Germany's Scholz Takes Power After Merkel's 16-Year Rule
BERLIN-Germany's parliament elected a new chancellor on
Wednesday, ending Angela Merkel's 16-year rule. The country's new
center-left leader inherits longstanding challenges from his
predecessor and faces a cluster of short-term crises that could
complicate his plans to modernize the German state and its
Olaf Scholz, 63, and his Green and free-market coalition
partners have agreed on a four-year program to overhaul Germany's
economy, fight climate change, digitize public services and reverse
its demographic decline.
Blinken Calls China, Russia Efforts to Disrupt Global Order
Attempts by China or Russia to expand their territory by
invasions of Taiwan or Ukraine, respectively, would be serious
mistakes with severe consequences, Secretary of State Antony
Blinken said Tuesday at The Wall Street Journal's CEO Council
President Biden's warning to Russian President Vladimir Putin on
a secure video call Tuesday about the consequences of a potential
invasion of Ukraine should "affect President Putin's calculus going
forward," Mr. Blinken said.
Giant Gap Persists Between Job Openings and Available
U.S. job openings continue to far outpace the number of
available workers, with nearly five million more open positions
than people seeking work.
There are around 11 million job openings in the U.S., according
to estimates from job-search site ZipRecruiter, based on their
analysis of online job postings and government data sources. That
compares with 6.9 million people who are unemployed but say they
want to work.
Crypto CEOs to Testify Before Lawmakers Weighing Greater
WASHINGTON-The chief executive officers of half a dozen
cryptocurrency firms are set to appear before Congress on
Wednesday, as lawmakers and regulators wrestle with how to bring
the more than $2 trillion market under government oversight.
The House Financial Services Committee, led by Rep. Maxine
Waters (D., Calif.), called the hearing in hopes of improving
lawmakers' understanding of crypto assets and how the sector fits
into existing regulations.
Japan's Economy Shrank More Than Estimated in Third Quarter
Japan's economy shrank more than initially estimated in the
July-September quarter due to weaker spending by consumers and the
government, revised data showed Wednesday.
The world's third-largest economy after the U.S. and China
contracted 3.6% on an annualized basis, which reflects what would
happen if the third-quarter pace continued for a full year.
House Votes to Approve Bill Setting Up Process for Lifting Debt
WASHINGTON-Top Republicans and Democrats struck a deal for a
process to raise the debt ceiling in the Senate, with the House
passing a bill late Tuesday that paves the way for Congress to
prevent a calamitous default.
The bill, which also prevents cuts to Medicare and other
programs that threatened to kick in at the end of the year, is the
product of weeks of talks between Senate Majority Leader Chuck
Schumer (D., N.Y.) and Senate Minority Leader Mitch McConnell (R.,
Ky.). It doesn't itself raise the debt ceiling. Instead, it sets up
a procedure for an additional vote on the issue that would require
a simple majority in the Senate rather than the 60 votes needed for
China Auto Sales Decline as Covid-19 Outbreaks Hurt Retail
BEIJING-China's car sales declined for the sixth straight month,
as sporadic Covid-19 outbreaks in the world's biggest auto market
hit retail, even as shortages of chips and components eased.
Sales of passenger cars in November fell 12.7% from a year
earlier to 1.82 million vehicles, the China Passenger Car
Association said Wednesday. January-November sales rose 6.1%
compared with the same period last year, the association said.
Sen. Joe Manchin Holds Back Support for Social-Spending Bill
WASHINGTON-Sen. Joe Manchin declined to commit to voting for
Democrats' roughly $2 trillion social-policy and climate package,
citing concerns about inflation and the length of programs, weeks
before the Christmas deadline party leaders are racing to meet.
Mr. Manchin, a West Virginia Democrat, made the remarks during
The Wall Street Journal's CEO Council Summit at a pivotal moment
for Democrats in Washington-and one where he has been a key figure.
Because Senate Democrats are using a special budget maneuver to
pass their education, healthcare and climate package without any
GOP support, they can't lose a single senator from their own
Commission Approves Report on Supreme Court Amid Partisan
WASHINGTON-A bipartisan commission appointed by President Biden
unanimously adopted a report detailing controversies over the
Supreme Court and assessing proposals to address them, but few
expected the 294-page document to resolve political divisions
concerning the judiciary that have intensified in recent years.
At Tuesday's meeting, members of the commission universally
praised the report-writing process for its civil dialogue and
regard for all views. However, the final report was neither
designed to nor did it produce consensus or any
China Aims to 'Revise the Global Rule Set,' Top U.S. General
WASHINGTON-China is expanding its military in a bid to "revise
the global rule set" and undo the post-World War II national
security framework, the highest ranking military officer said
Army Gen. Mark Milley, the Chairman of the Joint Chiefs of
Staff, said China's investment in its navy, hypersonic missiles,
cyber and other technologies are designed to ensure that it, along
with Russia and the U.S., are world-leading nations. Such a rise
would end a post-World War II era in which Russia and the U.S. were
the only superpowers.
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(END) Dow Jones Newswires
December 08, 2021 06:22 ET (11:22 GMT)
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