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 restrictions."

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 Garnier.

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 division.

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 e-vehicles.

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 price.


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 authority.

U.S. Markets:

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 after Thanksgiving.

"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 clients.

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 policy normalization."

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 limited."

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 shortage.

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.




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 the horizon.

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 Norway

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 Materials

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," said Volkswagen.


Berkeley Group 1H Profit, Revenue Increased; Raises FY 2022 Guidance

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 96,506.


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 economy.

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 Serious Mistakes

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 Summit.

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 Workers

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 Regulation

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 Limit

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 most legislation.


China Auto Sales Decline as Covid-19 Outbreaks Hurt Retail Spending

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 party.


Commission Approves Report on Supreme Court Amid Partisan Differences

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 recommendations.


China Aims to 'Revise the Global Rule Set,' Top U.S. General Says

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 Tuesday.

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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