European stocks traded lower Thursday, and with little in the way to drive market direction, investors watched Omicron-related developments.

European governments have moved to tighten restrictions, spurring concerns about setbacks to the economic recovery. U.K. Prime Minister Johnson outlined a new work-from-home mandate and mask guidelines on Wednesday evening. A study released by a Japanese scientist said the variant was four times more transmissible than the Delta strain.

"The UK's move to new restrictions points towards the expected playbook for the weeks to come, and could well put some pressure on equity markets in what is normally a fairly positive time," said Chris Beauchamp at IG.

Shares on the Move: Rolls-Royce shares fell 3.2% after its trading update. CMC Markets said that while things are moving in the right direction, the engine-maker is still set to fall short of its 2021 target for large engine flying hours.

CMC's Michael Hewson said this isn't surprising given what has been happening with the Delta coronavirus variant in Europe and latterly Omicron, and international travel is likely to remain a headwind heading into next year.

Rolls-Royce returned to positive free cash flow in the third quarter, but the company still has some way to go to reach its 2022 free cash flow target of GBP750 million, and much of this will depend on when and if international travel returns to normal.

Market Outlook: JPMorgan said in its "2022 Year Ahead Outlook" that it expects the Covid pandemic to end next year, which will allow the global economy to go back to normal pre-Covid conditions.

"In 2021, economies around the globe made great progress towards recovery and re-opening. Our view is that 2022 will be the year of a full global recovery, an end of the global pandemic, and a return to normal conditions we had prior to the Covid-19 outbreak.

In our view, this is warranted by achieving broad population immunity and with the help of human ingenuity, such as new therapeutics expected to be broadly available in 2022."

Metzler said financial markets will have to live with the fact that the European Central Bank won't commit itself for as long as at all possible. This backdrop implies volatility near term.

"We think investors should be prepared for some volatility in the financial markets in the coming weeks, especially after corona [Covid-19] continues to make big waves and the price advances surprise on the upside." The ECB's next monetary policy meeting is scheduled for Dec. 16.

U.S. Markets:

Stock futures edged down as investors assessed the latest headlines on restrictions to limit the spread of the Omicron variant.

Stocks have swung in recent weeks, buffeted by conflicting headlines on the Omicron coronavirus variant and mixed signals on the health of the economy. Investors are still awaiting further data on the strain's severity and vaccine efficacy. Some pharmaceutical companies including Pfizer and GlaxoSmithKline have said this week that their shot and antibody treatment appear to work in early-stage studies.

Up ahead, cloud-computing firm Oracle, network company Broadcom and wholesaler Costco are set to report Thursday after market close. Popular meme stock GameStop declined 3.2% in off-hours trading after the company posted earnings that showed a widening loss last quarter.

"Earnings have been strong overall, it's a really positive underlying driver for equity markets," said Kiran Ganesh, a multiasset strategist at UBS Global Wealth Management.

Shares of declined 0.2% premarket after the Italian government fined it $1.3 billion for alleged abuse of market dominance. The European Union is also investigating the e-commerce giant in a similar antitrust case.

Fresh data on U.S. jobless claims, a proxy for layoffs, is set to go out at 8:30 a.m. ET. Economists are forecasting that the level will remain near pandemic lows. It has come close to the pre-pandemic average in recent weeks in a sign that the labor market is improving.


The dollar was higher in Europe, with the USD Index back above 96.00, as investors looked ahead to data Friday that are expected to show inflation accelerated further in November, which would support bets the Federal Reserve will speed up the withdrawal of asset purchases.

On Wednesday the dollar "emerged as an underperformer" on reduced safe haven flows after the Pfizer/BioNTech announcement, said ING analysts. "Investors may be attracted by current levels [in particular against low-yielders] to build back some dollar longs ahead of the CPI report and the Fed meeting next week, so we would expect the dollar to start finding some support as early as today."

Sterling is likely to weaken versus the dollar if the Bank of England delays raising interest rates and the Fed accelerates the tapering of asset purchases, MUFG Bank said.

The BOE will likely keep rates unchanged until at least February after the U.K. government tightened coronavirus restrictions and following recently cautious comments from BOE officials, MUFG's Lee Hardman said.

Meanwhile, the Fed should speed up tapering at its December 14-15 meeting, he said. "The time gap between the first BOE and Fed rate hikes is likely to be much shorter now than initially expected which should keep downward pressure on cable heading into year end and moving it closer to the 1.3000-level."

Bitcoin reversed direction after four days of gains, slipping 2% from its level at 5 p.m. Wednesday. It traded below $50,000, a 28% drop from its record high set in November.

The Norwegian krone's fell after weaker-than-expected economic growth data but could resume its recent appreciation next week before the central bank's policy meeting, ING said.

"Markets may have started to position for a hawkish tone by the Norges Bank as it announces monetary policy (and most likely hike rates) next week," ING analysts said.

There is room for the krone to extend its recent gains into the Norges Bank's December 16 meeting, they said. EUR/NOK rose 0.3% to 10.1275 after earlier hitting a near two-week low of 10.0575, according to FactSet.

Data on showed Norway's economic growth was flat month-on-month in October, versus the 0.4% growth expected by economists in a WSJ survey.


Long-dated yields for government debt edged higher still in Europe, after they posted their biggest three-day rise in weeks following the Pfizer/BioNTech Omicron report. Meanwhile, the 2-year yield, which is most closely associated with the near-term path of Fed policy, declined on Wednesday.

Bank of America said the yield curve will keep flattening: "The hawkish Fed pivot suggests risks of further curve flattening and further pull forward of rate hikes."

Higher U.S. front-end rates "are a clear reflection of the recent shift in Fed policy due to elevated inflation concerns," while fears of policy errors help drive the long-end trend, as tightening begins when the economy still struggles, said BofA.

The European Central Bank's first interest rate rise could come at the beginning of 2024, with a 25 basis point increase, said Barclays. It sees some risks of a rate hike already a quarter earlier, or even in mid-2023, subject to inflationary developments.

"If inflation does not fall below 1.5% in 4Q 2022-1Q 2023, as per our and the ECB's current forecasts, but converges to 2% from above, the lift-off date would likely be brought forward to 1H 2023," Barclays said.

The new German government--a coalition of the Social Democrats, Greens and the Free Democrats--won't have a significant impact on the outlook for German Bunds, said Franziska Palmas, markets economist at Capital Economics.

"We think German politics will continue to have little bearing on moves in Bund yields in the coming year," Palmas said, adding that the policies proposed in the coalition agreement are unlikely to significantly alter the outlook for either the economy or the public finances.

Capital Economics expects 10-year Bund yields to rise gradually over the next year as the recovery continues and the ECB edges toward tightening policy.


Brent crude could climb even further after a recent rebound as structural deficits keep supporting prices, Goldman Sachs said. Brent has already recovered about half of the ground it lost as the emergence of the Omicron variant fueled concerns about oil demand.

"We therefore recommend investors re-engage some long positions, but caution that oil markets may see substantial increases in volatility and decreases in liquidity in coming weeks," it said.

Iron ore has become Morgan Stanley's top mined-commodities pick on a six-month horizon, citing an expected recovery in Chinese steel output following the Beijing Winter Olympics in February.

A recent slip in aluminum prices should give investors a good entry point to buy into that commodity as well in the coming months, supported by constrained Chinese supply, said Morgan Stanley.

"We also highlight nickel's strong demand story, supported by both stainless steel output and EVs, and supply risks in Indonesia." Coal and zinc are toward the bottom of its list of picks, given Beijing has intervened to boost coal supply and zinc is facing risks to demand.

Meantime, Citi expects a U-shaped swing in iron-ore prices in 2022 as an easing in Chinese credit will likely prompt a recovery in property starts and sales in the second half of 2022, following major declines in the first half. Citi said China already has plenty of iron ore sitting in stockpiles at its ports to meet upticks in demand.

"Steel mills' weak appetite for purchasing iron ore, owing to lower output and rising use of steel scrap, has resulted in 30-million-ton inventory builds at Chinese ports since July 2021."

Gold was flat in early European trade with investors focusing on upcoming U.S. inflation data due this week.

Geopolitical tensions between the U.S. and Russia may help support demand for safe-haven assets like gold in the near term, Commerzbank said.



Italy's UniCredit Unveils New Strategy as Restructuring Ends

ROME-UniCredit SpA said it plans to expand by hiring staff and investing in digitization as part of a three-year strategic plan that includes share buybacks and bigger dividends.

The plan, the first since Chief Executive Andrea Orceltook the helm in April, targets annual revenue growth of about 2% and profit growth of 10% through 2024.


Amazon Fined $1.3 Billion in Italian Antitrust Case

Italy's antitrust regulator fined Inc. $1.3 billion for harming competitors by favoring third-party sellers that use the U.S. company's logistics services.

The fine of 1.13 billion euros comes as Amazon awaits the outcome of a similar investigation being carried out by the European Union. The EU last year separately filed antitrust charges against Amazon for allegedly using nonpublic data from third-party sellers to compete against them.


Rolls-Royce Returned to Positive Free Cash Flow in 3Q

Rolls-Royce Holdings PLC said Thursday that it restored positive free cash flow in the third quarter.

The British aerospace and defense company said that the gradual recovery in international flying, combined with market recovery in Power Systems and resilience in Defense, are driving improvements in its performance.


U.K. Imposes New Covid-19 Restrictions as Omicron Cases Double Every Few Days

LONDON-The British government warned that Covid-19 infections caused by the Omicron variant are doubling every two or three days, as it imposed new restrictions in England, including a work from home order and a requirement for proof of vaccination for indoor venues such as nightclubs.

The news is a sign of increasing concern over the trajectory of the Omicron variant, which British authorities say could crowd out the currently dominant Delta variant within weeks and result in over a million total Covid-19 infections by the end of the month. Britain has recorded 10.6 million cases over the course of the whole pandemic.


AstraZeneca Covid-19 Antibody Authorized by FDA as Novel Tool to Prevent Symptomatic Disease

The U.S. Food and Drug Administration authorized a preventive antibody combination from AstraZeneca PLC that has shown strong efficacy in reducing risk of symptomatic Covid-19, offering a first-of-its-kind alternative for a minority of people for whom vaccines are considered less effective.

The antibody cocktail, called Evusheld, is aimed primarily for use in a minority of adolescents and adults age 12 and older with moderate to severely compromised immune systems. That may be because they have cancer or another illness or take medications or undergo treatments such as chemotherapy that inhibit an immune response to Covid-19 vaccines, the FDA said in a statement.


Justice Department Told Deutsche Bank Lender May Have Violated Criminal Settlement

The Justice Department has informed Deutsche Bank AG that the German lender may have violated a criminal settlement when it failed to tell prosecutors about an internal complaint in its asset-management arm's sustainable investing business, according to people familiar with the matter.

The complaint alleged that the asset manager, DWS Group, overstated how much it used environmental, social and governance criteria, known by the industry acronym ESG, to manage its assets. U.S. authorities learned of the issue in an August Wall Street Journal article, rather than from the bank, which had ongoing disclosure and compliance obligations under the earlier criminal settlement, according to people familiar with the matter.


Uber Workers Would Be Classed as Employees Under EU Proposal

Uber Technologies Inc., Inc.-backed Deliveroo PLC and other gig-economy companies could be forced to give more benefits to their drivers and delivery personnel under a European Union proposal that would reclassify many of their jobs as employment.

The draft bill, proposed Thursday by the EU's executive arm, would establish a presumption that many of the companies in what is often called the gig economy actually employ workers, depending on the level of control the companies exercise over how workers perform their jobs. Until now, most such companies have deemed the majority of their workers to be independent contractors.


German Exports Rose in October, Beating Forecasts

German exports increased in October, beating forecasts and surpassing pre-pandemic levels.

Exports rose 4.1% on month in adjusted terms, statistics office Destatis said Thursday. Economists had forecast a 1.1% increase in adjusted terms, according to a poll by The Wall Street Journal.


DS Smith 1H Pretax Profit, Revenue Rose; Increases Dividend

DS Smith PLC said Thursday that pretax profit and revenue rose for the first half of fiscal 2022 and that it has increased the interim dividend.

The packaging company made a pretax profit of 175 million pounds ($231.1 million) for the six months to Oct. 31 compared with GBP97 million a year earlier.


Vinci, Eiffage Raise Offer for France's Prado Tunnel Operator

French infrastructure company Vinci SA and civil-engineering firm Eiffage SA said late Wednesday that they have raised their price for a takeover of tunnel operator Societe Marseillaise du Tunnel Prado Carenage.

Vinci said they would file a takeover with the French market authorities for a price of 27 euros ($30.63) a share, up from EUR23 previously.


Mambu Valued at $5.3 Billion in Investment Led by Private-Equity Firm EQT

A group led by private-equity company EQT AB is acquiring a minority stake in banking-software firm Mambu, a deal that values the financial-technology company at more than $5.3 billion, the companies said.

The investment is the latest bet on European technology providers that are taking advantage of the switch to digital-banking services by consumers and businesses.


U.S. Moves to Tighten Iran Sanctions Enforcement as Nuclear Talks Stall

The Biden administration is moving to tighten enforcement of sanctions against Iran, according to senior U.S. officials, the first sign of Washington increasing economic pressure on Tehran as diplomatic efforts to restore the 2015 nuclear deal falter.

According to senior State and Treasury Department officials, the U.S. will send a top-level delegation, including the head of Treasury's Office of Foreign Assets Control, Andrea Gacki, next week to the United Arab Emirates. The U.A.E. is a top U.S. ally but also Iran's second-largest trade partner and a conduit for Iran's trade and financial transactions with other countries.



Jobless Claims Are Stabilizing at Pre-Pandemic Levels

Worker filings for unemployment benefits are settling at pre-pandemic levels as a tight labor market keeps layoffs low.

Economists surveyed by The Wall Street Journal expect jobless claims, a proxy for layoffs, fell to 211,000 for the week ended Dec. 4 from 222,000 the previous week. The Labor Department will report last week's jobless claims figures on Thursday at 8:30 a.m. ET.


Market Can Weather Evergrande Crisis, China's Top Central Banker Says

Financial stress at China Evergrande Group and a few of its peers won't cause longer-term damage to the Hong Kong market, and broader problems with debt at Chinese property developers should be dealt with according to market principles, China's top central banker said.

Hong Kong-listed Evergrande, which is one of China's largest developers and has close to $20 billion in U.S. dollar bonds outstanding, didn't make overdue payments on some bonds before a final deadline Monday, potentially setting the stage for Asia's largest default. Fitch Ratings downgraded Evergrande and two key subsidiaries to a "restricted default" rating on Thursday, citing the missed coupon payments.


China Reopens a Funding Spigot for Property Developers

HONG KONG-Chinese regulators have quietly reopened an onshore funding spigot for the country's property developers, enabling some firms to tap into an obscure form of debt financing that helps pay their suppliers.

Over the past four years, real-estate developers from China Evergrande Group to Country Garden Holdings Co. were regular users of yuan-denominated debt instruments known in the industry as "supply chain asset-backed securities." Property firms were behind the equivalent of more than $38.6 billion in such bonds that were issued last year, according to Wind data, a huge jump from $12.4 billion in 2019. The actual totals are likely higher, because some deals from developers weren't classified as such.


China's Factory-Gate Inflation Softens in November

HONG KONG-China's factory-gate inflation ebbed in November after hitting a 26-year high, which economists say will give policy makers more room for easing to bolster a slowing economy.

The producer-price index rose 12.9% from a year earlier in November, down from 13.5% growth in October, which was the fastest increase since 1995, according to data released by the National Bureau of Statistics. The reading beats the 12% increase expected by economists polled by The Wall Street Journal.


Covid Spurs Biggest Rise in Life-Insurance Payouts in a Century

The Covid-19 pandemic last year drove the biggest increase in death benefits paid by U.S. life insurers since the 1918 influenza epidemic, an industry trade group said.

Death-benefit payments rose 15.4% in 2020 to $90.43 billion, mostly due to the pandemic, according to the American Council of Life Insurers. In 1918, payments surged 41%.


Senate Passes Legislation Aimed at Blocking Biden's Covid-19 Vaccine Rules for Employers

WASHINGTON-The Senate approved legislation aimed at nullifying President Biden's vaccine-or-test mandate for private employers, marking a significant rebuke even if lawmakers ultimately fall short of stopping the new Covid-19 rule.

The measure passed 52-48, with Democratic Sens. Joe Manchin of West Virginia and Jon Tester of Montana joining all Republicans in supporting the bill.


Covid-19 Vaccine Rollout for Young Children Is Slow in Many States

Covid-19 vaccinations for children 5 to 11 years old are off to a slow start in many parts of the U.S., federal data show, underscoring the challenges health officials face in persuading parents to inoculate their children.

Roughly five million, or 18%, of the estimated 28.4 million U.S. children in the 5-to-11 age bracket have gotten at least one shot in the five weeks since they were cleared to get vaccinated, the data show. The picture varies by region, with rates in several New England states above 30% and some states in the South far off the national pace, an analysis by The Wall Street Journal of the data shows.


Olympics Boycott Expands to Include Diplomatic Officials From U.K., Canada

OTTAWA-The U.K. and Canada on Wednesday joined a widening diplomatic boycott of the 2022 Winter Olympics in Beijing, citing concerns over China's human rights record.

The U.S. said on Monday that it wouldn't send government officials to the Games, which are set to begin in February, although athletes will still be able to participate. The Biden administration had faced pressure to boycott the Olympic Games for months, but those calls intensified after Chinese tennis star Peng Shuai vanished from public view in November after making a public allegation of sexual assault against a retired Chinese official.


U.S. Accuses El Salvador's Government of Cutting a Deal With Gangs

The administration of El Salvador's President Nayib Bukele secretly negotiated a truce with the imprisoned leaders of the country's top criminal gangs in exchange for financial and prison benefits, including sex workers and cellphones, the U.S. Treasury said on Wednesday.

The accusation by the U.S. government is the latest sign of rising tension with the impoverished Central American nation, where rampant violence and endemic poverty have led to mass migration to the U.S.


Biden Rules Out Unilateral Force if Russia Invades Ukraine

President Biden said Wednesday he hoped to convene meetings between Russia and NATO allies to discuss Moscow's troop buildup along the Ukrainian border, and ruled out the unilateral use of U.S. force if Russia invades its neighbor.

And in Moscow, Russian President Vladimir Putin said he was responding to a "creeping threat" from the North Atlantic Treaty Organization and didn't fully close the door on an invasion.


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(END) Dow Jones Newswires

December 09, 2021 06:34 ET (11:34 GMT)

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