European stocks traded lower Thursday, and with little in the
way to drive market direction, investors watched Omicron-related
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
"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.
Stock futures edged down as investors assessed the latest
headlines on restrictions to limit the spread of the Omicron
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 Amazon.com 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
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
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
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
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
"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
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
"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
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
"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
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,
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 Amazon.com 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
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
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., Amazon.com 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
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
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
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
Mambu Valued at $5.3 Billion in Investment Led by Private-Equity
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
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
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.
Market Can Weather Evergrande Crisis, China's Top Central Banker
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
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
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
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
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
Olympics Boycott Expands to Include Diplomatic Officials From
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
U.S. Accuses El Salvador's Government of Cutting a Deal With
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
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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