European stocks were down, with the biggest losses in the
technology and travel and leisure sectors.
Tech stocks were the biggest fallers as Treasury yields rise
following recent comments from Federal Reserve officials that have
boosted expectations for imminent monetary policy tightening.
"However, today's bearish price action is still seen as temporary,
with most market operators looking to hedge their portfolio with
other asset classes ahead of what is going to be a crucial earnings
season," ActivTrades analyst Pierre Veyret said.
Investors in interest-rate futures markets are betting on four
to five interest rate hikes this year, according to CME Group.
"Markets are still trying to find a level for rate hikes. It was
only in October the market was expecting one rate hike for 2022 and
now it's expecting four," said Edward Park, chief investment
officer at U.K. investment firm Brooks Macdonald. "That's
reflecting the level of uncertainty we have in the market right now
about the path of Fed policy."
Stocks to Watch: Germany's financial regulator has tightened
some requirements on banks operating in the country in light of
rising house prices, and this should crimp Deutsche Bank and
Commerzbank's excess capital the most, Citi said.
Citi estimates the banking sector will take a 7 basis-point hit
to core equity tier 1 ratio from the measures, which should reduce
excess capital to 6% from 7%.
"The risk is more regulators in Europe adopt such measures in
the face of stimulus-fuelled housing booms," it said, adding that
similar measures have already been taken in some Scandinavian and
Eastern European countries.
Regulators might be hoping that a strong repricing of loans will
cool demand for mortgages. Despite this headwind, Citi remains
overweight on European banks this year.
Stocks on the Move: Shares of GAM Holding fell 8% after the
Swiss asset-management firm said it would notch a net loss for 2021
equivalent to around $33 million.
High expectations put a dampener of Lindt's "excellent" sales
development in 2021, Vontobel analyst Jean-Philippe Bertschy said
after the Swiss chocolatier released figures showing higher revenue
than in 2019.
Double-digit on-year growth in all regions in 2021 is a strong
result, though slowdown in North America in the second half is
disappointing, Bertschy said. And while the sales growth should be
positive for operating leverage and, therefore, earnings,
expectations were aggressive, he noted.
Vontobel nevertheless keeps a buy rating as Lindt confirmed
guidance for 2021's operating margin and this year's sales and
margin development. Shares slip 3.2%.
SMCP's board looks more independent and offers a greater range
of expertise, Jefferies said after the French fashion group
replaced representatives of its former parent with new independent
Former Unibail-Rodamco-Westfield boss Christophe Cuvillier
becomes chairman of the board, while three new independent
directors were appointed last week after shareholders approved a
motion jettisoning all representatives of Chinese former majority
shareholder Shandong Ruyi and its holding subsidiary European
This is a positive development for SMCP's corporate governance
ahead of new ownership, Jefferies says, noting that the company
will benefit from greater director expertise across retail, real
estate and risk management. Shares slip 3.2%.
Economic Insight: The U.K.'s labor market seems to have remained
tight after both the end of the government wage-subsidy program and
the start of the Covid-19 Omicron wave, strengthening the case for
a rate increase in February, Capital Economics said.
"These [November-December] data suggest that labor demand has
remained fairly strong, that supply is struggling to keep up and
that the squeeze on households real wages is only just beginning,"
Capital Economics' chief U.K. economist Paul Dales said.
The firm expects the Bank of England to raise interest rates to
0.50% from the current 0.25% at its meeting on Feb. 3.
U.S. stock futures fell, led by large technology stocks, as
government bond yields rose to a two-year high, a sign that
investors are rotating out of stocks that do well in a
A slew of financial companies are slated to post earnings ahead
of the market open, most notably Goldman Sachs, plus Bank of New
York Mellon, PNC Financial Services and Charles Schwab. Profits
have begun to ebb at some big banks that benefited from the
tumultuous pandemic economy.
In premarket trading, shares of electric-vehicle maker Tesla
fell 2.5%. Twitter, Meta Platforms -formerly known as Facebook-and
Amazon.com each fell about 2%.
The Cboe Volatility Index-Wall Street's so-called fear gauge,
also known as the VIX-ticked up to 21.78, its highest level in a
The dollar should remain supported by expectations for imminent
U.S. interest rate rises ahead of the Federal Reserve's next
meeting, ING said. The absence of notable data before the Fed's
January 25-26 means pricing for monetary policy tightening should
remain largely unchanged, ING analysts said.
That should offer some room for speculators to rebuild dollar
longs, or bets on the currency rising, which were unwound in the
first two weeks of January, they said.
"Another grim day for global equities may also help the dollar
to find some support," they said, noting the dollar's safe haven
Cryptocurrencies, which have shown themselves in recent weeks to
be sensitive to monetary policy as risk assets, were lower.
Bitcoin, the leading crypto, was down 2.5% over the last 24 hours
to below $42,000, according to data from CoinDesk. Smaller peer
Ether fell 3.5% over the same period to around $3,150.
The latest U.K. jobs data support expectations the Bank of
England will raise interest rates further and this should benefit
sterling, ING said. Market expectations for four rate rises by
year-end are "overdone" but Tuesday's employment data and
Wednesday's inflation report will do little to challenge the
"hawkish bets," ING analysts said.
"This means that the pound's good momentum, which has remained
immune to the UK's political noise, should remain broadly intact
into the February 3 BOE meeting."
EUR/GBP could fall below 0.8300, they said. EUR/GBP fell 0.1% to
0.8353 but GBP/USD drops 0.1% to 1.3644. The data showed the
unemployment rate fell 0.4 percentage points to 4.1% in the three
months to the end of November.
The recent upward trend in German Bund yields is expected to
slow "as Covid cases increase," DZ Bank analyst Birgit Henseler
said. "In our view a downturn in business and consumer confidence
indicators will slow down the recent rise in yields," she said,
adding that a sharp and sustained fall in 10-year Bund yields isn't
in sight because of upward pressure on yields from inflation.
The German bank forecasts the 10-year Bund yield reaching 0% on
a three-month horizon and at 0.10% on a six-month view. "But if
inflation declines sharply towards the end of the year, we see
10-year yields falling back to 0% in spite of the winding down of
asset purchases," she said.
Seven-year U.K. government bonds trade cheap ahead of U.K. Debt
Management Office's planned sale Tuesday of GBP2.5 billion in the
0.5% January 2029 conventional gilt, said RBC Capital Markets.
The narrative of faster central bank policy normalization in the
U.K. and globally has pushed yields higher since the year began,
analysts at the bank said.
Seven-year gilts sold off Monday, driving yields to their
highest level since first half of 2019, though yields are now
trading at important resistance levels, limiting further advances,
they said. The bond was last tapped on Nov. 3 and will not be
tapped further this quarter, according to DMO.
Oil prices climbed to their highest level in seven years, as
geopolitical tensions in the Middle East added to worries about
tight supply. Brent crude oil futures rose as high as $88.11 a
barrel, their highest level since late-2014 before paring some
Yemen's Iran-backed Houthi rebels claimed responsibility for
drone and missile attacks on the United Arab Emirates, in
retaliation for the gulf state's renewed involvement in the Yemeni
Part of the attack targeted facilities of the state-owned oil
firm ADNOC. The attack on the major energy producer added
"geopolitical tension" to "ongoing signs of tightness across the
market," said ANZ Bank in a note.
Goldman Sachs expects Brent oil prices to rise to $100 a barrel
in the third quarter of the year before climbing as high as $105 by
the first three months of 2023.
GS expects OECD inventories to fall to their lowest level since
2000 this summer as demand remains robust in the face of new
variants of Covid-19.
At the same time, the bank doubts the capacity of OPEC+ nations
to raise supply sufficiently. The bank argues only demand
destruction can help balance the market, which will "require ever
rising oil prices given the reluctance to invest in oil during the
energy transition and the gradual depletion of shale's geological,
midstream and service capacities."
Copper prices weakened as inventories climb to a two-month high.
After falling almost constantly since August 2021, LME stocks of
the red metal have turned higher this year rising to 94,525 tons
However, supply risks could still support prices after Peruvian
community groups on Monday rejected the latest proposals to end a
standoff with a major mine.
The communities have been blockading access to the Las Bambas
copper mine over environmental concerns. Peru is the world's
second-largest copper producer and Las Bambas is the second-largest
mine in the South American nation.
German Economic Expectations Rebounded to a Five-Month High in
Economic expectations in Germany rebounded at the beginning of
the year after falling the previous month as financial market
experts expected the hit from the Covid-19 Omicron wave to be
short-lived, the ZEW economic research institute said Tuesday.
The index of economic expectations increased to 51.7 in January
from 29.9 in December, topping the 32.5 consensus forecast from
economists polled by The Wall Street Journal and the highest
reading since July.
UK Labor Market Tightened in December Despite Omicron Woes
The number of people employed in the U.K. rose in December and
unemployment continued to fall, signaling that the end of the
furlough program and the spread of the Omicron coronavirus variant
didn't weaken the country's labor market.
Staff on businesses' payrolls increased by 184,000 in December
compared with the previous month, to 29.5 million, according to
data from the Office for National Statistics released Tuesday.
Hugo Boss Gets Into Gear as 4Q Online Sales Surge
Higher online sales and good brand development helped Hugo Boss
AG record consensus-beating top-line growth in the final quarter of
2021, as the German premium-fashion company's sales strategy
appears to be bearing fruit.
According to preliminary figures released Tuesday, Hugo Boss
made sales of 906 million euros ($1.03 billion) in the fourth
quarter, up by more than half on-year at constant currency, and 12%
higher than in the same period of 2019, before the global pandemic
888 Holdings Sees 2021 Revenue Growth of 14% on Expansion in
888 Holdings PLC said Tuesday that it expects to report revenue
growth of 14% for 2021, driven by an expansion in regulated
The online betting and gaming company said it anticipates
revenue for the year of $972 million compared with $850 million a
year earlier. Growth was driven by regulated and taxed markets,
with strong performances in the U.K., Italy, Romania and
EU New Car Sales Fell in December
Passenger-car registrations across the European Union fell in
December, marking the sixth consecutive month of decline in 2021,
according to the European Automobile Manufacturers Association.
New car registrations--a reflection of sales--declined roughly
23% on year to 795,295 vehicles for the month, the ACEA said
Tuesday. In the January-December period, registrations for new
passenger cars in the EU stood at 9.7 million, down 2.4% on year
mainly due to the semiconductor shortage's hit on production.
Rolls-Royce, Bentley, BMW Sales Surge as Cheaper Brands Lag
BERLIN-Luxury car brands such as Rolls-Royce, Bentley, Porsche
and BMW have reported record sales, thanks to customers who have
craved them and manufacturers that have directed scarce chips
toward their most profitable models.
With international travel stalled during the pandemic and many
avenues of flashy spending closed to them, a young generation of
luxury-car consumers went on a shopping spree last year.
Rio Tinto Full-Year Australian Iron-Ore Shipments Fall; 2022
Exports Likely Higher
Rio Tinto PLC said annual iron-ore shipments from its Australian
mining operations fell by 3% in 2021 as projects were disrupted by
a worker shortage and supply chain issues, but said shipments will
likely increase this year.
The world's No. 2 mining company by market value said 321.6
million metric tons of iron ore were shipped from its operations in
remote northwest Australia last year. Fourth-quarter shipments were
down 5% year-over-year at 84.1 million tons, the miner said.
Credit Suisse's António Horta-Osório Lost Board Support Over
Covid-19 Rules Breach
He came to fix Credit Suisse Group AG's broken culture. Then he
became part of the problem.
António Horta-Osório was hoping for a slap on the wrist Sunday
from the Credit Suisse board for breaking coronavirus quarantine
rules on trips to events, according to people familiar with his
departure. Instead, he had to leave his job as the bank's chairman
for not upholding the high standards he set when joining Credit
Suisse eight months ago.
Yemen's Houthi Rebels Claim Aerial Attacks on U.A.E. Capital
Yemen's Houthi rebels said they were behind aerial attacks in
the United Arab Emirates that killed three people on Monday, as
intensifying fighting in a 7-year-old civil war spills out across
the broader Middle East.
The Houthis, who are backed by Iran, said they had targeted Abu
Dhabi with ballistic and cruise missiles and a large number of
drones in retaliation for a recent escalation by the U.A.E. in
Yemen, where Emirati-backed militants last week dealt the Houthis
an unexpected defeat in the oil-rich province of Shabwa. The
Emiratis have intensified their efforts recently in support of
local militants in Yemen in a Saudi-led coalition that had suffered
Bond Yields Hit Two-Year High as Stock Futures Fall
U.S. stock futures fell and bond yields hit two-year highs,
intensifying investor fears that rising interest rates will set
back the large technology stocks that have come to dominate
Futures for the S&P 500 fell 1% Tuesday, after U.S. markets
were shut Monday for a public holiday. Contracts for the
tech-focused Nasdaq-100 declined 1.6% and futures for the Dow Jones
Industrial Average fell 0.7%.
Offices Are Leased Up, Thanks to Cash Gifts for Tenants, Months
of Free Rent
The recent recovery of U.S. office rents owes much of its
success to something landlords hate to discuss: all the freebies,
cash gifts and other incentives they have to fork over to
These sort of payouts have long existed to a degree in the
office, retail real-estate and apartment markets, especially in
places like New York City and San Francisco. But they have never
been so big or so commonplace as they are in urban office markets
these days, real-estate brokers say.
With Rate Increases Looming, Investors Dump Shares of
Moonshot stocks are coming back to Earth.
As the Federal Reserve moves closer to raising interest rates,
investors are repricing their bets on one of the riskiest corners
of the market: shares of companies that don't make money.
Cash-burning technology firms, biotechnology companies without any
approved drugs and startups that listed quickly via mergers with
blank-check companies-some of which soared during the pandemic-have
BOJ Raises Inflation Expectations Amid Pandemic-Related Supply
TOKYO-The Bank of Japan raised its price forecast slightly amid
pandemic-related supply shortages, although it still expects its 2%
inflation target won't be reached for at least the next two
In its quarterly outlook released Tuesday, the bank's policy
board projected inflation would increase 1.1% in the year ending
March 2023 and 1.1% in the following year, up from previous
projections for 0.9% and 1.0%, respectively.
China PBOC Aims to Act Forcefully to Help Stabilize Economy
China's central bank said Tuesday that it would act early and
more forcefully to help stabilize the economy in 2022, a
politically important year for Chinese leaders.
The People's Bank of China plans to guide financial institutions
to expand their credit issuance this year, and will use multiple
monetary instruments to keep market liquidity reasonably ample,
said Liu Guoqiang, vice governor at the central bank, during a
BlackRock's Climate Stance Is About Profits, Not Politics, Larry
Larry Fink's efforts to get companies to adopt climate-friendly
policies have led some to call him an activist. The BlackRock Inc.
chairman and chief executive prefers a different label:
In his annual letter to the CEOs of the companies in which
BlackRock invests, Mr. Fink said businesses that don't plan for a
carbon-free future risk being left behind. The quest for long-term
returns, and not politics, is what animates the money manager's
efforts, he wrote.
China's Zero-Covid Policies Cause a Traffic Jam in Vietnam as
China's zero-Covid policies are putting Chinese cities into
lockdown and grounding air travel anew. They are also disrupting
trade routes across its land borders that are lifelines for the
region's farmers and merchants.
In neighboring Vietnam, thousands of trucks laden with dragon
fruit, jackfruit, watermelons and other produce have been backed up
at the border awaiting passage for weeks. Their trips were
disrupted after Chinese authorities toward the end of last year
suspended operations at a number of gates or slowed traffic citing
a need to contain Covid-19.
Taliban Intensify Efforts to Take Control of Afghanistan's
ROME-Five months after the Taliban seized Kabul, Afghanistan's
new rulers are stepping up their campaign to gain control of the
country's embassies abroad, most of which continue to be run by
diplomats appointed by the former, U.S.-backed government.
No foreign capital has formally recognized the Taliban. And
nearly all of the country's 65 diplomatic missions still fly the
flag of the fallen Afghan republic-though after the Aug. 15 flight
of former President Ashraf Ghani from Kabul, they have no
government to represent.
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(END) Dow Jones Newswires
January 18, 2022 06:46 ET (11:46 GMT)
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