MARKET WRAPS

Stocks:

European stocks fell sharply on Friday led by technology, which echoed a late-session selloff on Wall Street. Profit warnings in the renewables sector sent the shares of two Siemens subsidiaries tumbling.

Wind-power company Siemens Gamesa Renewable Energy fell nearly 15% after it posted an operating loss and lowered its guidance, citing supply-chain constraints.

The warning from its Spanish subsidiary prompted Siemens Energy to lower its targets for fiscal 2022, and shares tumbled 10%. Those of rival Vestas Wind Systems dropped 6%.

While tech led the losses in Europe, few sectors showed any green. Among chip names in Europe, heavily weighted ASML dropped 3%, and ams shares fell 3%, while business software group SAP was down 1.2%.

The FTSE 100 fell, with mining shares among the worst performers as commodity prices slipped. Energy names were under pressure as a risk-off mood hit oil prices and BP and Royal Dutch Shell shares fell 1% each.

Meanwhile, tensions between Russia and NATO are also weighing on market sentiment, investors said.

"Geopolitical risk plays a role, repricing of [central bank] policy plays a role and the inflation mix in the sense of cost pressures. You put all those together and there is actually quite a change," said Georgina Taylor, a multiasset fund manager at Invesco. "Risk premium for equities needs to go up."

Shares on the move: Siemens Gamesa's profit warning is down to internal and external factors, Citi's Vivek Midha said after the Spanish renewable-energy company cut fiscal 2022 guidance on preliminary 1Q results. Issues with the ramp-up of the company's 5.X turbine platform affected 1Q results, but so did the wider supply-chain issue, Midha noted.

The underlying loss in 1Q was better than consensus had expected, but the company's guidance cut goes further than the 1Q miss because of global assumptions on supply-chain problems ahead--namely, that they won't ease as quickly as thought, Midha says.

Citi has a neutral rating and a EUR20.50 target on Gamesa stock.

Data in focus: Societe Generale expects Greek government bonds to become investment grade within two years, in the first half of 2023 at the earliest, it said. It bases its view on improved fundamentals but added that it sees "near-term pain and relative underperformance versus other peripherals as investors worry about rising yields and spreads."

The French bank's rates strategists add that Greece's recently launched new 10-year government bond attracted lower demand "than we have become accustomed to, similar to other January syndications in peripheral bonds."

Greece sold EUR3 billion in June 2032-dated bonds on Wednesday, with books for the transaction closing in excess of EUR15 billion.

The latest U.K. retail sales figures for December don't make for pleasant viewing, ING's developed markets economist James Smith said. Retail-sales volumes dropped 3.7% from a month earlier.

"Some of this fall is undoubtedly linked to Omicron, given footfall appeared to have been a little lower in the run-up to Christmas," Smith said.

But a lot of this also looks like a pullback after an unusually strong November and Black Friday, he added.

Strong October sales also hinted that consumers did more of their Christmas shopping early relative to past years, Smith said. ING said these figures are unlikely to move the needle much for the Bank of England, which looks poised to hike rates again in February.

In the eurozone, a combination of labour shortages, high inflation, and increased minimum wages, means 2022 is set for a decent recovery in nominal wage growth, ING said.

The past few months have seen surprisingly rapid declines in unemployment and the economy has recovered quicker than expected, which has resulted in labor shortages, ING's economists said.

The relationship between unemployment and inflation--the Phillips curve--has flattened in the last decade, they said. "It takes longer for wage growth to emerge from low unemployment and it leads to less wage growth as well," ING says.

But this relationship remains alive. ING expects wage growth to significantly accelerate in 2022 and 2023 to around 3.5%, as most important wage growth drivers point to a sharp increase.

U.S. Markets:

Stock futures were mixed Friday, but the Nasdaq was poised to push deeper into correction territory as technology stocks remain under pressure on multiple fronts.

Wall Street looks to end the week after a tumultuous few days of trading. Wednesday and Thursday both saw the Nasdaq rise more than 1% and then end down more than 1%, which is the first time a back-to-back rise and fall like that has happened in almost a year. The index entered correction territory earlier in the week -- down more than 10% from its high in mid-November -- and was heading deeper into the red Friday.

One of the latest catalysts for a move lower among tech stocks, which have a weighting with more influence in the S&P 500 and Nasdaq than the Dow, was downbeat news about Peloton. Underwhelming financial results from Netflix after the bell Thursday haven't helped the picture.

"The bears took control of the ball," said Jim Reid, a strategist at Deutsche Bank. "The S&P 500 is on track for a third consecutive weekly decline for the first time since September 2020."

Forex:

The dollar has been under pressure for most of January with favorable interest rate differentials failing to prop up the currency, RBC Capital Markets said.

The rally in commodity prices and U.S. equity weakness have been a more important driver for the dollar in the last month, RBC's George Davis said.

"With U.S. equities recently posting a series of bearish long-term trend reversals, further declines could undermine the USD via shifts in asset allocation." U.S. equity declines may trigger outflows from U.S. assets, thereby hurting the dollar, he said.

The Turkish lira is likely to weaken this year following a temporary stabilisation as Turkey's central bank looks set to resume its interest rate cutting cycle after leaving rates unchanged Thursday, Capital Economics said.

"We think that falling inflation towards the end of the year will provide the motivation for the CBRT to press ahead with further rate cuts amounting to 100 basis points placing renewed downward pressure on the lira," Capital Economics economist Joseph Marlow said.

Meanwhile, very low foreign exchange reserves mean policymakers won't be in a position to intervene in the currency market to bolster the lira, he says. Capital Economics expects USD/TRY to rise to 16.00 by year-end from 13.3994 currently.

Cryptocurrencies, already pressured by market sentiment away from risk assets, tumbled. Bitcoin was 7.5% lower over the past 24 hours to below $39,000, according to data from CoinDesk. Smaller peer Ether dropped around 8.5% over the same period to below $2,900.

The fall can mostly be blamed on Russia, where cryptocurrencies are popular among citizens and the country is a hub for mining -- the process that generates new digital currency tokens. The Russian central bank has proposed banning crypto mining as part of a wider prohibition that includes preventing people from trading or transacting with the likes of Bitcoin.

"The pessimism continues to grow among investors and traders when it comes to riskier assets and this is chiefly influencing the price of equities and bitcoin," said Naeem Aslam, chief market analyst at AvaTrade, in a note to clients.

"The thing with bitcoin is that when it begins to fall, the price action drops like there is no tomorrow," said Aslam, who added that January also tends to be a volatile month for the cryptocurrency on a historical basis.

Sterling fell after data showed retail sales unexpectedly declined in December. Retail sales dropped 0.9% year-on-year, compared to the 3.4% increase expected by economists in a WSJ survey.

Many consumers did Christmas shopping earlier than usual in November and stayed at home in December as the Omicron coronavirus variant spread.

"Even as Plan B restrictions lift, the number of shoppers is unlikely to snap back to pre-pandemic times in high streets and city centre locations given that hybrid working is fast becoming the norm and household budgets are tightening," Hargreaves Lansdown analyst Susannah Streeter said.

Bonds:

The rise in government bond yields won't be a linear process, DZ Bank analyst Christoph Kutt said. "The trajectory of inflation rates may involve downside as well as upside surprises, which the central banks will have to address as part of their exit strategies," he said.

The Fed's approach toward policy normalization will be "far more forceful" than that of the European Central Bank, Kutt said.

The ECB has to be vigilant against inflation risks and the threat of eurozone fragmentation, he said.

Soaring inflation and the prospect of central banks raising interest faster than anticipated is fueling yield volatility in credit markets. "Yield volatility is likely to remain elevated, a further gradual repricing of European credit is in the cards," UniCredit said.

The stock of negative-yielding euro corporate bonds in the iBoxx senior investment-grade nonfinancial index has plunged to 11% at present from 55% in November 2020, they sid.

Credit curves are likely to retain their steepening bias and UniCredit reiterates its preference for corporate bonds maturing in between three and five years.

Commodities:

Oil's rally should continue as OPEC struggles to meet its production targets and winter weather keeps demand strong, said TD Securities. Demand expectations have risen this week, the firm noted, pointing to upward revisions to forecasts from the IEA.

At the same time, signs that OPEC is struggling to meet supply targets are building. Add to that the possibility of cold winter weather in the Northern Hemisphere and oil's outlook is bullish, said Bart Melek, the firm's head of commodity strategy.

"As the winter continues, strong demand across the energy complex will add to bullish sentiment. There is a very real possibility that colder-than-usual weather due to La Niña weather patterns will drive demand higher, pushing the market into a deficit sooner, rather than later."

A shortage of nickel worsened in November, according to data from the International Nickel Study Group. The global nickel market had a 3,000-metric-ton deficit in November, 1,400 tons larger than in the previous month, the INSG said.

In the 11 months through November, the shortage of nickel totaled 167,000 tons, compared with a surplus of 92,500 tons in the same period during 2020. Nickel prices have soared this month as stocks have dwindled.

Reports that Indonesia, a major producer, is considering a tax on nickel exports have put additional upward pressure on prices. Three-month nickel on the LME fell 0.7% to $23,680 a ton, but remains more than 14% higher for the month.

Gold edged lower in early European trade on position adjustment ahead of the weekend. The focus of gold traders is shifting to next week's FOMC meeting, with Russia-Ukraine tensions probably factored into the prices of precious metals, Phillip Futures said.

Rising U.S. interest rates remain a potential headwind since this translates into a higher opportunity cost of holding non-yielding bullion, the brokerage added.

Copper prices have seen choppy trading this week with demand concerns presenting headwinds while falling inventories have offered support. That range-bound trading is likely to continue with prices averaging $9,690 a metric ton this year, said analysts at BNP Paribas.

Weakness in China's construction sector is likely to drag on copper demand in the first half of the year while rising mine supply should also add to headwinds, the bank said.

Three-month copper on the LME was down 0.8%, joining a rout in global markets that comes as investors slash their exposure risk assets on fears of slowing economic growth. For the week, the metal is on course to end with a modest 2.2% gain.

   
 
 

EMEA HEADLINES

Investors See New Sparkle in Europe's Tech Scene

Europe's tech scene has struggled to emerge from the shadows of giants in the U.S. and Asia, but friendly local policies and a global overflow of investment capital are now giving the region a gusher of cash.

Investments in European tech firms soared to $93.3 billion last year, a record and a 142% increase over the year before, according to CB Insights. The number of deals jumped as well, to 7,051 from 5,746 the year before and 6,051 the year before that.

   
 
 

France's Total Exits Myanmar, Citing Shareholder Pressure Since Coup

SINGAPORE-France's TotalEnergies SE said it is withdrawing from Myanmar over shareholder pressure and a deteriorating human-rights situation since the country's military seized power in a coup last year.

Western energy companies have faced growing calls to divest or withhold revenue from the junta, while governments including the U.S. and France have come under pressure to sanction the sector. Myanmar's oil-and-gas industry is the country's single largest source of foreign revenue.

   
 
 

Eurozone Inflation Seen Falling in 2022, But More Slowly Than Expected

Eurozone inflation climbed to a record-high level of 5.0% in December but should start decelerating from January. However, more persistent supply-side price pressures observed in energy, food and non-energy goods suggest a very gradual inflation moderation in 2022, Barclays says.

For Barclays, the eurozone inflation outlook remains uncertain with risks skewed to the upside. The surge in wholesale energy prices has so far mainly boosted inflation in counties with a relatively high share of variable-rate utility tariffs in the overall consumer bill, such as Spain and Belgium. This leaves countries with a larger share of regulated and fixed-rate utility tariffs--including Germany, France and Italy--exposed to delayed, and potentially sharp, consumer price hikes.

   
 
 

Siemens Gamesa Issues FY2022 Pft Warning After Swinging to 1Q Loss Amid Supply Bottlenecks

Siemens Gamesa Renewable Energy SA lowered its guidance for the fiscal year late Thursday after it swung to an operating loss in the first quarter on continued supply-chain constraints.

In the three months to Dec. 30, the Spanish energy company posted an adjusted loss before interest and taxes of 309 million euros ($350 million) from a profit of EUR121 million a year earlier, on revenue that fell to EUR1.8 billion from EUR2.3 billion, according to preliminary figures.

   
 
 

Siemens Energy Lowers FY2022 Targets on Gamesa Profit Warning

Siemens Energy AG late Thursday lowered its targets for fiscal 2022 after swinging to an operating loss in the first quarter, and following a profit warning from its Spanish renewables subsidiary.

According to preliminary results, Siemens Energy made an adjusted loss before interest, taxes and amortization of 57 million euros ($64.5 million) in the October-December period, compared with adjusted Ebita of EUR243 million in the same quarter the previous year. According to a company-compiled consensus, it had been expected to make a profit of EUR91 million.

   
 
 

U.K. Retail Sales Slumped in December as Omicron Cases Raged

U.K. retail sales sank in December, sharply missing analysts' forecasts, as the nation witnessed surging Covid-19 cases and tightened social-distancing guidance.

Retail sales volumes dropped 3.7% from a month earlier, the Office for National Statistics said Friday. Economists polled by The Wall Street Journal had forecast a more modest decline of 0.6%.

   
 
 

Rio Tinto Reviewing Serbia's Move to Revoke Lithium Project Licenses

Rio Tinto PLC said Thursday it was reviewing the legal basis and implications of a decision by Serbia's government to revoke licenses for the mining company's lithium project.

"Rio Tinto is extremely concerned by the statement from the prime minister, Ana Brnabic, about cancelling the spatial plan and revoking licences related to the Jadar project," a company spokesman said.

   
 
 

Palfinger Issues 1Q, 1H Profit Warning on Rising Costs, Supply Chain Woes

Palfinger AG late Thursday issued a profit warning for its first quarter and first half of 2022 citing "massive" cost increases and supply-chain issues.

The Austria-based crane producer said it expects its earnings before interest and taxes in the January-March and January-June periods to come in far below levels from the previous year.

   
 
 

Airbus Cancels Qatar Airways Order for 50 A321 Planes

Airbus SE has canceled a plane order from state-owned carrier Qatar as the two companies have been in dispute for months over surface degradation on A350 jets.

The European plane maker has canceled a contract for 50 of its A321 planes, a company spokeswoman told Dow Jones Newswires on Friday, confirming an earlier report by Bloomberg.

   
 
 

Investor AB Raises Dividend After Investments Generated 4Q Shareholder Return of 21%

Investor AB on Friday proposed a dividend increase after the value of its investments rose sharply during the fourth quarter, generating total shareholder return of 21% compared with 2% for the same period the previous year.

Total shareholder return for the year rose to 55% from 19%.

   
 
 

How a Small Town Learned to Stop Worrying and Love Amazon

DARLINGTON, England-Many traders in this old market town hold Amazon.com Inc. partially to blame for the closures of a raft of local shops in recent years.

Then, Amazon opened a warehouse here.

   
 
 

U.K. Consumer Confidence Drops to a Near Year-Low on Inflation, Omicron Worries

British consumers turned more pessimistic in January as the spread of the Covid-19 Omicron variant and high inflation weighed on households' outlook of the economy and spending plans, according to a survey by the research firm GfK.

GfK's consumer-confidence barometer fell to minus 19 in January from minus 15 December, the lowest level since February 2021. Economists polled by The Wall Street Journal expected the confidence index to retreat slightly to minus 16.

   
 
 
   
 
 

GLOBAL NEWS

China's Yield Advantage Over U.S. Bonds Narrows

The extra yield that Chinese government bonds offer over U.S. Treasurys this week dropped below a percentage point for the first time in nearly three years, as the central banks of the world's two largest economies move in opposite directions.

The narrowing gap, reflecting both a rally in Chinese bonds and a U.S. selloff, reduces one longstanding argument in favor of foreign investors buying more Chinese debt. But analysts and investors say the long-term torrent of international money pouring into Chinese fixed-income markets is likely to continue.

   
 
 

Swoon in Tech Stocks Puts Startup Valuations in Harsh New Light

Waning enthusiasm for tech stocks in the public markets is casting doubt on valuations in the private market, where prices last year hit stratospheric levels.

The public arenas have begun to dial down their fervor for high-growth tech stocks, with investors in particular punishing companies that don't make money-startups in tech and biotech, blank-check companies and others still finding their feet.

   
 
 

Investors See New Sparkle in Europe's Tech Scene

Europe's tech scene has struggled to emerge from the shadows of giants in the U.S. and Asia, but friendly local policies and a global overflow of investment capital are now giving the region a gusher of cash.

Investments in European tech firms soared to $93.3 billion last year, a record and a 142% increase over the year before, according to CB Insights. The number of deals jumped as well, to 7,051 from 5,746 the year before and 6,051 the year before that.

   
 
 

China's Transport Ministry Summons Freight-Delivery Platforms, Warns Ride-Hailing Firms

China's Ministry of Transport has summoned four leading freight-delivery platform operators and warned four internet ride-hailing companies over recent driver complaints, in a sign of Beijing's continued scrutiny of the country's massive tech sector after a year-long crackdown.

The ministry on Friday said it has summoned four internet freight delivery firms, including the cargo businesses owned by DiDi Global Inc. and 58.com Inc., to discuss recent driver complaints about arbitrary pricing rules, membership fee increases, unfair competition and illegal practices such as overloading.

   
 
 

The SPAC Ship is Sinking. Investors Want Their Money Back.

Wall Street's favorite pandemic bet is taking on water.

SPACs, or special-purpose acquisition companies, burst onto the scene in 2020 as the hip way to take Silicon Valley's hottest startups public. Unlike traditional initial public offerings, SPACs were seen as modern and accessible, allowing any investor to put money into the companies of the future at the same time as professional money managers.

   
 
 

Blinken to Meet Russia's Foreign Minister Amid Ukraine Border Crisis

KYIV, Ukraine-As Secretary of State Antony Blinken prepares for a high-stakes meeting with Russian counterpart Sergei Lavrov on Friday, Ukraine's foreign minister warned that his country's soldiers and civilians could "pay with their blood" for any delays to a sanctions package that could be imposed on Moscow immediately should it choose to invade.

The meeting in Geneva follows a string of meetings Mr. Blinken's deputy, Wendy Sherman, held earlier this month with European allies and her Russian counterpart at NATO's headquarters, followed by more gatherings Mr. Blinken held this week in Kyiv and Berlin.

   
 
 

Afghans Housed at Military Base in Kosovo Risk Being Denied Entry to U.S. for Alleged Terrorist Ties

WASHINGTON-Afghan evacuees housed on a U.S. military base in Kosovo are at risk of being denied entry to the U.S. because of their alleged links to the Taliban and other terrorist groups, U.S. officials have said, potentially leaving them without a home country.

Fewer than 10 Afghans have been declared ineligible for entry after security officials found disqualifying information about them during an extensive vetting process, according to a person familiar with the issue. About 90 other individuals continue to be vetted at the Camp Bondsteel base in Kosovo, according to administration officials.

   
 
 

Biden Seeks to Reassure Ukraine, Vowing a Strong Response to Russia and Transferring Weapons

President Biden said Thursday that any Russian troop movement into Ukraine would be considered an invasion, seeking to clear up confusion over his position on a potential incursion as the administration gave approval for U.S.-made weapons to be transferred to Kyiv.

"I've been absolutely clear with [Russian] President [Vladimir] Putin. He has no misunderstanding," Mr. Biden said at a White House event. "If any-any-assembled Russian units move across the Ukrainian border, that is an invasion."

   
 
 

Belarusian Officials Charged With Aircraft Piracy in Diversion of Ryanair Flight

The U.S. Justice Department charged four Belarusian government officials with aircraft piracy, alleging they conspired to fabricate a bomb threat to divert a Ryanair passenger jet last year to arrest a dissident journalist.

In an indictment filed Thursday in New York, the Belarusian officials were also accused of conspiring to cover up the fake bomb plot after the Boeing 737 made an emergency landing in May in the nation's capital, Minsk. The aircraft, carrying 126 passengers, was en route from Athens to Vilnius, Lithuania, when Belarusian air-traffic controllers told the pilots of the purported threat, according to the indictment.

   
 
 

Write to sarka.halas@wsj.com

Write to us at newsletters@dowjones.com

We offer an enhanced version of this briefing that is optimized for viewing on mobile devices and sent directly to your email inbox. If you would like to sign up, please go to https://newsplus.wsj.com/subscriptions.

This article is a text version of a Wall Street Journal newsletter published earlier today.

 

(END) Dow Jones Newswires

January 21, 2022 06:51 ET (11:51 GMT)

Copyright (c) 2022 Dow Jones & Company, Inc.
FTSE 100
Index Chart
From Apr 2022 to May 2022 Click Here for more FTSE 100 Charts.
FTSE 100
Index Chart
From May 2021 to May 2022 Click Here for more FTSE 100 Charts.