European shares eased lower on Friday ahead of the monthly U.S.
employment report that's likely to offer important guidance to the
Federal Reserve at its next policy meeting in early November.
Lindsey Bell, chief markets and money strategist at Ally, thinks
the data may offer a glimpse of the short-term direction for
The report is expected to show the economy added 275,000 jobs
for the month, compared with 315,000 new positions added in August,
according to a survey polled by Dow Jones.
"The expectation is that the report will be goldilocks in
nature--not too hot and not too cold," Bell said, adding the data
will need to be in line with, or short of expectations, in order
for the stock market to continue higher.
Stocks to Watch:
Jefferies said Remy Cointreau should book good momentum when it
sets out its second-quarter sales update later this month, with
performance in reopening China driving group growth.
The company should report sales around 15% higher on year, with
the cognac division's strong growth in China offset by an
unfavorable shipment effect in the U.S., according to Jefferies's
The liqueurs & spirits division should be boosted by a
strong summer season in Europe and by a good performance by orange
liqueur Cointreau in the U.S., Jefferies said. It has kept a buy
rating on the stock and a EUR220 target price.
Italy's next scheduled ratings review is due on Oct. 21 from
S&P but Citi considers Fitch's review on Nov. 18 to be a bigger
"Fitch has tended to show the greatest sensitivity in the past
towards a high debt burden and yet rates Italy one notch higher
than Moody's does, " Coto said.
Moody's rates Italy at Baa3, the lowest investment-grade rating,
with a negative outlook. Citi said Fitch has so far not acted on
Italy's rating since the departure of Mario Draghi's government,
while S&P lowered its outlook to stable from positive and
Moody's changed its outlook to negative from stable.
Stock futures were stuck in tight ranges with investors looking
ahead to the jobs report.
Brian Mulberry, client portfolio manager at Zacks Investment
Management, sees equity prices being volatile if we get a "really
strong jobs report, " which may have a negative impact on stock
"Too many people making too much money, [means they] keep
spending money. That keeps prices high, and that means, ultimately,
interest rates will be higher for longer," said Mulberry.
He said investors would want to see a monthly decline, with more
jobs lost in the economy each month, but "we're not seeing that
As a result, the economy is getting to the target Fed fund rate
quicker than previously thought because "we're not having a job
erosion that we want to see."
A weaker jobs report could cause the dollar to fall, as
investors speculate the Fed might soon pause raising rates, but any
dollar weakness is unlikely to last, MUFG said.
"Any dollar weakness on a weak NFP [non-farm payrolls] print
that fuels easing expectations next year is in our view unlikely to
last," MUFG said.
As of now there is "certainly no evidence" of Fed officials
shifting their rhetoric and plenty of data have suggested the labor
market "remains resilient."
Current levels in sterling above $1.10 look "unsustainable"
given fragility in the bond market and the U.K.'s deteriorated
fiscal and current account position, ING said.
"A return to sub-1.10 levels in cable [GBP/USD] is a question of
when rather than if, in our view," ING said, adding that solid jobs
data may favor "a more rapid descent" in the pound.
Societe Generale has raised its forecast for the 10-year Bund
yield, suggesting it will test 2.8% in early 2023, due to high
inflation. "Sticky inflation suggests 'higher for longer' ECB
rates," SocGen said.
Given the typical market overshoot on terminal rate expectations
and Societe Generale's analysis on timing the peak in long maturity
rates, it now foresee the 10-year Bund yield ending 2022 at around
2.50% before gradually increasing to 2.80% in the first quarter of
Gilts continue to face a bearish outlook, Citi said.
Among the factors pointing to this case are the coming fiscal
plan that is meant to reassure, though it may just unnerve, Citi
said. Another factor is that issuance in the coming months is
likely to be hard to absorb given uncertainty around the Bank of
England's bank rate.
Citi's strategists target 4.5% for 10-year gilt yield; on
Thursday it closed at 4.194%, up two basis points, according to
Tradeweb. Citi also said the 10-year gilt-German Bund yield spread
could widen to 230-250bps; it is currently around 205bps, according
Mizuho said as the BOE has bought a "pitiful" GBP4 billion of
gilts, "the strategy is clearly to send the message that the
outlined amount is only for extreme circumstances."
Mizuho is of the view, however, that this policy "makes extreme
circumstances more likely" and said it sees gilt yields moving
"Alongside LDI [liquidity-driven investment] deleveraging,
factors implying that UK rates will remain high, if not higher
include: more gilt supply, active QT approaching, and rising
underlying inflation pressures," Mizuho said.
Read: Syndicated Issues Could Boost Eurozone Government Bond
Issuance Volume Next Week
Oil futures rose, with Brent crude on course to end the week
with its biggest weekly gain since February, buoyed by OPEC+'s
large cut to production quotas.
With OPEC+ having largely exhausted its spare capacity, the cut
had to happen at some point, JPMorgan said.
"The outcome of the October 5th OPEC+ meeting was already
largely embedded into our baseline supply forecast," the bank
Metals wavered, with prices swayed recently by macroeconomic
sentiment, so Friday's U.S. jobs report is likely to impact how
investors react to risk assets.
DOW JONES NEWSPLUS
EU Leaders Set to Clash Over Energy Prices at Prague
PRAGUE-European leaders who have been compromising on their
response to Russia's war in Ukraine all year now face a growing
rift over how to offset the rising damage of high energy prices to
their domestic economies.
Italy and several other countries will square off against
Germany at a summit in Prague on Friday, in a spat that mirrors
clashes from past crises. Heavily indebted countries fear that
their wealthier neighbors will gain an unfair edge by supporting
their businesses and consumers.
Credit Suisse Launches $3 Billion Bond Buyback
Credit Suisse said it will spend around $3 billion to buy back
senior bonds to save on interest payments as it prepares to reshape
itself as a smaller and safer bank.
Credit Suisse stock and bond prices fell in recent weeks as
investors anticipate it could raise new shares to fund its
restructuring. An online frenzy also sparked concerns about the
bank's financial health.
Telenor Sells Stake in Norwegian Fiber Business For $1 Bln
Telenor ASA said Friday it has agreed to sell 30% of Telenor
Fiber AS in Norway to a consortium led by KKR & Co. Inc. and
Oslo Pensjonsforsikring for around 10.8 billion Norwegian kroner
Telenor Fiber is a newly established subsidiary that will own
the company's fibre infrastructure assets in Norway, including
130,000 kilometers of cables that connect more than 560,000 homes,
with Telenor maintaining control of both the operations and
processes in the company.
German Industry Contracted in August, Energy Intensive Branches
Germany's industrial production fell in August as demand for
goods moderated and factories grappled with high energy prices and
Total industrial output--comprising production in manufacturing,
energy and construction--decreased 0.8% on month in August, data
from the German statistics office Destatis showed Friday.
Economists polled by The Wall Street Journal had expected a 0.5%
U.K. Bond Markets Come Under Pressure Again
The Bank of England stopped buying long-dated bonds as part of
its rescue plan over the past two days, helping fuel a fresh
selloff in U.K. debt markets.
Yields on U.K. government bonds have climbed this week, with the
30-year yield rebounding to 4.4% from 3.8% last Friday. It hit a
peak of 5.1% last week. Yields rise when prices fall.
Shell's Slip Shows Oil and Gas Prices Aren't Everything
A weaker quarter for Shell is a timely reminder that high oil
and gas prices don't always mean bumper supermajor results.
Liquefied-natural-gas prices were stratospheric in the third
quarter, while crude benchmarks oscillated between $80 and $100 a
barrel. Shell's third-quarter update Thursday nonetheless warned of
"significantly lower" gas-trading results and reduced refining and
chemicals margins that together could pack an earnings hit of much
as $2 billion. Marketing profits and oil production improved, but
the overall picture clearly surprised some investors: The company's
shares were down almost 5% in European trading, though pared back
some of that fall later in the day.
European Leaders Hold Summit to Test Out a Larger Political
PRAGUE-Months after French President Emmanuel Macron's
long-floated pan-European political project was being dismissed as
either a gabfest or a divisive distraction by some regional
officials, 44 leaders gathered in the Czech capital on Thursday for
security, energy and other discussions.
Propelled by the grave challenge of Russia's invasion of Ukraine
and its continent-wide economic costs, the European Union's 27
leaders met with their counterparts in 17 European countries
outside the bloc-the new European Political Community-billing it
primarily as a show of support for Ukraine.
IMF to Lower Global 2023 Growth Forecast Amid Shocks to
WASHINGTON-The head of the International Monetary Fund said that
the institution expects slower global economic growth next year and
that policy makers must do more to reduce inflation to prevent
The IMF will lower its 2023 growth forecast from its earlier
estimate of 2.9% in a report to be released next week, said the
fund's Managing Director Kristalina Georgieva in a speech Thursday.
She didn't specify the new estimate, but said it would reflect a
darkening outlook as soaring inflation cuts into people's ability
U.N. Nuclear Agency Warns of Increased Risk at Ukraine's Largest
KYIV, Ukraine-The head of the United Nations' nuclear agency
warned on Thursday that staff at Europe's largest nuclear-power
plant are under increasing pressure after Russian authorities
attempted this week to deepen their control over the plant, posing
a heightened safety risk.
Russia's capture of the Zaporizhzhia nuclear-power plant in
southeastern Ukraine in March and a resulting struggle with
Ukraine, along with shelling near the occupied facility, have
raised global concern about the risk of an atomic catastrophe. The
Ukrainian engineers staffing the plant have continued to operate it
since Russia's military took control of it.
Iran Student Protests Pose Challenge to Raisi Government
Protests in Iran have spread to universities and high schools as
the new academic year begins, infusing fresh energy into a
weekslong, nationwide movement demanding more rights and prompting
a brutal crackdown from authorities.
The involvement of young students seeking more liberties adds a
new dimension to the rights movement that erupted in Iran after the
death of 22-year-old Mahsa Amini on Sept. 16 in police custody for
allegedly violating Iran's strict Islamic dress code. Protesters
initially called for more freedom for women, but those demands have
since morphed into broader calls to overthrow the Islamic Republic,
posing one of the toughest challenges yet to the country's
ultraconservative clerical leadership.
The S&P 500 Still Looks Expensive. The Average Stock
Even after all of the S&P 500's declines this year, the
market benchmark still looks expensive. But the average stock is
more reasonably valued, leaving opportunity for those who look
beneath the surface.
The S&P 500 has dropped more than 20% from the record high
it hit in January. And the index now trades for about 16 times the
aggregate per-share earnings its component companies are supposed
to produce over the next year, down from about 21.5 times to start
Fed Officials Say Stubborn Inflation Justifies Continued Rate
High inflation is proving to be more persistent than anticipated
and has created a strong case for the Federal Reserve to lift and
then hold interest rates at levels that will slow economic
activity, a central bank official said Thursday.
The Fed will need to keep rates at restrictive levels "until we
are confident that inflation is firmly on the path toward our 2%
goal," said Fed governor Lisa Cook in remarks at the Peterson
Institute for International Economics, where she made her first
speech since joining the central bank's board this May.
U.S. Takes Aim at OPEC for Oil Production Cuts
WASHINGTON-OPEC's decision to slash oil production has the U.S.
considering responses that could include measures aimed at breaking
the cartel's hold on markets or limiting U.S. oil exports should
The cutback by the Organization of the Petroleum Exporting
Countries and its Russia-led allies is the latest dilemma for
President Biden, who has sought to transition the U.S. away from
fossil fuels while at the same time keeping consumer prices in
Elon Musk's Revived Twitter Deal Could Saddle Banks With Big
Banks that agreed to fund Elon Musk's takeover of Twitter Inc.
are facing the possibility of big losses now that the billionaire
has shifted course and indicated a willingness to follow through
with the deal, in the latest sign of trouble for debt markets that
are crucial for funding takeovers.
The $44 billion deal, which Mr. Musk had been trying to walk
away from, would be paid for in part with some $13 billion of debt
seven banks including Morgan Stanley, Bank of America Corp. and
Barclays PLC agreed to provide when the takeover was sealed in
Donald Trump PAC Jumps Into Ohio, Pennsylvania Senate Races
Donald Trump is jumping into the midterm-election ad wars with a
pair of spots in the hotly contested Pennsylvania and Ohio Senate
races, the first wave in what is expected to be millions of dollars
in spending from the former president's new political-action
Mr. Trump, who has faced pressure to use his fundraising
resources to help Republican candidates, had before this week spent
modestly-and not on TV ads for candidates. He preferred instead to
stage boisterous rallies in battleground states.
Appeals Court Allows Florida to Prohibit Businesses From
Requiring Proof of Covid-19 Vaccination
A federal appeals court ruled Thursday that Florida can bar
businesses from requiring proof of Covid-19 vaccination of their
The 2-1 ruling from the 11th U.S. Circuit Court of Appeals
tossed out a lower-court ruling that had found the state's
prohibition on proof of vaccination violated the speech rights of
Norwegian Cruise Line Holdings Ltd., which challenged it in
Prosecutors Hold Off Final Hunter Biden Case Decision Amid Talks
With Defense Lawyers
Prosecutors are holding off on a final decision on whether to
bring a case against President Biden's son, Hunter, while they
review defense evidence in the long-running investigation, people
familiar with the matter said.
Investigators for months have believed there is enough evidence
to charge the younger Mr. Biden with tax crimes and a false
statement related to a gun he purchased, and had expected a case to
be brought by the end of the summer, the people said.
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(END) Dow Jones Newswires
October 07, 2022 05:19 ET (09:19 GMT)
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