European shares recovered some equilibrium Tuesday, following
the previous session's heavy losses.
Investors fretted in the last trading session over the
implications of the potential failure of China Evergrande-the
world's most indebted property developer.
Fears over what could come out of the looming collapse of
Evergrande continue to make markets uneasy, but investors will have
to wait until Wednesday, when Chinese exchanges come back online,
to see the next major update.
"Even if the Evergrande case has sparked a wave of market fear,
especially with traders worried that the consequences could spread
to other countries, most investors now seem confident the PBoC will
keep on providing support and inject cash to mitigate the global
risk," ActivTrades analyst Pierre Veyret said. "Investors are still
looking towards the Fed, anticipating a new tapering
Investors are closely watching the Federal for clues as to how
and when the central bank will begin slowing, or tapering, its
Covid-19 pandemic-era program of monthly asset purchases, which add
liquidity to markets.
Indications that a taper will come sooner rather than later
could cause markets to wobble even more in the current environment,
as broader fears persist.
"The market rout we're seeing is reflecting a wider set of risks
than just Chinese property, and comes after increasing questions
have been asked about whether current valuations could still be
justified, with talk of a potential correction picking up," said
Jim Reid, a strategist at Deutsche Bank.
Airlines, miners and oil stocks were among the biggest
pan-European risers Tuesday.
Shares on the move:
Shares of Vivendi fell 13% after the spin-off and listing of
Universal Music Group, for years its crown jewel that accounted for
the lion's share of revenue growth.
Vivendi distributed a 59.87% stake in Universal as a special
dividend to shareholders, leaving it with a 10.13% holding in the
record label. The distribution will leave Vivendi with pay-TV
business Canal+ Group, ad-holding firm Havas and publishing company
Editis as its main businesses.
Shares in Stagecoach jumped more than 20% after the bus company
said it was in talks about an all-share takeover by rival National
Express. Its shares also rose 8.2%.
Competition authorities might have something to say about the
two public-transport operators coming together, but otherwise the
deal looks fairly sensible, AJ Bell said. "A key factor to consider
is whether someone else might fancy owning Stagecoach, such as an
overseas transport operator. It's not an easy feat to build up a
large position in the U.K. public-transport market and Stagecoach
now has 8,400 buses and coaches," Bell's investment director Russ
Sixt stock extended its advance, rising another 2.2% after
Monday's 7% gain. This after the German car-rental company had
raised its forecast for the current year as the development of the
summer vacation in Europe and the U.S. was better than it had
initially planned for.
Third-quarter revenue at the German car-rental company is
expected at EUR741 million, M.M. Warburg said, which would mark a
60% increase compared with 2020 but would still be slightly lower
than the same quarter in 2019. There could be further upside to
2021 estimates, however, and the recent lifting of U.S.
restrictions on vaccinated travelers from Europe could further
support Sixt's fourth-quarter performance.
Wall Street was set for a cautious recovery, in line with global
stocks that rose, with Wednesday's Fed announcement seen as
"We are at a pivot point: we are moving away from maximum policy
accommodation and at the same time the V-shaped recovery is over
and it poses some real questions about what is next," said David
Donabedian, chief investment officer at CIBC Private Wealth. "We
have had a great run but it is going to get tougher from here, with
lower returns and more volatility."
EUR/USD was largely flat, having fallen to a four-week low of
1.1701 on Monday, with the prospect the Fed will taper asset
purchases in coming months having boosted the dollar recently.
Carlo Alberto De Casa, market analyst at Kinesis, said the
European Central Bank's own "small tapering" has limited the euro
falls. The ECB said earlier this month that pandemic-related asset
purchases would continue at a moderately lower pace. This "is in
some way helping the euro," De Casa said.
The Swedish krona edged lower, cutting earlier gains, after the
Riksbank kept interest rates at zero percent and said it expects to
keep rates at that level for the entire forecast period until the
third quarter of 2024. However, moves were limited as most analysts
had expected this, although they had said there was a small
possibility of the Riksbank adding a rate increase into its
rate-path forecast following recent strong inflation data for
The Riksbank revised up its inflation forecast, with inflation
expected to be higher than 2% in the coming year before falling
back later. It will continue to purchase securities in 2021 and
forecasts that the holdings will be "more or less unchanged in
JPMorgan remains constructive on intra-eurozone government bond
"We remain convinced that for intra-EMU spreads the path of
least resistance over the coming weeks is towards tighter spreads
given our expectation of intensifying search-for-yield dynamics in
a low volatility environment in the near-term," said strategists
Aditya Chordia and Elisabetta Ferrara.
Near-term positive spread catalysts include favorable supply
versus ECB purchase dynamics for the remainder of 2021, limited
political noise over the next one to two months and still light
investor positioning in intra-eurozone.
The JPMorgan strategists remain "broadly constructive" on
Greece, and expect the country to come to the bond market one more
time this year, likely with a syndicated tap for around EUR2
billion in the fourth quarter.
Their view is fuelled by attractive valuations, favorable supply
versus ECB purchase dynamics, constructive macro outlook and stable
political landscape. Even after the recent relative outperformance,
the 10-year Greek-German spread trades around 15 basis points away
from the tight levels reached over the summer, the strategists
said, expecting it to return to these levels over coming weeks.
Rates markets are expected to give a relatively muted response
to the coming German elections, TD Securities said.
"Recent polling suggests that markets are well-prepared to see a
transformation within the German government, with the SPD [Social
Democratic Party] polling ahead of the CDU/CSU [Christian
Democratic Union/Christian Social Union]," TD Securities said.
The reaction of bond markets has been close to muted to incoming
polls. A government led by SPD chancellor candidate Olaf Scholz is
likely to experience the continuation of the current fiscal policy,
TD Securities said, expecting other drivers near term. "In the near
term, we expect the EUR rates reaction will be driven by the
recalibration of the ECB's policy at the December meeting."
The U.K. government is likely to scale back fiscal stimulus in
autumn, despite official data showing public finances have
improved, Capital Economics said.
"August's public finance figures provided more evidence that the
government's financial position isn't as bad as the Office for
Budget Responsibility predicted back in March," senior U.K.
economist Ruth Gregory said.
The GBP20.5 billion of public sector net borrowing in August was
once again lower than the OBR's forecast of GBP21.6 billion, though
it was higher than the a forecast in a WSJ pool of GBP14.0 billion.
U.K.'s Treasury chief expected to signal the end of pandemic-era
stimulus at his Budget on Oct. 27, when he presents the
government's fiscal plans.
Crude futures rebounded as part a broader market rally, said
ING, with Shell's confirmation that some of its Gulf of Mexico
capacity shut down by Hurricane Ida may remain offline for some
time, supporting oil's gains.
Meanwhile, European gas storage is at about 72% capacity
compared with a 5-year average of 88%, ING's Warren Patterson said.
"The tightness in the European market suggests that prices are
likely to remain elevated, as well as volatile."
Gold ticked higher but has continued to trade in a narrow range
this week. "The firm dollar, coupled with expectations of the Fed,
appears to have been keeping the gold price in check,"
Commerzbank's metals analyst Daniel Briesemann said.
Copper prices rose 1.5% on the LME, recovering some of Monday's
losses, but market participants remain concerned about the
ramifications of an Evergrande default.
"Markets are still waiting for clarity [on] how Evergrande will
be able to manage its $300 billion of liabilities," Anna Stablum,
at brokerage Marex, said.
Separately, the International Copper Study Group said the global
refined copper market had a 90,000-ton deficit in June compared
with a 4,000 ton surplus the previous month.
OECD Expects Delta Variant to Slow, But Not Derail, Global
The fast-spreading Delta variant of Covid-19 has slowed the pace
of the global economic recovery, but won't derail it, according to
new forecasts released by the Organization for Economic
Co-operation and Development on Tuesday.
In its latest quarterly report on the economic outlook, the
Paris-based research body lowered its growth forecasts for the
global and U.S. economies in 2021, the first downgrade since
December last year, when new infections were surging.
Universal Music Shares Soar in Market Debut
Shares of Universal Music Group NV-behind stars including Taylor
Swift, Drake and the Beatles-surged in their trading debut, a
strong vote of confidence from investors in continued growth in the
In early trading, the company's stock rose 38% above the
reference price of 18.50 euros, set Monday evening by the Euronext
exchange in Amsterdam. At the current price, the world's largest
music company, which is being spun off from French media
conglomerate Vivendi SE, has a valuation of more than EUR45
billion, equivalent to $52.75 billion.
Shell to Sell Permian Assets to ConocoPhillips for $9.5
Royal Dutch Shell PLC has agreed to sell all of its assets in
the Permian basin, the most active U.S. oil field, to
ConocoPhillips for around $9.5 billion in cash.
The deal, disclosed by both companies on Monday, comes as Shell
is attempting to cut its carbon emissions and invest more in
renewable energy. The sale is one of the largest recent
transactions in the shale patch as large oil companies come under
increasing pressure to diversify outside of fossil fuels.
Credit Suisse's Archegos Disaster Exposes Cracks in Bank
When Archegos Capital Management blew up, it saddled Credit
Suisse Group AG with $5.5 billion in losses. One reason investors
and regulators were blindsided: a gap in the regulatory oversight
of big international banks.
That is the conclusion of financial risk consultants who have
sifted through the wreckage.
Stagecoach Is in Merger Talks With National Express Group
U.K. transportation group Stagecoach Group PLC said Tuesday that
it is in talks for an all-share takeover by peer National Express
Group PLC that will give its shareholders about 25% of the combined
group if the deal proceeds.
Under any takeover, Stagecoach shareholders will get 0.36 new
National Express ordinary shares for each Stagecoach ordinary share
Kingfisher 1H Adjusted Pretax Profit Rose, Came in Ahead of
Kingfisher PLC on Tuesday reported an expectations-beating jump
in adjusted pretax profit for the first half of fiscal 2022,
boosted by strong demand for home improvement, and said its outlook
for the full year has improved.
The home-improvement retailer posted a pretax profit of 677
million pounds ($924.65 million) for the six months ended July 31,
compared with GBP398 million for the same period a year earlier.
Adjusted pretax profit came in at GBP669 million, ahead of the
company-compiled market estimate of GBP657 million.
Compass Group Says 4Q Underlying Revenue to Be 86% of FY
Compass Group PLC said Tuesday that it expects fourth-quarter
underlying revenue on a constant currency basis to improve to 86%
of 2019 revenue, and for it to be slightly ahead of the previous
guidance range of 80% to 85%.
The U.K. catering contractor said although it expects most of
its sectors to continue performing well, it remained cautious about
its Business & Industry segment given the continuing
uncertainty surrounding the pace of office reopenings in its major
AstraZeneca to Build $360 Mln Manufacturing Plant in Dublin
AstraZeneca PLC said Tuesday that it will invest $360 million in
a manufacturing facility in Ireland.
The pharmaceutical company said it is planning to build an
active pharmaceutical ingredient-manufacturing facility for small
molecules near Dublin to ensure that its supply network is fit for
Surging Energy Prices Push U.K. to Weigh Helping Hard-Hit
LONDON-The U.K. government is considering measures to soften the
fallout from a sharp increase in energy prices that has put power
suppliers to consumers out of business and stoked problems for a
range of industries from steel to brewing and fertilizers.
Natural-gas prices across Europe have surged as economies bounce
back from the pandemic at a time when stores of the fuel are low
and Asian demand is strong.
Glasgow Climate Summit Faces 'High Risk of Failure,' U.N. Leader
NEW YORK-The coming climate summit in Glasgow, Scotland, runs a
"high risk of failure" unless world leaders take stronger measures
to stem greenhouse-gas emissions, United Nations Secretary-General
António Guterres said Monday.
Mr. Guterres made his comments to reporters following a two-hour
closed session with U.K. Prime Minister Boris Johnson, U.S. climate
envoy John Kerry and other leaders on the sidelines of the U.N.
General Assembly meeting.
Pfizer, BioNTech Say Covid-19 Vaccine Is Safe for Children Aged
5 to 11
Pfizer Inc. and partner BioNTech SE said their Covid-19 vaccine
was found to be safe in children ages 5 to 11 years in a late-stage
study and generated a strong immune response in them, bringing the
prospect of broader vaccination coverage closer.
Pfizer said it would share the results with regulators in the
U.S. and other countries and seek emergency use authorization in
the U.S. as early as the end of the month.
Flying Taxis' Best Ride Is to the Helicopter Market
Cabdrivers don't need to worry about being replaced by flying
cars. Helicopter makers might need to a little bit.
Vertical Aerospace, a British startup devoted to the development
of electric vertical-takeoff-and-landing vehicles, or eVTOL, has
just received a preorder for 25 aircraft plus an option for 25 more
from Bristow Group, a U.S.-owned operator of civil helicopters, the
air-taxi company told The Wall Street Journal.
Powell's Taper Tightrope Could Be Complicated by Fed 'Dots'
Federal Reserve Chairman Jerome Powell faces the risk of another
dot dilemma this week.
Mr. Powell has stressed in public remarks that the Fed's
decision about when to slow its bond buying shouldn't fuel
inferences about officials' intentions to lift rates.
U.S. Stock-Market Tumble Hasn't Quelled Optimism
U.S. stocks are facing their most uncertain outlook since the
Covid-19 pandemic sent the market tumbling last year. But many
investors say there is no better place to be right now.
Major U.S. stock indexes sank Monday, with the Dow Jones
Industrial Average losing more than 600 points, or 1.8%, as
concerns grew that a default by real-estate developer China
Evergrande Group could spur a widespread retreat from riskier
assets. Percolating worries about a slowdown in economic growth,
ongoing supply-chain issues and rising deaths tied to the Delta
variant of the coronavirus added to the volatility.
China Evergrande Fallout Hits Western Bond Funds
The potential default of real-estate developer China Evergrande
Group is taking a toll on funds in Europe and the U.S. that chased
high yields in the Chinese corporate bond market.
Concerns that Evergrande might not pay its bonds this month
triggered selling of other companies in the country's property
sector, weighing down funds managed by Ashmore Group, BlackRock
Inc. and Pacific Investment Management Co., among others.
Retailers Navigate Freight Costs, Scarce Inventory and Uncertain
Finance executives in the retail industry continue to face a
multitude of challenges as they plan for the fall and the holiday
season despite being generally optimistic on their companies'
Retailers are grappling with ongoing supply-chain disruptions
that are keeping inventory low and often causing delays, forcing
companies to pay premiums to accelerate shipments. Deliveries from
Vietnam and other Southeast Asian countries have slowed as local
governments limit factories' production capacity due to the Delta
variant, potentially resulting in delays and shortages of certain
products. Companies say they are experiencing a level of
uncertainty not seen since the onset of the pandemic, putting their
financial plans in doubt.
Why Container Ships Can't Sail Around the California Ports
There appears to be no sailing around the breathtaking backup of
container ships off the jammed ports of Los Angeles and Long
Newly-arriving vessels are adding to a record-breaking flotilla
waiting to unload cargo that on Sunday reached 73 ships, according
to the Marine Exchange of Southern California, nearly double the
number a month ago and expanding a fleet that has become a stark
sign of the disruptions and delays roiling global supply
Democrats Add Debt Limit to Spending Measure, Sparking Showdown
WASHINGTON-Democratic leaders said Monday they would attach a
suspension of the debt limit through December 2022 to a short-term
spending bill, setting up a clash with Republicans over preventing
both a partial government shutdown and a potential default on U.S.
The House is expected to vote on the combined measure this week,
but GOP opposition in the Senate cast uncertainty over how and when
lawmakers will act to prevent the federal government from running
out of cash. Many Republicans said Monday they wouldn't supply any
votes for an effort to raise the government's borrowing limit in
protest to Democrats' plans to move trillions of dollars in new
spending through Congress.
Bitcoin Price Slides as China Jitters Hit Crypto Markets
Bitcoin fell sharply on Monday as a wave of selling triggered by
tumult in China's indebted property sector hit the crypto
The world's largest cryptocurrency was trading at about $43,489
at 5 p.m. ET, down 8.6% from Friday, according to CoinDesk.
Biden to Stress Importance of Alliances in U.N. Speech
WASHINGTON-President Biden will outline a U.S. foreign-policy
vision rooted in diplomacy and global alliances during his first
address to the United Nations as commander-in-chief, calling for a
shift away from armed conflict after two decades of war.
At a moment when some U.S. alliances are facing strain, Mr.
Biden is expected to make the case that the biggest issues facing
the world-from the coronavirus pandemic to climate change-can only
be solved with cooperation among countries with varying national
interests, according to U.S. officials. He'll encourage competition
among rising powers but make clear that he doesn't want another
Cold War, the officials said.
U.S. Pledge to Vaccinate Poor Countries Stutters Amid Logistical
A White House plan to donate hundreds of millions of doses of
Covid-19 vaccines has been hampered in many developing countries by
a lack of infrastructure to handle storage and distribution,
leaving poorer nations far behind the developed world in
After a delayed start-the U.S. missed its first donation
target-the Biden administration has been ramping up overseas
donations, shipping around 137 million doses, most of them Moderna
Inc. and Johnson & Johnson. It expects to send 500 million
doses of a shot developed by Pfizer Inc. and BioNTech SE by the end
of June 2022, the largest donation total of any country.
U.S. Covid-19 Death Toll Surpasses 1918 Flu Fatalities
The number of known Covid-19 deaths in the U.S. has surpassed
the country's fatalities from the 1918-19 flu pandemic.
The U.S. on Monday crossed the threshold of 675,000 reported
Covid-19 deaths, according to Johns Hopkins University, which
tracks data from state health authorities. The Centers for Disease
Control and Prevention estimates the influenza pandemic killed
about that many people in the U.S. a century ago, in 1918 and 1919.
Both figures are likely undercounts, epidemiologists and historians
Canada's Justin Trudeau Headed for Victory in National Vote
OTTAWA-Canadian Prime Minister Justin Trudeau was headed toward
a third straight electoral victory Tuesday morning, although his
bet that a snap vote would help him secure a majority government
failed to materialize.
Both Canada's CTV Network and the Canadian Broadcasting Corp.
projected the incumbent Liberal Party was set to win enough seats
in parliament to form a minority government.
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(END) Dow Jones Newswires
September 21, 2021 06:22 ET (10:22 GMT)
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