Eurozone, Germany, France, U.K., Flash PMI; France Business
Sentiment; ECB Economic Bulletin; U.K., Switzerland, Norway, South
Africa, Turkey Interest Rate Decisions; U.K. BOE Meeting Minutes,
Consumer Confidence; updates from Merck KGaA, Air France-KLM, Royal
Mail, Fuller Smith & Turner, Investec
Europe is set for a firmer open as investors digest the latest
Fed policy update. In Asia, most stocks climbed, the dollar and
Treasury yields eased back slightly, oil edged higher but gold
extended its retreat.
Shares in Europe should extend gains on Thursday, following a
higher finish on Wall Street and despite the prospect of the
Federal Reserve reversing its stimulus as early as November.
All three major U.S. indexes finished higher on Wednesday,
marking the first day of gains for the S&P 500 and Dow Jones
Industrial Average after a punishing four-session losing streak.
Both indexes finished the day up 1% to record their largest one-day
gain since July.
Some of the recent fears spurred by Evergrande started to
subside, and investors turned their attention to the Fed following
the conclusion of its two-day September meeting.
In a statement issued after its meeting, the Fed said that if
economic progress continues broadly as expected, "a moderation in
the pace of asset purchases may soon be warranted." Jerome Powell
added later that officials generally agreed that "a gradual
tapering process that concludes around the middle of next year is
likely to be appropriate."
The central bank left interest rates unchanged, though new
projections released showed half of 18 officials expect to raise
interest rates by the end of next year, up from seven officials in
The Fed's decision sent stocks rocketing, with the Dow gaining
as much as 521 points. But as Mr. Powell spoke at a news conference
in the afternoon, indexes bounced around before eventually paring
their gains for the day.
"Markets are keenly aware of the effect of interest-rate
increases on cash flow, earnings and all kinds of things," said
Jamie Cox, managing partner for Harris Financial Group, of the
market's reaction to the Fed statement. "Chairman Powell has said
the test for [an interest rate increase] is quite a bit higher than
it is for tapering."
The dollar eased back slightly in Asia, having gained after some
back and forth trading on Wednesday following Jerome Powell's
The euro remained generally elevated and ING said a recent
unwinding of carry trades funded in euros may be helping the
currency to outperform, particularly against sterling. EUR/GBP,
which hit a two-week high of 0.8615 on Wednesday, having risen
steadily since late last week, was recently at 0.8586.
Ahead the Bank of England rate decision, the pound was steady
having fallen recently, as some market participants question
whether the central bank may be too optimistic over its rate-rise
prospects given a shaky U.K. economic outlook.
"Some people in the FX market may be getting worried that the
BOE's view is overly aggressive," Marshall Gittler, head of
investment research at BDSwiss said.
The BOE said at its last meeting that "some modest tightening of
monetary policy over the forecast period is likely to be necessary"
and the market is therefore pricing a full interest-rate rise by
June, Gittler said.
The Norges Bank is widely expected to raise interest rates from
zero to 0.25% on Thursday, but it may need to signal another rate
rise in December to give a significant boost to the Norwegian
krone, Niels Christensen, currency strategist at Nordea said.
A rate increase is "a done deal," which will leave focus on the
central bank's accompanying message and the rate path. "The message
needs to support a rate hike at the December meeting for the
Norwegian krone to rise," he said.
EUR/NOK last traded at 10.1272 but could fall toward 10.00 after
the Norges Bank announcement, although it is unlikely to drop below
that level, Christensen said.
Treasury yields weakened slightly, after those on all but the
longest-term U.S. bonds climbed following the Fed meeting,
reflecting greater clarity on tapering and rate hike timing.
"The Fed is looking past the Covid Delta wave, while
acknowledging that it has 'slowed' the recovery in the most
Covid-sensitive sectors in recent months," Pantheon said. "But with
inflation 'elevated' and policymakers seemingly confident that
growth will rebound post-Delta, the Fed no longer needs to pump
$120 billion per month into the markets."
In the U.K., the BOE is expected to keep monetary policy
unchanged and offer muted signals regarding when it could start
scaling back pandemic-era stimulus at Thursday's rate decision,
Brown Advisory said.
Rate-setters will "be very firmly on hold," Ryan Myerberg,
portfolio manager in Brown Advisory's Global Sustainable Fixed
Income team said. The event is likely "to be one of those meetings
where they try to say and signal as little as possible and move on
In Myerberg's view, there's more than "enough uncertainty" to
the economic picture to allow the Monetary Policy Committee to
remain in assessment mode without having to signal any specifics to
the market with regards to the timing for quantitative
Oil prices edged higher in Asia after they closed up over 2% on
Wednesday, as the EIA reported a seventh straight weekly decline in
U.S. crude inventories.
However, S&P Global Platts said signs of excess supply of
Middle Eastern crude in the Asian market, could cap future gains
for oil. "Unsold supplies of Middle East crude could weigh on
sentiment for the last few days of the November-loading cycle,"
While this would mainly impact prices of Middle Eastern
benchmarks like Dubai or Oman crude, signs of faltering Asian
demand could also put downward pressure on other international oil
Gold futures were lower, extending Wednesday's losses, following
the Fed's hawkish policy statement.
"With a taper now almost nailed on this year and rates
potentially rising from next, it seems gold's appeal is beginning
to wane," Oanda said, adding that the precious metal could fall to
as low as $1,740 an ounce.
However, Oanda thinks much of the risk looks priced in, so "just
because the Fed is moving to a tightening path, it doesn't mean
gold is in freefall."
Aluminum was modestly higher, as power shortages in China
contributed to a slowdown in industrial metals production, ING
The bank said that grid companies in China have issued warnings
on power shortages amid growing electricity demand in the country.
This has led to disruptions to multiple industries including metals
smelting and downstream semi-fabricating. Rising thermal coal
prices were also exacerbating the problem, ING added.
Iron-ore prices were back above $100/ton, but the risk is that
the upward move is only temporary.
Commonwealth Bank of Australia said the rebound could reflect
restocking demand in China ahead of the National Day holidays in
October, and market participants returning after the Mid--Autumn
Festival holiday this week. Prices also gained after China's
Evergrande onshore property unit said it reached an agreement with
yuan bondholders on an interest payment.
Still, CBA said that property construction looks set to weaken
in China as default risks rise for Evergrande as more bond payments
become due. "If a default were to occur, it would lead to an even
more aggressive fall in China's property construction activity,"
With Chinese property markets weakening and the risks to the
Chinese economy rising, Jefferies has cut its iron-ore price
forecasts. It now expects iron-ore fines to average $150/ton this
year, down 11% from a prior projection of $169/ton. It also expects
prices to average $90/ton next year, compared with $130/ton
"We estimate that the Chinese property markets account for about
25% of the country's demand for steel," Jefferies said. That
implies Chinese property accounts for about 15% of global steel
TODAY'S TOP HEADLINES
Fed Tees Up Taper and Signals Rate Rises Possible Next Year
The Federal Reserve signaled it was ready to start reversing its
pandemic stimulus programs in November and could raise interest
rates next year amid risks of a lengthier-than-anticipated jump in
The Fed's rate-setting committee, at the end of a two-day
gathering, indicated in its postmeeting statement Wednesday that it
could start to reduce, or taper, its $120 billion in monthly asset
purchases as soon as its next scheduled meeting, Nov. 2-3.
Major Evergrande Shareholder Looks to Exit Company
One of China Evergrande Group's largest shareholders has pared
its stake in the debt-laden conglomerate and said it could exit the
company amid concerns about the developer's financial
Chinese Estates (Holdings) Ltd., the property investment company
of Hong Kong tycoon Joseph Lau, said Thursday that it would seek to
sell some or all of its 751.1 million shares in Evergrande within
the next 12 months. Based on the stock's previous closing price, it
said it could book a loss of 9.49 billion Hong Kong dollars
(US$1.22 billion) if it exits its position.
Biden Pushes Democrats to Find Consensus on Budget Package
WASHINGTON-President Biden pressed lawmakers to reach a
consensus on his sweeping $3.5 trillion spending proposal during a
series of meetings at the White House on Wednesday, aiming to
settle sharp intraparty differences that threaten to derail his
During his sit-down with moderate Democrats, lawmakers discussed
reducing the size of the package, which would expand access to
healthcare, offer universal prekindergarten and reduce carbon
emissions, among other measures, to below $3 trillion, according to
two people familiar with the meeting. Progressives, meanwhile,
continued to threaten to block passage of a separate, roughly $1
trillion infrastructure bill next week if it comes to the House
floor before the larger package.
Elizabeth Warren, Other Top Democrats Raise Concerns About SPAC
Elizabeth Warren and three other Democratic senators sent open
letters to several creators of special-purpose acquisition
companies Wednesday questioning how SPAC executives are compensated
and requesting more details about their potential conflicts of
The letters are the latest sign that regulators and lawmakers
are increasing their scrutiny of so-called blank-check companies,
which were rarely used as a way for startups to go public before
2020 but have exploded in popularity recently. Some skeptics argue
that SPACs disproportionately benefit insiders through lucrative
incentives even if companies they take public struggle and stick
individual investors with losses.
Europe Is Pumping Less Gas as Demand Rebounds, Leaving a Gap
Russia Is Filling
A giant Dutch natural-gas field once pumped enough fuel to cover
the current needs of Germany, Europe's largest economy. Next year
the field is shutting down over environmental concerns.
Natural-gas supply shortfalls have led to record prices for the
fuel and electricity, stoking fears of a shortage and spotlighting
European efforts to cut greenhouse-gas emissions. The conflict is
one economies world-wide face as they try to adopt cleaner energy
Evergrande Is In Crisis, But a Risky China Still Beckons to
Some big U.S. investors are looking past the potential failure
of a massive Chinese property developer whose debt woes shook
global markets this week, giving a vote of confidence to China as
an investment destination despite the rising regulatory and
political risks foreign investors increasingly face there.
As China Evergrande Group, one of the country's biggest property
developers, grappled with looming debt payments this week, its
troubles prompted investors to take stock of their exposure to
China. Economic growth once looked unstoppable in China, but now
faces a range of challenges, including lofty levels of corporate
debt and a regulatory clampdown that has clipped the wings of some
of its most prominent private business tycoons.
London Stock Exchange to Close Unprofitable Interest-Rate
London Stock Exchange Group PLC is shutting its venture in
interest-rate derivatives, CurveGlobal Ltd., after it failed to
gain traction with traders over the past five years.
CurveGlobal will close in January, and some of its futures
markets with zero activity are being suspended immediately, LSEG
said in a notice to traders posted on its website Tuesday. A
spokesperson for the U.K.-based exchange operator confirmed the
Biden Expected to Nominate Wall Street Critic as Top Banking
WASHINGTON-President Biden plans to nominate a law professor who
has criticized Wall Street banks to oversee some of the largest
U.S. lenders, people familiar with the matter said.
Mr. Biden is expected to tap Saule Omarova, a Cornell University
law professor, to become the Comptroller of the Currency, which
oversees national banks including JPMorgan Chase & Co. and Bank
Western Investors Bargain Hunt in China Bond Rout
Property developer China Evergrande Group's financial crisis is
ripping through the roughly $750 billion market for "offshore"
Chinese corporate bonds issued primarily to international investors
in dollars and euros.
Foreign investors who own much of the debt are scrambling to
analyze their potential losses if Evergrande defaults on its $18
billion of foreign-currency bonds and whether to start buying as
bond prices throughout the market take a dive.
Supplier Contracts Get Revamped After Covid-19 Disruptions
Pandemic-driven strains in supply chains are triggering changes
in contract terms between suppliers and their manufacturing and
retail customers as companies try to address the risks and added
costs brought on by persistent delays and disruptions.
Procurement experts say that when drafting new contracts and
renewing existing ones, companies increasingly are seeking to add
provisions that cover the impact of pandemics or epidemics and
accelerating inflation. The moves come as commodity costs and
shipping prices have soared far faster during the past two years
than considered in traditional contract terms.
Biden, Macron Vow to Work to Ease Diplomatic Spat
President Biden and France's President Emmanuel Macron, speaking
for the first time since a diplomatic spat arose over a deal by the
U.S. and United Kingdom to supply Australia with nuclear-powered
submarines, vowed to seek ways to patch up an alliance that is part
of American efforts to counter China's influence in the
In a joint statement from the U.S. and France, both sides
acknowledged the situation would have benefited from better
communication. Mr. Biden also reaffirmed a commitment to discuss
matters of strategic interest to France and European partners, it
said. Mr. Macron said his ambassador, Philippe Etienne, would
return to Washington next week after having been recalled for
consultations, the joint statement said.
FDA Clears Covid-19 Booster Shots From Pfizer for High-Risk
U.S. health authorities cleared Covid-19 vaccine booster shots
for people 65 and older and certain other adults at high risk of
severe illness, a bid to help curb the pandemic and the dangerous
The Food and Drug Administration on Wednesday said it permitted
a third dose of the shot from Pfizer Inc. and BioNTech SE for
people who got two doses of the Pfizer-BioNTech messenger RNA
vaccine and are 65 years and older or are at risk of severe disease
and death, including because of their jobs or where they live.
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Expected Major Events for Thursday
04:30/NED: 2Q GDP - 2nd estimate
06:00/NOR: Jul Labour force survey SA, incl unemployment
06:45/FRA: Sep Monthly business survey (goods-producing
07:00/SPN: 2Q Final GDP
07:15/FRA: Sep France Flash PMI
07:30/SWE: 2Q Financial accounts
07:30/GER: Sep Germany Flash PMI
07:30/SWI: Swiss National Bank monetary policy assessment
08:00/EU: Sep Eurozone Flash PMI
08:00/POL: Aug Unemployment
08:00/NOR: Norges Bank monetary policy decision and presentation
of Monetary Policy Report
08:00/ICE: Aug Labour Force Survey
08:30/UK: Sep Flash UK PMI
09:00/MLT: Aug Registered Unemployed
11:00/UK: 3Q Agents' Summary of Business Conditions
11:00/UK: UK interest rate decision
11:00/TUR: Turkish interest rate decision
16:59/SPN: 2Q Quarterly Balance of Payments
23:01/UK: Sep UK Consumer Confidence Survey
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(END) Dow Jones Newswires
September 23, 2021 00:46 ET (04:46 GMT)
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