European stocks were lower Friday as bond yields continued to
rise and investors kept an eye on troubled real estate giant China
Evergrande headed into the weekend.
Stocks had enjoyed two strong days of gains following the
Federal Reserve's policy meeting on Wednesday, as markets seemed to
welcome a delay to the start of tapering and ignored the hawkish
undertones of the central bank's outlook. But a delayed taper
tantrum appeared to show up for bonds on Thursday, as yields shot
higher and remained elevated on Friday.
"Something has clearly changed and positioning on rates is
shifting. U.S. 10yr yields jumped to 1.44%, posting their biggest
one-day gain since March, whilst 30yr bond yields jumped the most
in a single day since March 2020," said Neil Wilson, chief market
analyst for Markets.com.
"Although the Fed and BoE remain fairly cautious and the dogma
of transitory inflation persists, they're starting to move beyond
pandemic-era emergency mode. Investors see this and are moving too
- rates steepening again as they did earlier this year," said
Major indexes were holding on to slim weekly gains, in a week
that began with sharp losses linked to fears over global contagion
from troubles surrounding property group China Evergrande.
Shares on the move:
German sportswear companies Adidas and Puma both slip in opening
trade Friday after U.S. peer Nike missed 1Q sales expectations and
said continued supply-chain disruptions would mean lower revenue
for the fiscal year than previously thought.
Nike pointed to pandemic-related restrictions in Vietnam, where
much footwear production is based, as it cut full-year sales
targets to single-digit growth, and warned of longer delivery times
affecting the key U.S. holiday season.
Adidas also highlighted Vietnam when it set out full-year
guidance this summer, although analysts at the time said
supply-chain issues looked largely factored into the company's
targets. Adidas traded 3.5% lower, while Puma fell 2.3%.
Drugmaker AstraZeneca rose nearly 3% after reporting results on
a prostate cancer treatment.
Data in focus:
Germany's manufacturing sector is taking an expected blow from
supply shortages and worries about China, its most important
market, said Christian Schulz, European economist at Citi.
However, the hit wasn't as bad as feared and the domestic
economy showed signs of resilience in the Ifo index, the economist
For Schulz, the Ifo index surprised to the upside because the
drop was almost entirely driven by the current assessment
component, which Citi treats like a measure of the output gap. The
expectations component, which leads business investment growth by a
quarter, fell less than expected by Citi.
"Growth momentum has faded, but a solid further recovery remains
on the cards once supply constraints and price pressures are
addressed," Schulz said.
The third successive decline in the Ifo business climate index
in September provides further evidence that Germany's recovery is
losing steam, as supply chain difficulties persist and the surge in
gas prices piles additional pressure on prices and production,
Capital Economics said.
Both the current conditions index and expectations index
declined, as the surge in high gas and coal prices and supply
shortages took their toll, Capital Economics' assistant economist
Michael Tran said.
Nevertheless, the current conditions index remained high by past
standards and is well above its average over the past decade, Tran
said. Capital Economics expects GDP growth of 3.0% in the third
quarter, given the low base at the start of 2Q.
Stock futures wavered and bond yields ticked up to multi-month
highs, as uncertainty lingered about the future of heavily indebted
property giant China Evergrande Group.
"There has been a growing feeling that there is a pullback
waiting," said Seema Shah, chief strategist at Principal Global
Investors. "The market is so vulnerable to any kind of shock right
now given growth is slowing and valuations are looking
Markets have been whipsawed this week by fears that the possible
collapse of Evergrande could spill over into global markets and add
to an already darkening outlook for global growth. Evergrande
inched closer to a potential default Friday as a deadline on a key
interest payment to its U.S. dollar bondholders passed without any
"It is one of the largest companies in the second largest
economy in the world and if something pulls down Chinese growth it
is going to pull down global growth," said Ms. Shah.
In U.S. off hours trading, Meredith Corp. surged 19% off hours
after The Wall Street Journal reported the People Magazine
publisher was in talks to be acquired by Barry Diller's
Shares of Nike fell 4% in premarket trading after the sportswear
giant lowered revenue guidance, citing supply-chain disruptions in
Asia. Shares in warehouse grocery chain Costco ticked up 0.8% after
the warehouse grocery giant reported quarterly sales.
The DXY dollar index fell, erasing some of the gains in the wake
of Wednesday's U.S. Federal Reserve announcement that took it to a
one-month high, but investors should return to buy the currency due
to prospects of tighter monetary policy, ING said.
"We are still inclined to think markets will buy the dips in the
dollar given the reinforced backdrop of policy normalisation in the
U.S.," it said.
The Fed said it could start tapering asset purchases as early as
November while interest rates could rise by the end of next year.
ING said markets for now seem reluctant to "trust" the Fed's
interest-rate projections and may need more evidence from U.S.
The pound traded steady, failing to build on Thursday's gains
after a Bank of England policy statement suggested the central bank
was moving closer to tightening monetary policy, and MUFG said it
could reverse these gains due to near-term risks to the U.K.
These include reduced pandemic-related support, surging gas
prices and continuing supply bottlenecks. The hit to real incomes
from surging utility bills just as an increase to benefit payments
added during the pandemic is taken away "could undermine consumer
confidence and weaken consumer spending," said MUFG's Derek
Sterling advanced nearly 1% versus the dollar Thursday "but
near-term elevated risks leave us more wary of the move reversing,"
Markets were contending with a rise in government bond yields,
after several central banks-including the Fed-this week signaled
they were on the path toward removing pandemic-era stimulus
The yield on the benchmark 10-Year U.S. Treasury note rose to
1.437% Friday, from 1.408% Thursday, hitting its highest level
OFI Asset Management expects a gradual rise in U.S. and eurozone
bond yields by year-end as central banks intend to gradually remove
some monetary stimulus, said Jean-Marie Mercadal, head of
OFI AM's year-end targets for the 10-year U.S. Treasury and
German Bund yields are 1.75% and -0.20%, respectively, with the
expected increases not triggering any major price fluctuations in
Markets seem to have priced in the Fed's intention to scale back
asset purchases, he said.
The European Central Bank also decided in September to continue
asset purchases at a "moderately lower" level in the coming quarter
compared with 2Q and 3Q.
A new German government with a softer stance on austerity and no
strong opposition against a permanent EU debt capacity would argue
for tighter eurozone periphery spreads, said Christoph Rieger, head
of rates and credit research at Commerzbank.
Germany will hold elections on Sunday, with recent polls showing
the Social Democratic Party (SPD) in the lead. "While a moderate
shift to the left under an SPD-led German government should not
come as a surprise at this stage, the FDP [Free Democratic Party]
counterweight in a traffic light coalition may turn out to be
weaker than some expect," he said.
The traffic light coalition scenario refers to a government
formed by SPD, FDP and the Greens.
Euro-denominated corporate bonds are tightly priced suggesting
limited scope for further gains until the end of the year, said
UniCredit. "Tight spread levels across European credit market
segments suggest only limited scope for tightening until the end of
the year," analysts at the bank said.
The market is set to hold steady Friday, as little-changed
equity and Bund futures this morning suggests that European credit
market spreads are likely "to close the week pretty flat today,"
Oil prices rose, with both benchmarks on course for weekly
gains. Brent's trading close to its October 2018 high, with UBS's
Giovanni Staunovo pointing to the supply disruptions and recovering
oil demand that have caused volatility in the market since
On top of Hurricane Ida, maintenance work in Kazakhstan, as well
as outages in Nigeria, Mexico, and Libya have all contributed to
rising prices in recent weeks, he added, forecasting a Brent price
of $80 a barrel for the end of the month.
Gold rebounded after a steep fall on Thursday that was prompted
by rising bond yields and signs that global central banks could
soon hike rates to tame inflation. The precious metal slumped as
low as $1,739.70 in the previous session as U.S. treasury yields
rose to their highest level since July.
"The market is showing a little bit of a taper tantrum," says
Seema Shah, chief strategist at Principal Global Investors, of the
rising bond yields. Signs that global central banks were moving to
remove pandemic-era stimulus measures are behind the move in bond
markets, she said.
Talking Markets: Europe Faces Challenging Winter Amid Energy
Europe is in for a difficult winter: Energy prices are soaring,
and power supply may not stretch far enough, threatening to cause
outages, disrupt the continent's industry and hurt the economic
Electricity prices have risen to their highest levels in more
than a decade in recent weeks, according to the International
Energy Agency. This is largely attributable to prices for natural
gas world-wide, which have soared due to demand being higher than
expected, spurred by the global economic rebound, and because of
German Business Sentiment Falls for Third Month Running in
German business sentiment worsened again in September, as
supply-chain bottlenecks clouded the short-term outlook.
The Ifo business-climate index decreased to 98.8 points in
September from 99.6 points in August, data from the Ifo Institute
showed Friday. This marks the third consecutive month of decline
after it peaked at 101.8 in June.
Naturgy's Largest Shareholder Opposes $5.7 Bln Partial Takeover
Naturgy Energy Group SA's single largest shareholder said Friday
that it would reject an offer for a stake in the company launched
by IFM Global Infrastructure Fund, arguing that the move isn't in
the company's long-term interests.
CriteriaCaixa, an investment holding company linked to CaixaBank
SA, said it opposed the offer to acquire a 22.69% stake made by IFM
through its investment vehicle Global InfraCo 0 (2). The offer was
first made in January, with the bid later revised downward from 23
euros to EUR22.07 a share, or total 4.86 billion euros ($5.70
billion.) The offer was approved by Spanish regulator the CNMV
earlier this month.
Apple Insists EU Push for Universal Charger Would Repress
Innovation, Create Waste
Apple Inc. hit back at European Union moves to introduce a
universal charger for smartphones, tablets and other electronic
devices, saying such legislation would be anti-innovation and would
serve to increase waste.
The European Commission, the bloc's executive arm, said Thursday
that it is proposing USB-C as the standard port for smartphones,
tablets, headphones, portable speakers, cameras, and some videogame
consoles, regardless of the device brand. The move aims to cut
waste related to the production and disposal of chargers.
U.K. Consumer Confidence Wanes in September on Inflation
Confidence among British consumers took a hit in September,
falling to a five-month low, as concerns over high inflation and
the end of government support soured consumers' mood.
GfK's consumer-confidence barometer came in at minus 13 in
September, down five points from August and missing economists
expectations, who had forecast a reading of minus seven when polled
by The Wall Street Journal.
U.S. and European Economies Slowed by Delta Variant, Supply
The U.S. and European economies slowed in September as
supply-chain bottlenecks and worries over the Delta variant weighed
on businesses, adding to signs the global economy is experiencing a
soft patch amid an uneven recovery, purchasing managers' surveys
Manufacturing and services businesses in both the U.S. and
Eurozone reported slower growth in activity this month, although
the pullback was more pronounced in Europe.
Turkish Lira Falls Near Record Lows After Rate Cut
Turkey's central bank cut its key interest rate on Thursday in a
move that could complicate the country's path to economic recovery
from the Covid-19 pandemic and a prolonged inflation problem.
Officials cut Turkey's key policy rate, its one-week repo rate,
to 18% from 19%. Following the announcement, the Turkish lira fell
1.3% against the dollar, with one dollar buying 8.767901 lira, just
shy of record lows hit in June.
Migrant Candidates Face Racism in German Election
BERLIN-More German Turks will run for election this year than at
any time in the past two decades, but candidates from Germany's
largest ethnic minority say they often face racism, underlining the
difficulties the country faces in integrating its diverse migrant
"I had 400 campaign posters, and I think 250 of them are already
destroyed with racist slurs," said Orkan Özdemir, a center-left
candidate for the Berlin House of Representatives, which elects its
members Sunday, the same day as the country's general election.
CDC Chief Backs Pfizer Boosters for At-Risk Workers in Break
The director of Centers for Disease Control and Prevention said
workers at high risk of Covid-19 infection should receive a booster
of Pfizer Inc.'s vaccine, in a decision that deviated from the
recommendation of an advisory panel that the CDC typically
CDC Director Rochelle Walensky signed off on a series of
recommendations from the panel, saying boosters should be offered
to people 65 and over as well as those 50 to 64 years with
underlying medical conditions, according to the Associated Press.
The extra dose would be given at least six months after the last
Buying a Share of a Collectible Guitar? In This Market, You May
Space-tourism companies, flying-taxi startups and pizza-related
cryptocurrencies are among the unlikely ventures to have recently
reached public markets. Now it is the turn of electric guitars.
This month, American guitar maker Gibson said it would use
Rally, a site specializing in collectibles, to issue shares in
prototype instruments designed in collaboration with famous
players. Ownership of an EDS-1275 doubleneck model approved by
Slash, of the band Guns N' Roses, was chopped into 13,000 parts and
sold for $5 apiece to 562 investors in just two hours.
China Evergrande Keeps Dollar Bondholders Guessing on Key
Global investors who own China Evergrande Group's U.S. dollar
bonds were in the dark Thursday about whether the property giant
would make a key interest payment, a major test of the highly
indebted developer's ability to avoid a default.
Evergrande was on the hook to make $83.5 million in coupon
payments on Sept. 23 on dollar bonds with a face value of $2.03
billion. As of late afternoon in New York on Thursday, bondholders
hadn't received the money, according to people familiar with the
Democratic Leaders Scramble to Find Areas of Agreement on $3.5
Trillion Spending Bill
WASHINGTON-Democratic leaders raced Thursday to find enough
agreement around a roughly $3.5 trillion spending package to
assuage concerns between the party's dueling centrist and liberal
factions that threatened to derail a separate vote on an
infrastructure package next week.
Liberal Democrats have said the two bills are linked and have
balked at voting for the roughly $1 trillion infrastructure package
on Monday in the House unless the broader healthcare, education and
climate-change package has passed. The infrastructure bill has
already cleared the Senate with bipartisan support, and moderates
have urged leadership to bring it to the floor in the House.
IMF Calls for Lending Clamps to Cool Australia's Housing Price
SYDNEY--The International Monetary Fund has added to calls for
regulatory steps to be taken to cool surging house price growth in
Australia, warning of building "incipient risks" in the market.
In an Article IV discussion paper, the IMF said so-called
macroprudential policy should be tightened to address gradually
rising financial stability risks.
America's Cash Might Stay on the Sidelines
If Americans ever feel comfortable again, they have a lot of
money that they can spend. But who knows when that comfort will
The Federal Reserve on Thursday reported that the net worth of
U.S. households was $134 trillion in the second quarter-up from
$128.4 trillion in the first quarter. That figure stood at $110
trillion In the fourth quarter of 2019, before the pandemic took
hold. Including nonprofits, accumulated household net worth in the
second quarter hit a record $141.7 trillion.
Trapped in Kabul, Prominent Afghan Women Fear Retribution Under
KABUL-Nabila, a 31-year-old Afghan judge, used to grant divorces
to the wives of militants while their husbands languished in
prison. Two days after the Taliban captured Kabul on Aug. 15 and
emptied prisons across the country, she received threatening calls
from several of these men.
She broke her SIM card, packed light and went into hiding.
North Korea Calls Peace-Deal Proposal by South's Moon Jae-in
SEOUL-North Korea dismissed a proposal by South Korea's
president for a peace declaration, calling the proposition
premature as Pyongyang sees what it calls continuing aggression
from Washington and Seoul.
During a speech Tuesday at the United Nations General Assembly,
South Korean President Moon Jae-in suggested the adoption of a
peace deal that would replace the armistice that halted hostilities
in the 1950-1953 Korean War. He proposed that the U.S., along with
the two Koreas and possibly China, agree to declare the war
U.S. Officials Call for Fines Against Companies That Don't
Top U.S. cyber officials on Thursday urged Congress to add more
teeth to any legislation forcing firms that operate critical
infrastructure to disclose hacks, calling for a narrow reporting
window after a breach and fines against companies that don't
Such mandates could help federal agencies and critical economic
sectors to respond to incidents, security experts say. But many
businesses and some lawmakers are wary of the tighter regulation
and potential penalties for which the Biden administration is
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(END) Dow Jones Newswires
September 24, 2021 06:31 ET (10:31 GMT)
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