Watch For:

Eurozone M3; U.K. Capital issuance; Bundesbank Monthly Report; Christine Lagarde appears at Committee on Economic and Monetary Affairs; no major earnings updates expected

Opening Call:

Surging oil prices should boost the energy sector on Monday and support wider gains in European equities. In Asia, most stock indexes rose, but virus and Evergrande worries weighed on Chinese shares. Elsewhere, the dollar dipped but Treasury yields and gold prices strengthened.


European stocks should post solid gains on Monday, with energy companies in the spotlight after oil prices jumped to three-year highs.

In Asia, most major benchmarks rose, while U.S. futures also advanced at the start of a week that sees Jerome Powell and Treasury Secretary Janet Yellen appear before a Senate panel to discuss the U.S. economic recovery.

The hearing comes as growth shows signs of slowing, inflation is running the hottest in more than a decade, the Fed is planning to reverse pandemic stimulus programs, and government-shutdown and debt-ceiling deadlines loom.

Stocks to Watch:

Prudential will raise $2.4 billion by issuing new shares, proceeds of which will be used by the insurer to redeem high-coupon debt due in six months and invest for growth. The U.K. insurer will sell 130.8 million new shares in the Hong Kong offer at a maximum price of $18.46, Prudential said late Sunday.


Rolls-Royce beat out incumbent Pratt & Whitney and GE in a contest to supply new engines for the U.S. Air Force fleet of B-52 bombers, a deal that could be worth up to $2.6 billion. The U.K. company will supply more than 600 of the F130 engines built at its Indianapolis facility that it said could keep the bomber flying for another 30 years or more.


The dollar was slightly weaker in Asian trade but Commonwealth Bank of Australia expects the currency to have a firmer bias this week even as it remains in the crosscurrents of a more hawkish FOMC and fading concerns of a potential China Evergrande default.

Evergrande jitters could reemerge, but it's unlikely that moves in financial markets would be as pronounced as recently, CBA said. Last week's FOMC decision was dollar supportive given it all but confirmed the Fed will announce a taper of asset purchases in November.

CBA expects GBP/USD will continue to hold above 1.3600 and EUR/USD will consolidate around 1.1700. USD/JPY is struggling to break above 110.50 but should still trend higher, even if more slowly than expected.

Separately, CBA said the outcome of the German election is unlikely to generate meaningful euro volatility.

But beyond the near term, the likelihood of a political shift to the left suggests Germany's fiscal stance could become less of a drag on the economy over the next few years than is currently projected by the change in the cyclically adjusted primary budget balance. This would ultimately benefit the euro, CBA said.

Partial results suggest the outcome is too close to call between the Social Democratic Party and the outgoing chancellor's center-right Christian Democratic Union party. Most likely scenarios at this stage are a left-leaning coalition or a SPD-led grand coalition that includes the CDU, CBA added.


Treasury yields strengthened in Asia, with the 10-year note yield holding above 1.4% but DZ Bank sees only limited scope for yields to rise in the next three months, despite last week's announcement of a tapering timetable by the Fed.

"As the Fed will only be reducing, but not stopping, its asset purchases over the coming six months, we see only limited scope for higher 10-year yields," said analyst Birgit Henseler.

DZ Bank forecasts the 10-year yield level at 1.60% on a six-month view. If the Fed's asset purchases come to an end at the end of next summer, the Treasury yield would rise to 1.90%, Henseler added.

Germany's election results shouldn't have an immediate impact on financial markets, as it seems a long period of negotiations lies ahead, UBS said.

There could some day to day volatility in the Bund curve as potential coalition arrangements unfold over weeks or months, but the pandemic and ECB policy would remain the medium-term drivers, UBS said.

Eonia forwards and Bund yields have already cheapened substantially over the past few days and UBS sees limited space for a further rise in 10-year Bunds.


Oil prices extended their climb on Monday, as supply tightness continued to draw on inventories across all regions, ANZ Research said.

A rally in the natural gas price improved the economics for oil to produce power, which is exerting upward pressure on prices, said ANZ. China also has started its response to contain crude prices by selling from its strategic petroleum reserve via auction as it did for metals.

ANZ said there are some signs of relief for oil supply, as higher prices are encouraging rig developments.

"The market is pricing in a prolonged impact of supply disruptions, and the likely storage draws that will be needed to fulfill refinery demand, " said Louise Dickson, senior oil market analyst at Rystad Energy, in daily commentary.

"Even as barrels come back on production, the perceived supply shortage, paired with bullish hints of demand recovery, have significantly tightened the market, at least in the very short-term, paving the ascent of Brent to above $77 per barrel," she said.


Gold futures in Asia added to Friday's gains, with Phillip Futures saying hawkish central bank stances have likely been factored in to prices.

Senior commodities manager, Avtar Sandu, said the Evergrande contagion fallout and the U.S. debt-ceiling crisis would support gold prices below $1,740 in the immediate term.

Copper prices were also higher, as China's power rationing could continue to weigh on metal production.

ANZ said nearly 10 copper-making companies have said the ongoing power rationing could lead to a halt in production and the Shanghai Futures Exchange's copper inventories were continuing to fall, which should support prices.

Chinese PMI this week is likely to show "continued loss of momentum" in industrial activity, and that could cool down commodity prices, specially industrial metals, Capital Economics said.

"Investors will also be closely watching developments around Evergrande. We expect a managed restructuring of the company, which should limit the negative impact on China's metals demand."

U.S. steel prices look solid through December due to industrial demand and as mills carry out maintenance, but UBS thinks they could then start to sag.

"Into 2022, steel prices have downside risk as pent-up demand fizzles out coupled with rising supply from import growth and new capacity starting up," UBS said.

In China, production cuts should cushion falling demand from the property sector. "This should result in flat to declining exports, which should ease import pressure in other regions."



China Evergrande New Energy Vehicle Scraps Shanghai Listing Plans

Cash-strapped China Evergrande New Energy Vehicle Group Ltd. has shelved plans to list on the Shanghai Stock Exchange, as the debt crisis at its parent, China Evergrande Group, weighs on market confidence.

The proposed issue of A-Shares "will not proceed further," the company said late Sunday without elaborating.


Uncertain Election Leaves Germany Facing Period of Power Vacuum

BERLIN-Germany faces weeks and perhaps months of uncertainty after Sunday's national election left open the shape and agenda of its next government and offered little clarity about who would succeed Chancellor Angela Merkel.

At least initially, the world's fourth largest economy and the European Union's biggest member could find itself without strong leadership, then with a weakened government in the following four years.


Cargo Piles Up as California Ports Jostle Over How to Resolve Delays

Nike Inc. doesn't have enough sneakers to sell for the holidays. Costco Wholesale Corp. is reimposing limits on paper towel purchases. Prices for artificial Christmas trees have jumped 25% this season.

Despite mounting shipping delays and cargo backlogs, the busiest U.S. port complex shuts its gates for hours on most days and remains closed on Sundays. Meanwhile, major ports in Asia and Europe have operated round-the-clock for years.


In a Troubled U.S.-China Relationship, Moments of Pragmatism Emerge

Behind-the-scenes dealings that freed a Chinese executive from U.S. prosecution removed a stumbling block between the nations and demonstrated a little-noticed pragmatic dimension to the relationship.

The U.S. and China are at loggerheads on numerous fronts, from technology and human rights to Beijing's territorial claims; the United Nations secretary-general this month termed the nations' relationship as "completely dysfunctional."


China Wields New Legal Weapon to Fight Claims of Intellectual Property Theft

WASHINGTON-Chinese technology giants have seized on a new legal tactic to fight claims of intellectual property theft, raising concerns in the U.S. that Beijing's promises to strictly enforce patent and copyright laws will be undermined by Chinese courts.

In four major cases since 2020, Chinese courts granted so-called anti-suit injunctions blocking foreign companies from taking legal action anywhere in the world to protect their trade secrets.


Debt-Limit Standoff Could Force Fed to Revisit Emergency Playbook

A crisis-management playbook Federal Reserve officials created years ago could guide their response this fall if the federal government can't pay all its bills because of a political standoff over raising the federal debt limit.

The options include the Fed buying Treasury securities in default on the open market and selling Treasurys owned by the Fed to counteract potentially severe strains in financial markets, according to the transcript of an October 2013 conference call.


Congress Heads Into Tumultuous Week Pressured by Converging Deadlines

WASHINGTON-A slew of high-stakes deadlines will collide on Capitol Hill this week, setting up potentially chaotic negotiations against the backdrop of expiring government funding and the threat of a possible U.S. default.

Even by the standards of a Capitol used to operating under pressure, this week's maelstrom of legislative and fiscal crosscurrents is setting the stage for an extraordinary sprint. Democratic leaders are trying to shepherd two complicated legislative packages: a roughly $1 trillion bipartisan infrastructure bill and a sprawling healthcare, education and climate package whose proposed $3.5 trillion price tag and contents are still under intense debate within the party.


Logistics Operators Raise Pay, Enlist Robots to Meet Holiday Demand

Warehouse operators are throwing every tool they can at increasingly urgent efforts to hire seasonal workers as they brace for an expected flood of holiday goods amid competition for scarce labor from deep-pocketed rivals.

Logistics providers are boosting pay, adding flexibility to shifts, blanketing social media with recruitment ads and even shipping in more robots to help workers field surging e-commerce volumes. They are also jockeying with titans like Inc., Walmart Inc. and United Parcel Service Inc. that are dangling inducements, from signing bonuses to assistance with college tuition, as they push to bring on hundreds of thousands of workers ahead of the holidays.


Bitcoin Miners Eye Nuclear Power as Environmental Criticism Mounts

Bitcoin miners, under fire for their sizable environmental footprint, are forging partnerships with owners of struggling nuclear-power plants with electricity to spare.

The matchups have the potential to solve key issues facing each industry, executives and analysts say: Electricity-hungry bitcoin miners want stable and carbon-free power, while nuclear plants facing competition from cheaper power sources need new customers.


Individuals Embrace Options Trading, Turbocharging Stock Markets

Shares of Robinhood Markets Inc. had mostly disappointed the trading app's fans since their initial public offering. But Harsh Patel felt sure that was about to change.

Mr. Patel, a 27-year-old nurse in Columbus, Ohio, figured its price would rise after he saw chatter about Robinhood light up a stock market chatboard. So on Aug. 4, he paid $600 for a call option-a contract that confers the right, though not the obligation, to purchase 100 shares at a stated price by a certain date.


Corporate-Buyout Loans Near Highs of 2007

A buyout boom fueled by easy money and a looming hike in the capital-gains tax is sweeping Wall Street deal making to highs not seen since before the 2008 financial crisis.

Companies have issued $120 billion of "leveraged loans" this year through Sept. 23 to finance corporate buyouts by private-equity firms-just shy of the $124 billion record for the first nine months of the year set in 2007, according to data from S&P Global Market Intelligence's LCD.


Credit Investors Follow the Workers

Labor shortages and supply-chain disruptions have become make-or-break factors for some investors weighing bets on corporate debt.

Tom Murphy, portfolio manager and head of global investment-grade credit at Columbia Threadneedle, said the asset manager is placing companies in two buckets: those that can offset increased wages, bottlenecks and shortages with higher prices, and those that can't without losing business. That has him avoiding packaged-goods makers and department stores.


Prudential to Raise $2.4 Billion From Hong Kong Offer

Prudential PLC will raise $2.4 billion by issuing new shares, proceeds of which will be used by the insurer to redeem high-coupon debt due in six months and invest for growth.

The U.K. insurer will sell 130.8 million new shares in the Hong Kong offer at a maximum price of 143.8 Hong Kong dollars per share (US$18.46), Prudential said late Sunday.


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Expected Major Events for Monday

06:00/DEN: Aug Retail Sales Index

07:00/SPN: Aug PPI

08:00/ITA: Aug Foreign Trade non-EU

08:00/EU: Aug Monetary developments in the euro area (M3)

08:30/UK: Aug Capital issuance

15:59/UKR: Aug Industrial Production

23:01/UK: Aug Zoopla House Price Index

All times in GMT. Powered by Kantar Media and Dow Jones.

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


(END) Dow Jones Newswires

September 27, 2021 00:24 ET (04:24 GMT)

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