Eurozone M3; U.K. Capital issuance; Bundesbank Monthly Report;
Christine Lagarde appears at Committee on Economic and Monetary
Affairs; no major earnings updates expected
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
European stocks should post solid gains on Monday, with energy
companies in the spotlight after oil prices jumped to three-year
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
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%,
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,
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
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
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,"
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
"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."
TODAY'S TOP HEADLINES
China Evergrande New Energy Vehicle Scraps Shanghai Listing
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
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
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
Cargo Piles Up as California Ports Jostle Over How to Resolve
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%
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
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
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
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
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
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
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 Amazon.com 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
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
Individuals Embrace Options Trading, Turbocharging Stock
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
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
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
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(END) Dow Jones Newswires
September 27, 2021 00:24 ET (04:24 GMT)
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