MARKET WRAPS
Watch For:
Watch For: Eurozone Trade Balance, New Passenger Car
Registrations; France, Italy CPI; Italy Foreign Trade EU; updates
from Pearson, X5 Retail, Mediclinic, Hargreaves Lansdown, Rio
Tinto, Hargreaves Lansdown, Ashmore, Evraz, DS Smith, TCS
Group.
Opening Call:
Stocks could finish the week higher after broad-based rally in
U.S. stocks. The dollar was a touch weaker against major currencies
while the Japanese yen weakened as risk appetite increased. 10-year
treasury yields rose slightly to 1.525%. Commodities were mixed as
oil rose and gold remained unmoved.
Equities:
European stocks are set to continue their winning streak Friday
after U.S. stocks rallied Thursday, propelling the S&P 500 to
its best performance in more than seven months.
U.S. stocks rose on a combination of after better-than-expected
earnings and economic data eased concerns about the outlook for the
economy.
As earnings season progresses, investors will be watching for
commentary that indicates how executives are feeling about many of
the economic issues that have weighed on markets in recent weeks.
Already, Delta Air Lines said Wednesday that it expects higher fuel
prices to undercut its profits in the fourth quarter.
"The big uncertainty right now continues to be around the
duration of this higher inflationary period," said Allen Bond,
managing director and portfolio manager at Oregon-based Jensen
Investment Management, which has about $12.8 billion under
management. "We are going to be looking for evidence and data that
gives us a sense of how companies are managing" that, as well as
supply-chain constraints.
Money managers and strategists said Thursday's rally doesn't
necessarily mean that the U.S. stock market has turned a corner.
Many expect more uncertainty in the months ahead. Still, with bond
yields so low and few other places for strong, consistent returns,
many remain bullish on stocks.
"We don't think any of these problems are going to end the bull
market," said Chris Zaccarelli, chief investment officer at
Independent Advisor Alliance. "I think this is a natural period of
consolidation and volatility and that it's completely normal as
part of any economic recovery."
Stocks on the move: Spanish utility stocks could remain in focus
on Friday after they traded higher Thursday after the Spanish
government on showed itself willing to walk back a measure that
would cap their profits.
Teresa Ribera, Spain's ecological transition minister, said
Thursday that the government wouldn't apply the measure, which
limits windfall profits from a rise in the cost of electricity, if
utilities provide businesses with energy at reasonable prices,
Spanish media report.
Endesa shares and Iberdrola both traded higher. Utility company
Naturgy was after Australian fund IFM Global Infrastructure's offer
for a $2.69 billion stake in the company was accepted.
Forex:
The Japanese Yen weakened against most G-10 and Asian currencies
amid risk appetite. There seems to be some renewed risk-on
sentiment, IG said, noting developments including Wall Street's
rally, the decline in U.S. initial jobless claims and a U.S. core
PPI reading that was below expectations.
The dollar remained flat against the euro, but a touch weaker
against other major currencies in early Asian trade. Bank of
America said at the end of 3Q, the market remained short USD, "but
this position is less stretched than earlier in the year."
The firm added that hedge-fund aggregate positions were broadly
flat, after they cut their dollar shorts in 3Q. Meanwhile, "real
money remains short USD, but somewhat less so than during H1."
UBS Global Wealth Management advises buying the Australian
dollar against Swiss franc, targeting a level of 0.71 and placing a
stop loss at 0.662. AUD/CHF rises 0.4% to 0.6846.
The AUD "still has some juice left in it" after recent gains due
to rising commodity prices, the lifting of coronavirus restrictions
and better-than-expected domestic activity, UBS strategists
said.
The CHF has "unduly strengthened" in recent days, they said. The
Swiss National Bank is likely to maintain its loose polices and
foreign exchange interventions, while many of its G10 peers
consider withdrawing support, they said. "Higher commodity prices,
particularly prices for energy, which Switzerland imports, should
be a headwind rather than a tailwind for the Swiss franc."
Currencies of oil exporters including the Russian ruble,
Canadian dollar and Norwegian krone rallied as crude prices rise.
"Although we wouldn't be surprised if energy prices remained
elevated for a while, we still think they will fall back over the
next year, weighing on the currencies of net energy exporters,"
Capital Economics economist Joseph Marlow said.
Bonds:
Goldman Sachs expects a mix of higher inflation and slower
growth in the near term, but correlation patterns across macro
assets to look more consistent with "reflationary" rather than
"stagflationary" dynamics, the bank said.
This means bond yields rising while risky assets appreciate
given still-high growth levels in most regions, the bank said.
Despite the recent selloff in U.S. yields, analysts at the bank
think any overshoot of their year-end U.S. 10-year yield target of
1.6% is likely to be relatively contained based on the bank's
expectation for a growth slowdown in 2022.
Market pricing appears to question the European Central Bank's
current guidance on the sequencing of monetary policy
normalization, whereby interest-rate rises are unlikely until the
pandemic-emergency and the regular asset-purchase programs are
scaled back, said Nordea's chief analyst Anders Svendsen.
"Markets are pricing the first ECB rate hike in early 2023,
which might be after Pandemic Emergency Purchase Programme tapering
is done, but most likely not before Asset Purchase Programme
tapering is done," he said.
Svendsen said ECB monetary policy will be determined by
developments in inflation and wage growth. He sees both transitory
and persistent factors to current inflation. "When the transitory
factors have played out, I believe we'll still have inflation
markets that are anchored at 2% forward," which will allow a very
gradual normalization of policy rates, he said.
Energy:
Oil rose in early morning Asian trade following a media report
that Saudi Arabia has dismissed calls for additional OPEC+ supply.
This report along with the International Energy Agency saying that
natural gas prices could increase demand for oil among power
generators have led to higher oil prices, Phillip Securities
Research said.
Carbon pricing, a relatively new and popular financial
instrument in Europe that tabulates the external costs to
greenhouse emissions, is being singled out as a main culprit for
European consumers' soaring natural gas prices.
Chris Midgley, global head of analytics at S&P Global
Platts, said the aim of carbon pricing is noble, as it incentivizes
power companies to use less high-polluting coal and more renewables
or cleaner-burning fuels.
But he said the current environment of high energy demand and
low energy supply makes coal usage necessary no matter how many
carbon credits need to be purchased, and those costs are passed on
to consumers. "So carbon pricing isn't making people use less coal,
it's just creating consumer pain."
Metals:
Gold was steady in the morning Asian session but has a bright
outlook. U.S. real yields are likely to stay in negative territory
even as the Fed debates rate increases for next year, so gold's
outlook should turn bullish, Oanda said. The precious metal's
rebound is facing a lot of resistance around $1,800/oz, but gold
should eventually rise toward $1,840/oz, Oanda said
Zinc fell in a likely technical correction in Asian morning
trading. Futures jumped 3.7% Thursday after major producer Nyrstar
said it was halving output at three European plants. Citi Research
expects zinc to hit $3,700 a metric ton within three months, given
that Nyrstar's production cuts add to an already tight physical
market.
TODAY'S TOP HEADLINES
Fed's Thomas Barkin Unsure Economy Can Recover All Jobs Lost in
Pandemic
Federal Reserve Bank of Richmond President Thomas Barkin said
changes in the economy could mean that some workers who left the
job market during the pandemic won't return.
Citing the number of pre-pandemic jobs that haven't been
recovered, Mr. Barkin said, "I'm in the mood of giving a little
more time to see whether these five million people come back" to
the labor force, but added that might not happen, during a speech
in New York on Thursday.
U.S., European Nations Claim Progress on Path to Removing
Digital Taxes
The U.S. and five European countries have reached an agreement
on how those countries' digital-service taxes would be withdrawn as
a broader international agreement moves forward, French Finance
Minister Bruno Le Maire said on Thursday.
The deal isn't likely to yield an immediate withdrawal of those
taxes because it is still linked to the broader global tax
agreement being completed and implemented over the next few years.
But having a path forward could ease tensions between the U.S. and
France, Italy, the U.K., Austria and Spain.
New York Fed Official: High Reverse Repo Usage Isn't a
Problem
Daily cash inflows of well over a trillion dollars into a tool
designed to help the Federal Reserve control short-term interest
rates aren't a problem and will likely persist for some time, a top
New York Fed staff member said Thursday.
The official is Lorie Logan, who manages the New York Fed's
massive holdings of cash and bonds and leads its implementation of
monetary policy. In a speech, she weighed in technical issues the
central bank has been dealing with to ensure that changes in
monetary policy flow through markets and affect the course of the
economy.
Coinbase Pitches Blueprint for Special Crypto Regulator
WASHINGTON-The largest U.S. cryptocurrency exchange wants
Congress to block the Securities and Exchange Commission from
overseeing the nascent industry and instead create a special
regulator for digital assets, according to a policy blueprint
reviewed by The Wall Street Journal.
Coinbase Global Inc., which has feuded with U.S. regulators in
recent months, plans to publicly release a document with proposals
for crypto regulation. It says crypto-market participants face
uncertainty about which federal agencies should oversee particular
assets.
White House Ransomware Summit Eyes Tighter Global Scrutiny for
Crypto
Officials from 32 governments who met virtually this week to
coordinate their response to the ransomware boom said uneven
cryptocurrency standards are helping hackers cash in.
The representatives pledged to share information about
cyberattacks and investigations, push firms to shore up security,
and disrupt the financial infrastructure of a criminal hacking
economy that has flourished in recent years. Consistent
international scrutiny of cryptocurrencies will be key, the
officials said, as ransomware groups that extort victims for
digital payments can quickly transfer the funds to countries with
lax standards for monitoring illicit transactions.
U.S. Crude Oil Inventories Surge as Refineries Hit the
Brakes
U.S. crude-oil inventories rose much more than expected last
week as refinery activity declined sharply, according to data
released Thursday by the Energy Information Administration.
Benchmark U.S. oil prices that were higher before the somewhat
bearish report came out reduced those gains afterward. The Nymex
front-month crude contract for November delivery was recently up
0.5% at $80.85 a barrel.
What Bank Earnings From JPMorgan, Bank of America Tell Us About
the U.S. Economy
Wall Street is booming, or at least parts of it are. Merger
mania and stock trading lifted the big U.S. banks' third-quarter
results. On Main Street, banks are still hunting for bigger loan
growth, but many customers are spending more after holding out last
year.
Here's what the biggest U.S. banks are telling us about the
state of the economy.
Rio Tinto Cuts 2021 Projection for Iron-Ore Shipments, Copper
Output
Rio Tinto PLC Friday said it expects to ship less iron ore than
previously anticipated from its Australian mining operations this
year because of delays to projects caused by labor shortages in the
country's west.
The world's second-largest miner by market value is also on
track to produce less copper and bauxite than it projected this
year in big part because of plant-related problems, the company
said on Friday.
Richard Branson's Virgin Galactic Pushes Back Commercial Space
Flights
Virgin Galactic Holdings Inc. said it is pushing back the launch
of full commercial service for private-astronaut trips until toward
the end of next year as it works to improve its space vehicles.
The company founded by billionaire entrepreneur Richard Branson
said Thursday that it now believes it will launch private-astronaut
flights in the fourth quarter of 2022, instead of the end of the
third quarter of next year, as Chief Executive Michael Colglazier
previously told investors. The company has said it is charging at
least $450,000 a seat for private-astronaut flights.
Signa Sports Attracts Investment From Saudi Arabia's Public
Investment Fund
Online retailer Signa Sports United is nearing a deal to raise
money from a group of investors including Saudi Arabia's
sovereign-wealth fund, according to people familiar with the
matter.
Saudi Arabia's Public Investment Fund would join Signa's earlier
backers, including Japan's SoftBank Group Corp., and Abu Dhabi
sovereign-wealth fund Mubadala Investment Co., the people said. It
would mark a reunion of sorts for the three investors, who were the
cornerstones of SoftBank's $100 billion Vision Fund, launched in
2016.
U.S., European Nations Claim Progress on Path to Removing
Digital Taxes
The U.S. and five European countries have reached an agreement
on how those countries' digital-service taxes would be withdrawn as
a broader international agreement moves forward, French Finance
Minister Bruno Le Maire said on Thursday.
The deal isn't likely to yield an immediate withdrawal of those
taxes because it is still linked to the broader global tax
agreement being completed and implemented over the next few years.
But having a path forward could ease tensions between the U.S. and
France, Italy, the U.K., Austria and Spain.
Financial Firms Get Seal of Approval for Climate Plans
An organization that assesses the credibility of corporate
climate-change targets gave its blessing to the emission-reduction
plans of two banks and a private-equity firm. The endorsements
apply to the companies themselves as well as their investment and
lending activities, a first for the sector.
The Science Based Targets initiative said Thursday it endorsed
the emissions targets of French bank La Banque Postale, South
Korean bank KB Financial Group and Swedish private-equity firm EQT
AB. As well as committing to slash emissions from their own
operations, the companies set targets for their portfolios, which
experts say have a greater environmental impact.
White House Ransomware Summit Eyes Tighter Global Scrutiny for
Crypto
Officials from 32 governments who met virtually this week to
coordinate their response to the ransomware boom said uneven
cryptocurrency standards are helping hackers cash in.
The representatives pledged to share information about
cyberattacks and investigations, push firms to shore up security,
and disrupt the financial infrastructure of a criminal hacking
economy that has flourished in recent years. Consistent
international scrutiny of cryptocurrencies will be key, the
officials said, as ransomware groups that extort victims for
digital payments can quickly transfer the funds to countries with
lax standards for monitoring illicit transactions.
Johnson & Johnson Places Talc Injury Claims in
Bankruptcy
Johnson & Johnson placed into bankruptcy its liabilities for
tens of thousands of lawsuits linking talc-based products to
cancer, betting the move will help drive a settlement of
personal-injury claims that are expected to grow for decades to
come.
J&J said Thursday that a corporate affiliate holding
talc-related liabilities had filed for chapter 11 protection in the
U.S. Bankruptcy Court in Charlotte, N.C., shifting the landscape of
a yearslong legal fight over whether Johnson's Baby Powder caused
ovarian cancer, asbestos poisoning and other illnesses. The company
has maintained that the powder, which it stopped selling last year,
is safe and doesn't contain asbestos.
Elizabeth Holmes Trial: Dermatologist Describes Theranos Lab
Director Stint
SAN JOSE, Calif.-A dermatologist testified Thursday in the
criminal trial of Elizabeth Holmes that he agreed to serve as
Theranos Inc.'s lab director after being asked to fill the role by
one of his patients, but never did much more than sign paperwork
and appear in the company's lab once or twice.
Sunil Dhawan told jurors that he accepted the role in November
2014 at the request of Ramesh "Sunny" Balwani, Theranos's chief
operating officer, whom he had treated for almost 15 years.
Write to sarka.halas@wsj.com
Expected Major Events for Friday
06:00/NOR: Sep External trade in goods
06:00/EU: Sep New Passenger Car Registrations in Europe
statistics (EU27 + EFTA3)
06:45/FRA: Sep CPI
07:00/SVK: Aug New orders in industry
08:00/POL: Aug Merchandise trade
08:00/POL: Sep CPI
08:00/ITA: Sep CPI
09:00/CRO: Sep CPI
09:00/EU: Aug Foreign Trade
09:00/ITA: Aug Foreign Trade EU
10:00/IRL: Aug Goods Exports and Imports
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(END) Dow Jones Newswires
October 15, 2021 00:26 ET (04:26 GMT)
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