European Commission Assessment of Covid-19's Impact on Economy;
Eurozone Construction Output; updates from Deutsche Boerse,
Publicis, LVMH, Roche, Aeroports de Paris, Siemens Healthineers,
Petrofac, Tele2, BHP Group
European equities should see a mildly-positive start, despite
U.S. stocks wavering over global growth concerns. In Asia, stocks
mostly gained; the dollar, Treasury yields and oil weakened while
Shares are likely to edge higher in Europe following a largely
positive finish on Wall Street on Monday and gains in Asia this
The S&P 500 and Nasdaq rose Monday, boosted by investor
enthusiasm over a busy earnings week that many hope will give clues
about how companies are dealing with inflation and supply-chain
issues. However, the Dow closed the session down 0.1%. Asian stocks
mainly advanced on Tuesday, tracking Wall Street's tech-driven
rally, with Chinese markets rebounding.
A strong start to the third-quarter U.S. earnings season has
alleviated some of the uneasiness among investors in recent days.
About 81% of S&P 500 companies that have reported so far have
beat earnings-per-share expectations, according to FactSet
"Many of the companies we are looking at are citing very strong
demand, and we can work with a situation where demand is strong and
supply is problematic because eventually we will work through
supply problems," said Christopher Harvey, head of equity strategy
at Wells Fargo Securities. "We're trying to ascertain if we've had
a peak in supply-chain issues[and whether] this might be as bad as
Stocks to Watch:
BHP's first-quarter production was soft, said Macquarie, with
better-than-expected petroleum and energy coal output being offset
by misses for metallurgical coal, copper and iron-ore output
volumes. "Importantly, guidance for all key commodities is
unchanged with maintenance programs the key driver behind the
metallurgical coal weakness."
BHP was last down 1.6% in Sydney.
Jefferies prefers BHP over rival Rio Tinto, for now, based on
the latest production reports and relative valuations. Strength in
prices for some of BHP's key commodities, including steelmaking
coal, copper and petroleum, should offset weakness in iron ore
prices for the world's No. 1 miner in the short run, said
The bank does forecast a fall in BHP's earnings and cash flow in
FY 2022 versus FY 2021, "however, risk to our commodity price
forecasts is to the upside."
The dollar continued to ease lower in Asia as risk appetite
strengthened in most regional markets.
"The market has re-assessed its expectations for the Federal
Reserve and now has lift-off fully priced by November 2022. That
said, some bullish short-term USD risks are still present,
especially vs low-yielders," said JPMorgan.
"Higher, stickier, and more broad-based inflation points to the
potential for further front-end repricing, a USD-bullish dynamic,
as evident in the performance of JPY last week but with
applicability to EUR as well."
Sterling failed to gain on Bank of England Governor Andrew
Bailey's remarks that the central bank "will have to act" to curb
inflation, as the market has already factored in an interest-rate
hike before year-end, said Deutsche Bank.
"Markets were already pricing in an initial +15 basis points
move up to 0.25% by the end of the year before the speech."
Speaking to the G30 group of central bankers on Sunday, Bailey
said the energy crisis means inflation will last longer and the BOE
may need to respond.
Treasury yields edged slightly lower early Tuesday as the recent
rally in oil continued to buttress concerns about inflation in the
short-term and as investors positioned for an eventual reduction of
the Fed's asset purchases.
Increased demand for U.S. government debt last week was
"technical and temporary" and inflation is likely to be "persisting
in the foreseeable future," said JPMorgan.
"The inflation force is putting pressure on central banks to
unwind ultra-accommodative policies, not only because inflation has
risen uncomfortably above their targets, but also because inflation
depresses real policy rates making current monetary policy even
more accommodative than the nominal policy rate suggests."
U.K. sovereign bonds carry a substantial amount of valuation
risk as the Bank of England is expected to start scaling back
ultraloose monetary policy, said AJ Bell.
"Twelve years of ultra-loose monetary policy has driven gilt
prices so high, they now carry an awful lot of valuation risk, and
offer a desultory yield in return," said Laith Khalaf, head of
Gilt investors and conventional gilts are directly in the firing
line if monetary policy tightens, either through interest rate
rises or an unwinding of quantitative easing, Khalaf said, adding
that some U.K. gilt funds have already sustained double-digit falls
so far this year and that the average U.K. gilt fund has lost
Oil prices were near-flat in Asia after they took a split path
Monday, with Brent ending lower for the first time in three
sessions and the U.S. benchmark significantly paring early gains
after both touched multiyear highs.
The oil market is likely to see an increase in volatility
because of the recent multiyear highs for prices, said Phil Flynn,
senior market analyst at The Price Futures Group. However, "from
the supply versus the demand side, all the news is bullish."
Natural-gas prices, meanwhile, fell by nearly 8% on Monday, as a
forecast for warmer weather helped to ease worries about winter
Morgans said this oil cycle has a long way to go. Demand is
rushing back while supply has been caught flatfooted, mainly due to
"While we see the potential for oil prices to rally through
$100/bbl, more important will be the market's restored confidence
in what a typical oil cycle looks like," said Morgans.
Gold futures rose, helped by mild dollar weakness. The price of
gold seems to be reflecting a tug of war between Fed rate-increase
expectations, with many traders becoming more confident a rate
increase could occur next summer, said Oanda.
The precious metal may eventually get steady inflows once
investors focus excessive money supply and rising inflation in the
U.S., Oanda added.
Gold settled with a loss on Monday for a second straight
session, pressured by a rise in bitcoin and some strength in
Treasury yields, but a retreat in most global stock markets helped
to limit losses for the precious metal.
Copper and aluminum prices were higher too, despite China's weak
GDP growth weighing on the market, said ING.
The bank said this was because the market for the metals was
still fundamentally tight, which should result in continued price
support. The aluminum market may tighten further as China's ongoing
power crunch crimps production of the energy-intensive industrial
metal, it added.
TODAY'S TOP HEADLINES
Auto Supply-Chain Constraints Weighed on September's Industrial
Industrial production in the U.S. declined in September as
supply-chain disruptions in the auto industry and lingering effects
of Hurricane Ida weighed on manufacturing and mining output during
Industrial production-which includes output at factory, mining
and utility companies-fell at a seasonally adjusted 1.3% in
September from the previous month, data from the Federal Reserve
released Monday showed.
Yellen Says Debt-Limit Deal Will Keep Government Funded Through
Treasury Secretary Janet Yellen on Monday said the debt-limit
deal enacted by Congress last week will allow the government to
keep paying its bills through Dec. 3.
In a letter to Capitol Hill leaders, Ms. Yellen said the deal
"provides only a temporary reprieve" and urged lawmakers to take
further action to ensure that the government can continue to borrow
In Record M&A Year, First Trillion-Dollar Year for Private
Equity Within Sight
Technology deals are driving what is shaping up to be a record
year for M&A, one where so-called megadeals and club deals came
roaring back and helped power what is expected to be the first $1
trillion deal year for private-equity firms.
As of the third quarter, private-equity firms had disclosed $868
billion in deals, topping the high-water mark of 2006-07 when PE
firms collectively announced more than $750 billion in deals,
according to Ernst & Young LLP.
Global Climate Finance Falling Short of What Is Needed, Report
Global investment in climate-change-related projects rose in
2019 and 2020, but remained far below the level that would be
needed to finance the transition to a low-carbon economy and
minimize the impacts of climate change, new data showed.
The Climate Policy Initiative, a nonprofit research group that
publishes a survey of climate finance every two years, identified
$623 billion of climate-related investment in 2019 and $640 billion
in 2020. Those were record figures, but growth has slowed,
according to the CPI. It monitors a broad spectrum of public and
private spending, spanning areas such as electric-car purchases and
BHP First-Quarter Iron Ore, Copper Output Falls
BHP Group Ltd. produced less iron ore, copper and steelmaking
coal in its first fiscal quarter mostly because of planned
maintenance work at its operations.
The world's biggest mining company by market value said it
produced 63.3 million metric tons of iron ore in the three months
through September, down 4% year-over-year and 3% lower than the
quarter immediately prior.
German Fintech N26, Newly Valued at $9 Billion, Again Draws
N26 Bank GmbH, a Berlin-based digital bank that is now as
valuable as the country's second-largest lender, said Germany's
financial regulator had temporarily capped the number of new
customers it can sign up, the third regulatory action in six months
aimed at improving controls at the startup.
N26 on Monday said the regulator, BaFin, had ordered it to limit
new European customers to 70,000 a month. A spokeswoman declined to
disclose its monthly sign-up numbers, though N26 said it has added
more than 2 million customers in the past year.
Chip-Designer Arm Sees Chip Shortage Lasting Through Next
The boss of chip-design specialist Arm Holdings says the
semiconductor shortage will persist through next year, joining the
growing list of executives forecasting that crippling supply
pressures won't disappear soon.
"What we're seeing from our licensees is that they could all be
selling more, if only...there was more capacity to go around.
Everyone is seeing huge demand," Arm Chief Executive Simon Segars
said Monday at The Wall Street Journal's Tech Live conference.
Write to firstname.lastname@example.org
Expected Major Events for Tuesday
06:00/SWI: Sep Trade Balance
07:00/SPN: Aug Trade Balance
08:00/POL: Sep Average gross wages
09:00/EU: Aug Construction output
10:00/POR: Sep PPI
12:00/HUN: Oct Hungarian interest rate decision
23:01/UK: Sep Scottish Retail Sales Monitor
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(END) Dow Jones Newswires
October 19, 2021 00:33 ET (04:33 GMT)
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