ECB Bank Lending Survey; updates from Orange, UBS, Novartis,
Atos, Kering, Thales, Faurecia, Whitbread, Bunzl, Reckitt
Stocks could extend gains after U.S. stocks closed at record
highs. Dollar strengthened against the yen and weakened against the
euro. The yen weakened against most G-10 and Asia currencies. Oil
rose and gold declined.
European stocks are set to continue their march upward after the
S&P 500 and Dow Jones Industrial Average closed at record
Strong earnings from U.S. banks, consumer companies and
manufacturers have soothed investors' concerns about higher
inflation and labor shortages. Now all eyes are set on technology
stocks, which have a weighting of nearly 30% in the S&P
Facebook shares jumped in after-hours trading in the U.S. after
it reported earnings on Monday afternoon. Microsoft, Twitter and
Alphabet, Google's parent company, are scheduled to report earnings
Tuesday. Apple and Amazon.com are expected to report later in the
"Without a doubt, tech is the most important sector to the
S&P overall," said Eric Mintz, portfolio co-manager at Eagle
Asset Management. "I broadly expect earnings from the tech sector
to be robust."
Michael Hewson, chief markets analyst at CMC Markets, said that
one notable takeaway from earnings reports so far has been "the
ability of companies, for the most part, to pass on increases in
prices onto their customers without seeing a drop in sales."
A key question for investors is how global central banks will
respond to rising prices. Recent trading in short-dated U.K. gilts
suggests investors think the British government may raise interest
rates as soon as November. Investors await comments from the
European Central Bank and the Bank of Japan, which both have
meetings scheduled this week. The Federal Reserve has signaled a
possible rate increase next year, and officials could start scaling
back pandemic-era stimulus at the November meeting.
"It's very normal at this stage in the game, when the Fed starts
taking away the punch bowl, for dividend growth stocks to
outperform," said Sarah Henry, managing director and portfolio
manager at Logan Capital Management. "It seems like the complexion
of the market has changed and the tone that investors are
Meanwhile, rising energy prices and supply disruptions in
various product and labor markets are causing lower economic growth
and higher inflation expectations, which have risen to multiyear
highs in the eurozone, UBS said.
But the pandemic has shown that markets can look past
challenging periods-provided they are not persistent, economists at
UBS said. "Currently, we see the challenges in energy, product, and
labor markets as transitory rather than the makings of a new
stagflationary economic regime," UBS' Global Wealth Management
chief investment office Mark Haefele said.
With current issues still appearing more transitory than
structural, equity markets will continue to move higher, Haefele
Stocks to watch: J.P. Morgan was disappointed by Rio Tinto's
recent investor day, especially the outlook for its Australian
iron-ore business, with the miner having backed away from a
360-million-ton target in the medium term.
"Our previous view was that Rio's iron-ore division was a
short-term turnaround story," JPM said. "We no longer view it this
way, with our medium-term estimates now reflective of 2H21
The bank cut its target on the stock to A$113/share from
A$143/share, although it keeps an overweight rating because of
Rio's relatively low price-to-NPV, 10% yield and net cash balance.
Rio was down 0.8% in Sydney.
The U.S. dollar strengthened against the yen and was flat
against the euro in early Asia trading. The WSJ Dollar Index rose
slightly. A rates selloff has triggered enyasu, or a weak yen,
Goldman Sachs said.
The bank said relative to G10 peers, the yen is more sensitive
to changes in longer-dated rates, and this "has been especially
true since 2016, when the BoJ implemented its YCC framework, which
caps nominal yields and thereby acts as an amplifier when rates in
the rest of the world are on the move.
In this context, the recent sharp selloff in the yen has been
right in line with shifts in other asset classes."
Given the relatively more aggressive policy expectations now
priced across the G10, "we see a higher bar for the USD/JPY rally
to continue much further."
JPY weakened against most G-10 and Asian currencies as risk
appetite increases, underpinned by news of more countries in the
region reopening their economies to international travel. Thailand
joined the growing list of those to reopen, allowing fully
vaccinated visitors from 46 countries to forgo quarantine, starting
Nov. 1, according to reports.
Bitcoin's price could rise as the amount of the cryptocurrency
on exchanges has reached the lowest in more than four years,
digital asset broker GlobalBlock said.
"On chain analysis is more bullish than ever for bitcoin, as the
balance on exchanges is the lowest it has been since August 2017, a
phenomenon that could lead to a higher bitcoin price as less of the
asset is available for trading and locked away, most probably in
expectation of a continued rally," GlobalBlock sales trader Marcus
The Norwegian economy's robust recovery and a jump in oil and
gas prices have boosted the krone recently but the currency is
unlikely to rise much further, UBS Global Wealth Management
"While the short-term outlook remains unclear, we think gas
prices will eventually level off in 2022, removing some support for
the krone," UBS analysts said.
The global outlook will also become "less supportive" of the
krone next year as economic growth eases, they said. The Norges
Bank is likely to raise interest rates further but this is well
anticipated by investors, they said.
UBS expects EUR/NOK to trade at 9.70 by December 2022, little
changed from its current level.
Investors and policymakers will have to deal with a macro
environment that is "radically different" from that seen in the
decade prior to the pandemic, Joachim Fels, global economic advisor
at Pimco, said in a webinar.
"What lies ahead in the next five years or so is a much more
uncertain, more volatile and more divergent growth and inflation
environment," he said.
The upcoming years will be different from the pre-pandemic era
of low but relatively stable growth, below-target inflation and
very subdued volatility in financial markets, he said. Asset
returns are likely to be lower and volatile, he added.
Germany is unlikely to give up its fiscal discipline under its
new government but it will likely pursue a less dogmatic fiscal
stance, Konstantin Veit, portfolio manager at Pimco, said in a
"While we don't believe that Germany will turn from fiscally
conservative to fiscally profligate, and while we don't believe
Germany will run current account deficits in the end of our secular
[three to five years] horizon, we believe the new government will
look to pursue a somewhat less dogmatic fiscal stance," he
A new government could be in place in Germany as early as in
December, likely to be led by the Social Democratic Party, with the
Greens and the pro-business Free Democratic Party being part of the
Fixed-income market pricing of interest rate rises in the
eurozone at the end of 2022 "represents a clear contradiction with
the European Central Bank's new forward guidance," the conditions
of which will not have been met at this point," said Gergely
Majoros, member of Carmignac's investment committee.
This implies that at the coming meeting on Thursday, "the ECB
needs to defend the credibility of its own commitments," he said.
Carmignac finds its fair to assume that the ECB will try to prevent
an abrupt deterioration of financial conditions in the eurozone in
the coming months, including after the termination of the Pandemic
Emergency Purchase Programme in March 2022, he said.
Oil rose in Asian trading amid reports that the European Union
will hold discussions with Iran later this week, ANZ said. This is
a prelude to broader talks in Vienna on how to revive the 2015
Meanwhile, OPEC also appears to be concerned about how rising
Covid-19 cases may affect oil demand, leading Saudi Arabia to
suggest that producers shouldn't take the rise in prices for
granted as demand recovery still looks fragile, ANZ said.
Gold declined in early Asian trade. IG said the precious metal
has scope to rise, however, noting catalysts such as by
expectations for more persistent inflation in the U.S., as well as
the downplaying of the relationship between tapering and rate hikes
ahead of the Federal Open Market Committee meeting next week.
The brokerage also notes that gold has now gone past the key
$1,800 level, and this may turn out to be a support level to
Copper was flat in early trade, with expectations of increased
supply possibly offsetting inventory shortages. Copper-shortage
concerns have eased despite a rapid fall in warehouse stockpiles,
Commonwealth Bank of Australia said.
Global supply from mines is likely to rise 2.1% in 2021 and 3.9%
in 2022, compared with a 0.3% gain in 2020, it says. However, CBA
reckons that "it's worth considering that new mine supply may take
longer than currently expected to hit the market."
Chinese iron ore rose as concerns over the Chinese property
sector stemming from China Evergrande seem to be easing after it
staved off default last week, ANZ said.
"This saw some support return for iron ore, with futures inching
higher on the news," the bank said. However, ANZ said demand is
still weak amid lower Chinese steel production due to the country's
TODAY'S TOP HEADLINES
Cryptocurrency Company Snared in SEC Dragnet Sues Regulator
A cryptocurrency developer who was handed two subpoenas as he
walked inside a hotel last month won't comply with the demands-and
is instead suing the federal regulator that issued them.
Do Kwon, a South Korean citizen and resident, says the move by
the Securities and Exchange Commission violated the agency's rules
and was designed either to embarrass him or to stir up media
interest in its crackdown on the cryptocurrency market.
Democrats Negotiate Tax, Healthcare Provisions as Biden Seeks
Deal This Week
WASHINGTON-Democrats are sprinting to wrap up negotiations over
their social-spending and climate bill, hoping by this weekend to
resolve disagreements on issues including tax policy and
Senate Majority Leader Chuck Schumer (D., N.Y.) said Monday
there were three to four open issues. Lawmakers and aides said
major policy areas, including the tax increases to pay for the
package, Medicare and Medicaid provisions and a paid leave program,
remain unresolved. The bill, initially drafted at $3.5 trillion, is
now expected to cost between $1.5 trillion and $2 trillion.
Inflation Pinches Restaurants, but Customers Seem Willing to
Split the Check
Inflation is making casual-dining shareholders sick to their
stomachs. Relief is likely on the way.
Brinker International, owner of Chili's, said last Tuesday that
it earned 34 cents a share on an adjusted basis in its fiscal first
quarter, which ended in September-far below Wall Street analysts'
estimate of 68 cents a share.
Fed Prepares to Taper Stimulus Amid More Doubts on Inflation
Federal Reserve officials are set to wind down their $120
billion-a-month bond-purchase program in November, but questions
over how soon inflation pressures will fade are creating more
uneasiness inside the central bank.
Fed Chairman Jerome Powell and senior officials have played down
worries this year that a surge in prices during the uneven pandemic
recovery would lead to permanently higher inflation. The most
notable price increases have been tied to items most affected by
the shutdown and reopening of the economy, but there are signs that
inflation is coming from a broader set of products and
Buyout Firms Set Record for Loading Companies With Debt to Pay
Private-equity firms are taking advantage of a frothy credit
market to pay themselves record sums with borrowed money, a
controversial practice that critics say benefits buyout-firm
executives but can harm portfolio companies.
Companies backed by U.S. private-equity firms have taken on
$58.5 billion in dividend-recapitalization debt this year through
Oct. 20, S&P Global Market Intelligence's LCD unit said in
response to a Wall Street Journal data request. That is more than
levels of such debt for 2019 and 2020 combined. The previous
full-year record of $51.1 billion was set in 2013.
Energy-Stock Surge Leaves Climate-Focused Investors Behind
A surge in energy stocks is challenging climate-conscious money
managers who beat the market for years when the sector struggled
but are now missing out on Wall Street's hottest trade.
The S&P 500 energy sector has rebounded 54% this year,
outpacing the broad index's 21% climb and leading the second-best
performing group by about 16 percentage points. That would mark the
third-largest such gap between the top two sectors since 2000,
according to Dow Jones Market Data.
Facebook Whistleblower Frances Haugen Calls for New Tech Laws in
LONDON-Facebook Inc. whistleblower Frances Haugen encouraged
U.K. lawmakers to pass legislation to rein in social-media
platforms, saying that Facebook has trouble curbing misinformation
and hate speech in many languages and dialects, including British
Ms. Haugen's comments to a U.K. parliamentary committee Monday
give new impetus to the biggest potential expansion in global tech
regulation in years, with Britain currently considering legislation
to curb harmful online content. The former Facebook employee
presented her conclusions from a set of internal Facebook
documents-first disclosed in The Wall Street Journal-that she says
illustrate the social-media company's struggles to balance the
safety of its users with its own profit motive.
Afghan Refugees Can Be Sponsored by Private Citizens Under New
WASHINGTON-Private citizens will be allowed to sponsor Afghan
families under a new program launched Monday by the Biden
administration, as overwhelmed agencies have left thousands stuck
on military bases in harsh conditions waiting to be resettled.
The Sponsor Circle Program will be run along with a nonprofit
that was set up last month to help refugees settle in the U.S.,
filling the role of traditional resettlement agencies. The program
will allow private citizens to group together to sponsor families
and help them access housing and other necessities like food,
clothing and education.
Russian Military Drills Near Afghan Border Deliver Warning to
HARB-MAIDON RANGE, Tajikistan-Russia held a series of joint
military exercises with its Central Asian neighbors near the border
with Afghanistan last week, a reflection of the concern in Moscow
that ethnic tension or terrorism could spill over from the country
as extremists such as Islamic State challenge the Taliban's rule
The Russian-led Collective Security Treaty Organization, or
CSTO, which also includes Belarus, Armenia, Kazakhstan, and
Kyrgyzstan, conducted a weeklong series of exercises that ended
Saturday on the Harb-Maidon training range, less than 20 miles
north of Tajikistan's border with Afghanistan.
Analysis: U.K.'s Gilt Supply Set to Fall as Government Reins in
U.K. public borrowing is set to continue to fall in the fiscal
year 2021/22 amid expectations that Treasury chief Rishi Sunak will
set out a tighter fiscal policy when he presents the latest Budget
statement to parliament on Wednesday.
Mr. Sunak is expected to scale back the emergency stimulus due
to the Covid-19 pandemic in an attempt to bring the public finances
to a more sustainable path.
Facebook Inc. blamed Apple Inc.'s privacy rules for posting
slower sales growth and warned of further uncertainty for the
social-media giant's crucial advertising business.
Facebook's ad sales, its primary revenue source, saw slower
growth in the first full quarter since Apple in April started
requiring apps to ask users whether they want to be tracked. That
change has made it harder for advertisers to target their ads at
audiences and get information regarding how well their ads
Bankruptcy Judge Declines to Pause Talc Litigation Against
Johnson & Johnson
A bankruptcy judge refused an initial bid to pause talc
litigation against Johnson & Johnson, setting the stage for a
November hearing that will likely scrutinize the corporate
maneuvering the company undertook to try to settle thousands of
personal-injury lawsuits through a subsidiary's chapter 11.
Judge J. Craig Whitley of the U.S. Bankruptcy Court in
Charlotte, N.C., on Friday refused to extend to J&J a temporary
restraining order that would have halted lawsuits against the
consumer-goods giant during the two-week period before next month's
Jeff Bezos' Blue Origin Pursues Private Space Station
Jeff Bezos' space company said it would help to build a new
space station, part of a growing bet by entrepreneurs and companies
that many future orbital facilities will be privately owned and
Blue Origin LLC said Monday it is working with a unit of Sierra
Nevada Corp., Boeing Co. and others to create a station that is
meant to become operational in its initial form in the latter half
of this decade. The planned facility, called Orbital Reef, will aim
to generate revenue from government agencies and private-sector
customers including entertainment companies and manufacturers,
executives said during a briefing.
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Expected Major Events for Tuesday
05:00/FIN: Sep Labour force survey, incl unemployment
07:00/SPN: Sep PPI
07:30/SWE: Sep PPI
09:00/LUX: Aug Trade
10:00/UK: Oct CBI Distributive Trades Survey
23:01/UK: Oct REC JobsOutlook survey
23:01/UK: Oct Shop Price Index
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(END) Dow Jones Newswires
October 26, 2021 00:19 ET (04:19 GMT)
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