European stocks were flat Friday while oil prices continued to
rise after OPEC and a group of Russia-led oil producers agreed to
continue pumping more crude.
Investors are grappling with the unclear impact of Omicron for
the global economy. The variant has triggered fresh restrictions
around the world, throwing up new obstacles to overseas travel just
as it was starting to bounce back from last year's Covid-19
measures. Scientists are trying to gauge how effective current
vaccines will be against the variant.
"What we see now this week since we had the Omicron news is
extremely high volatility and extreme nervousness in markets," said
Carsten Brzeski, ING Groep's global head of macro research. He
expects this to continue until more is known about Omicron.
Brent crude futures, the benchmark in global oil markets rose
after OPEC and a group of Russia-led oil producers agreed Thursday
to continue pumping more crude, betting that pent-up demand in a
post-lockdown world would outweigh any hit to economic activity
from the recent Covid-19 permutations. But the group said its
session would remain open, a technical move that would allow it to
reconvene quickly and change course if the Covid-19 situation
Shares on the move:
Allianz's new midterm targets are a positive surprise, Jefferies
The German insurer is now targeting up to 7% annual growth in
earnings per share from 5% previously, implying operating-capital
generation of a total of EUR12 billion, Jefferies noted.
Meanwhile, a new dividend policy targeting a 5% increase on the
previous year's level is also good news, Jefferies said.
"Having expected Allianz to largely reiterate the previous
plans' targets, today's announcement has positively surprised in a
number of material ways," said the bank, which has a buy rating and
a EUR250 target on the stock.
Shares in Swedish Orphan Biovitrium fell sharply after Advent
International Corporation and Aurora Investment Pte Ltd withdrew
their offer to acquire the Swedish drugmaker for nearly $8
The two private-equity firms had offered 235 Swedish Krona
($26.0) a share to acquire Swedish Orphan Biovitrium, also known as
Sobi. They said that about 87.3% of Sobi's shares were tendered in
the offer, which was below a set threshold of 90%.
The offer was made through Agnafit Bidco, which represented the
Shares in Sobi were down 23% in opening trade.
Data in focus:
Having slowed since peaking in July, economic growth across the
eurozone reaccelerated in November, according to the latest
purchasing managers indexes.
The eurozone composite PMI rose to 55.4 in November from 54.2 in
October, indicating a solid and accelerated rate of economic
But the improvement in economic growth signaled by the eurozone
PMI looks likely to be short-lived, IHS Markit's chief business
economist Chris Williamson said.
"Not only did demand growth weaken, but firms' expectations of
future growth also sank lower as worries about the pandemic
intensified again," Williamson said.
Prices have continued their rise, with rates of inflation in
both companies' costs and average selling prices for goods and
services hitting new highs in November, IHS Markit said.
Germany's services firms recorded another moderate rise in
business activity in November following a similar result in
October, with the sector's growth having slowed notably since the
third quarter, IHS Markit said.
The services purchasing managers index rose to 52.7 in November
from 52.4 in October. But the survey's forward-looking indicators
gave reason for concern, IHS Markit's economics associate director
Phil Smith said.
"Inflows of new work and business confidence were already in
decline in November thanks to the fourth wave of coronavirus, and
now the Omicron variant brings added uncertainty and a risk of
tighter virus containment measures," Smith said.
U.K. services activity continued to recover in November,
supported by a fast increase in new business, according to IHS
Markit's survey of purchasing managers in the sector. The service
PMI stood at 58.5 in November, down slightly from October's
Export sales were a key factor supporting growth in November,
with looser travel restrictions contributing to a steep upturn in
new business, the report said.
"The overall speed of recovery looks to have accelerated in
comparison to the third quarter of 2021," IHS Markit's Associate
Director for Economic Indices Tim Moore said. However, the majority
of survey responses were received prior to the news of the Omicron
coronavirus variant, which has the potential to derail near-term
growth prospects, he said.
U.S. stock futures fell, as investors awaited November jobs
data, at the end of a volatile week driven by headlines over the
omicron coronavirus variant and hawkish comments from Federal
Reserve Chair Jerome Powell.
Investors are awaiting data at 8:30 a.m. ET on how many jobs
U.S. employers added in November. Employers say they are eager to
hire from a depleted pool of workers, leading to increased
bargaining power and rising wages for many employees.
A strong rebound in the labor market could impact the Federal
Reserve's timeline for paring back some of its monetary policy
support that has supported asset prices.
"After a week of mixed macro news, some stronger news would be
good for the market," Mr. Brzeski said.
The dollar could receive a further boost from U.S. nonfarm
payrolls data, particularly after Federal Reserve Chair Jerome
Powell said earlier this week that inflation no longer looks
transitory, ING said.
Strong data would add to the view that the Fed could remove
monetary stimulus more quickly, it said.
"Any sharper than expected drop in the unemployment rate (3.8%
has been suggested as a metric for full employment and the start of
tightening) or sharper rise in average hourly earnings (e.g. more
than 0.4% month-on-month) could drive the dollar higher today."
The consensus in a WSJ poll is for nonfarm payrolls to rise by
573,000 and an unemployment rate of 4.5%.
The Turkish lira fell after ratings agency Fitch downgraded the
country's outlook to "negative" from "stable" and following data
that showed inflation accelerated.
Fitch said premature interest rate cuts and the prospect of
further easing have weakened domestic confidence, reflected in the
lira's sharp depreciation and rising inflation, which create risks
to macroeconomic and financial stability and could re-ignite
external financing pressures.
Data on Friday showed consumer prices jumped 21.31% year-on-year
in November after rising 19.89% in October.
With no signs President Recep Tayyip Erdogan will permit large
rate rises, the lira will struggle to recover and inflation will
remain very high through most of the next six-to-nine months,
Capital Economics economist Jason Tuvey said.
An overvalued pound could weaken against the Canadian dollar in
2022 on comparisons between the Bank of England and Bank of
Canada's credibility, RBC Capital Markets said.
"GBP failed to benefit from a sharp rise in policy rate
expectations in late-2021 in a way that suggests markets are
starting to question the credibility of U.K. policy," RBC analysts
That's consistent with long-term breakeven inflation rates
rising to more than 1% above the BOE's target, compared to Canada
where breakevens are close to the BOC's target, they said.
The BOE could deliver fewer interest rate rises than expected
and deemed necessary, whereas RBC has "high degree of confidence"
in the BOC's policy tightening cycle, they said.
Within a year, the monetary policy environment changed from "QE
infinity" and "lower interest rates for longer" to one
characterized by a global, generalized and rapid rise in interest
rates, said Gergely Majoros, member of Carmignac's investment
With this backdrop, Carmignac remains "very cautious" on core
sovereign bonds and very selective in corporate bonds, while it
sees value niches in emerging-market bonds and equity markets, he
Majoros said that in an environment where inflation should
persist longer, Carmignac's risk management focuses on an active
management of duration exposure, cash and short-term instruments
which are the most suited in episodes of volatility, and the USD
given its safe-haven status and dynamics.
Pimco maintains a positive view on spread securities from the
eurozone periphery, especially Italy, while focusing on receiving
adequate compensation for policy uncertainty, Konstantin Veit,
portfolio manager and head of European rates, said.
Given the euro area's unique institutional structure and uneven
macroeconomic conditions, Pimco expects yields in the region to
remain relatively more anchored than elsewhere in the world, and
Pimco therefore is positioned rather independently from benchmark
indexes with a view to overall duration, he said.
"While starting valuations offer limited room for spread
tightening and the macroeconomic outlook remains highly risky, a
less crisis-prone euro area generally bodes well for risky assets,"
German Bunds will close 2021 at expensive levels versus Citi's
fair value estimate, rates strategist Jamie Searle said.. "Bunds
are ending 2021 rich to our fair value of -0.15% [for the 10-year
Bund yield] making us bearish, at least into 1Q, with Omicron the
clear risk to the view," he said.
Citi expects the European Central Bank to be less forceful on
asset purchases, but persistent on policy rates.
This likely means that core euro yields are anchored, while
eurozone spreads are volatile, Searle said.
Citi's base case is that 10-year Bund yields will stay negative
for all of 2022, albeit with a drift higher, especially in 1Q,
subject to Omicron developments.
Citi expects more volatility in eurozone government bond yield
spreads in 2022 but its spread forecasts aren't materially higher
than current levels, largely because of recent rapid widening
toward its targets, rates strategist Jamie Searle said.
For the 10-year Italian BTP-German Bund yield spread, Citi
forecasts an average of 140-160 basis points; this compares with
levels slightly below 138 bps at Thursday's close, according to
Brent crude oil rose after OPEC+ pressed ahead with plans to
raise oil production by 400,000 barrels a day in January despite
the emergence of the Omicron coronavirus variant and the recent
move by oil consuming nations to tap strategic reserves.
Prices fell after the decision on Thursday but then rebounded on
the day and continue higher Friday.
Goldman Sachs's Damien Courvalin points to the alliance's
promise to immediately adjust their plans should the situation
require it. Similarly, while OPEC+ will raise production in
January, the small increase exacerbates "the long-term
deficit...[and] we believe current price levels offer compelling
opportunities to reposition for the ongoing structural bull
market," he added.
London gold prices were flat, with the selloff in the precious
metal appearing to lose steam. The prospect of the Fed tapering its
asset-buying program has boosted the U.S. dollar this week, putting
pressure on gold.
That is despite the rising risk aversion and asset selloffs that
have come with the emergence of the Omicron coronavirus variant,
said Oanda's Jeffrey Halley.
LME three-month copper futures were, after gentle losses on
Thursday, with most metals prices moving higher as well.
Eurozone Retail Sales Rose in October, But Missed
Eurozone retail sales rose in October but failed to meet
expectations, the European Union's statistics agency Eurostat said
The volume of retail sales increased 0.2% in October compared
with the previous month, after a downwardly revised 0.4% decrease
in September, Eurostat said. Economists polled by The Wall Street
Journal had forecast a 0.3% increase for October.
Turkey Annual Inflation Rose to Three-Year High in November
Turkey's annual rate of inflation rose for the sixth consecutive
month in November to a three-year high as a weaker lira and higher
inflation expectations pushed prices up further.
The consumer price index rose 21.31% in November compared with
the same period of 2020, the Turkish statistics office Turkstat
Allianz Sets out Midterm Targets
Allianz SE on Friday set out higher financial targets for the
next three years, as the German insurer looks to focus on its most
profitable business lines.
Marking its capital-markets day, Allianz said it is aiming to
book 5%-7% compounded average annual growth in earnings per share
between 2022 and 2024. This will be driven by higher revenue,
better profitability and efficient capital management, the company
Dassault Aviation, Airbus to Supply UAE With Military Aircraft
in $19 Bln Deal
Dassault Aviation SA said Friday that it will supply the United
Arab Emirates with 80 Rafale F4 fighter jets as part of wider deal
with the French aerospace industry worth more than 17 billion euros
At 1102 GMT, shares in the French manufacturer of military and
business jets were up 7.3%.
Scientists Studying Omicron in South Africa See Rise in Covid-19
Scientists in South Africa tracking the spread of the Omicron
variant said Thursday they are seeing a rise in reinfections in
people who had recovered from Covid-19 as the country reported
another sharp daily rise in new cases.
The scientists' conclusions suggest previous infection provides
less protection against the new variant than against earlier
versions. They also offer a possible explanation of why Omicron has
been able to spread so quickly in the country, outpacing even the
highly transmissible Delta variant, which is currently dominant in
much of the rest of the world.
Germany Restricts Social Contact for Unvaccinated People
Germany is tightening restrictions aimed at curbing the spread
of the coronavirus amid a recent surge in cases, including a ban
for unvaccinated people from retail and social gathering
During a joint conference with the heads of regional
governments, incumbent chancellor Angela Merkel said the government
would extend the so-called 2G rule--which grants access to venues
only to the vaccinated or to people who have recently healed from
the virus--to retail, excluding shops for basic needs. Ms. Merkel
said that cultural events and leisure activities will only be open
to people who are vaccinated or have recovered from Covid-19
independently of the incidence of new infections on the
Societe Generale Draws Line Under Two Legal Cases in the US
Societe Generale SA France said Friday that the U.S. Department
of Justice has requested the dismissal of two cases involving the
The legal proceedings ended after the bank complied with its
obligations per the deferred prosecution agreements it struck with
the U.S. authorities three years ago.
November Likely Saw Strong Job Gains, but Omicron Threat
Lower Covid-19 case numbers likely helped propel the U.S.
economy and powered strong job gains in November, economists say,
but the new Omicron variant could jeopardize that progress.
Economists surveyed by The Wall Street Journal estimate that
employers added 573,000 jobs in November, roughly on par with
October. The unemployment rate is expected to tick down to 4.5%
from 4.6%. The Labor Department is schedule to release November
employment figures at 8:30 a.m. Eastern time Friday.
Companies Cling to Libor as Key Deadline Nears
U.S. companies need to give up the London interbank offered rate
for new debt at the end of December. Many want to close just one
more deal before that.
Come Jan. 1, banks won't be able to issue new loans or other
financial contracts using Libor, which underpins trillions of
dollars in corporate loans, derivatives and home mortgages. They
will, however, be able to keep referencing Libor for debt issued
before the year-end deadline through June 2023.
Citigroup Applies for China Securities License
Citigroup Inc. has applied for a securities license in China,
according to a person familiar with the matter, as the New
York-based banking giant eyes a bigger presence in the world's
The bank recently submitted its application to the China
Securities and Regulatory Commission, the person said. Citigroup is
also planning to apply for a futures license in the coming months
and intends to hire around 100 people in mainland China in the next
two years to support its expansion onshore, the person added.
A Couple Stored IRA Gold at Home. They Owe the IRS More Than
It's official: Owners of individual retirement accounts with
assets invested in gold and silver coins can't store them in a safe
at their home.
So ruled the judge in a recent Tax Court case, Andrew McNulty et
al. v. Commissioner. The decision will cost Mr. McNulty and his
wife Donna dearly-taxes of nearly $270,000 on about $730,000 of IRA
assets, plus penalties likely to exceed $50,000.
Asia-Pacific Nations Use Tougher Tactics to Combat Omicron
Countries in the Asia-Pacific region are creating tougher rules
for those infected with the Omicron Covid-19 variant, as
governments move more aggressively than they have against all other
previous iterations, including Delta.
The modifications come as Omicron begins to reach the
Asia-Pacific region, with Australia, Hong Kong, India, Japan, South
Korea, Singapore and Malaysia reporting confirmed cases. The
initial moves focused on national travel restrictions and border
Omicron's Severity Will Take More Time to Assess, Doctors
JOHANNESBURG-It is still too early to tell whether Covid-19
caused by the new Omicron variant is milder or more severe than
that from other strains of the coronavirus, doctors tracking a
rapidly growing outbreak in South Africa said Friday.
The country, which has more known Omicron cases than any other,
is likely to be the first to deliver answers to the questions
doctors and scientists have been grappling with since the World
Health Organization declared the new strain a "variant of concern"
a week ago. Key among those are whether Omicron makes those
infected sicker, whether it is more transmissible and in how far
current Covid-19 vaccines or a past infection protect against the
U.S. to Lead Global Effort to Curb Authoritarians' Access to
WASHINGTON-The U.S. plans to work with other countries to limit
exports of surveillance tools and other technologies that
authoritarian governments can use to suppress human rights, an
alleged practice in China.
The Biden administration said Thursday that it would launch an
initiative with friendly nations to establish a code of conduct for
coordinating export-licensing policies. The effort would also see
participating nations share information on sensitive technologies
used against political dissidents, journalists, foreign government
officials and human rights activists, administration officials
Biden Administration Issues Cybersecurity Directives for Freight
and Passenger Rail
WASHINGTON-Nearly all U.S. freight and passenger rail systems
will be required to report certain cybersecurity incidents to the
Department of Homeland Security within 24 hours of discovery under
new directives published Thursday by the Biden administration.
The orders, issued under congressional authority given to the
Transportation Security Administration, will affect about 90% of
passenger rail systems in the U.S. and 80% of freight rail systems
that are considered "higher risk," a senior Department of Homeland
Security official said, meaning they are considered vital to
economic and national security.
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(END) Dow Jones Newswires
December 03, 2021 06:45 ET (11:45 GMT)
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