MARKET WRAPS
Watch For:
Personal Income & Outlays for November; Durable Goods for
November; Weekly Jobless Claims; University of Michigan Final
Consumer Survey for December; New Home Sales for November
Opening Call:
Stock futures traded mostly higher Thursday as studies on the
Omicron variant revealed infected people were at less risk of being
hospitalized.
A study from the University of Edinburgh and another from the
Imperial College London found that while the Omicron variant of
Covid-19 was more infectious, it was less severe. Also, researchers
at South Africa's National Institute for Communicable Diseases
found people were 70% to 80% less likely to be hospitalized if
infected with Omicron.
Meanwhile, the Food and Drug Administration on Wednesday
authorized the Covid-19 antiviral pill from Pfizer, adding a new
weapon against the pandemic.
Stock markets will be closed Friday because the Christmas Day
holiday falls on a Saturday. Investors, however, will have plenty
of data to wade through Thursday ahead of the three-day Christmas
break.
Durable-goods orders, new-home sales, jobless claims and the
Fed's preferred inflation gauge, the personal consumption
expenditures price index, will be issued before and soon after the
trading day begins.
Strong inflation data earlier in December helped prompt the
Federal Reserve to accelerate a winding down of its pandemic-era
stimulus. Brisk demand for goods, disrupted supply chains,
temporary shortages and a rebound in travel have pushed inflation
higher. Investors and central bankers are worried that the Omicron
variant could add additional pressure to inflation.
"Inflation is center stage for a lot of people," said Andrew
Cole, head of multiasset in London at Pictet Asset Management.
"Inflation is widely expected to peak, if not in the first quarter,
the first half of next year. You might have to wait until the
second half of next year for central banks to relax."
Oversease, stocks in Asia finished Thursday's session with gains
while European equities were rising in early trading.
Economic Insight:
Despite inflation, central banks will exercise extreme caution
before taking their foot off the accelerator, said J.P.Morgan Asset
Management, referring to central banks' exit from asset
purchases.
"Monetary policy tightening will be gradual, announced well in
advance and only in response to strong economic activity," said
chief EMEA market strategist Karen Ward and global market
strategist Tilmann Galler. "In other words, there will be strong
'management' of interest rates in all parts of the government bond
yield curve."
Forex:
The DXY Dollar Index has fallen to the bottom of its recent
trading range between 96.00 and 97.00 as growing evidence that
Omicron isn't as dangerous as previous variants lifts equities and
weighs on safe-haven assets, said MUFG.
"The recent improvement in risk sentiment on the back of reduced
omicron fears is currently weighing on the dollar," said currency
analyst Lee Hardman. Omicron now looks less likely to significantly
disrupt the global-growth outlook next year, he added.
Prospects of U.S. interest rates rising next year should limit
any losses for the dollar, however, Hardman said.
He also said the recent jump in natural gas prices could hurt
the euro relative to the dollar.
"Recent price action has reinforced our view that the energy
price shock will hit the European economies harder than the U.S.
and further boosts the relative appeal of the dollar heading into
early next year."
He said the price of natural gas in the Netherlands has
increased by a further 80% this month, with similar price action
evident in the U.K. By contrast, U.S. natural gas prices are around
40% below peak levels in early October.
Bonds:
The 10-year Treasury yield edged higher in Europe after it had
its biggest drop in almost a week on Wednesday, as markets
continued to focus on the economic impact of Omicron. Bond markets
will close an hour early Thursday and will remain closed in
observance of Christmas on Friday.
"We suspect Thursday's most tradable new information will be the
recommended early close as trading volumes thin and investors head
for the exit ahead of the long weekend," BMO's Jeffery and Ian
Lyngen wrote in a note. In a period of thin liquidity in the
Treasury market, "the technicals may play a greater role in
dictating the immediate price action."
Commodities:
If major new restrictions are reintroduced in response to the
spread of Omicron, oil prices are likely to fall sharply, causing
headline inflation in most economies to decline, said Capital
Economics' group chief economist Neil Shearing.
"This hit to energy prices means that the initial effect of a
major Omicron wave is likely to be disinflationary rather than
inflationary," said Shearing. However, it's possible it could also
exacerbate underlying price pressures, and thus medium-term
inflation, if the hit to supply outweighs the hit to demand, the
economist said.
Supply is already failing to keep pace with demand in many
countries, and would presumably be curtailed by further new
restrictions, he said.
TODAY'S TOP HEADLINES
Citigroup Continues Consumer-Banking Pullback With Philippine
Sale
Citigroup Inc. agreed to sell its consumer-banking business in
the Philippines to a local lender, pressing ahead with its strategy
to exit most of its retail operations in Asia and switch gears to
grow in wealth management.
On Thursday, the New York-based bank said it would divest its
consumer franchise in the Southeast Asian country to Union Bank of
the Philippines. The buyer will pay a premium equivalent to $908
million, plus a cash consideration for the net assets
transferred.
Elon Musk's Share-Selling Spree Tops $15 Billion
Elon Musk on Wednesday unloaded more Tesla Inc. stock, bringing
the total value of his share sales to more than $15 billion since
the billionaire last month began a string of such transactions.
The sales came as Mr. Musk exercised more than 2.1 million Tesla
stock options, according to regulatory filings late Wednesday. He
sold more than 934,000 of the shares in the company he runs, valued
at around $928.6 million, to cover tax withholdings, the
disclosures state.
Griddle Maker Blackstone Products to Go Public in $780 Million
SPAC Deal
Blackstone Products is merging with a special-purpose
acquisition company to go public in a combination that values the
griddle maker at roughly $780 million, the companies said.
The deal adds to a wave of investment activity for makers of
outdoor cooking equipment, with more consumers preparing food at
home during the coronavirus pandemic. Well-known grill makers Weber
Inc. and Traeger Inc. went public through traditional initial
public offerings earlier this year, as did Solo Brands Inc., owner
of the popular Solo Stove outdoor fire-pit brand.
Tencent Slashes JD.com Stake With $16 Billion Dividend to
Shareholders
HONG KONG-Chinese social-media giant Tencent Holdings Ltd. is
shedding most of its stake in JD.com Inc., saying that the
e-commerce company has grown to the point where it no longer
requires Tencent's financial backing.
Tencent on Thursday said it would distribute about 457 million
shares of JD.com, worth roughly $16.4 billion, in the form of a
special dividend to Tencent shareholders. The distribution leaves
Tencent with a 2.3% stake in JD.com from 17% before, when it was
JD's largest shareholder.
FAA Seeks Engine Fixes to Get Grounded Boeing 777s Back in
Service
The Federal Aviation Administration on Wednesday proposed fixes
to prevent engine coverings from breaking apart on certain Boeing
Co. 777 aircraft, as they did in a series of incidents including on
a United Airlines jet over Colorado earlier this year.
The proposed changes, which would allow the aircraft to return
to service, are aimed at strengthening engine covers to prevent
plane parts from detaching midair and striking aircraft or falling
to the ground.
Some Fresh Express Salads Recalled Over Listeria Concerns
Fresh Express is recalling some prepackaged salads that the
company and federal officials said could be contaminated with
harmful bacteria.
The Food and Drug Administration said this week that a Fresh
Express salad sample produced at a facility in Streamwood, Ill.,
had tested positive for a strain of listeria monocytogenes linked
to a multistate outbreak.
Novavax Says Early Data Shows Covid-19 Vaccine Protects Against
Omicron
Novavax Inc. said its two-dose Covid-19 vaccine demonstrated
"strong immune responses" against the Omicron variant and other
variants of the coronavirus, citing initial data.
Still, the company said neutralization against the Omicron
variant was "4-fold lower" than it was against the original strain
of the virus, suggesting that a booster shot or a new
Omicron-specific vaccine would be beneficial.
Gilead's Remdesivir Covid-19 Therapy Cuts Risk of
Hospitalization in Study
Gilead Sciences Inc.'s drug remdesivir significantly reduced
hospitalizations in a study of people recently diagnosed with
Covid-19 and at high-risk of developing severe illness.
Vista Equity Backs Salesloft at $2.3 Billion Valuation
Vista Equity Partners is taking a majority stake in sales
engagement software company Salesloft Inc., the latest big
transaction in a record year for private-equity tech
investments.
The deal gives the Atlanta-based company a valuation of $2.3
billion, according to Chief Executive Kyle Porter.
Judge Trims Hertz Bondholders' Bankruptcy Claims
The judge who oversaw Hertz Global Holdings Inc.'s chapter 11
restructuring trimmed bondholders' requests for early repayment
premiums and interest payments, saying that some claims aren't
payable under U.S. bankruptcy law or the company's debt
contracts.
Judge Mary Walrath of the U.S. Bankruptcy Court in Wilmington,
Del., said Hertz's unsecured bondholders weren't entitled to
collect interest payments at the contractual rate following the
rental-car company's bankruptcy filing last year. The judge also
absolved Hertz of any obligation to make premium payments on bonds
that were scheduled to come due in 2022 and 2024 to compensate for
the early retirement of those debts.
Covid-19 Marches Toward Endemic Status in U.S. as Omicron
Spreads
The Omicron variant's aggressive advance is the latest twist in
the course of a disease that public-health experts say is on a path
toward becoming endemic in the U.S.
In other words, the Covid-19 pandemic won't have an end date.
Rather, a crisis that engulfed the world within months of the
coronavirus's discovery in China will dissipate in fits and starts
into something that feels more like normal over the course of
years, infectious-disease experts say.
Consumer Spending Likely Slowed in November
Consumer-spending growth likely cooled in November, economists
say, and risks are now mounting for the broader economy to slow
amid the latest wave of Covid-19 cases.
Economists surveyed by The Wall Street Journal estimate that
U.S. consumer spending rose by 0.6% in November from a month
earlier, after climbing 1.3% in October.
Jobless Claims Trending Near Historic Lows Despite Omicron
Concerns
New applications for unemployment benefits have been hovering
near historically low levels in recent weeks, as businesses hold on
to workers amid a tight labor market.
Economists surveyed by The Wall Street Journal estimate that
initial jobless claims, a proxy for layoffs, held steady at a
seasonally adjusted 206,000 in the week ended Dec. 18, a level
unchanged from the prior week, and just above the lowest levels in
a half-century. The Labor Department will release the latest data
at 8:30 a.m. ET Thursday.
M&A Likely to Remain Strong in 2022 as Covid-19 Looms Over
Business Plans
Companies are gearing up for another banner year for deal
making.
Mergers and acquisitions hit a record in 2021, fueled by low
interest rates, a surge in private-equity fundraising and
companies' efforts to respond to broader shifts in their
industries. The total value of global M&A transactions through
Dec. 21 was $5.7 trillion, up 64% from the same period a year
before, according to Refinitiv, a data provider. The total number
of deals, meanwhile, rose 22% during that period, to 59,748,
Refinitiv said.
Air Cargo Also Disrupts Supply Chain as Goods Spill Out of
Warehouses
Cargo flights provided a solution this year for producers of
consumer electronics, machine parts and toys that struggled to move
goods along rails and through ports. Then the airports got
clogged.
Labor shortages at air-cargo hubs like Chicago O'Hare
International Airport during the fall have disrupted operations for
the ground-handling companies that unload planes, and left goods
piling up. Airlines, handlers and freight companies said they are
working to speed up loading and security checks, tapping warehouse
robots and trained sniffer dogs.
ETFs Claim More of Muni Market
Municipal bond investors are piling into exchange-traded funds,
attracted by low costs and the ability to trade quickly.
Muni ETFs held $80 billion as of the end of the third quarter,
up from less than $50 billion two years ago, Federal Reserve data
shows. Citigroup projects they will hold $125 billion by December
2022.
Gas Price Surge Will Keep Eurozone Inflation Higher in 2022 --
Analysis
This year's surge in natural gas prices means that eurozone
headline inflation will be higher in 2022 than previously expected,
even if oil prices decline, economists say.
The jump in gas prices could push inflation in the
single-currency bloc up to one percentage point higher next year
than it would otherwise have been, Capital Economics says.
Supreme Court Sets Oral Arguments on Biden Covid-19 Vaccine
Rules
WASHINGTON-The Supreme Court on Wednesday said it would hold a
special sitting to hear oral arguments early next month on whether
the Biden administration can enforce Covid-19 vaccine-or-testing
rules for large private employers, as well as vaccine requirements
for many healthcare workers.
The cases, set for fast-track arguments on Jan. 7, could go a
long way to determining how much latitude the administration has to
combat the coronavirus pandemic in the workplace.
Biden Says He Is More Likely to Run in 2024 if Trump Is His
Opponent
WASHINGTON-President Biden said he is eager to run for
reelection against Donald Trump in 2024 and expressed regret that
he didn't act more quickly to purchase at-home Covid-19 tests to
distribute to the public.
In an interview with ABC News that aired on Wednesday night, Mr.
Biden, 79, said he planned to run for reelection if he remains
healthy. "If I'm in the health I'm in now-if I'm in good
health-then, in fact, I would run again," he said.
Rep. Mary Gay Scanlon Carjacked in Philadelphia
U.S. Rep. Mary Gay Scanlon was carjacked at gunpoint in
Philadelphia on Wednesday as she walked to her car from a meeting,
according to her office and law-enforcement officials.
The Pennsylvania Democrat wasn't physically harmed, her office
said.
Write to paul.larkins@dowjones.com TODAY IN CANADA
Earnings:
None scheduled
Economic Indicators (ET):
0830 Oct Payroll employment, earnings & hours
0830 Oct GDP
Market Talk:
Dye & Durham's Link Bid Looks Like Favorable Outcome
Dye & Durham's plan to acquire 100% of Australian data
services company Link at A$5.50 a share looks to be a favorable
outcome for Link's shareholders, says Morgans.
It says that the bid is superior to Carlyle Group's recent
indicative bid for Link of A$5.38 per share. Still, Morgans reckons
there is potential for Carlyle Group to come back with a higher bid
for Link after conducting due diligence.
"A$6.00 per share would always tempt the board, particularly
given Link's recent struggles and likely on-going shareholder
pressure," says Morgans. (alice.uribe@wsj.com)
Expected Major Events for Thursday
00:01/UK: Dec CBI Growth Indicator Survey
00:01/UK: Nov UK monthly automotive manufacturing figures
05:00/JPN: Oct Indexes of Business Conditions - Revision
05:30/JPN: Nov Tokyo area department store sales
05:30/JPN: Nov Nationwide department store sales
06:00/JPN: Nov Revised Machine Tool Orders
07:00/GER: Nov Foreign trade price indices
09:00/ITA: Dec Consumer Confidence Survey
09:00/ITA: Dec Business Confidence Survey
13:00/RUS: Weekly International Reserves
13:30/CAN: Oct Payroll employment, earnings & hours
13:30/US: Nov Personal Income & Outlays
13:30/CAN: Oct GDP
13:30/US: Nov Advance Report on Durable Goods
13:30/US: 12/18 Unemployment Insurance Weekly Claims Report -
Initial Claims
13:30/US: U.S. Weekly Export Sales
14:45/US: Consumer Comfort Index
15:00/US: Dec University of Michigan Survey of Consumers -
final
15:00/US: Nov New Residential Sales
15:00/US: 3Q GDP by State
15:30/US: 12/17 EIA Weekly Natural Gas Storage Report
21:30/US: Foreign Central Bank Holdings
21:30/US: Federal Discount Window Borrowings
23:30/JPN: Nov CPI (Nation), CPI ex-food (Nation)
23:50/JPN: Nov Services Producer Price Index
23:50/JPN: Dec Provisional Trade Statistics for 1st 10 days of
Month
All times in GMT. Powered by Kantar Media and Dow Jones.
Expected Earnings for Thursday
Bit Digital Inc (BTBT) is expected to report for 3Q.
Cronos Group Inc (CRON,CRON.T) is expected to report $-0.10 for
3Q.
Eargo Inc (EAR) is expected to report for 3Q.
Forward Industries (FORD) is expected to report for 4Q.
Li-Cycle Holdings Corp (LICY) is expected to report for 4Q.
SandRidge Mississippian Trust I (SDTTU) is expected to report
for 3Q.
Sanderson Farms (SAFM) is expected to report $6.33 for 4Q.
Powered by Kantar Media and Dow Jones.
ANALYST RATINGS ACTIONS
Adagio Therapeutics Cut to Hold From Buy by Jefferies
Agco Corp Cut to Market Perform From Outperform by Bernstein
Allakos Cut to Market Perform From Outperform by SVB Leerink
Allakos Cut to Market Perform From Outperform by William
Blair
ALX Oncology Cut to Hold From Buy by Jefferies
BigCommerce Holdings Raised to Outperform From Neutral by
Wedbush
Caterpillar Raised to Outperform From Market Perform by
Bernstein
Cerner Cut to Sector Weight From Overweight by Keybanc
Darden Restaurants Raised to Buy From Hold by Stifel
EVO Payments Raised to Buy From Neutral by Northcoast
Research
Global Payments Raised to Buy From Neutral by Northcoast
Research
Paccar Raised to Outperform From Market Perform by Bernstein
Scholar Rock Holding Corp. Tumbles on Analyst Downgrade
Scholar Rock Holding Cut to Hold From Buy by Jefferies
Williams-Sonoma Raised to Buy From Hold by Loop Capital
This article is a text version of a Wall Street Journal
newsletter published earlier today.
(END) Dow Jones Newswires
December 23, 2021 05:55 ET (10:55 GMT)
Copyright (c) 2021 Dow Jones & Company, Inc.