Watch For:

New Commercial Vehicle Registrations in Europe statistics; U.S. interest rate decision; updates from Hapag Lloyd, Lonza, Sage Group.

Opening Call:

European stocks could rise for a second day, while U.S. stock futures also point to early gain on Wall Street. Dollar strengthens. 10-year Treasury yields unchanged. Oil falls. Gold edges higher.


European stocks could extends gains Thursday ahead of a U.S. Federal Reserve meeting that will indicate how aggressive it will be in fighting inflation.

U.S. stock futures were also pointing higher. Tuesday on Wall Street, shares came well off their lows by late afternoon. But another burst of selling in the final hour of trading pulled them lower again. Technology stocks were the biggest drag on the market.

Wall Street is dealing with signs of slowing economic growth because of COVID-19 and a Fed that can't really go back on what it said it would do, said Barry Bannister, chief equity strategist at Stifel.

"The market has come to terms with that and that's a big deal," he said. "Fiscal and monetary tightening, together, is tough on financial assets when they're coming off of a rip-roaring party from stimulus."

Still, the fact that the major stock indexes came off their lows of the day could be a sign that some investors are betting that a dimmer outlook for economic growth may prompt the Fed to take a more measured approach to raising interest rates.

"Weaker economic growth projections have contributed to investors breathing a sigh of relief that the Fed won't have to be overly aggressive," said Sam Stovall, chief investment strategist at CFRA.

Stocks in Asia were mixed.


The dollar strengthened 0.4% against the euro and is a hair weaker against the yen. The dollar's recent strength isn't complicated, Scott Petruska, chief currency strategist at Silicon Valley Bank, told WSJ.

"It's a dollar story. It's a rush into safer currencies." He said the dollar is outperforming the Swiss franc and yen due to more attractive interest rates and yields.

"The Fed meeting is coming up and they're ready to cut stimulus more aggressively" than the Swiss, Japanese or other major central banks. The risk-off mood that's helping the dollar is driven by the "spectacular fall and volatility" in the US stock market, especially in tech, and the Russia-Ukraine crisis, Petruska said.

Asian currencies consolidated against the U.S. dollar in the Asian morning session ahead of the FOMC meeting's outcome later in the day.

Sentiment seems to have tilted to the cautious side, with market participants bracing for the FOMC decision, said.

With inflation running high and commodity prices edging up, markets may be expecting the Fed to tighten policy sooner and quicker, added.


The 10-year Treasury yields was unchanged. Investors are looking at the Fed meeting and presser, with some discussion about whether policy makers are seeing any reason to speed up monetary tightening, or rather to get a little more dovish after the Omicron impact.

The impression left from the previous meeting is that tapering will wrap up, and rates will lift off, in March. The prospect of higher rates is blamed for the recent volatility in equity markets, while the 10-year yield is up 0.288 percentage point year to date.


Oil fell in early Asian trade, tracking equity-market weakness amid fears of interest-rate increases by the Fed, Rystad Energy said. Investor pessimism is outweighing bullish fundamentals, the energy consulting firm said, pointing to crude-supply concerns due to Ukraine-Russia tensions and OPEC+ struggling to hit its targeted monthly output increases.

Regardless, Rystad reckons these factors should cap any near-term losses in oil prices. "Oil prices will remain bullish through the end of February" although bearish blips may occur, it said.


Gold edged higher in Asia on Fed-tightening fears and as geopolitical risks grow, according to Oanda. It said the precious metal is rallying as investors scamper to safety over fears the Fed, which is holding a regular policy meeting, will signal an aggressive tightening of monetary policy.

Oanda also points to tensions between the Ukraine and Russia, the Iranian nuclear deal and North Korea's recent missile launches as further reasons for investors to flock to the asset.

Copper prices were slightly lower in early trade, as risk-off sentiment weighs amid uncertainty surrounding the outcome of the Federal Reserve meeting, ING said.

ING also expects copper supply to rise, as the risk of mine supply disruptions ease after a strike was avoided at Teck's Highland Valley Mine. The three-month forward LME copper contract was down 0.2%.

Chinese iron-ore futures were higher in early trade amid expectations of increased steel production after the Lunar New Year, said Goldman Sachs.

"With no material policy constraints in place for steel production this year, the normal post-CNY seasonal ramp up in steel mill output is set to play out," it said.

It forecasts China's steel output to rise to 242 million tons in 1Q and 269 million tons in 2Q, compared with 211 million tons in 4Q 2021. The likely higher steel production should in turn lift demand for iron ore. The most-traded May iron-ore contract rose 2.0%



Analysis: Why the Fed Is Unlikely to Start Raising Rates With a Half-Point Increase

Market speculation around whether the Federal Reserve might raise interest rates by a half percentage point, instead of a quarter point, at its March meeting has picked up in recent weeks. Hedge-fund manager Bill Ackman called for such a "shock and awe" move recently, as did Henry Kaufman, the former chief economist at Salomon Brothers.

While the Fed isn't likely to rule out a half-percentage-point increase as an instrument in its tool kit, the central bank is unlikely to begin any sequence of rate rises with such a move, in part because it would essentially concede that it had made a policy mistake.


Investors Pile Into Gold, Seeking Safety From Market, Geopolitical Turbulence

One asset holding up through the early 2022 market turmoil: gold.

Rising geopolitical tensions in Europe and a slide in major U.S. stock indexes has sent investors rushing into the haven metal. On Friday, they poured a record net $1.6 billion into SPDR Gold Shares, the world's largest physically backed gold exchange-traded fund, according to Dow Jones Market Data. When individuals buy shares of an ETF backed by physical gold, they are buying a stake in a trust. The ETF tracks the metal's price since the asset held by that trust is metal.


Chip Shortage Leaves U.S. Companies Dangerously Low on Semiconductors, Report Says

WASHINGTON-U.S. manufacturers and other companies that use semiconductors are down to less than five days of inventory for key chips, the Commerce Department said Tuesday, citing the results of a new survey.

In 2019, companies typically maintained 40 days of inventory for key chips, according to the Commerce Department report. Now for the same chips-defined as 160 products that companies identified as being the most challenging to acquire-companies are operating with fewer than five days of inventory, the report said.


Imports Drop at Southern California Ports as Ship Backup Grows

Imports are tumbling at the nation's busiest container port complex even as the backup of ships waiting to unload there breaks records.


AMC in Advanced Talks to Refinance Debt as Meme-Stock Luster Fades

AMC Entertainment Holdings Inc. is stepping up its efforts to refinance some of its debt as the cinema chain's shares and bonds have slumped, giving up most of their gains since the company became a meme-stock favorite.

AMC is in advanced refinancing talks with multiple interested parties, according to people familiar with the matter who said the company has options to lower its interest burden and stretch out maturities by several years.


Inflation, Supply Chain, Omicron Expected to Take a Bigger Toll on Global Growth

WASHINGTON-The pace of economic growth both in the U.S. and globally is likely to decline more sharply than previously expected, the International Monetary Fund says in its latest forecast, citing inflation, fallout from the Omicron variant and chronic supply-chain problems.


Companies Prepare for Fallout From Cyberattacks Against Ukraine

Businesses including utilities, manufacturers and financial-services companies are bracing for potential spillover from cyberattacks against Ukraine, as U.S. officials warn of Russia-linked hacks that could ripple outward across borders and industries.

Many companies are examining their ties to Ukrainian businesses, as well as vendors with footprints in the country, as they shore up computer systems against digital campaigns that could accompany a Russian military advance into the country.


EU, U.K. Drop Border Travel Restrictions, Lessening Burden of Flying

LONDON-The European Union is lifting Covid-19 travel restrictions, allowing member countries to do away with quarantine and testing for vaccinated fliers traveling inside the bloc.

While the Omicron variant is still spreading across the continent, officials said the recent wave has reached a level at which travel restrictions may not help curb its footprint anymore.


Why Calling the Bottom on Credit Suisse Is Tricky

Company turnarounds can be very rewarding for investors, but they need perfect timing or nerves of steel to ride out the early bumps. Credit Suisse seems intent on testing its shareholders' mettle.

On Tuesday, the beleaguered Swiss lender warned that additional litigation provisions and more subdued trading meant it only broke even in the quarter through December, excluding an already announced goodwill write-down of 1.6 billion Swiss francs, equivalent to $1.75 billion. The most worrying news was that its international wealth management business-its strategic focus and crown jewel-had net asset outflows in the period.


U.S. Plans Sanctions, Export Controls Against Russia if It Invades Ukraine

The U.S. is prepared to impose export controls on critical sectors of the Russian economy if Russian President Vladimir Putin invades Ukraine, and is working to soften market shocks if Russia withholds energy supplies in retaliation, officials said.

Taking a page out of the Trump administration playbook to pressure Chinese telecom giant Huawei Technologies Co., senior administration officials on Tuesday said the U.S. could ban the export to Russia of various products that use microelectronics based on U.S. equipment, software or technology.


Oil Price Rise Blamed in Part on OPEC, Russian Output Shortfalls

OPEC and its Russia-led partners have promised to increase oil production to pre-pandemic levels this year but are falling short of those public commitments, stoking fast-rising global crude markets.

Last month, the Organization of the Petroleum Exporting Countries and its Russia-led allies increased their collective production by 250,000 barrels a day, or 60% of what the two groups promised for the month, according to the International Energy Agency. Overall, the group is pumping 790,000 barrels a day below its publicly stated targets, said the Paris-based watchdog, which advises industrialized nations on energy.


Microsoft Earnings Grew Last Quarter With Demand for Cloud Services

Microsoft Corp. said its earnings continued to grow last quarter as its cloud-services business stayed strong.

On Tuesday, the Redmond, Wash., software giant said its sales in the quarter ended in December hit $51.7 billion, up 20% from a year earlier. Its net income rose 21% to $18.8 billion.


Supply-Chain Software Provider o9 Solutions Valued at $2.7 Billion

Supply-chain software provider o9 Solutions Inc. has raised a new round of private funding that has more than doubled the Dallas-based company's value to $2.7 billion in less than two years.

O9 said it received a $295 million equity investment from growth-equity firm General Atlantic, its climate-focused investment strategy BeyondNetZero and Generation Investment Management, a sustainability investor co-founded by former Vice President Al Gore. The latest funding comes as more companies focus on supply-chain initiatives.


Canadian National Railway Names New CEO, Averts Proxy Fight

Canadian National Railway Co. named a new chief executive officer and made changes to its board Tuesday, moves that will allow the railroad operator to avert a proxy fight.

The Canadian railroad operator named longtime railroad executive Tracy Robinson as CEO and president. Also, U.K.-based activist TCI Fund Management Ltd. agreed to drop its proxy contest at Canadian National, which named a new independent director and plans to appoint two new independent directors with North American railroad experience by its annual meeting.


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Expected Major Events for Wednesday

00:01/UK: Jan REC JobsOutlook survey

07:00/EU: Dec New Commercial Vehicle Registrations in Europe statistics (EU27 + EFTA3)

07:00/DEN: Dec Retail Sales Index

07:00/SWE: Dec PPI

07:00/SWE: Dec Foreign trade

07:45/FRA: Jan Consumer confidence survey

09:00/ITA: Dec Foreign Trade non-EU

09:00/POL: Dec Unemployment

11:00/FRA: 4Q Claimant count and job advertisements collected by Pole emploi

13:00/POL: Dec Broad money M3

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This article is a text version of a Wall Street Journal newsletter published earlier today.


(END) Dow Jones Newswires

January 26, 2022 00:32 ET (05:32 GMT)

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