European stocks climbed Wednesday, heading for a two-day winning
streak, with gains led by financials and the travel sector, as
investors looked ahead to the Federal Reserve announcement that is
expected to provide clarity on coming interest-rate rises.
Shares have been rocked in recent days by expectations the Fed
will embark on a series of rate increases this year to temper
heightened inflation. The prospect of a shrinking balance sheet and
higher rates has prompted some to sell risky assets, including
shares of technology companies that promise future returns, and
Investors are also monitoring rising tensions between Russia and
Ukraine that have drawn the focus of NATO allies.
"Today the focus is going to be on the Fed," said Luca Paolini,
chief strategist at Pictet Asset Management. "It's more about the
tone of the press conference. People may have an expectation that
given the market turmoil and the geopolitical tensions the Fed may
tone down its rhetoric."
Stocks on the Move:
Major European and U.K. airlines rose sharply after the EU
lifted Covid-19 travel restrictions in the bloc following Britain's
new guidance for vaccinated passengers.
Airlines have argued that travel restrictions haven't
significantly slowed rising case numbers of the Omicron variant in
Shares in Fresnillo fell 15% after the precious-metals miner
reported disappointing fourth-quarter figures, with production
missing estimates by 8%-9% for silver and gold, said Jefferies.
Guidance was well below consensus estimates too, particularly for
silver, Jefferies added.
"Beyond the delay in Juanicipio, announced in December,
Fresnillo is citing lower volume of ore at Saucito due to personnel
shortages, Covid-related absenteeism and instability caused by
increased seismicity in the Jarillas vein," Jefferies said.
Oxford Economics' eurozone recovery tracker rose 1.4 points to
80.3 in the two weeks ended Jan. 9, driven by a recovery in
mobility due to a rise in movement in workplaces after the
"We view the reading with a bit of caution, as it may reflect a
reflexive rebound following the Christmas dip rather than the start
of a steady improvement, as high-frequency data tend to be noisy at
the start of the year," Oxford Economics' chief French economist
Daniela Ordonez said.
Although Oxford Economics expects the Omicron wave to be sharp
but short, health metrics in several countries indicate infections
have yet to peak, she says. While the recovery tracker has likely
troughed, Ordonez expects it to remain restrained for some
Stock futures gained ahead of the Fed announcement.
"Trading in U.S. equities remains hectic, unpredictable and full
of surprises," wrote Ipek Ozkardeskaya, Senior Analyst at
"The escalating tensions on the Ukrainian border, Biden
threatening Putin with personal sanctions, IMF cutting U.S. and
Chinese growth outlooks, combined with hawkish Fed expectations are
mostly responsible for the rising volatility and confusion among
Concerns over Russia-Ukraine tensions are likely to prevent the
euro from rising considerably against the dollar even if the
greenback falls after the Fed's policy decision, said ING.
"The implications of forthcoming sanctions to Russia for the
EU-Russia relationships [in particular related to the gas supply]
are important factors for the EUR's short-term outlook," ING
Until these implications become clearer, the euro will "keep
feeling the drag" of Russia-Ukraine tensions so a weaker dollar
after the Fed's decision wouldn't be enough to significantly lift
The market has fully priced in a 25bp rate rise by the Fed in
March and will be looking for a confirmation of that at today's
meeting, but the Fed's hints on the terminal rate for USD could be
more of a mover for euro duration, Citi's rates strategists
Citi's rates strategists' base case is four interest rate hikes
by the Fed in 2022, each for 25 bps. "For euro duration, what
perhaps matters more is not what the Fed signals for 2022--where
the ECB effectively has closed the hiking window--but if the Fed
says anything to prompt a re-pricing of the terminal rate for USD,
to which EUR is currently trading with a high beta," Citi said.
Eurozone government bond yields edged higher with the market's
focus on the Fed and the likely confirmation of a first interest
rate rise in March, analysts said.
"The market will be expecting to see a strong signal from the
Fed of a 25bp hike to come in March, with more later on," said
Mizuho's rates strategists.
Inflation fears and some extra yield should spur demand for the
U.K. Debt Management Office's planned sale of GBP600 million in the
0.125% March 2051 index-linked gilt, said RBC Capital Markets.
"While the bond does not stand out as particularly cheap
compared to its nearest neighbours, there are some signs that a
concession has been priced into the sector ahead of today's
auction," analysts at the bank said.
This combined with continuing fears of higher inflation should
help support the take-down of today's auction. The next
index-linked auction will be on March 15.
Oil prices ticked higher in Europe as supply remains tight and
tensions continue to linger in Ukraine, with market participants
concerned about dwindling spare capacity.
"With OPEC's effective spare capacity razor thin, any given
nation's underproduction is increasingly difficult to offset," said
TD Securities. It added: "The conflict between Russia and Ukraine
and tensions in the Middle East [is] the largest source of supply
Copper rose 1.5% on the LME as traders awaited the conclusion of
the Fed meeting for guidance on rate rises, with TD Securities
saying "a growing cohort of participants [are] hoping the Fed will
manage to provide a soothing tone for markets."
TD Securities said that with the central bank's stated goal to
dampen inflation, "it's unlikely the Fed will pivot from its plan
to start hiking rates as soon as March."
Investors who bet on gold ahead of the recent market turmoil are
likely pleased to see that the precious metal has held on to recent
gains while most other asset classes have suffered. Comex gold
futures were down 0.4% Wednesday but have gained almost 1% so far
"With most asset classes losing money in recent days, even
standing still is helpful for an investor's portfolio, so gold has
still performed its role as a safe haven," said Rupert Rowling, an
analyst at Kinesis Money.
After shunning gold exchange-traded funds for months, investors
are flocking back to them amid the turbulence in stock markets. The
SPDR Gold Shares ETF saw its largest ever inflows of more than $1.6
billion on Friday, according to data from FactSet.
Inflows have continued this week with a further $273 million
flowing into the fund on Monday. The sizable inflows coupled with
more modest inflows into other, smaller funds means the 17 gold
ETFs tracked by FactSet have seen net inflows of $2.35 billion
dollars over the past 30 days.
DOW JONES NEWSPLUS
Intel Wins EU Antitrust Appeal as Court Annuls $1.2 Billion
BRUSSELS-Intel Corp. won an annulment of a $1.2 billion fine
issued by the European Union's antitrust regulator more than a
decade ago over allegations the microchip producer had used its
commercial power to squeeze out a competitor.
The court's decision is a blow to the European Commission, the
bloc's main antitrust regulator, which is seeking to expand its
reach through new regulations and a reinterpretation of its
existing powers. Lawyers said a ruling in favor of Intel could put
a greater burden on the commission in pursuing some antitrust
Vestas Prereleases Earnings, Guidance After Warning of Higher
Vestas Wind Systems AS Wednesday released preliminary 2021
earnings and 2022 guidance after cautioning that the wind power
industry continues to be challenged by supply-chain instability
which is causing significant cost inflation and delays to projects
while visibility and profitability remain severely affected.
The Danish wind-turbine maker posted preliminary full-year
revenue of 15.59 billion euros ($17.6 billion) for 2021, within the
company's guidance range of EUR15.5 billion-EUR16.5 billion, while
pre-items earnings before interest and tax is expected to total
EUR461 million, equating to a margin of 3.0%. The company had
guided for a margin of around 4.0%.
Lonza Posts Higher 2021 Sales; Confirms Mid-Term Targets
Lonza Group AG on Wednesday posted higher sales for full-year
2021 and reconfirmed its mid-term guidance until 2024.
The Swiss life-sciences company said core earnings before
interest, taxes, depreciation and amortization grew to 1.67 billion
Swiss francs ($1.82 billion), from CHF1.38 billion the year prior,
on sales that grew to CHF5.41 billion from CHF4.51 billion.
Metro Unveils Strategy Through 2030
Metro AG on Wednesday unveiled its strategic targets through
2030, saying it plans to focus on professional customers and expand
its multichannel business model.
The German wholesale company said at its capital markets day
that it targets total sales to grow at a compound annual rate of 3%
to 5% in the 2022-25 period and reach over 40 billion euros ($45.19
billion) by 2030.
Wacker Chemie Posts Increased Profit for 2021
Wacker Chemie AG said Wednesday that profit more than tripled in
2021, citing preliminary figures.
The German chemicals company posted a net profit of 780 million
euros ($881.5 million) for 2021 compared with a profit of EUR202
million in the previous year.
EU, U.K. Drop Border Travel Restrictions, Lessening Burden of
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
Companies Prepare for Fallout From Cyberattacks Against
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
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.
U.S. Plans Sanctions, Export Controls Against Russia if It
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.
Fed Expected to Signal Rate Increases to Start in March
Federal Reserve officials are set to keep interest rates near
zero Wednesday, at the conclusion of their two-day policy meeting,
while likely signaling they are preparing to raise rates at their
following gathering in mid-March.
The central bank is also poised to approve one final round of
asset purchases and resume deliberations over how and when to
reverse the pandemic-driven expansion of its $9 trillion securities
portfolio later this year.
Derby's Take: Fed Likely to Use Job View in FOMC Statement to
Tee Up March Rate Hike
The Federal Reserve will likely work to prepare markets for the
start of interest rate increases by upgrading how it describes the
job market in the policy statement to be released at the end of its
monetary policy meeting Wednesday, economists say.
The forecasters believe that to tee up a widely expected March
increase in the now near-zero federal-funds rate target range, the
Federal Open Market Committee policy statement will likely move to
say that the economy has achieved full employment. In the last FOMC
statement from mid-December, the Fed said that the economy was
still working to achieve that level.
Analysis: Why the Fed Is Unlikely to Start Raising Rates With a
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
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
IMF Urges El Salvador to Ditch Bitcoin's Legal Tender Status
The International Monetary Fund urged El Salvador to strip
bitcoin of its status as legal tender because of its large risks to
financial stability, the latest twist in protracted talks between
the fund and the highly indebted Central American country to secure
a $1.3 billion loan.
The fund said on Tuesday that El Salvador's recent adoption of
bitcoin as a national currency also creates risks for financial
integrity, consumer protection and fiscal liabilities in a tiny
economy with limited government resources.
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
Imports are tumbling at the nation's busiest container port
complex even as the backup of ships waiting to unload there breaks
House Speaker Nancy Pelosi to Run for Re-Election, Doesn't
Address Leadership Plans
WASHINGTON-House Speaker Nancy Pelosi (D., Calif.) said she
plans to seek re-election this fall, but gave no indication of
whether she wants to remain her party's leader, as Democrats face
an uphill battle to keep control of the chamber in the midterms
To win backing for the speakership in 2018, Mrs. Pelosi made a
deal with party lawmakers that she would serve as speaker for just
two more terms. Since then, she has declined to talk about whether
she plans to step aside. While she has the firm backing of her
caucus, many have openly called for a change in leadership.
New York Mask Mandate Reinstated in State Appeal
An appellate judge reinstated New York's indoor mask mandate on
Tuesday after the state Health Department appealed a ruling that
struck down pandemic-related requirements for schools and
Judge Robert Miller stayed a Monday ruling that the state's
requirements for face coverings, adopted at the start of the school
year and extended in December to cover all indoor public places,
were unconstitutional because they didn't relate to a specific law
Biden Administration Withdraws Emergency Covid-19 Vaccine
Mandate After Supreme Court Blocks Rule
The Biden administration is withdrawing an emergency
private-sector vaccination mandate against Covid-19 after the
Supreme Court blocked its implementation.
The Occupational Safety and Health Administration said Tuesday
it would continue to work on imposing the vaccination requirement
through the regular-and lengthier-rule-making process.
Covid-19 Deaths in the U.S. Top 2,100 a Day, Highest in Nearly a
Covid-19 deaths in the U.S. have reached the highest level since
early last year, eclipsing daily averages from the recent
Delta-fueled surge, after the newer Omicron variant spread wildly
through the country and caused record-shattering case counts.
The seven-day average for newly reported Covid-19 deaths reached
2,191 a day by Monday, up about 1,000 from daily death counts two
months ago, before Omicron was first detected, data from Johns
Hopkins University show. While emerging evidence shows Omicron is
less likely to kill the people it infects, because the variant
spreads with unmatched speed the avalanche of cases can overwhelm
any mitigating factors, epidemiologists say.
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(END) Dow Jones Newswires
January 26, 2022 05:54 ET (10:54 GMT)
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