European stocks fell ahead of an expected mixed start for Wall Street.

A volatile month has whipsawed investors, who have juggled worries over the pace of Federal Reserve interest rate hikes, a mixed earnings season, the ongoing pandemic fallout and geopolitical worries surrounding a potential Russia invasion of Ukraine.

"Some of the global-market turmoil has subsided, now that the big events of the week are behind us," IG analysts said, adding that the atmosphere is still cautious. "It looks to be a quieter end to the week, with only U.S. PCE data on the economic ticket for the day, while earnings take on an industrial focus with Chevron and Caterpillar."

Shares on the move: Shares in ITV gained 1.5% to 113 pence after Barclays upgrades the U.K. broadcaster to overweight from equal-weight and increases its price target to 160 pence from 140p.

European broadcasters are almost universally unloved by investors who believe the trend of people watching more on-demand TV rather than on traditional TV channels will reduce advertising revenues, Barclays said.

Still, ITV's ad revenues have been rising and 2022 shouldn't be any different, the company has significant M&A opportunities, investors could re-evaluate its TV production business if management achieves its 5% annual revenue growth target and the shares are arguably cheap, Barclays said. "ITV is our non-consensual value call for 2022," Barclays analysts said.

Stocks to watch: LVMH looks well-placed to face near-term headwinds after second-half earnings beat expectations and sales growth continued to accelerate in the year's final quarter, Citi said.

The French luxury-goods giant's 2021 results followed impressive prints from luxury players like Swiss group Richemont, Italians Prada and Tod's and Danish jeweler Pandora, and didn't disappoint, Citi said, highlighting organic growth over two years in 4Q, exceptional operating profit in 2H, a generous dividend and a positive outlook for the new year.

Some near-term headwinds--the Russia-Ukraine crisis, stock-market volatility and new pandemic waves in Asia--shouldn't blow LVMH off course, the bank said.

CaixaBank shares should respond positively to its 4Q earnings despite a lower-than-expected net profit of EUR425 million for the period, Renta 4 Banco's equity research analyst Nuria Alvarez said.

Net interest income fell on year, but investors should welcome the strength in income from fees and insurances, the low cost of risk, and the lender's plans to increase the dividend payout for the next year. As for the share-buyback program to be carried out in 2022, Renta 4 Banco estimates that the bank could repurchase around 8% of its capital.

UniCredit reported a bigger net loss in the fourth quarter, mainly due to integration costs and higher investment losses, but its underlying earnings beat expectations as did revenue. Track the analysts' views of the earnings here. [[{%22t%22:%22symbol%22,%22q%22:%22djn:djnabout:UCG.MI%22,%22c%22:%22IT:UCG%22,%22n%22:%22UniCredit%20S.p.A.%22,%22cs%22:%22STOCK/IT/XMIL/UCG%22,%22ds%22:%22UCG.MI%22}, {%22t%22:%22operator%22,%22q%22:%22and%22,%22n%22:%22and%22}, {%22t%22:%22freetext%22,%22q%22:%22market%20talk%22,%22n%22:%22market%20talk%22}]&searchFilterState=open&includeDefaultFilter=true]

Data in focus: Germany's economy shrank 0.7% in the fourth quarter as restrictions were tightened amid a surge in Covid-19 cases and weighed on the services sector in the form of lower demand, UniCredit's chief German economist Andreas Rees said. UniCredit expects economic activity to shrink again in 1Q due to Covid-19 and supply shortages.

Looking beyond to 2Q, a strong and sustainable recovery in Germany inevitably requires a significant easing of supply shortages, UniCredit said.

"Otherwise, companies in the manufacturing and construction sector cannot work off their backlog orders and restock their record-low inventories to a more normal level," Rees said. Encouragingly, the latest survey data suggest a tentative easing of supply-side pressures, he added.

The strong reading of the French economy in the fourth quarter is no longer just the mechanical result of reopenings, but a sign of a solid economy, which is starting 2022 on a strong footing, even if the first quarter looks more difficult, Charlotte de Montpellier, ING's economist for France, said.

The pace of growth has slowed from the third quarter as a consequence of a resurgence of the coronavirus, the difficulties in supply chains and the acceleration in inflation, the economist said.

France's economic slowdown will probably continue well into the first quarter, de Montpellier said. Positive quarterly growth, though close to 0%, is expected in 1Q, according to ING.

U.S. Markets:

Stocks were poised for a fourth consecutive weekly loss as investors awaited earnings from Chevron and Caterpillar, as well as the Federal Reserve's preferred inflation gauge.

In premarket trading, Apple shares rose 4.9% after the biggest U.S. company by market capitalization posted record revenue and profits. Shares of brokerage Robinhood Markets, which reported a quarterly loss of $423 million, dropped 14% premarket. Tesla recovered 1.9% premarket after sliding 12% Thursday, highlighting the volatility wracking technology and growth stocks as investors prepare for the Fed to tighten monetary policy.

"Cheap money is like a comfort blanket for investors and for markets," said Jane Foley, senior foreign-exchange strategist at Rabobank. "Almost inevitably, you start to withdraw some of that cheap money and you're going to have more volatility in the markets."

Stocks have been choppy despite another solid round of earnings. Almost a third of the companies on the S&P 500 have reported fourth-quarter results and 78% of them have beaten analysts' estimates for earnings per share, according to FactSet. Companies due to report before the bell Friday include Chevron, Caterpillar and Colgate-Palmolive.

Investors will parse consumer-spending data from the Commerce Department at 8:30 a.m. ET. Economists expect the figures to show spending fell in December as rising coronavirus infections dented demand. Also due at 8:30 a.m., the Fed's preferred inflation gauge is forecast to show a continuation of the price pressures that have pushed the central bank to unwind stimulus.


Expectations for five interest rate rises by the Fed within the next year are priced in but the dollar still has scope to appreciate, UniCredit said.

"We think that there is still room for the USD to strengthen as the U.S. interest-rate advantage with respect to the rest of the world becomes more evident and there is no major incentive for investors to consider a trend reversal," UniCredit analysts said.

However, some profit-taking against the safe-haven dollar might emerge Friday after a rebound in Asian equity markets, they said.

The euro's recent depreciation against the dollar is likely to be on the European Central Bank's radar at its Feb. 3 meeting, Barclays said. EUR/USD has plummeted lately on the Fed's "notable hawkishness," Barclays analysts said, noting that the Fed indicated it would start raising interest rates in March.

The ECB might also turn "hawkish" as eurozone and global inflation continue to accelerate above forecasts, they said. "Indeed, euro-area flash inflation data for January will be released the day before the meeting: another upside surprise relative to consensus (following on from December's upside surprise) could potentially encourage a somewhat more hawkish tone."

The Bank of England isn't pushing back against the market's interest rate rise expectations as it probably wants to encourage a stronger pound, ING said. The market sees the benchmark rate rising to 1.35% by December from 0.25% currently, ING analysts said.

Previously the BOE may have issued a "verbal rate protest" against such pricing to weaken sterling in a deflationary environment with poor global demand but now it's likely welcoming sterling strength to fight against higher energy prices, they said.

EUR/GBP could fall towards 0.8275 if the BOE lifts rates by 25 basis points and doesn't protest against rate bets at next Thursday's meeting, they said.


As long as the ECB can hold its nerve, as seems likely, then lift-off pricing is stuck, Citi's rates strategist Jamie Searle said. How many interest rate rises the market can price from 2023 is likely to depend, at least for the coming months, far more on the Federal Reserve than the ECB, he said.

Citi sees bearish risks for Bunds as obvious, but it is of the view that Bund yields can remain, on average, negative in the coming months, "especially with signs that policy error concerns may keep terminal rate pricing sticky," Searle said.

Government bond syndications in the eurozone in February are expected to pivot away from the 10-year sector and toward the long end, Barclays's rates strategists said.

They expect a new 20-year Italian BTP, a 30-year Spanish bond and a 30-year Belgian OLO. Barclays calculates that eurozone sovereigns have already completed approximately 11% of gross government bond issuance expected this year, with the volume boosted by heavy syndicated supply.

The overall volume of syndicated government bond issues amounted to close to EUR50 billion in January, Barclays calculates.

As Spanish government-bonds yield spreads over German Bunds have widened less than Italian BTP and French OAT spreads recently, Spanish government bonds are starting to look rich but the outperformance is justified, said Societe Generale's rates strategists.

"The falling correlation of SPGB [Spanish government bond]-Bund with BTP-Bund and OAT-Bund may be justified in our view, at least in the near term," they said.

The Spanish bond outperformance versus Italy and France is justified, among others, by the yet-to-be-concluded presidential elections and parliamentary elections in early 2023 in Italy, and with presidential elections in France in the spring. In addition, Italian bonds tend to suffer more than Spanish ones when Bund yields rise and credit spreads widen, Societe Generale said.

Investors may be forced to price in a higher peak for U.S. interest rates than 2%, UniCredit said. The Fed's statements and dot plot, a chart that summarizes the central bank's outlook for the federal funds rate due in mid-March, should shine a light on the issue, analysts at the bank said.

The focus remains the prospect of the first rate-rise in March "seemingly cast in stone," while Treasury yield curve movements are likely to be predominantly determined by shifts in views about the pace of rate hikes this year, they added.


Oil prices were on course for a sixth weekly rise amid tight supplies and geopolitical tensions in Eastern Europe and the Middle East. For the week, Brent is on course for a 0.7% gain while WTI is set for a 2.2% gain.

Tensions between Russia--a major oil producer--and Ukraine--a major conduit for natural gas supplies--have helped drive prices higher this week. At the same time, producing nations in OPEC are struggling to keep pace with their own supply targets.

"In effect, spare capacity is at a level which may not be enough to cover any geopolitical disruptions," said ANZ.

As tensions between Ukraine and Russia mount, energy prices are likely to push higher. The situation in Eastern Europe increases geopolitical premium in oil prices, causing more inflation, Rob Thummel from TortoiseEcofin said.

However, the biggest concern for Europe at the moment could be regarding natural gas supply security, as the continent is highly dependent on Russia.

"Given that there's a lot of winter left, I think there are scenarios where it could become really challenging, and inventories could go really low," Thummel said.

Conversely, the U.S. has a large supply of gas and exports LNG to Europe. "Post conflict between Russia and Ukraine, post winter and when Covid cases have lessened, I think there's potential for [U.S.] gas prices to fall to around $3.00 [per million British thermal units] by the end of 2022," Thummel said.

Gold fell in European trade and Oanda said gold is vulnerable to further technical selling now that the $1,800 level has been breached, risk aversion should provide price support for the safe-haven asset. Oanda puts support for the precious metal at $1,760 an ounce.

Most base metals are on course for a weekly loss as a stronger dollar and equity market jitters have weighed on prices. Three-month copper is down 0.9% Friday and set for a nearly 3% weekly loss.

All other base metals with the exception of aluminum are also set for weekly losses, with the largest being nickel at more than 7%. "A stronger dollar, high energy prices and wobbly equity markets--all occurring against a backdrop of a hawkish Fed and lingering geopolitical tensions--are creating a feeling of unease," said Ed Meir, a metals consultant for ED&F Man.

Chinese manufacturing PMI data is due Sunday, while Tuesday is the start of China's Lunar New Year holidays, which could sap liquidity from the market and heighten volatility.



UniCredit 4Q Net Loss Widened as Revenue Rose

UniCredit SpA reported a bigger loss in the fourth quarter of 2021, but posted higher-than-expected revenue.

The bank, Italy's second-largest by assets, on Friday reported a net loss of 1.44 billion euros ($1.60 billion), from a EUR1.18 billion loss a year earlier and compared with an expected EUR1.32 billion loss, according to a company-provided median consensus estimate.


Henkel to Merge Businesses, Launch EUR1 Bln Share Buyback

Henkel AG & Co. KGaA said Friday that it intends to merge its laundry-and-home-care and beauty-care divisions into one unit to be called Henkel Consumer Brands, and that it will launch a share-buyback program with a total value of up to one billion euros ($1.11 billion).

The German home and personal-care products company also reported preliminary results for 2021, and set targets for 2022 and for the mid-to-long term.


Hennes & Mauritz to Focus on Growth Again After Posting 4Q Earnings Beat

Sweden's Hennes & Mauritz AB said Friday it will now focus on growth again, after posting a forecast-beating rise in fourth-quarter net profit as sales returned to pre-pandemic levels.

The fashion retailer posted a net profit of 4.62 billion Swedish kronor ($493.6 million) for the fiscal quarter ended Nov. 30, compared with SEK2.49 billion a year earlier. Analysts polled by FactSet had expected a profit of SEK3.99 billion.


German Economy Contracted in 4Q

Germany's economy contracted in the fourth quarter due to a rise in coronavirus cases and the related re-imposition of restrictions, according to a first estimate published Friday by the German Federal Statistical Office.

Gross domestic product fell by an adjusted 0.7% from the previous quarter, Destatis said. This contraction was larger than economists' expectations of a 0.5% drop in a Wall Street Journal survey.


France's GDP Growth Slows Down at the End of 2021

The French economy grew in the fourth quarter, although at a slower pace than in the previous quarter because of a surge in coronavirus infections, an intensification of supply-chain problems and rising inflation.

The eurozone's second-largest economy expanded by 0.7%, following 3.1% growth in the previous quarter, French statistics agency Insee said Friday in a first estimate for the period. Economists polled by The Wall Street Journal had forecast the economy would grow by 0.5% on quarter.


LVMH Shares Rise After Results Show Revenue Growth Continues to Accelerate

Shares in LVMH Moet Hennessy Louis Vuitton SE jumped in early trading Friday after the luxury-goods giant said revenue growth continued to accelerate at the end of 2021, leading to a much higher annual profit.

At 0813 GMT, shares traded 3.4% higher at EUR717.60, having risen as high as EUR733.90 early in the session.


Electrolux Expects Continuing Hit From Supply-Chain Constraints

Electrolux AB on Friday reported a drop in fourth-quarter net profit, and said global supply-chain constraints will continue to affect the ability to fully meet demand, with sequential improvements expected starting in mid-2022.

The Swedish home-appliance manufacturer posted a net profit of 596 million Swedish kronor ($63.7 million), compared with SEK1.86 billion a year earlier, as sales rose 4.3% to SEK35.37 billion.


Volvo 4Q Beat Forecasts, but Cautions on Continued Supply Disruptions

Volvo AB on Friday posted forecast-beating fourth-quarter earnings amid strong truck demand, though it cautioned that production stoppages due to component shortages and supply-chain disruptions will continue.

The Swedish truck maker reported net profit of 8.0 billion Swedish kronor ($854.8 million), compared with SEK9.2 billion a year earlier, and beating a FactSet consensus forecast of SEK7.43 billion.


JCDecaux Shares Rise on Better-Than-Expected Revenue

Shares in JCDecaux SA jumped Friday after the French outdoor-advertising company posted revenue ahead of market expectations for the fourth quarter.

At 0832 GMT, JCDecaux shares traded 9.2% higher at EUR23.34.


Givaudan Shares Slide on Weak Profitability, Costs Impact

Shares of Givaudan SA dropped Friday after the Swiss flavor-and-fragrance company posted earnings below market expectations amid an increase in input costs.

At 1010 GMT, Givaudan shares traded 5% lower at CHF3880.00.


SSAB 4Q Net Profit Beat Forecasts Amid High Steel Prices

Swedish steelmaker SSAB AB on Friday posted a bigger-than-expected rise in fourth-quarter net profit, driven by high steel prices.

The company said fourth-quarter net profit rose to 5.46 billion Swedish kronor ($583.4 million) from SEK343 million a year earlier, as sales rose 61% to SEK27.34 billion.


Telia Lifts Dividend After 4Q Earnings Beat Expectations

Telia Co. AB on Friday lifted its dividend after posting a better-than-expected fourth-quarter net profit.

The Swedish telecommunications operator said it made a fourth-quarter net profit of 1.19 billion kronor ($126.7 million), compared with a loss of SEK24.5 billion a year earlier and the SEK1.1 billion expected in a FactSet poll.



Consumer Spending Could Be Slowed by Inflation, Omicron

Consumer spending, a key engine of economic growth, has shown signs of stalling heading into 2022, amid rising prices and the Omicron wave.

Economists surveyed by The Wall Street Journal estimate that consumer outlays declined by 0.7% in December from the prior month, as prices rose at their fastest pace in nearly four decades. The Commerce Department will release a report on consumption and inflation in December at 8:30 a.m. ET Friday. The report comes on the heels of separate data showing retail sales declined last month.


U.S. Employers Confront Highest Labor Costs in 20 Years, Fueling Inflation

The cost of hiring new employees and retaining existing ones in the nation's tight labor market is growing at nearly its fastest pace in a generation. That is helping to fuel inflation as employers pass labor costs to customers.

The U.S. employment-cost index-a quarterly measure of wages and benefits paid by employers-is expected to show that costs continued to rise at the highest rate in two decades of available records. Economists surveyed by The Wall Street Journal expect a seasonally adjusted increase of 1.2% in the fourth quarter of 2021 over the prior three months, which experienced a similar increase. The third-quarter gain, when compared with the same quarter from a year earlier, rose 3.7% on a nonseasonally adjusted basis.


IMF Says China's Economic Imbalances Have Worsened

Imbalances in the Chinese economy have worsened and delayed China's transition to consumption-led growth, the International Monetary Fund said in an annual review on Friday, slashing its outlook for the country this year.

The IMF assessment, in its Article IV review, reflects growing concern among some economists and officials that greater state intervention in the economy could be hindering China's long-held goal of "high-quality" growth-one driven by consumption rather than investment.


Derby's Take: Pandemic Stimulus Was Just Right, Powell Says

Federal Reserve leader Jerome Powell isn't buying the argument made by some critics that massive government aid and monetary-policy stimulus overdid it, creating a huge surge in U.S. inflation.

"It's too soon to write that history," Mr. Powell told reporters Wednesday after a Federal Open Market Committee meeting. As the second anniversary of the Covid-19 pandemic approached, he cautioned armchair quarterbacks who see the stimulus as overly abundant to think back to how dire things looked when the health crisis struck, and said "there was a real risk of lasting damage" to the economy that called for a very aggressive response.


Where Six Meme Stock Investors Are Now

Some regret their exuberance. Others value the lessons they learned. Still others are convinced big profits lie ahead.

Months after interviewing them in 2021, we checked back in with some of the investors who went all-in on so-called meme stocks during the pandemic-or bet against them-to see how they are adjusting as the market deals with a new round of turbulence.


China's Property Crisis Has Investors in Green Bonds Seeing Red

Before the Chinese property sector ran into trouble, developers had rushed to issue green bonds, making them among the most prolific corporate issuers in this fast-growing corner of global finance.

But the selloff in China's property-bond market in recent months, and a string of defaults, have hammered prices for many of these dollar-denominated green or sustainable bonds, which finance environmentally friendly or social projects. Creditors have suffered hefty losses. Several of the securities now trade at less than 30 cents on the dollar, indicating deep skepticism among investors that they will get back anything close to the original value.


U.S. Seeks to Confront Russia at U.N. Security Council Over Ukraine

The U.S. called for a meeting of the United Nations Security Council to discuss the standoff over Ukraine, seeking to apply international pressure on Russia to negotiate its concerns about European security among diplomats rather than on the battlefield.

The meeting would be a rare opportunity for Washington and its allies to discuss the actions of another permanent Security Council member-Russia-on the world stage. Set for Monday, the meeting would occur just one day before Moscow takes over the rotating presidency of the council.


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(END) Dow Jones Newswires

January 28, 2022 06:42 ET (11:42 GMT)

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