UKX FTSE 100 Index

MARKET WRAPS

Stocks:

European stocks were led lower by shares of retail, travel and leisure companies.

Shares on the move:

H & M Hennes & Mauritz fell over 3% after the Swedish clothes retailer said sales in its third quarter fell short of analysts' expectations.

The luxury-goods sector remains under pressure for a second day amid concerns over the spread of Covid-19 in Asia -- the industry's most critical market. LVMH fell 2.5% in Paris, Burberry was down 1% in London, Richemont slipped 2.4% in Zurich and Kering declined 3% in Paris.

Data in focus:

Consumers in Germany can expect inflation to amount to 3% this year, the Ifo Institute said. The main reason for the comparatively high rate in 2021 is to be found in the previous year, the institute said.

"The temporary reduction in VAT in the second half of 2020 and the crash in energy prices during the coronavirus crisis led to exceptionally low prices in 2020," Ifo's head of forecasts Timo Wollmershaeuser said.

The study also shows that the inflation rate can be explained in part by an accelerated increase in prices over the course of 2021, which is especially apparent in energy, food, and some service industries, Wollmershaeuser said. In 2022, German inflation could stand between 2.0% and 2.5%, Ifo forecasts.

Consumer prices in the U.K. grew at their fastest pace in almost a decade in August, adding more pressure to the Bank of England to scale back pandemic-era monetary policy support, said Shane O'Neill, head of interest rates for Validus Risk Management.

Commenting on annual CPI inflation accelerating 3.2% in August, he said inflation and Tuesday's solid jobs data "will give some support to those members of the Monetary Policy Committee who want to starting reducing stimulus sooner rather than later."

Yesterday's labor data showed the number of payroll employees back above pre-pandemic levels.

The Bank of England is unlikely to speed up scaling back stimulus, despite a steep increase in consumer prices in August, which should be supportive for the rebound of corporate profits and the equity market, said Ben Laidler, global markets strategist at multi-asset investment platform eToro.

U.K. annual CPI inflation surged to a 9-year high of 3.2% in August, marking the biggest monthly jump in the annual rate on record. Yet Laidler expects the Bank of England to remove policy stimulus slowly as bank officials remain keen to support the economic recovery.

"We see this stimulus staying for an extended period, whilst growth uncertainties remain high, and much of the inflation acceleration one-off," he said.

U.S. Markets:

U.S. stock futures ticked up, signaling a tepid rebound for major indexes that have come under renewed pressure on concerns that the pace of the economic recovery is slowing.

Stocks have slipped in September amid worries that markets are ripe for a pullback after marching higher for much of the year. Just as concerns about high valuations are on the rise, investors say the economic rebound likely won't be as fast as they previously expected. The spread of the Delta variant of coronavirus, an economic slowdown in China and supply-chain difficulties have all dampened sentiment.

"We've shifted from worrying about premature tightening [by the Federal Reserve] killing off the recovery in equities to concerns about the strength of the recovery weighing on equities," said Sebastian Mackay, multiasset fund manager at Invesco. Mr. Mackay remains upbeat about the outlook for stocks, but said he has taken out insurance against volatility by buying put options.

Investors will parse data on U.S. industrial production at 9:15 a.m. for clues about the state of the economic recovery. Economists forecast that output rose in August.

Forex:

Tuesday's slightly weaker (although still-elevated) U.S. inflation figures had little impact on the dollar, which has kept to a tight range, MUFG said.

The figures keep the Federal Reserve on track to announce plans to taper asset purchases later this year, but this is now more likely in November than September. Next week's meeting is unlikely to "fuel any renewed FX volatility" as "any lingering expectations of something meaningful happening" are now gone, said Derek Halpenny, MUFG's head of research for global markets EMEA.

EUR/USD, last up 0.1% at 1.1817, should stay in a narrow range, with the euro supported by solid economic fundamentals but hampered by divergence between Fed policy and that of the European Central Bank, he said.

Federal elections in Germany could create shifts in terms of fiscal policy and monetary policy that "err on the side of probably more accommodation and expansion" and potentially cause the euro to fall, said Michael Hasenstab, chief investment officer for global macro at Franklin Templeton.

"I think that will have implications for the euro," he said. This doesn't only apply to the euro against the dollar and falls may be more pronounced against Scandinavian currencies, Hasenstab said.

He pointed to strong current accounts in Sweden and Norway, as well as good growth and probably tighter policy--the latter has already been signaled in Norway. "So, it's not just about euro-[US] dollar, but really euro-Scandinavia and euro to some of the other currencies that we think is equally interesting," he said.

Bonds:

In the bond market, the yield on 10-year Treasury notes ticked up to 1.280% from 1.276% Tuesday.

Commerzbank is upbeat about the strong performance of eurozone peripheral government bonds, saying it sees promising dynamics as yield spreads continue tightening regardless of market direction.

This has taken the 10-year Italian BTP-German Bund yield spread below the key 100-basis-point level, rates strategists at the German bank say. The 10-year BTP-Bund spread is trading at 99.4 basis points in early trade, with 10-year Spanish-German spreads at around 64 basis points and 10-year Portuguese-German spreads slightly below 55 basis points, according to Tradeweb.

Commodities:

Oil prices rose, with Hurricane Nicholas adding to disruption for U.S. Gulf of Mexico producers, who hadn't even fully ramped back up following Hurricane Ida. Those hurricanes are among the factors pushing oil higher Wednesday according to OANDA's Jeffrey Halley

Elsewhere, jumping natural gas prices in Europe may add indirect support for oil, he adds. Those factors come after OPEC raised its demand forecast for 2022 and the IEA on Tuesday slashed its supply forecast for this year--both of which suggest a tightening market

Gold prices edged lower, but hold on to most of the gains made on Wednesday after U.S. inflation data were weaker than expected. The weaker-than-expected CPI reading offered support to the Federal Reserve's view that inflation will be fleeting, leading investors to bet that the central bank's tapering and rate hikes won't happen imminently.

"The influence of the special effects caused by the pandemic [on inflation] appears to be gradually dwindling," Commerzbank said. The Fed "will not be in any great rush to scale back its bond purchases," the bank said.

Copper prices edged higher, halting two days of declines, driven by concerns about fresh Covid-19 outbreaks in China. Three-month copper on the LME is up 0.6% at $9,492 a metric ton. Prices rallied to a roughly six-week high on Monday but have slumped since.

"Investors are growing concerned about the spreading Delta variant, especially in China, which now seems to have more than its usual share of outbreaks," said Ed Meir, a metals consultant at ED&F Man.

Beijing has locked down the city of Xiamen, a manufacturing hub, Meir said.

Aluminum meanwhile rises 1.4% to $2,873.50 a ton. Data released Wednesday shows China's aluminum output fell for a fourth straight month, amid production restrictions.

EMEA HEADLINES

UK Annual Inflation Accelerated in August

Annual inflation in the U.K. accelerated in August to its highest level in almost a decade, adding to signs of inflationary pressure as the global economy recovers from the pandemic.

Consumer prices rose 3.2% on the year in August, the Office for National Statistics said Wednesday. That was the highest annual rate of inflation since March 2012 and well in excess of the Bank of England's 2% target.

Inditex Books Swing to 1H Profit as Sales Recover From Pandemic

Industria de Diseno Textil SA continued its momentum in the second quarter, with sales returning above pre-pandemic levels as the Spanish fashion company swung to a net profit for the first half of its fiscal year.

Inditex booked a net profit of 1.27 billion euros ($1.50 billion) in the six months to end-July swinging from a net loss of EUR195 million in the same period last fiscal year. Sales in the half rose almost 50% to EUR11.94 billion. In the second quarter, sales were 7% higher at constant currency than the same period of 2019.

H&M 3Q Sales Rose on Pandemic Recovery, But Fell Short of Expectations

Sweden's Hennes & Mauritz AB said Wednesday that third-quarter sales grew as stores reopened following the easing of restrictions put in place to combat the pandemic.

The fast-fashion retailer said sales were 55.59 billion Swedish kronor ($6.46 billion) in the three months to Aug. 31. That figure is slightly below estimates of SEK57.23 billion, according to a FactSet poll.

BHP Says Memorandums of Understanding in Place With Importers for Jansen Output

BHP Group Ltd., the world's largest mining company, said it has non-binding memorandums of understanding with major importers for up to 100% of future production from its Jansen project in Canada's Saskatchewan province.

BHP last month approved the first phase of the Jansen project, which is estimated to cost $5.7 billion to build. Potash is one of three major fertilizer ingredients, alongside nitrogen and phosphate, and BHP thinks mining at Jansen could last about 100 years.

Tullow Oil Swung to 1H Net Profit; Narrows 2021 Production Guidance Upward

Tullow Oil PLC on Wednesday reported a profit for the first half of the year and narrowed 2021 production guidance toward the upper end of the range.

The oil company, which operates in Africa and South America, made a net profit of $92.7 million for the six months ended June 30, swinging from a $1.33 billion net loss a year earlier--when it booked write-offs and impairments of $1.4 billion.

U.K. Bets on Covid-19 Booster Shots to Avoid Winter Lockdowns

LONDON-British Prime Minister Boris Johnson presented a suite of measures including booster Covid-19 vaccinations for people over 50 as he aims to avoid new lockdowns this fall while keeping social-distancing restrictions to a bare minimum.

In contrast with other European countries that are taking a more interventionist approach to squash infection rates, Mr. Johnson plans instead to lean heavily on vaccines to protect the British population should the virus rapidly spread in the fall.

U.S., EU Seek Global Pledge to Slash Methane Emissions by 2030

Officials in the U.S. and European Union are crafting a pledge to reduce global methane emissions by nearly a third by 2030, and pushing several of the world's largest economies to join them, according to people familiar with the effort.

The agreement would mark the first global commitment to cut emissions of methane, a gas less prevalent than carbon dioxide in the atmosphere but far more potent at trapping heat. Dubbed the Global Methane Pledge, the agreement doesn't call for country-specific targets, but rather for the signatories to support an effort to reduce global, human-caused methane emissions by at least 30% by 2030 compared with 2020 levels, one of the people said.

Russia's Vladimir Putin Self-Isolating After Covid-19 Exposure in Inner Circle

Russian President Vladimir Putin is self-isolating after being exposed to several people with Covid-19 but was tested for the virus and "is absolutely healthy," his press secretary said Tuesday.

Press secretary Dmitry Peskov said he didn't know whether the people in Mr. Putin's entourage who were sick were vaccinated against Covid-19. Mr. Putin is vaccinated with Russia's vaccine, Sputnik V. He received his second dose in April 2021.

Outgoing U.K. Privacy Regulator Wants Global Consensus on Data Disputes

Elizabeth Denham will step down next month as the U.K.'s data protection regulator, a post she has held since 2016. Ms. Denham has overseen the country's implementation of the European Union General Data Protection Regulation in 2018 and after its exit from the EU last year.

As the U.K.'s top privacy watchdog, Ms. Denham issued multimillion-dollar fines against Marriott International Inc., International Consolidated Airlines Group SA's British Airways and other companies for privacy and security failings. She recently gave an online speech hosted by Oxford University calling for a Bretton Woods-style conference bringing together regulators, academics and other privacy experts from around the world to hash out a global convention on privacy rules. An accord among countries would allow them to more easily transfer data between jurisdictions, an activity currently hampered by legal restrictions.

GLOBAL NEWS

Uranium Heats Up, and Hedge Funds Score

Uranium prices are rising, enriching a handful of hedge funds that have been betting a market laid low by a nuclear disaster a decade ago would rebound.

The price of uranium hit an eight-year high of $44 a pound this week, according to the price tracker UxC LLC. The surge follows the recent launch of an exchange-traded trust by Sprott Asset Management LP, which has bought large stockpiles of uranium after raising money from shareholders and emerged as a favored trading vehicle in its own right, traders said.

China's Economic Recovery Is Looking Gloomier

BEIJING-Growth across a range of Chinese economic indicators pulled back sharply in August, as a new outbreak of the Covid-19 Delta variant and tighter government regulations on the property market hit consumer spending and the housing sector.

Retail sales, a key gauge of China's consumption, rose just 2.5% in August from a year earlier, down sharply from July's 8.5% year-over-year growth, according to data released Wednesday by China's National Bureau of Statistics. The result marked the lowest pace of growth in a year and missed by a large margin the 6.3% increase expected by economists polled by The Wall Street Journal.

High Steel Prices Have Manufacturers Scrounging for Supplies

Manufacturers are facing the highest steel and aluminum prices in years, another hurdle for U.S. companies already struggling to make enough cars, cans and other products.

Rapidly increasing metal costs are pushing manufacturers to take what steel they can get and hire more people to seek out available supplies, company executives said. The rising costs are flowing through to some producers of consumer goods: Campbell Soup Co. is paying more to get the cans it fills with tomato soup; Peloton Interactive Inc. is seeing prices rise for parts that go into its stationary bikes; and Steelcase Inc. is paying more to make metal desks and filing cabinets. Car makers like Ford Motor Co. and General Motors Co. are also dealing with rising metal prices.

Derby's Take: Fed Faces Inflation Cross Currents Ahead of FOMC Meeting

As the Federal Reserve ramps up for its monetary policy meeting next week, it faces some tough cross currents on the inflation front.

The Fed has for some time been up against an unexpected surge in price pressures testing its desire to keep monetary policy on an aggressively supportive footing to help the U.S. economy recover from the body blow of the coronavirus pandemic.

Some Oil Majors Back Investor Standard for 'Net Zero' Plans

Some big oil companies have thrown their weight behind new investor-backed guidelines for plans to reach net-zero carbon emissions, a move that could make it easier to compare different approaches among energy providers.

BP PLC, Eni SpA, Repsol SA, Royal Dutch Shell PLC and TotalEnergies SE said Wednesday they would trial next year the new "Net Zero Standard for Oil and Gas," a 30-page set of guidelines put together by investors and energy companies. The U.S.'s Occidental Petroleum Corp. also gave feedback on the standards, but won't participate in the trial as of now.

Supply-Chain Strains Hit Prices, Inventories of Artificial Christmas Trees

Supply-chain disruptions will make decking the halls more expensive than ever for consumers looking for artificial trees this Christmas.

Some U.S. retailers are raising prices by 20% to 25% to keep pace with skyrocketing shipping costs and they are warning that certain trees could sell out early because deliveries from overseas producers have been hit by the congestion that has tied up distribution networks from ports in China to freight yards in Chicago.

Biden to Meet With Top Executives on Covid-19 Vaccine Mandate

WASHINGTON-President Biden is expected to meet Wednesday with executives from companies including Walt Disney Co., Microsoft Corp. and Walgreens Boots Alliance Inc. to advance his Covid-19 vaccination requirements for the private sector.

The White House meeting comes after a plan Mr. Biden announced last week designed to bring the pandemic under control, which includes vaccine requirements affecting roughly 100 million workers. Attendees are expected to discuss how they are expanding requirements at their companies and institutions and how mandates have driven up vaccinations among employees, a White House official said.

North Korea Fires Two Ballistic Missiles Off Its East Coast

SEOUL-North Korea launched two ballistic missiles off its east coast on Wednesday, South Korean and Japanese officials said, in Pyongyang's second weapons test in recent days.

The missiles splashed into the waters between Korea and Japan. The distance flown and the precise time of launch weren't immediately released by South Korea's Joint Chiefs of Staff. The projectiles didn't enter Japanese territory and weren't believed to have landed inside the nation's exclusive economic zone, Tokyo's military said.

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(END) Dow Jones Newswires

September 15, 2021 06:20 ET (10:20 GMT)

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