MARKET WRAPS

Watch For:

Watch For: Eurozone Trade Balance, New Passenger Car Registrations; France, Italy CPI; Italy Foreign Trade EU; updates from Pearson, X5 Retail, Mediclinic, Hargreaves Lansdown, Rio Tinto, Hargreaves Lansdown, Ashmore, Evraz, DS Smith, TCS Group.

Opening Call:

Stocks could finish the week higher after broad-based rally in U.S. stocks. The dollar was a touch weaker against major currencies while the Japanese yen weakened as risk appetite increased. 10-year treasury yields rose slightly to 1.525%. Commodities were mixed as oil rose and gold remained unmoved.

Equities:

European stocks are set to continue their winning streak Friday after U.S. stocks rallied Thursday, propelling the S&P 500 to its best performance in more than seven months.

U.S. stocks rose on a combination of after better-than-expected earnings and economic data eased concerns about the outlook for the economy.

As earnings season progresses, investors will be watching for commentary that indicates how executives are feeling about many of the economic issues that have weighed on markets in recent weeks. Already, Delta Air Lines said Wednesday that it expects higher fuel prices to undercut its profits in the fourth quarter.

"The big uncertainty right now continues to be around the duration of this higher inflationary period," said Allen Bond, managing director and portfolio manager at Oregon-based Jensen Investment Management, which has about $12.8 billion under management. "We are going to be looking for evidence and data that gives us a sense of how companies are managing" that, as well as supply-chain constraints.

Money managers and strategists said Thursday's rally doesn't necessarily mean that the U.S. stock market has turned a corner. Many expect more uncertainty in the months ahead. Still, with bond yields so low and few other places for strong, consistent returns, many remain bullish on stocks.

"We don't think any of these problems are going to end the bull market," said Chris Zaccarelli, chief investment officer at Independent Advisor Alliance. "I think this is a natural period of consolidation and volatility and that it's completely normal as part of any economic recovery."

Stocks on the move: Spanish utility stocks could remain in focus on Friday after they traded higher Thursday after the Spanish government on showed itself willing to walk back a measure that would cap their profits.

Teresa Ribera, Spain's ecological transition minister, said Thursday that the government wouldn't apply the measure, which limits windfall profits from a rise in the cost of electricity, if utilities provide businesses with energy at reasonable prices, Spanish media report.

Endesa shares and Iberdrola both traded higher. Utility company Naturgy was after Australian fund IFM Global Infrastructure's offer for a $2.69 billion stake in the company was accepted.

Forex:

The Japanese Yen weakened against most G-10 and Asian currencies amid risk appetite. There seems to be some renewed risk-on sentiment, IG said, noting developments including Wall Street's rally, the decline in U.S. initial jobless claims and a U.S. core PPI reading that was below expectations.

The dollar remained flat against the euro, but a touch weaker against other major currencies in early Asian trade. Bank of America said at the end of 3Q, the market remained short USD, "but this position is less stretched than earlier in the year."

The firm added that hedge-fund aggregate positions were broadly flat, after they cut their dollar shorts in 3Q. Meanwhile, "real money remains short USD, but somewhat less so than during H1."

UBS Global Wealth Management advises buying the Australian dollar against Swiss franc, targeting a level of 0.71 and placing a stop loss at 0.662. AUD/CHF rises 0.4% to 0.6846.

The AUD "still has some juice left in it" after recent gains due to rising commodity prices, the lifting of coronavirus restrictions and better-than-expected domestic activity, UBS strategists said.

The CHF has "unduly strengthened" in recent days, they said. The Swiss National Bank is likely to maintain its loose polices and foreign exchange interventions, while many of its G10 peers consider withdrawing support, they said. "Higher commodity prices, particularly prices for energy, which Switzerland imports, should be a headwind rather than a tailwind for the Swiss franc."

Currencies of oil exporters including the Russian ruble, Canadian dollar and Norwegian krone rallied as crude prices rise. "Although we wouldn't be surprised if energy prices remained elevated for a while, we still think they will fall back over the next year, weighing on the currencies of net energy exporters," Capital Economics economist Joseph Marlow said.

Bonds:

Goldman Sachs expects a mix of higher inflation and slower growth in the near term, but correlation patterns across macro assets to look more consistent with "reflationary" rather than "stagflationary" dynamics, the bank said.

This means bond yields rising while risky assets appreciate given still-high growth levels in most regions, the bank said. Despite the recent selloff in U.S. yields, analysts at the bank think any overshoot of their year-end U.S. 10-year yield target of 1.6% is likely to be relatively contained based on the bank's expectation for a growth slowdown in 2022.

Market pricing appears to question the European Central Bank's current guidance on the sequencing of monetary policy normalization, whereby interest-rate rises are unlikely until the pandemic-emergency and the regular asset-purchase programs are scaled back, said Nordea's chief analyst Anders Svendsen.

"Markets are pricing the first ECB rate hike in early 2023, which might be after Pandemic Emergency Purchase Programme tapering is done, but most likely not before Asset Purchase Programme tapering is done," he said.

Svendsen said ECB monetary policy will be determined by developments in inflation and wage growth. He sees both transitory and persistent factors to current inflation. "When the transitory factors have played out, I believe we'll still have inflation markets that are anchored at 2% forward," which will allow a very gradual normalization of policy rates, he said.

Energy:

Oil rose in early morning Asian trade following a media report that Saudi Arabia has dismissed calls for additional OPEC+ supply. This report along with the International Energy Agency saying that natural gas prices could increase demand for oil among power generators have led to higher oil prices, Phillip Securities Research said.

Carbon pricing, a relatively new and popular financial instrument in Europe that tabulates the external costs to greenhouse emissions, is being singled out as a main culprit for European consumers' soaring natural gas prices.

Chris Midgley, global head of analytics at S&P Global Platts, said the aim of carbon pricing is noble, as it incentivizes power companies to use less high-polluting coal and more renewables or cleaner-burning fuels.

But he said the current environment of high energy demand and low energy supply makes coal usage necessary no matter how many carbon credits need to be purchased, and those costs are passed on to consumers. "So carbon pricing isn't making people use less coal, it's just creating consumer pain."

Metals:

Gold was steady in the morning Asian session but has a bright outlook. U.S. real yields are likely to stay in negative territory even as the Fed debates rate increases for next year, so gold's outlook should turn bullish, Oanda said. The precious metal's rebound is facing a lot of resistance around $1,800/oz, but gold should eventually rise toward $1,840/oz, Oanda said

Zinc fell in a likely technical correction in Asian morning trading. Futures jumped 3.7% Thursday after major producer Nyrstar said it was halving output at three European plants. Citi Research expects zinc to hit $3,700 a metric ton within three months, given that Nyrstar's production cuts add to an already tight physical market.

TODAY'S TOP HEADLINES

Fed's Thomas Barkin Unsure Economy Can Recover All Jobs Lost in Pandemic

Federal Reserve Bank of Richmond President Thomas Barkin said changes in the economy could mean that some workers who left the job market during the pandemic won't return.

Citing the number of pre-pandemic jobs that haven't been recovered, Mr. Barkin said, "I'm in the mood of giving a little more time to see whether these five million people come back" to the labor force, but added that might not happen, during a speech in New York on Thursday.

U.S., European Nations Claim Progress on Path to Removing Digital Taxes

The U.S. and five European countries have reached an agreement on how those countries' digital-service taxes would be withdrawn as a broader international agreement moves forward, French Finance Minister Bruno Le Maire said on Thursday.

The deal isn't likely to yield an immediate withdrawal of those taxes because it is still linked to the broader global tax agreement being completed and implemented over the next few years. But having a path forward could ease tensions between the U.S. and France, Italy, the U.K., Austria and Spain.

New York Fed Official: High Reverse Repo Usage Isn't a Problem

Daily cash inflows of well over a trillion dollars into a tool designed to help the Federal Reserve control short-term interest rates aren't a problem and will likely persist for some time, a top New York Fed staff member said Thursday.

The official is Lorie Logan, who manages the New York Fed's massive holdings of cash and bonds and leads its implementation of monetary policy. In a speech, she weighed in technical issues the central bank has been dealing with to ensure that changes in monetary policy flow through markets and affect the course of the economy.

Coinbase Pitches Blueprint for Special Crypto Regulator

WASHINGTON-The largest U.S. cryptocurrency exchange wants Congress to block the Securities and Exchange Commission from overseeing the nascent industry and instead create a special regulator for digital assets, according to a policy blueprint reviewed by The Wall Street Journal.

Coinbase Global Inc., which has feuded with U.S. regulators in recent months, plans to publicly release a document with proposals for crypto regulation. It says crypto-market participants face uncertainty about which federal agencies should oversee particular assets.

White House Ransomware Summit Eyes Tighter Global Scrutiny for Crypto

Officials from 32 governments who met virtually this week to coordinate their response to the ransomware boom said uneven cryptocurrency standards are helping hackers cash in.

The representatives pledged to share information about cyberattacks and investigations, push firms to shore up security, and disrupt the financial infrastructure of a criminal hacking economy that has flourished in recent years. Consistent international scrutiny of cryptocurrencies will be key, the officials said, as ransomware groups that extort victims for digital payments can quickly transfer the funds to countries with lax standards for monitoring illicit transactions.

U.S. Crude Oil Inventories Surge as Refineries Hit the Brakes

U.S. crude-oil inventories rose much more than expected last week as refinery activity declined sharply, according to data released Thursday by the Energy Information Administration.

Benchmark U.S. oil prices that were higher before the somewhat bearish report came out reduced those gains afterward. The Nymex front-month crude contract for November delivery was recently up 0.5% at $80.85 a barrel.

What Bank Earnings From JPMorgan, Bank of America Tell Us About the U.S. Economy

Wall Street is booming, or at least parts of it are. Merger mania and stock trading lifted the big U.S. banks' third-quarter results. On Main Street, banks are still hunting for bigger loan growth, but many customers are spending more after holding out last year.

Here's what the biggest U.S. banks are telling us about the state of the economy.

Rio Tinto Cuts 2021 Projection for Iron-Ore Shipments, Copper Output

Rio Tinto PLC Friday said it expects to ship less iron ore than previously anticipated from its Australian mining operations this year because of delays to projects caused by labor shortages in the country's west.

The world's second-largest miner by market value is also on track to produce less copper and bauxite than it projected this year in big part because of plant-related problems, the company said on Friday.

Richard Branson's Virgin Galactic Pushes Back Commercial Space Flights

Virgin Galactic Holdings Inc. said it is pushing back the launch of full commercial service for private-astronaut trips until toward the end of next year as it works to improve its space vehicles.

The company founded by billionaire entrepreneur Richard Branson said Thursday that it now believes it will launch private-astronaut flights in the fourth quarter of 2022, instead of the end of the third quarter of next year, as Chief Executive Michael Colglazier previously told investors. The company has said it is charging at least $450,000 a seat for private-astronaut flights.

Signa Sports Attracts Investment From Saudi Arabia's Public Investment Fund

Online retailer Signa Sports United is nearing a deal to raise money from a group of investors including Saudi Arabia's sovereign-wealth fund, according to people familiar with the matter.

Saudi Arabia's Public Investment Fund would join Signa's earlier backers, including Japan's SoftBank Group Corp., and Abu Dhabi sovereign-wealth fund Mubadala Investment Co., the people said. It would mark a reunion of sorts for the three investors, who were the cornerstones of SoftBank's $100 billion Vision Fund, launched in 2016.

U.S., European Nations Claim Progress on Path to Removing Digital Taxes

The U.S. and five European countries have reached an agreement on how those countries' digital-service taxes would be withdrawn as a broader international agreement moves forward, French Finance Minister Bruno Le Maire said on Thursday.

The deal isn't likely to yield an immediate withdrawal of those taxes because it is still linked to the broader global tax agreement being completed and implemented over the next few years. But having a path forward could ease tensions between the U.S. and France, Italy, the U.K., Austria and Spain.

Financial Firms Get Seal of Approval for Climate Plans

An organization that assesses the credibility of corporate climate-change targets gave its blessing to the emission-reduction plans of two banks and a private-equity firm. The endorsements apply to the companies themselves as well as their investment and lending activities, a first for the sector.

The Science Based Targets initiative said Thursday it endorsed the emissions targets of French bank La Banque Postale, South Korean bank KB Financial Group and Swedish private-equity firm EQT AB. As well as committing to slash emissions from their own operations, the companies set targets for their portfolios, which experts say have a greater environmental impact.

White House Ransomware Summit Eyes Tighter Global Scrutiny for Crypto

Officials from 32 governments who met virtually this week to coordinate their response to the ransomware boom said uneven cryptocurrency standards are helping hackers cash in.

The representatives pledged to share information about cyberattacks and investigations, push firms to shore up security, and disrupt the financial infrastructure of a criminal hacking economy that has flourished in recent years. Consistent international scrutiny of cryptocurrencies will be key, the officials said, as ransomware groups that extort victims for digital payments can quickly transfer the funds to countries with lax standards for monitoring illicit transactions.

Johnson & Johnson Places Talc Injury Claims in Bankruptcy

Johnson & Johnson placed into bankruptcy its liabilities for tens of thousands of lawsuits linking talc-based products to cancer, betting the move will help drive a settlement of personal-injury claims that are expected to grow for decades to come.

J&J said Thursday that a corporate affiliate holding talc-related liabilities had filed for chapter 11 protection in the U.S. Bankruptcy Court in Charlotte, N.C., shifting the landscape of a yearslong legal fight over whether Johnson's Baby Powder caused ovarian cancer, asbestos poisoning and other illnesses. The company has maintained that the powder, which it stopped selling last year, is safe and doesn't contain asbestos.

Elizabeth Holmes Trial: Dermatologist Describes Theranos Lab Director Stint

SAN JOSE, Calif.-A dermatologist testified Thursday in the criminal trial of Elizabeth Holmes that he agreed to serve as Theranos Inc.'s lab director after being asked to fill the role by one of his patients, but never did much more than sign paperwork and appear in the company's lab once or twice.

Sunil Dhawan told jurors that he accepted the role in November 2014 at the request of Ramesh "Sunny" Balwani, Theranos's chief operating officer, whom he had treated for almost 15 years.

Write to sarka.halas@wsj.com

Expected Major Events for Friday

06:00/NOR: Sep External trade in goods

06:00/EU: Sep New Passenger Car Registrations in Europe statistics (EU27 + EFTA3)

06:45/FRA: Sep CPI

07:00/SVK: Aug New orders in industry

08:00/POL: Aug Merchandise trade

08:00/POL: Sep CPI

08:00/ITA: Sep CPI

09:00/CRO: Sep CPI

09:00/EU: Aug Foreign Trade

09:00/ITA: Aug Foreign Trade EU

10:00/IRL: Aug Goods Exports and Imports

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(END) Dow Jones Newswires

October 15, 2021 00:26 ET (04:26 GMT)