MARKET WRAPS
Stocks:
European stocks rose Friday, cheered by news that troubled
property group Evergrande had made an overdue interest payment to
international bondholders.
"An early payment from the Chinese property giant reassured
investors, as the likelihood of a default and associated risk to
the financial system faded. However, this optimistic mood may be
short-lived as investors' biggest concern remains inflation," said
ActivTrades analyst Pierre Veyret.
Shares on the move:
London Stock Exchange dropped 3.6% after earnings showed revenue
rose 2% in the last quarter, and the company said it expects growth
to slow in the final quarter of the year.
---
L'Oréal rose 6.3% after reporting sales for the third-quarter of
EUR8 billion, ahead of analyst expectations of EUR7.7 billion.
Sales growth at the personal-care company was driven by strong
demand for luxury products, which jumped 20%, amid sustained growth
in China.
---
Renault fell 0.7% after it said the global chip shortage would
lower production more than forecast, with yearly losses now at
500,000 vehicles from the 220,000 previously forecast.
---
Vivendi rose 2.6% after the media giant reported sales of EUR2.5
billion in the third quarter, up 10% from a year ago and ahead of
analyst consensus.
Economic news:
Eurozone business activity growth slowed sharply to a six-month
low in October amid increasing supply bottlenecks and ongoing
pandemic concerns, flash purchasing managers index data by IHS
Markit showed.
The eurozone flash composite PMI fell to 54.3 in October from
56.2 in September, posting a decline for the third consecutive
month. Although October's expansion was the weakest since April,
the latest reading remains above the survey's pre-pandemic long run
average of 53.0.
"The ongoing pandemic means supply chain delays remain a major
concern, constraining production and driving prices ever higher,
both in manufacturing and in the services sector," IHS Markit's
chief business economist Chris Williamson said.
U.S. Markets:
The U.S. stock market was pausing near record highs Friday, as
investors turned their attention to growth data at the end of an
upbeat week of trading.
Stocks rallied this week on the back of strong corporate
earnings, helping investors shrugging off wider concerns that have
weighed on markets in the past month-such as inflation, central
bank stimulus, and supply-chain disruptions.
Companies reporting financial results in the day ahead include
American Express and Honeywell.
Forex:
The euro slightly remained higher versus the dollar, shrugging
off the latest eurozone purchasing managers' index survey.
The composite PMI, which measures manufacturing and services
activity, fell to a six-month low of 54.3 in October from 56.2 in
September with a level above 50 signalling growth. Economists
polled by the WSJ expected a reading of 55.2.
The euro has been "quite unreactive" to recent PMI releases,
said ING analysts. "We think we saw the short-term peak around
1.1660 in EUR/USD this week, and we are expecting the pair to move
back below 1.1600 into the Fed November meeting."
The dollar might be poised to recover after the DXY Index
dropped to its lowest in more than three weeks on Thursday, as
investors turned their attention to the prospects of the Fed
scaling back monetary easing, said ING.
"A quite convincing U.S. earnings season is set to leave space
for the more structural concerns about higher inflation and the
prospect of Fed tightening, which, in our view, should provide the
basis of a new gradual re-appreciation of the dollar in the next
few weeks," said ING.
Sterling pared losses after data showed growth in U.K. services
and manufacturing activity accelerated by more than expected in
October.
The composite PMI rose to a three-month high of 56.8 in October
from 54.9 in September and above forecasts of 54.0.
"The U.K. economy picked up speed again in October, but the
expansion is looking increasingly dependent on the service sector,
which in turn looks prone to a slowdown amid the recent rise in
Covid-19 cases," said Markit economist Chris Williamson.
Bonds:
Eurozone government bond yields were trading higher, with the
10-year Bund yield edging up to a new 2021 high of -0.070%,
according to Tradeweb data, on market expectations of early
interest rate rises by the European Central Bank. However, the Bund
pared the selloff quickly, with the yield last trading at
-0.091%.
"Bearish rates momentum [is] still in place," said Mizuho's
rates strategists.
Eurozone government bond yield spreads over German Bunds have
remained broadly intact as bond yields have been rising due to
inflation expectations, but the chance for spread widening is
growing from next year, said DZ Bank.
It expects an asymmetric risk-return environment to prevail from
next year. "The probability of increasing spreads over Bund is
rising."
DZ Bank has forecast a much lower return on eurozone sovereign
bonds on a six-month horizon compared with other eurozone bond
classes.
Given this view, DZ Bank has kept sovereign bonds underweight in
a fixed-income asset allocation and turned more cautious on
non-financial corporate bonds, lowering them to neutral weight from
overweight. Its recommendation for bank bonds is unchanged at
overweight and neutral weight for agency and covered bonds.
Eurozone governments have raised over 85% of gross government
bond issuance planned for the year, while in net terms less than
EUR40 billion remains for the remainder of the year, said Barclays'
rates strategists.
This estimated net government bond issuance, which compares to
around EUR600 billion for the year as a whole, will be easily
offset by the European Central Bank's asset purchases, Barclays
said. It has forecast the ECB's overall QE pace, including
purchases under the PEPP and the APP to average EUR80 billion-EUR90
billion per month in the fourth quarter.
Commodities:
Oil futures were down 0.2% in Europe, with Brent on course to
close at a weekly loss for the first time since late August, after
prices came under pressure on Thursday following a broader selloff
in commodities.
In addition, reported "comments from the Russian president that
OPEC+ was increasing output slightly more than agreed [have]
probably not helped sentiment," said ING's Warren Patterson.
Despite what might be a blip this week, inventories look to fall
during the remainder of 2021, he added, meaning "oil prices will
remain well supported."
Gold prices rose 0.6% as the dollar weakened and rising
inflation expectations counteracted the impact of higher bond
yields.
"Because market-based inflation expectations rose to a nine-year
high...real yields actually fell slightly," said Daniel Briesemann,
an analyst at Commerzbank. Still, investors continue to shun gold
exchange traded funds, he added.
Gold ETFs tracked by FactSet had net outflows of roughly $459
million in the week through Thursday.
DOW JONES NEWSPLUS
EMEA HEADLINES
Supply Bottlenecks Curb Eurozone Economic Growth to Six-Month
Low in October
Eurozone business activity growth slowed sharply to a six-month
low in October amid increasing supply bottlenecks and ongoing
pandemic concerns, flash purchasing managers index data by IHS
Markit showed.
The eurozone flash composite PMI fell to 54.3 in October from
56.2 in September, posting a decline for the third consecutive
month.
Renault 3Q Revenue Fell, Expects Further Production Losses
Renault SA on Friday said that revenue fell in the third quarter
and expects further production losses, but confirmed guidance for
its full-year operating margin.
The French car maker's quarterly revenue came in at 8.99 billion
euros ($10.45 billion) down from EUR10.37 billion a year earlier.
An analysts' consensus forecast provided by FactSet had forecast
the figure at EUR8.93 billion.
Remy Cointreau 2Q Sales Rose Sharply; Sees Strong FY
Earnings
Remy Cointreau SA said Friday that sales rose above expectations
in its second quarter and that it is targeting strong growth in
operating profit for the full fiscal year, but declined to set out
numerical guidance.
The French drinks group's sales for the July-September period
increased 24% at constant currency, taking the first-half total 52%
higher to 645.3 million euros ($750.3 million) following a strong
first quarter. Cognac sales increased at a rate of 27% in the
second quarter.
L'Oreal Shares Rise on 3Q Sales Beat, Outweighing Cost-Inflation
Concerns
L'Oreal's shares rose on Friday after the company reported a
strong beat in third-quarter sales across the board, suggesting
operating leverage would more than compensate for cost
inflation.
The French cosmetics and consumer-products company's quarterly
sales were up 13.1% organically, compared to consensus expectations
of 7.6%. The beat was driven by the active, professional and luxe
divisions.
Stellantis, Samsung SDI to Make EV Batteries in North
America
French-Italian car maker Stellantis NV has entered into a
memorandum of understanding with South Korean electronic component
maker Samsung SDI Co. to make battery cells and modules for North
America, it said Friday.
The move is part of Stellantis's plan to make electric cars
represent 40% of its sales in the U.S. by 2030, the company
said.
J Sainsbury Ends Talks to Sell Banking Arm
J Sainsbury PLC said Friday that it has ended talks to sell its
banking arm as it believes the business will deliver better value
for shareholders being kept within the group.
The U.K.'s second-largest grocer by market share said it
continues to make progress strengthening and simplifying its
financial-services business, and remains comfortable with consensus
profit forecasts for the unit.
U.K. Consumer Confidence Fell in October to Eight-Month Low on
Worsening Economic Outlook
Consumer confidence in the U.K. declined in October for the
third straight month as expectations for the economy over the
coming year deteriorated sharply.
GfK's consumer-confidence barometer decreased to minus 17 in
October from minus 13 in September, missing economists'
expectations and falling to the lowest level since February.
Economists had expected the barometer to fall to minus 15.
European Leaders Urge Caution in EU Clash With Poland
European Union leaders urged Brussels to act cautiously in an
escalating fight with Poland's nationalist government over its
judiciary as the bloc's heads of government gathered Thursday for a
summit.
The latest fight centers on a ruling by Poland's constitutional
tribunal two weeks ago that EU treaty law has become incompatible
with Polish law-an unprecedented ruling from a national court. The
ruling was delivered in response to a legal question posed by
Polish Prime Minister Mateusz Morawiecki.
Global Finance Watchdog Censures Turkey Over Money Laundering,
Terrorist Financing
WASHINGTON-A global watchdog on Thursday added Turkey to its
list of countries requiring special regulatory oversight for
failing to stop money laundering and terrorist financing, a
designation analysts say will rattle Ankara's already shaky
economy.
The action means Turkey joins a group of 23 countries-including
Zimbabwe, Haiti and Syria-that the Financial Action Task Force
determined "have strategic deficiencies in their regimes to counter
money laundering, terrorist financing, and proliferation
financing."
Deutsche Bank Whistleblower Gets $200 Million Bounty for Tip on
Libor Misconduct
A whistleblower whose information helped U.S. and U.K.
regulators investigate manipulation of global interest-rate
benchmarks by Deutsche Bank AG was awarded nearly $200 million for
assisting the probe, according to people familiar with the
matter.
The payout is the largest ever by the Commodity Futures Trading
Commission, which along with the Justice Department and U.K.
Financial Conduct Authority settled enforcement actions against
Deutsche Bank in 2015.
GLOBAL NEWS
China Evergrande Makes Overdue Interest Payment on Dollar Bonds,
State Media Says
China Evergrande Group made an overdue interest payment to
international bondholders, the state-owned Securities Times
reported Friday, an unexpected move that allows the property
company to stave off a default.
The Chinese real-estate developer on Thursday sent $83.5 million
to the trustee for the dollar bonds, and that financial institution
will in turn pay bondholders, the Securities Times reported. The
financial paper is run by the Communist Party's flagship People's
Daily newspaper.
Biden Could Use National Guard to Help With Supply Chain
Bottlenecks
WASHINGTON-President Biden said he would consider deploying the
National Guard to assist with supply-chain bottlenecks that have
led to shortages and higher consumer costs, if his administration
is unable to ease the problem.
"The answer is yes, if we can't move-increase the number of
truckers, which we're in the process of doing," Mr. Biden said
during a CNN town hall on Thursday when asked about deploying the
National Guard.
U.S. Issued $100 Billion in Export Licenses to Suppliers of
Huawei, SMIC
The U.S. Commerce Department issued more than $100 billion worth
of export licenses for semiconductors and other products to
suppliers of Huawei Technologies Co. and another blacklisted
Chinese tech company, as a global chip shortage started to
bite.
The Commerce data, released Thursday by a Republican member of
Congress, shows the department granted 113 export licenses worth
about $61 billion for suppliers of telecom giant Huawei and 188
licenses valued at $42 billion for suppliers of Semiconductor
Manufacturing International Corp., China's largest chip maker, from
Nov. 9, 2020, through April 20 this year.
Investors Bet Inflation Pressures Will Linger
A key measure of investors' inflation expectations has climbed
in recent weeks, adding fuel to concerns about rising consumer
prices.
As of Wednesday, the gauge known as the 10-year break-even rate
suggested that the consumer-price index will rise by an annual
average of 2.57% over the next decade, according to Federal Reserve
Economic Data, or FRED. That is up from a recent low of 2.28% in
late September and the highest level since 2013.
Natural-Gas Prices Fall From Peak as Warm Autumn Buoys
Stockpiles
Natural-gas prices have shed 19% since hitting a 13-year high
earlier this month, reversing some of a run-up that has prompted
fears of exorbitant heating bills and higher manufacturing costs at
a time of already high prices.
A warm start to autumn is behind the decline. With most of the
country yet to turn the heat on, gas has accumulated in storage
facilities faster than expected and shrunk a deficit that prompted
worries over winter price surges and even potential shortages.
Moderna and J&J Covid-19 Boosters, Mixing and Matching
Backed by CDC
Centers for Disease Control and Prevention Director Rochelle
Walensky recommended Covid-19 booster shots from Moderna Inc. and
Johnson & Johnson and backed mixing vaccines with a different
booster dose.
With Dr. Walensky's greenlight Thursday, the vaccine doses can
now become available at doctor's offices, pharmacies and
vaccination sites on Friday, a CDC spokeswoman said. It follows
unanimous recommendations from a panel of experts advising the
CDC.
Biden Signals Openness to Ending Filibuster on Some Issues
WASHINGTON-President Biden signaled he is open to doing away
with the filibuster to pass legislation to overhaul election rules
nationwide and may be amenable to eliminating the 60-vote threshold
for other bills as well.
Asked if he would consider establishing a filibuster carve-out
to advance voting legislation, Mr. Biden said during a CNN town
hall on Thursday night: "And maybe more."
Write to paul.larkins@dowjones.com
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(END) Dow Jones Newswires
October 22, 2021 05:51 ET (09:51 GMT)
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