MARKET WRAPS
Stocks:
European stocks struggled for momentum on Wednesday, with most
major benchmarks paring early gains as lockdown concerns continued
to dampen sentiment.
"The DAX is lagging behind U.K. stocks once again today, with
mainland European equities expected to continue on a bumpy road
thanks to an uncertain outlook for the weeks ahead," wrote Joshua
Mahony, Senior Market Analyst at IG.
"Rising [Covid] cases throughout some of the main European
nations bring the potential for further economic disruption at a
time that is traditionally associated with heightened consumer
spending."
Shares on the move:
Shares in Johnson Matthey fell 0.5% after the chemicals and
technology company reported Ebit of GBP293 million, which was 2%
above consensus expectations, Jefferies said. In addition,
full-year guidance was unchanged.
Jefferies noted the company's Advanced Glass Technologies
business is to be sold for GBP178 million and that a GBP200 million
share buyback will be launched, but said it expected a muted
share-price response to these announcements.
---
Valneva stock rose 0,4% on the news it signed an agreement with
the European Commission to provide 24.3 million doses of French
pharma's Covid-19 vaccine in the second and third quarters of 2022,
with an option to increase the amount to up to 60 million
doses.
As rapporteurs have been appointed at the European Medicines
Agency to review the vaccine in view of marketing authorization, an
approval should occur by the end of the year or early next year,
Bryan Garnier said.
"We may expect some orders from countries outside [the] EU, in
Asia or South America for example, when the vaccine will be
approved by EMA," Bryan Garnier said. Such potential additional
orders could be delivered in 2023.
Economic news:
A leap in new orders, mainly to export markets, propelled the
headline figure for France's manufacturing index higher midway
through the fourth quarter, Claus Vistesen, chief eurozone
economist at Pantheon Macroeconomics said. Manufacturing sentiment
climbed to 109 in November from 107 in October.
"Supply-side constraints are now easing, which should feed
through to input and output price expectations eventually, probably
in the first quarter," Vistesen said.
Judging by the details of the indicator, the latest reported
fall in production in September will give way to more robust data
for the fourth quarter in due course, Vistesen added. On the other
hand, he warned that the numbers don't fully reflect the most
recent surge in Covid-19 cases and the risk of new
restrictions.
---
The boom in online sales continued in Germany after shops
reopened following lockdowns, according to the latest government
statistics. Online shopping orders were 8.8% higher from May to
September this year than in the corresponding period in 2020.
Online sales increased 36% in the months of May to September 2021
compared with May to September 2019.
However, retail sales in stores haven't benefited from the
reopening after the first lockdown. Sales from May to September
2021 were 0.2% below the level in the same period the previous
year. Compared with sales from May to September 2019, there was a
2.9% increase--significantly lower than the increase in online
retail.
Economic Insight:
Oxford Economics's eurozone recovery tracker recorded a sizeable
drop over the two weeks ended Nov. 7, mainly driven by worsening
conditions in health and mobility.
"After a few weeks of resilience, the slump in the eurozone
recovery tracker highlights the gloom that is affecting the
eurozone economy in the last stage of the year," Nicola Nobile,
chief Italian economist said.
With Covid-19 cases on the rise in almost all eurozone
countries, governments are introducing new restrictions that are
likely to become increasingly tough, Nobile said and as a result,
Oxford Economics expects to revise down forecasts for eurozone
fourth-quarter GDP growth.
U.S. Markets:
Stock futures paused as investors awaited a busy day of economic
data releases ahead of the Thanksgiving holiday, plus minutes from
the Federal Reserve's latest meeting.
Stock markets' gains have been tempered in recent weeks by
concerns over fresh coronavirus lockdowns in parts of the world,
and inflation that is proving longer lasting than many had
anticipated. The robust earnings season, which had been a major
boost to markets, is drawing to a close and investors are looking
for fresh drivers.
"We have had fantastic earnings, the bond market is behaving
itself, inflation is up but rates are very low. As I sit here with
five to six weeks left to the year I have a hard time not being
optimistic," said Tim Holland, chief investment officer at Orion
Advisor Solutions. "As long as rates are low and earnings are
growing I think it's very difficult not to lean into stocks."
A slate of economic data is due Wednesday, including some
releases brought forward because of Thanksgiving. Durable goods
orders, jobless claims and a second reading of third-quarter gross
domestic product are due before data on consumer confidence, and
new home sales.
Data on personal spending is also due, a release that includes
the Fed's preferred measure of inflation-the core
personal-consumption expenditures price index-which is forecast to
show its biggest annual rise since the early 1990s.
Forex:
The dollar was slightly firmer against a basket of major
currencies and CBA said another set of strong inflation figures may
spur higher market pricing for FOMC interest-rate increases and
help the USD Index reach a fresh 2021 high. CBA said both the
headline and core PCE deflator for October could post a strong
reading as signaled by the recent sharp rise in the CPI.
EUR/USD has steadied to around 1.1250 but "remains intrinsically
weak" despite Tuesday's strong eurozone purchasing managers'
surveys, UniCredit said. A long list of economic data Wednesday
represents "a valid test of the EUR/USD's ability to remain above
the 1.12 baseline."
Wider U.S.-EUR rates spreads point to a bearish outlook for
EUR/USD in 2022, said BNP Paribas Markets 360. It has forecast
EUR/USD at 1.13 in the first quarter of 2022, then 1.12, 1.11 and
1.09 in the subsequent quarters.
The euro is expected to stabilize in 2023, as the European
Central Bank starts tightening at a time when the Fed's cycle of
interest-rate rises will be well under way. In the fourth quarter
of 2023, BNP Paribas Markets 360 expects the EUR/USD at 1.09.
Bonds:
The European debt market remains "quite sensitive" to any
signals concerning the outlook for central-bank policy, especially
regarding the destiny of the European Central Bank's asset purchase
programs, Dario Messi, fixed-income analyst at Julius Baer,
said.
After turbulent sessions in October, related to the
recalibration of interest rate expectations and then a following
calm period, renewed nervousness is observable in European bond
markets, he said.
"Newly introduced Covid-related restrictions overshadow the
positive read-across from the November flash PMIs as we approach
the crucial ECB meeting mid-December," Messi added. Julius Baer
expects the ECB to retain some flexibility on the asset purchase
programs well into next year, which should keep the probability for
a major spread widening limited.
The gravitational value of the 10-year German Bund yield is
expected to climb above 0% in 2022, Helaba said.
"The stronger economic momentum combined with declining but
still elevated inflation and the increase in government debt
provide the framework for a steepening yield curve."
Helaba forecasts the 10-year Bund yield to rise to 0% in the
first quarter 2022, followed by rises to 0.10%, 0.15% and 0.20% in
the proceeding quarters through the year.
For the 10-year Treasury yield, Helaba forecasts an increase to
1.70% in the first quarter, with the yield rising to 1.80%, 1.90%
and 2% in the subsequent quarters of 2022.
French presidential elections in the spring of 2022 are likely
to put widening pressure on French-German government bond yield
spreads in the run-up to the vote, BNP Paribas Markets 360
said.
Elsewhere, the expected slowing in asset purchases by the
European Central Bank is likely to outweigh improving fundamentals.
Nevertheless, it expects Italian government bonds to slightly
outperform Spanish ones in the second half of 2022 on diverging
credit outlooks, BNP Paribas Markets 360 said.
Commodities:
Oil prices gained, but their post-SPR rally slowed, with
investors' attention turning to OPEC+ when it meets next month.
DNB Markets' Helge Andre Martinsen said investors had expected
more than 100 million barrels of oil to be tapped from the
strategic petroleum reserves after of major oil-consuming nations,
considerably more than the 67 million barrels released. The move
had been a "classic 'sell the rumor buy the fact' dynamic."
Gold edged higher ahead of a bumper day of economic data
releases, while the FOMC meeting minutes should offer bullion
investors insight into the central bank's inflation views and
outlook for interest rates.
DOW JONES NEWSPLUS
EMEA HEADLINES
Germany's Olaf Scholz on Track to Succeed Angela Merkel as
Chancellor
BERLIN-Germany's Olaf Scholz is on course to succeed Angela
Merkel as chancellor after the victors of the September election
reached a policy agreement to form the country's first three-party
coalition, people involved in the negotiations said.
The policy program, which Mr. Scholz's center-left Social
Democrats, the environmentalist Greens and the pro-business Free
Democratic Party are set to unveil on Wednesday afternoon, aims to
overhaul the German economy with a focus on combating climate
change and updating the country's patchy digital
infrastructure.
U.N. Nuclear Chief Leaves Iran Without Deal on Access to Nuclear
Plant, Diplomats Say
BERLIN-The head of the United Nations atomic watchdog agency
left Iran late Tuesday after failing to reach a deal to allow
inspectors access to a factory making equipment for Tehran's
nuclear program, diplomats said Wednesday, casting a fresh shadow
over international nuclear talks set for next week.
The Wall Street Journal reported last week that the factory, in
Karaj, Iran, had resumed producing key parts for centrifuges, which
are used to enrich uranium, without any monitoring by the
International Atomic Energy Agency. The diplomats said talks
between the IAEA and Iran were continuing.
Turkey's Erdogan Looks to Regional Rival for Investment Amid
Currency Crisis
ANKARA, Turkey-Turkey's President Recep Tayyip Erdogan is set to
host on Wednesday the de facto leader of the United Arab Emirates
in search of foreign investment that could help ease the country's
economic crisis after the local currency extended a sharp
slide.
Abu Dhabi Crown Prince Mohammed bin Zayed al Nahyan's visit to
Ankara marks a recent thaw in ties after years of animosity between
the two countries, which have competed fiercely for influence in
the Middle East. It comes as Turkey seeks much-needed foreign
investment and offers the oil-rich U.A.E. potential support in a
broader struggle against Abu Dhabi's other main regional rival,
Iran.
German Business Sentiment Declined Again in November
German business sentiment worsened again in November, as supply
bottlenecks and the rise in coronavirus cases clouded the
short-term outlook.
The Ifo business-climate index decreased to 96.5 points in
November from 97.7 points in October, data from the Ifo Institute
showed Wednesday. This is the fifth consecutive decrease of the
indicator after it peaked at 101.8 in June.
Enel Sets Out Increased Midterm Investment; Brings Forward
Net-Zero Commitment
Enel SpA plans to step up investment in renewable energy and
infrastructure in the coming years and aims to reach carbon
neutrality sooner than previously targeted.
Marking its capital markets day Wednesday, the Italian utility
said it plans to increase direct investment to 170 billion euros
($191.22 billion) between now and 2030, 6% more than the previous
plan. A further EUR40 billion will be invested via third parties,
Enel said.
United Utilities Says 1H Pretax Profit Rose, Expects FY Revenue
Increase of 2%
United Utilities Group PLC on Wednesday reported a higher pretax
profit for the first half of its fiscal year as consumption
recovered, and forecast that revenue will rise 2% in the whole
year.
The FTSE 100 water company, which operates in northwest England,
made a pretax profit of 212.7 million pounds ($284.5 million) for
the six months ended Sept. 30, up from GBP201.1 million for the
first half of fiscal 2021. Its net loss was GBP216.2 million,
reflecting significant deferred tax charges.
BlackRock Invests in Car Makers' Charging-Network Operator
Ionity
Porsche AG said Wednesday that asset manager BlackRock Inc. is
investing in charging-network provider Ionity, a joint venture that
includes a number of auto makers such as the Volkswagen AG
sports-car brand.
Porsche said it would invest 700 million euros ($787.4 million)
by 2025 together with other Ionity shareholders but didn't disclose
individual shares or the size of BlackRock's stake in the network.
Ionity plans to increase the number of 350kW charging points for
electric vehicles in Europe to 7,000 by 2025 from the current
1,500.
Apple Sues Israeli Firm NSO Over Spyware, Claiming iPhone
Hacks
Apple Inc. has sued NSO Group, an Israeli maker of surveillance
software, alleging the company misused its products and services,
escalating a battle over surveillance and user privacy.
The lawsuit alleges that NSO Group engaged in "concerted efforts
in 2021 to target and attack Apple customers, Apple products and
servers and Apple through dangerous malware and spyware," and seeks
to bar NSO Group from using Apple's products.
GLOBAL NEWS
U.S. Households Likely Increased Spending in October
U.S. consumers likely boosted spending in October, helping to
power the broader economic recovery as businesses step up
investment and the labor market tightens.
Economists surveyed by The Wall Street Journal estimated that
consumer spending rose 1% in October from a month earlier and that
personal incomes edged up 0.2% last month. The Commerce
Department's report on October personal income and spending is
scheduled to be published at 10 a.m. Eastern time on Wednesday. It
includes a key reading on inflation, the personal consumption
expenditures price index.
U.S. Jobless Claims Expected to Edge Down
Filings for unemployment benefits likely continued their gradual
decline last week amid a hot labor market.
Economists surveyed by The Wall Street Journal estimate that
weekly jobless claims, a proxy for layoffs, fell to 260,000 in the
week ended Nov. 20 from 268,000 the prior week. That would bring
the four-week moving average for initial claims, which smooths out
weekly volatility, to the lowest level since the Covid-19 crisis
began last year.
RBNZ Raises Cash Rate, Forecasts Greater Monetary Tightening
WELLINGTON, New Zealand-New Zealand's central bank raised its
policy interest rate for the second time in two months as it
withdraws pandemic stimulus that has driven consumer price
inflation to its highest point since 2010.
The Reserve Bank of New Zealand on Wednesday raised its cash
rate by 25 basis points to 0.75%. Seven of eight forecasters in a
Wall Street Journal survey had expected that outcome. The central
bank had raised the cash rate to 0.5% from a record low 0.25% in
October.
Japan Confirms It Will Tap State Oil Reserves
The Japanese government confirmed on Wednesday that it will tap
its state oil reserves, following a similar announcement from
President Biden overnight aimed at bringing down gasoline
prices.
Japan plans to release several days' worth of oil by selling it
on the market. It will then buy oil at a later date to replenish
the stockpile. The government currently holds about 145 days' worth
of oil.
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(END) Dow Jones Newswires
November 24, 2021 06:01 ET (11:01 GMT)
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