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.

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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.

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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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