Name Symbol Market Type
FTSE 100 Index FTSE:UKX FTSE Indices Index
  Price Change % Change Price High Price Low Price Open Price Traded Last Trade
  49.51 0.69% 7,258.32 7,284.48 7,208.52 7,208.81 0 16:35:30

EMEA Morning Briefing: Stocks to Rise After Wall Street Comeback

25/01/2022 5:51am

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UK Public sector finances; ECOFIN's Le Maire appears at European Parliament Committee on Economic and Monetary Affairs; Germany Ifo Business Climate Index; U.S. Federal Open Market Committee meeting; updates from LVMH, Alstom, Remy Cointreau, Tod's Group.

Opening Call:

European stocks could open higher, while Asia suffers sharp losses and U.S. stock futures come under pressure. The U.S. dollar strengthens. Oil rises, gold is little changed.


European stocks are set to open higher following a volatile day on Wall Street. Inflation-fighting measures from the Federal Reserve and the possibility of conflict between Russia and Ukraine are overhanging markets.

U.S. markets whipsawed Monday, with the Nasdaq Composite declining as much as 4.9% before rallying to close 0.6% higher. The S&P 500 and Dow Jones Industrial Average also staged similar comebacks.

Early Tuesday, futures on key indexes fell, suggesting U.S. markets could come under fresh pressure on Tuesday after starting the week with a roller-coaster trading session.

Market volatility has picked up in recent sessions, as investors have grown anxious about how rapidly the Federal Reserve will act to combat inflation by raising interest rates and shrinking its balance sheet.

"We're in this wait-and-see mode, which is almost the most uncomfortable place to be, so I think the market is really grappling with that," said Lindsey Bell, chief markets and money strategist at Ally Invest.

The market is waiting to hear from chair Jerome Powell Wednesday after Fed policymakers conclude a two-day meeting and offer their latest thinking on the economy and interest rates.

In Asia, shares skidded Tuesday. Major decliners included the technology and telecoms giant SoftBank which fell 3.7%, and Sony, the electronics and entertainment conglomerate, which dropped 2.5%.

Hong Kong's Hang Seng Index dropped, with the banks HSBC and Standard Chartered both losing roughly 3%.

"The surprise turnaround in U.S. market does not seem to provide any relief into Asia's session today," said Yeap Jun Rong, market strategist at IG.


The U.S. dollar strengthened broadly, including slight firming against the euro and yen, as stocks sell off and investors look for safer assets. The dollar had a lackluster week last week, JPMorgan said, "with neither an extension in US real yields nor a pullback in US equities lending a great deal of support."

The firm continues: "Positioning, a broadening spectrum of hawkish central banks vs. the Fed, and some stabilization in global growth expectations all look like plausible near-term USD headwinds. But the risk of earlier/faster USD liquidity withdrawal from the Fed, or an accelerated pace of hikes that can serve to lift pricing of the terminal rate, suggests it is too early to discount completely the potential for a rates-led USD rebound this year."

Deutsche Bank raises its year-end forecast for the euro-dollar exchange rate as it expects the European Central Bank to raise interest rates earlier than previously anticipated.

The German bank expects EUR/USD to end 2022 at 1.15, compared to its previous forecast of 1.08, and sees it rising to 1.20 by end-2023, to 1.25 by end-2024 and 1.30 by end-2025. EUR/USD last trades at 1.1311.

"We now expect the ECB to initiate policy rate liftoff with a 25 basis points hike in December 2022 (previous view: +10 basis points in December 2023)," Deutsche Bank analysts said.

"After the latest upgrading of our HICP inflation forecasts, the ECB's 'triple lock' liftoff criteria are set to be met earlier than previously anticipated."

The JPY strengthened against most G-10 and Asian currencies in early Asian trade as continuing concerns over Fed tightening and rising geopolitical tensions boost the safe-haven allure of the Japanese currency.

Prospects of a Fed rate-increase cycle and balance-sheet reduction to tackle inflation is rattling markets, Phillip Securities Research said, adding that escalating U.S.-Russia tensions over Ukraine has encouraged demand for havens.


The yield on the benchmark 10-year U.S. Treasury note rose was fell 0.01 percentage point to 1.76%.

The Federal Reserve will put its likely March rate rise in play with new language on the job market's state of affairs, according to Oxford Economics' Kathy Bostjancic.

"The FOMC should alter its forward guidance in the policy statement to reflect their view that the labor market has now reached maximum employment--given the disappointingly slow rebound in labor force participation," she said, adding "this will indicate that policymakers are poised to imminently raise the Fed funds target range."

Over recent weeks, some Fed officials said full employment is here for now, at least until labor-force participation rates start to improve, which they see as a longer-run possibility. St. Louis Fed leader James Bullard noted in a recent interview that he sees the jobless rate under 3% by year's end.


Oil rose in early Asian trading amid signs of market tightness, with rising uncertainties around Russia-Ukraine tensions also supporting prices, ING said.

The bank said capacity constraints and other production issues among OPEC+ producers may mean supplies could increase at a slower pace than the agreed monthly increment of 400 million barrels a day.

Citing Commodity Futures Trading Commission data, ING noted that traders have increased their net long positions in WTI over the previous week, reflecting demand optimism.


Gold was little changed in early Asian trade, although prices of the precious metal may find support from rising ETF inflows amid rising geopolitical risks. Inflows into gold backed ETFs continue to surge thanks largely to the metal's draw as a safe-haven asset, ANZ said.

"A laundry list of geopolitical risks will likely lead to safe-haven flows for gold that should help it soon break above the $1,850 level," Oanda said. Spot gold is flitting between positive and negative and was last flat.

Nickel was lower in early trade after top producer Tsingshan Holding said it will boost supply for the key battery metal, ANZ said. The Chinese nickel producer recently shipped its first cargo of nickel matte from its Indonesian operations.

ANZ expects nickel prices to remain supported by the surging demand for electric vehicles, as Chinese EV sales rose 35% on month in December. The three-month forward LME nickel contract was 1.4% lower.



Treasury Wants Banks to Loop in Foreign Affiliates on Suspicious Transactions

The U.S. Treasury Department's Financial Crimes Enforcement Network has proposed a new rule that would allow banks to share so-called suspicious activity reports more readily with foreign affiliates.

The proposed rule, which FinCEN announced Monday, would create a pilot program to allow banks to share SARs with foreign branches and affiliates, a bid to improve financial institutions' ability to counter money laundering. The new program was mandated under the Anti-Money Laundering Act, which came into force in January 2021.


Australia's Core Inflation Rose at Fastest Pace Since 2014

SYDNEY-Australian consumer prices rose by much more than expected in the fourth quarter of 2021, which could set the stage for Australia's first rise in official interest rates in over a decade.

The consumer-price index rose 1.3% in the final three months of 2021, and 3.5% annually, according to the Australian Bureau of Statistics.


Glynn's Take: RBA Set to Entertain Interest Rate Rise in 2022, Exit QE in Feb

SYDNEY-In a significant rethink of the economic outlook, the Reserve Bank of Australia is set to concede that an interest-rate increase is now highly possible by late 2022, but reject money-market bets that it will keep pace with U.S. interest rate increases.

The RBA's first policy meeting for 2022 on Feb. 1 will also see its program of government bond buying wound up entirely, as it publishes revised economic forecasts that include the unemployment rate soon falling below 4.0%, its lowest since the 1970s.


Singapore Central Bank Tightens Policy in Surprise Move

Singapore's central bank on Tuesday unexpectedly tightened its currency policy as a pre-emptive move to stem the inflationary impact of supply-side constraints and rising commodity prices.

In an announcement before its scheduled policy meeting in April, the Monetary Authority of Singapore said it would slightly raise the rate of the Singapore dollar's appreciation against a basket of currencies.


SEC Looks to Bolster Market's Cyber Defenses

WASHINGTON-The Securities and Exchange Commission is exploring ways to improve cybersecurity in capital markets, including by extending compliance obligations to companies that currently don't have to meet them, Chairman Gary Gensler said Monday.

"The economic cost of cyberattacks is estimated to be at least in the billions, and possibly in the trillions, of dollars," Mr. Gensler said in a virtual speech to the Northwestern Pritzker School of Law's annual Securities Regulation Institute conference. "We at the SEC are working to improve the overall cybersecurity posture and resiliency of the financial sector."


Bitcoin Bounces Back After Falling Below $33,000

Bitcoin rallied on Monday afternoon, trading above $37,000, after falling to a seven-month low in the morning, as the cryptocurrency moved in lockstep with a swift rally in risk assets.

Bitcoin was trading at $36,800 at 5 p.m., up, 4.7% on the day, according to CoinDesk. In the morning, it traded below $33,000 for the first time since July. That extended its selloff to a more than 50% loss from its record high of $68,990.90, set on Nov. 10.


Evergrande Asks Overseas Creditors for More Time

China Evergrande Group asked international creditors to give the giant property developer more time to get a grip on its complicated financial situation, and warned that drastic legal action could be destabilizing.

The plea came days after a group of international bondholders threatened to enforce their legal rights against Evergrande, saying they had been unable to engage substantively with the troubled Chinese real-estate company for months. Advisers to some Evergrande bondholders last Thursday released a statement accusing the developer of withholding crucial information about its liabilities and failing to engage, despite statements to the contrary.


U.K. Steps Up Arms Backing for Ukraine, Leading European Efforts to Deter Russian Invasion

LONDON-The U.K. has pushed itself to the forefront of European efforts to deter a Russian invasion of Ukraine, becoming the first major Western country to join the U.S. in providing lethal weapons to Kyiv.

In recent weeks, Britain has shipped military hardware to Kyiv that analysts say would increase the risks to Russia if it launched a ground invasion into Ukraine and has called out what it described as Russian efforts to subvert Ukraine's political system.


Rio Tinto, Oyu Tolgoi Partners Reach Agreements to Advance Copper Project

Rio Tinto PLC said it has reached agreements with Turquoise Hill Resources Ltd. and Mongolia's government on the Oyu Tolgoi copper mine expansion in South Gobi desert that have led the partners to approve the start of underground operations.

Under the agreements, Turquoise Hill will waive a $2.4 billion loan to Mongolia's Erdenes Oyu Tolgoi, while Rio Tinto and Turquoise Hill have also promised improved cooperation with the state-owned company on the copper-mining operation, Rio Tinto said. The world's No. 2 miner by market value said the partners have agreed on measures to monitor underground development financing mechanisms and enhance environmental, social and governance matters, while also approving a new electricity supply agreement.


On the Brink of War With Russia, Ukrainians Are Resigned and Prepared

KYIV, Ukraine-Computer whiz Danylo Kovzhun has taught his children to handle a pistol. Confectioner Roman Nabozhniak is training colleagues to run his business so he can focus on fighting Russians. Bar owner Vitaliy Kyrychenko keeps his gas tank full in case he needs to get out fast.

Ukraine has struggled to maintain a sense of stability since it fully established itself as a sovereign country in 1991, and has been at war since 2014. But with 100,000 Russian troops gathered nearby, threatening Europe's biggest land war since the 1940s, people there say something feels different this time.


NATO to Send Ships, Jet Fighters to Eastern Europe Amid Standoff With Russia

BRUSSELS-NATO allies are bolstering the alliance's eastern flank in response to Russia's military buildup around Ukraine, as the European Union set out plans for loans and grants for Kyiv worth more than $1.3 billion and the Pentagon ordered thousands of troops to prepare for possible deployment.

The moves are part of efforts by the U.S. and its allies to gird for what they believe could be an imminent military invasion of Ukraine, which Russia denies it is planning. President Biden held a videoconference with European leaders Monday afternoon to coordinate the trans-Atlantic response to the Russian troop buildup.


Unilever Plans Job Cuts as Activist Investor Trian Takes Stake

Unilever PLC plans to cut thousands of jobs as part of a reorganization aimed at speeding up its decision making, according to a person familiar with the matter, a move that comes as the Ben & Jerry's owner looks for ways to jump-start growth.

Unilever's chief executive, Alan Jope, has been under pressure to buoy sales growth for months but that has ratcheted up in recent weeks. The Wall Street Journal and others reported over the weekend that Nelson Peltz's Trian Fund Management LP had acquired a stake in Unilever, just days after the company abandoned its $68 billion bid for GlaxoSmithKline PLC's consumer-healthcare business, after being rebuffed on price.


Omicron Slows the Global Economy, Hitting the U.S. Particularly Hard

Rising infection rates driven by the faster-spreading Omicron variant of Covid-19 led to a U.S. and global economic slowdown as the year got under way, surveys of purchasing managers said.

The pullback was particularly pronounced in the U.S., where both the services and manufacturing sectors reported slower growth, according to surveys by data firm IHS Markit conducted in the first weeks of January and released on Monday.


Differences Splinter U.S. Team Negotiating With Iran on Nuclear Deal

With talks to restore the 2015 nuclear agreement with Iran reaching a critical phase, differences have emerged in the U.S. negotiating team over how tough to be with Tehran and when to walk away, according to people familiar with the negotiations.

U.S. officials confirmed over the weekend that Richard Nephew, the deputy special envoy for Iran, has left the team. Mr. Nephew, an architect of previous economic sanctions on Iran, had advocated a tougher posture in the current negotiations, and he hasn't attended the talks in Vienna since early December.


Italy to Decide on Its Leadership-and Draghi's Future

ROME-Italy faces a political puzzle this week: It must fill its two most important leadership positions, but it has only one Mario Draghi.

Mr. Draghi is both the widely respected prime minister of Italy's bipartisan government and the most credible contender to become head of state, or president of the republic.


GameStop, Meme Stocks Hit by Market Turmoil

Shares of GameStop Corp., AMC Entertainment Holdings and other meme stocks numbered among the hardest hit by Monday's market turmoil, the latest blow to the favorite bets of many online day traders.


IBM Sales Surge. The Company's Turnaround May Be Taking Hold.

IBM posted strong results Monday for its fourth quarter, with its best sales growth in more than a decade. The results suggest that CEO Arvind Krishna's strategy for returning the legacy tech giant to growth is beginning to pay off.

Over the last year, IBM (ticker: IBM) has restructured its business to focus on its software and consulting units, after spinning off its managed IT services business, now known as Kyndryl (KD). IBM also recently agreed to sell its Watson Health unit to private equity shop Francisco Partners. While it is early in the turnaround, Wall Street is likely to be encouraged by today's results.


Meta Unveils New AI Supercomputer

Meta Platforms Inc. said Monday that its research team built a new artificial intelligence supercomputer that the company maintains will soon be the fastest in the world.

The supercomputer, the AI Research SuperCluster, was the result of nearly two years of work, often conducted remotely during the height of the pandemic, and led by the Facebook parent's AI and infrastructure teams. Several hundred people, including researchers from partners Nvidia Inc., Penguin Computing Inc. and Pure Storage Inc., were involved in the project, the company said.


Google Deceived Users About Location Tracking, States Allege

WASHINGTON-Alphabet Inc.'s Google deceived consumers by recording their location even after users tried to turn off the company's tracking on their smartphones and web browsers, according to lawsuits by Washington, D.C., and three other states.

Google falsely told customers that if they opted out of collection of their "Location History" or other settings, Google wouldn't store the places they went, according to one of the lawsuits, filed Monday in the District of Columbia's Superior Court by D.C. Attorney General Karl Racine.


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Expected Major Events for Tuesday

06:00/FIN: Dec Labour force survey, incl unemployment

07:00/UK: Dec Public sector finances

08:00/SPN: Dec PPI

09:00/GER: Jan Ifo Business Climate Index

10:00/LUX: Nov Trade

11:00/FRA: 3Q OECD Quarterly Employment Situation

11:00/UK: Jan CBI Industrial Trends Survey

13:00/HUN: Jan Hungarian interest rate decision

14:00/BEL: Jan Business Confidence Survey

All times in GMT. Powered by Kantar Media and Dow Jones.

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This article is a text version of a Wall Street Journal newsletter published earlier today.


(END) Dow Jones Newswires

January 25, 2022 00:36 ET (05:36 GMT)

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