MARKET WRAPS
Watch For:
U.S. Industrial Production and Capacity Utilization for
September; Canada Housing Starts for September.
Opening Call:
Stock futures edged lower after data showed that China's
economic growth slowed sharply in the third quarter, and investors
weighed the risk to global growth from stickier-than-anticipated
inflation, supply-chain problems and heightened demand for
energy.
Data out Monday showed China's economy grew 4.9% in the third
quarter from a year prior, a slowdown from the second quarter's
7.9% rate. Power shortages and supply-chain problems added to the
impact of Beijing's efforts to rein in its property and technology
sectors.
The slower growth data are "a reminder that China is expected to
lose some of its momentum, but also how these global issues like
the energy crisis and supply chain issues will filter through to
global growth," said Edward Park, chief investment officer at U.K.
investment firm Brooks Macdonald. "There's just a bit of rebasing
of expectations for China and the rest of the world."
"We're in a mid-cycle slowdown," said David Chao, global market
strategist for the Asia Pacific ex-Japan region at Invesco, adding
that Chinese markets were in for continued uncertainty and
volatility in the near term. Still, he added: "Keep in mind the
government has many tools to propel the economy forward."
A strong start to earnings season has underpinned hopes that
companies can weather mounting challenges. Albertsons and State
Street are set to report quarterly results before the market
opens.
U.S. industrial production data for September, due at 9:15 a.m.
ET, is expected to show a seventh consecutive monthly increase. The
measure of output at factories, mines and utilities has been buoyed
by strong consumer demand for manufactured goods, though
supply-chain disruptions and a semiconductor shortage could curtail
auto production and drag down headline figures.
Forex:
Investors have raised their expectations on the Fed lifting
interest rates following better-than-expected U.S. retail sales
data on Friday, and this should continue to support the dollar, ING
said.
"The strong release prompted one of our preferred metrics of Fed
tightening expectations--the 1m USD overnight index swap priced
three years' forward--to jump to a new high for the year," ING
analysts said.
"This is a dollar positive, especially against low-yielding
currencies with dovish central banks and against energy importers,"
they said. The Dutch bank expects the DXY dollar index to remain
higher on Monday, trading in the range of 94.00 to 94.50.
Bitcoin, the world's largest cryptocurrency by market value,
gained 4.1% from its 5 p.m. ET level Sunday to trade at $61,932.69.
The U.S.'s first bitcoin exchange-traded fund is expected to start
trading Tuesday.
The different policy paths that the Bank of England and the
European Central Bank seem to be taking point to moderate strength
for the pound against the euro, said Commerzbank.
"If ECB and BOE deliver what their governors are promising--i.e.
rate hikes in the UK and at least a gradually expansionary monetary
policy on the Continent--,what will matter going forward is which
point of view seems more plausible over the coming months," said
Commerzbank's Ulrich Leuchtmann.
The longer the accelerated inflation level persists, the more
attractive the BOE's stance is likely to seem, he said.
The Turkish lira fell to a record low versus the dollar as the
country's central bank is expected to cut interest rates further at
Thursday's meeting despite elevated inflation.
The lira's recent slump is unlikely to prevent Turkey's central
bank from lowering its policy rate again on Thursday after last
month's 100 basis points cut, Commerzbank's Ulrich Leuchtmann
said.
"The bank is no longer interested in the effects of its interest
rate policy on exchange rates, inflation and in the end the
stability of the Turkish economy." Ultimately the bank's decisions
are taken by President Recep Tayyip Erdogan, who wants lower rates,
Leuchtmann said.
Bonds:
In bond markets, the yield on the 10-year Treasury note ticked
up to 1.603% Monday, from 1.574% Friday.
European core government bonds sold off early Monday on what KBC
Bank attributes to the fact that high inflation readings continue
to weigh on sentiment. "Core bonds remain in sell-off mode this
morning as you can't look beyond the uncomfortably high inflation
stories," KBC said.
It added that European money markets continue to pull forward a
first interest rate rise by the ECB towards the end of 2022 or
early 2023.
Commodities:
Brent crude oil rose with prices having begun their rise during
Asian trading hours with coal prices rising there too. That
suggests the Asian power crunch is back on investors' minds, said
OANDA's Jeffrey Hally.
"With no signs of the China energy crunch alleviating soon, and
with the rest of Northern Asia and Europe competing for scarce
energy supplies, particularly gas, the price environment for oil
remains constructive," he added.
European benchmark gas prices were down 2.5% at EUR91.31 per
megawatt hour, after slipping on Friday in a move that "suggests
the market has started to price in an expected normalization of
Russian flows," said Goldman Sachs's Samantha Dart.
Copper prices rose to their highest level in five months as
stockpiles dwindled and the energy crunch raises concerns about
supply.
LME copper stock levels have been dropping almost constantly
since August and currently stand at their lowest level since
June.
"Focus remained on the tightening spreads as traders scramble
for metals, " said brokerage Marex. Concerns about energy-related
production shutdowns are also pushing investors to bet on higher
prices still to come.
Speculators increased their net-long bets on all LME base metals
except nickel last week, with the net long in zinc jumping 30% last
week, the brokerage said.
TODAY'S TOP HEADLINES
Goldman Sachs Cleared to Own All of China Unit
Chinese regulators approved Goldman Sachs Group Inc.'s
application to take full ownership of a key local unit, another
step in China's gradual opening of its financial system to major
players from the U.S. and elsewhere.
Goldman in December 2020 sought approval to increase its stake
in a domestic Chinese business that it has co-owned since 2004. The
New York-based bank said Sunday that China's financial markets
regulator, the China Securities Regulatory Commission, had given
its assent.
Read More ->
Facebook to Hire 10,000 Workers in EU to Build Up
'Metaverse'
Facebook Inc. is planning to create 10,000 jobs in the European
Union over the next five years to build a virtual realm it sees as
a key component of its future and a major driver of new technology
investment.
The U.S. social-media giant said Sunday it would embark on a
recruiting drive for highly skilled workers in the region to help
build a "metaverse," an online realm where users engage with one
another using technologies including virtual and augmented reality.
The company said it would focus on hiring in Germany, France,
Italy, Spain, Poland, the Netherlands and Ireland.
Read More ->
Saks E-Commerce Unit Begins IPO Preparations
The fast-growing e-commerce business of luxury retailer Saks
Fifth Avenue is aiming to go public soon at a valuation roughly
triple what it was pegged at earlier this year, in a sign of the
boom times for online department-store sales.
Saks is interviewing potential underwriters this week for an
initial public offering that could take place in the first half of
2022 and targets a valuation of around $6 billion, people familiar
with the matter said. It was last valued at $2 billion in
March.
Read More ->
Amtrak Hopes Infrastructure Bill Will Help Fund a Tunnel to Ease
Delays on Northeast Corridor
BALTIMORE-When the Baltimore and Potomac Railroad completed its
1.4-mile tunnel in 1873, a local newspaper hailed it as "one of the
greatest enterprises of the kind that has ever been executed."
Today, it is Amtrak's worst bottleneck on its most-traveled
corridor between Washington and New Jersey. The passenger railroad
plans to construct a new 2-mile tunnel several blocks away, and it
is counting on funding in the roughly $1 trillion infrastructure
bill to cover much of the project's $4 billion tab.
Read More ->
Facebook Says AI Will Clean Up the Platform. Its Own Engineers
Have Doubts.
Facebook Inc. executives have long said that artificial
intelligence would address the company's chronic problems keeping
what it deems hate speech and excessive violence as well as
underage users off its platforms.
That future is farther away than those executives suggest,
according to internal documents reviewed by The Wall Street
Journal. Facebook's AI can't consistently identify first-person
shooting videos, racist rants and even, in one notable episode that
puzzled internal researchers for weeks, the difference between
cockfighting and car crashes.
Read More ->
Alibaba Faces New Threat: an Evolving Chinese Shopper
TAIPEI-Alibaba Group Holding Ltd., challenged by Beijing's
yearlong clampdown on private enterprise, is facing another
problem: growing competition.
For more than 15 years, Alibaba was China's unassailable
e-commerce champion. The company founded by Jack Ma rose to become
one of the world's biggest and most valuable businesses, using
hard-knuckle tactics to muscle out challengers.
Read More ->
Hollywood Workers Reach Agreement With Studios, Averting
Strike
LOS ANGELES-The film and television industry avoided a shutdown
of production on Saturday evening after the International Alliance
of Theatrical Stage Employees reached a last-minute, tentative
agreement with studios and streaming services over worker
demands.
IATSE leaders had been in talks for weeks with the organization
representing studios and streaming services, the Alliance of Motion
Picture and Television Producers. IATSE leaders had set a strike
deadline of 12:01 a.m. PT on Monday.
Read More ->
Some Investors Say Bank Pledges to Cut Funding for Arctic
Drilling Contain Loopholes
Some of the world's largest banks, including Goldman Sachs Group
Inc., HSBC Holdings PLC and BNP Paribas SA, pledged in recent years
to stop direct financing of Arctic oil exploration. The idea was to
choke off money for fossil-fuel extraction in a pristine natural
environment.
A battle has broken out among investors, environmentalists and
banks over those pledges. Some investors and environmentalists say
they contain loopholes, and money has continued to flow from big
banks to companies active in areas of Norway, Russia, Canada and
Alaska rich in oil and gas. Under pressure, two of the banks, BNP
and HSBC, say they are reviewing their pledges to make them
stronger.
Read More ->
China's Third-Quarter Economic Growth Slows Sharply to 4.9%
BEIJING-China's economy grew 4.9% in the third quarter from a
year earlier, slowing sharply from the previous quarter's 7.9%
growth rate, as power shortages and supply-chain problems added to
the impact from Beijing's efforts to rein in the real estate and
technology sectors.
While many economists expected China's year-over-year growth to
trend lower in the second half of 2021, based in part on
statistical comparisons to last year, the scale of the
third-quarter slowdown was sharper than expected, falling short of
the 5.1% growth forecast by economists polled last week by The Wall
Street Journal.
Read More ->
Supply-Chain Bottlenecks, Elevated Inflation to Last Well Into
Next Year, Survey Finds
Uncomfortably high inflation will grip the U.S. economy well
into 2022, as constrained supply chains keep upward pressure on
prices and, increasingly, curb output, according to economists
surveyed this month by The Wall Street Journal.
The economists' inflation projections are up dramatically from
July, while short-term growth outlooks are lower.
Read More ->
GOP Sees Opening as Biden Copes With Pre-Christmas Inflation,
Supply-Chain Issues
The White House is wrestling with supply-chain issues and
elevated inflation ahead of the winter holiday shopping season-two
economic problems that Republicans say the administration's own
policies would exacerbate, driving up the risk of empty store
shelves and higher holiday prices.
With just over a month to go before the holiday shopping season
unofficially starts the day after Thanksgiving, the Biden
administration is seeking ways to ease the bottlenecks in the
strained supply chain, while acknowledging that they might not be
able resolve all those pressures immediately.
Read More ->
Green Investing Looks to Clean Up the Maritime Industry
First bonds went green. Now they are going blue.
Seaspan Corp., the world's largest containership lessor by
cargo-carrying capacity, sold nearly $1 billion of so-called blue
bonds earlier this year that sought to entice new investors by
promising to fund vessels that will lower emissions and pollution
at sea.
Read More ->
'Crazy' Bets on $200 Oil Invade the Options Market
A roaring trade in bullish crude-oil options says the 2021
energy rally is far from over.
Traders once again are betting that the U.S. oil benchmark will
surge above $100 a barrel, from a recent $82, as early as December.
U.S. crude, known as West Texas Intermediate or WTI, is up 10% this
month, and 70% this year, but it hasn't hit $100 since the oil
crash of 2014.
Read More ->
Global Investors Gain a New Way to Bet on Stocks in China
Hong Kong started trading in futures tied to an index of stocks
from mainland China, giving global investors a new tool for betting
on Chinese markets.
The futures are linked to the MSCI China A 50 Connect Index,
which was launched in August. The benchmark covers major A
shares-as stocks listed in either Shanghai or Shenzhen are
known-that are accessible to international investors through the
Stock Connect system that links onshore markets with Hong Kong.
Read More ->
Behind the Energy Crisis: Fossil Fuel Investment Drops, and
Renewables Aren't Ready
An energy price shock is serving as a reminder of the world's
continued dependency on fossil fuels-even amid efforts to shift to
renewable sources of energy.
Demand for oil, coal and natural gas has skyrocketed world-wide
in recent weeks as unusual weather conditions and resurgent
economies emerging from the pandemic combine to create energy
shortages from China to Brazil to the U.K.
Read More ->
Economy Week Ahead: China GDP, U.S. Industry and Housing
The latest snapshot of China's economic growth, U.S. industrial
production and the housing market highlight this week's economic
data.
Read More ->
Cars Are Making Money Like Homes-For Now
Financially, your car is behaving more like your home right now,
bringing new opportunities and hard-to-foresee risks.
Used-vehicle values have broken records over the past year, with
inflation running at an unprecedented 24%, according to the latest
official data. This is painful for car buyers, but there is a
less-discussed flip side: It is a great time to be a car owner.
Read More ->
Democrats Face a Deadline on Benefits and Climate Bill
Consensus
WASHINGTON-Democrats still tussling over how to scale back their
ambitions to expand the country's social benefits and overhaul its
climate-change policy face dwindling time to reach an agreement as
both the House and Senate return to Washington this week.
One major element related to climate change-a $150 billion
program aimed at pushing utilities to draw more power from
clean-energy sources-could be cut from the bill, according to
people familiar with the negotiations, as it has drawn objections
from the centrist Democrat Sen. Joe Manchin of West Virginia.
Read More ->
Group of 16 Americans and a Canadian, Including Five Children,
Kidnapped in Haiti
A group of American missionaries working in Haiti was kidnapped
by a notorious gang amid a sharp rise in abductions and political
turmoil in the Caribbean nation, a spokesman for the Haitian
Justice Ministry said.
Ohio-based Christian Aid Ministries said in a statement Sunday
that a group that included 16 Americans and one Canadian was
kidnapped Saturday morning during a trip to an orphanage. The
organization said that five of those who were abducted are
children. An aide to Prime Minister Ariel Henry said the
missionaries were taken hostage after being ambushed by heavily
armed men on a road outside the Haitian capital,
Port-au-Prince.
Read More ->
U.S. Afghan Resettlements Slowed by Housing Shortage, Old
Technology
The push to resettle the first wave of Afghan evacuees brought
to the U.S. is expected to take months longer than first
anticipated as a measles scare, a nationwide housing shortage and
paperwork delays have slowed the process, according to government
and resettlement officials familiar with the effort.
According to Defense Department officials and volunteers
involved in operations, the goal originally was to resettle the
evacuees by the end of the year if not sooner. But earlier this
month officials began telling volunteer groups they would likely be
needed through March or longer. "There is no way we are done by
Christmas," said one defense official.
Read More ->
Democrats Bet on Raising Taxes on High-Income People, Big
Businesses
WASHINGTON-Many Democrats are willing-even eager-to enact tax
increases on high-income households and big businesses and campaign
on them in next year's midterm elections, embracing a stance that
the party has struggled with in the past.
Although Democrats' slim majorities have forced them to abandon
some of their most sweeping tax proposals, President Biden and
congressional Democrats are still seeking to raise about $2
trillion over a decade from businesses and high-income
households.
Read More ->
California Scrambles to Find Electricity to Offset Plant
Closures
California is racing to secure large amounts of power in the
next few years to make up for the impending closure of fossil-fuel
power plants and a nuclear facility that provides nearly 10% of the
electricity generated in the state.
The California Public Utilities Commission has ordered utilities
to buy an unprecedented amount of renewable energy and battery
storage as the state phases out four natural-gas-fired power plants
and retires Diablo Canyon, the state's last nuclear plant, starting
in 2024.
Read More ->
Write to sarka.halas@wsj.com
TODAY IN CANADA
Earnings:
- Nothing major scheduled
Economic Indicators (ET):
0815 Sep Housing Starts
0830 Aug International transactions in securities
1030 Bank of Canada Business Outlook Survey
N/A Alberta and Northwest Territories municipal elections in
Canada
Stocks to Watch:
No items published
Other News:
*BOC's Macklem: Supply Bottlenecks Look More Complicated,
Persistent Than Expected
Group of 16 Americans and a Canadian Kidnapped in Haiti
A group of American missionaries working in Haiti was kidnapped
by a notorious gang amid a sharp rise in abductions and political
turmoil in the Caribbean nation, a spokesman for the Haitian
Justice Ministry said.
Ohio-based Christian Aid Ministries said in a statement Sunday
that a group that included 16 Americans and one Canadian was
kidnapped Saturday morning during a trip to an orphanage.
The organization said that five of those who were abducted are
children. An aide to Prime Minister Ariel Henry said the
missionaries were taken hostage after being ambushed by heavily
armed men on a road outside the Haitian capital,
Port-au-Prince.
"Join us in praying for those who are being held hostage, the
kidnappers, and the families, friends, and churches of those
affected," Christian Aid Ministries said.
Gédéon Jean of the Center for Analysis and Research in Human
Rights, a Port-au-Prince-based organization that tracks kidnappings
in Haiti, said the kidnapping was carried out by members of the 400
Mawozo gang.
Market Talk:
Bank of Canada's Business Outlook Survey Could Lift Canadian
Dollar
The Canadian dollar could strengthen if the Bank of Canada's
third-quarter Business Outlook Survey prompts investors to bring
forward expectations for the first post-pandemic interest rate
rise, ING said.
"This survey of 100 firms on their sales, investment and pricing
expectations/intentions is an important input for the BOC ahead of
its October 27 policy meeting," analysts at the Dutch bank
said.
The BOC's meeting next week is key as it releases its quarterly
monetary policy report, which includes the latest projections for
inflation and economic growth, they say. EUR/CAD could fall toward
1.4250, they said.
Expected Major Events for Monday
08:30/UK: Jul Card Spending statistics
12:15/CAN: Sep Housing Starts
12:30/CAN: Aug International transactions in securities
13:15/US: Sep Industrial Production & Capacity
Utilization
14:00/US: Oct NAHB Housing Market Index
14:30/CAN: Bank of Canada Business Outlook Survey
20:00/US: Aug Treasury International Capital Data
All times in GMT. Powered by Kantar Media and Dow Jones.
Expected Earnings for Monday
ARC Group Worldwide Inc (ARCW) is expected to report for 4Q.
Adamis Pharmaceuticals Corp (ADMP) is expected to report $-0.04
for 2Q.
Albertsons Companies Inc (ACI) is expected to report $0.46 for
2Q.
CSB Bancorp Inc (CSBB) is expected to report for 3Q.
Chemung Financial (CHMG) is expected to report $1.20 for 3Q.
Consumer Portfolio Services Inc (CPSS) is expected to report
$0.15 for 3Q.
CrossFirst Bankshares Inc (CFB) is expected to report for
3Q.
Equity Lifestyle Properties Inc (ELS) is expected to report for
3Q.
FB Financial Corp (FBK) is expected to report $0.81 for 3Q.
FNB Corp (FNB) is expected to report $0.30 for 3Q.
Guaranty Bancshares Inc (GNTY) is expected to report $0.77 for
3Q.
HMN Financial Inc (HMNF) is expected to report for 3Q.
Hexcel Corp (HXL) is expected to report $0.07 for 3Q.
PacWest Bancorp (PACW) is expected to report $1.03 for 3Q.
Peoples Bancorp of NC (PEBK) is expected to report for 3Q.
ServisFirst Bancshares Inc (SFBS) is expected to report $0.96
for 3Q.
State Street Corp (STT) is expected to report $1.89 for 3Q.
Steel Dynamics (STLD) is expected to report $4.74 for 3Q.
Zions Bancorp (ZION) is expected to report $1.35 for 3Q.
Powered by Kantar Media and Dow Jones.
ANALYST RATINGS ACTIONS
CatchMark Timber Trust Cut to Underperform From Outperform by
Raymond James
Disney Cut to Equal-Weight From Overweight by Barclays
NetApp Cut to Sell From Neutral by Goldman Sachs
This article is a text version of a Wall Street Journal
newsletter published earlier today.
(END) Dow Jones Newswires
October 18, 2021 06:07 ET (10:07 GMT)
Copyright (c) 2021 Dow Jones & Company, Inc.
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