MARKET WRAPS
Stocks:
European stocks rose, resuming the seesaw action that has become
the signature of markets since the emergence of the Omicron
Covid-19 variant.
Investors have grappled with a mix of concerns heading into the
end of the year. The rise in Omicron cases has spurred concerns
about global growth and whether it will prolong the global
supply-chain disruptions that have added to inflation. However,
signs that vaccine boosters offer protection against Omicron have
bolstered hopes that its impact on growth can be mitigated.
Meantime, hopes were raised that a version of the U.S.'s $2
trillion spending package could still be passed, after Senate
Majority Leader Chuck Schumer said Democrats would take up the
legislation early next year, despite opposition from Sen. Joe
Manchin.
"It seems we're continuing to get this risk-on, risk-off
environment. Investors are kind of torn," said Louise Dudley, an
equities portfolio manager at Federated Hermes. Despite heightened
uncertainty, investors are still incentivized to buy stocks, as
government bonds don't offer enticing yields, she said.
Shares on the move: Rockhopper Exploration shares rose after it
said that a tribunal in its arbitration against the Italian
government has again rejected Italy's intra-European Union
jurisdictional challenge.
The London-listed oil-and-gas exploration group said Italy
previously made a request and the tribunal agreed to admit a recent
ruling by the European Court of Justice related to intra-EU Energy
Charter Treaty disputes.
Data in focus: Germany's economy is being affected by
supply-chain disruptions along with demand-supply mismatch for the
automobile industry due to the global chip shortage, GlobalData
said.
The data company has revised down its 2022 real GDP growth
forecast for the country to 4.4%, a downward revision of 0.1
percentage point due to concerns over the Omicron variant.
"Tightening of measures to combat Covid-19 along with slow
industrial growth are expected to retard economic growth prospects
in the short-term," GlobalData's economic research analyst Gargi
Rao said.
Supply-chain disruptions in raw materials along with
semiconductor chip shortages will continue to hamper German
manufacturing output in the coming quarter, Rao said.
Real-time indicators, as well as the December U.K. composite
purchasing managers' index falling to its lowest level since
February, provide the clearest signs yet that the Omicron
coronavirus variant has set back economic recovery, Pantheon
Macroeconomics said.
Driven by declines in consumer-services activity, Pantheon
expects GDP will drop in December and January and cuts its forecast
for U.K. GDP growth in the fourth quarter and 1Q to 0.6% and 0.0%
respectively, from 1.0% and 0.8%.
Pantheon expects a 0.6% on-month drop in December, followed by a
further 0.3% drop in January, but that assumes no additional
restrictions are imposed, the economic-research firm says.
U.S. Markets:
Stock futures were pointed to a rebound for Wall Street, on the
heels of a sharp selloff, with investors driven by hopes countries
have enough in their arsenal to fight rising Covid cases.
Monday's volatile action saw the S&P 500 post its biggest
three-day percent slide since Sept. 30 and the Nasdaq's worst such
drop since May 12. Markets were hit first by surrounding fears over
rising COVID-19 cases from the omicron variant.
The Biden administration is due to announce a omicron-fighting
plan on Tuesday, with 500 million free at-home COVID-19 testing
kits due to be distributed to Americans, along with the deployment
of federal emergency assistance teams to six hard-hit states and
other measures, according to a report in The Wall Street
Journal.
Some are keeping an eye on Biden himself, after he tested
negative for COVID-19 on Monday, following close contact three days
earlier with an aide who tested positive, the White House said. He
will test again on Wednesday, and carry on with his normal
schedule.
Traders checking out early for the holidays, leaving less
liquidity and exaggerating some market moves, are also a hurdle for
those trying to navigate a shortened week of trading. Markets will
close on Friday, Christmas Eve.
The only data on tap for Tuesday are the third-quarter
current-account deficit.
Forex:
The dollar fell slightly as traders take profits on long
positions that bet on the currency rising, Oanda analyst Jeffrey
Halley said.
Some profit taking of the dollar's recent rally has set in but
declines will be limited as markets remain vulnerable to headlines
on the Omicron coronavirus variant, which has driven investors
towards safe havens, he said.
"I expect the chop-fest to continue, with a move through either
96.00 or 97.00 indicating the [DXY dollar index's] next directional
move."
The dollar could edge lower heading into the year-end as
investors take some profit on recent bets on further gains in the
currency, though it might recover again in the new year, MUFG
said.
"The U.S. dollar has continued to hold up well though so far
even though there is a risk that popular long positions could be
pared back heading into year-end as positions are lightened to take
risk off the table," MUFG currency analyst Lee Hardman said.
MUFG's seasonal analysis shows the dollar tends to underperform
in December, before reversing losses in January, he said.
Bitcoin-the world's largest cryptocurrency by market
value-gained 3.4% to $48,623.
The Turkish lira recovers versus the dollar after President
Recep Tayyip Erdogan announced measures to curb the currency's
slide. Late Monday Erdogan unveiled a scheme aimed at encouraging
Turkish residents to hold their savings in liras rather than
dollars.
That eased pressure on the lira, which recovered strongly after
hitting an all-time low on Monday after Erdogan on Sunday cited
Islam as a reason for not raising interest rates.
"We are quite doubtful this is the end to the current lira
story," Danske Bank analyst Lars Sparreso Lykke Merklin said.
Read what the analysts are saying here .
Bonds:
The clarity provided by the European Central Bank regarding the
asset purchase reduction in 2022 is a surprise, Ostrum Asset
Management said.
"A surprise is the visibility provided, as the ECB has
accurately described the path of QE throughout 2022,"
The ECB confirmed the scheduled end of the Pandemic Emergency
Purchase Programme at end-March, and to help offset this, it will
increase the regular Asset Purchase Programme in 2Q and 3Q, though
this will still mean a reduction in overall purchases.
The ECB purchases will absorb eurozone countries' net bond
issuance in 2022, Ostrum AM says, adding that the central bank will
limit tensions in sovereign rates and spreads.
Eurozone government bond yields are expected to rise in 2022,
with the 10-year Bund yield likely ending next year in positive
territory, Generali Investments said.
The combination of increasing U.S. yields, an expected
adjustment of long-term key rate expectations, less support from
the ECB, and an economy still growing above potential will
contribute to a rise in long-term yields, senior bond strategist
Florian Spaete said.
Forwards imply a slight increase of 10-year Bund yields to
-0.25%, but Generali Investments forecast the end-2022 level at
0.10%, he said.
Eurozone noncore government bond yield spreads are still rather
low by historical standards and they look vulnerable to a shift in
the ECB's narrative next year, Florian Spaete, senior bond
strategist at Generali Investments, said.
"The tighter central bank liquidity will dampen the current
carry-friendly low volatility environment," while an expected
increase in core yields will reduce the search for yield, he
said.
However, solid growth, still accommodative monetary policy and
the support from the NextGenerationEU program will prevent a
disorderly increase in risk premiums, he said, forecasting moderate
spread widening in 2022.
Presidential elections in Italy and France have the potential to
have a lasting impact on the current calm political environment,
Spaete said, expecting it to become bumpier in 2022.
Commodities:
Oil rose with both benchmarks paring some of Monday's losses
that came amid increasing worries about the impact of the Omicron
variant.
Arresting that decline is supply disruption in Libya, where
armed groups have shut down the country's largest oil field at
Sharara, which contributes 300,000 barrels a day, DNB Markets'
Helge Andre Martinsen said.
That has forced the country's national oil company to declare
force majeure on two important terminals. With a presidential
election around the corner, the risk of further disruption is
growing, the analyst added.
European gas prices were up 7.5% having soared to record highs
which DNB Markets's Helge Andre Martinsen said put it at an
equivalent of more than $300 a barrel. That latest rally comes as
Russian flows to Europe continue to dwindle.
According to Reuters, flows through the Yamal pipeline between
Russia and Germany via Poland that normally move from East to West
actually reversed earlier Tuesday.
On top of this, wind output in Germany is at its lowest level in
five weeks, boosting demand for gas even further. In short, "the
combination of low wind power and very restricted flow of Russian
gas is leading to soaring gas prices in Europe," Martinsen
said.
London three-month copper futures are up after worries over the
Omicron variant weighed on prices during Monday.
Equities and commodities markets all appear to be staging a
relief rally with a weaker dollar also helping dollar-denominated
commodities become less expensive for other currency holders.
Still, "low liquidity and volatility combined have intensified
market weakness across the board, and further tightening of
lockdown restrictions should add to the weakness during the
Christmas period [in copper]," Sucden Financial's Daria Efanova
said.
Meanwhile, the weaker dollar means London gold prices were
up.
EMEA HEADLINES
German Consumer Confidence Is Expected to Fall in January Due to
Inflation and Omicron Fears
Consumer sentiment in Germany is expected to deteriorate
noticeably in January, due to rising inflation and a surge in
coronavirus cases, according to data released by market-research
group GfK on Tuesday.
GfK's forward-looking consumer sentiment index forecasts
confidence among households falling to minus 6.8 in January from a
revised figure of minus 1.8 points in December. Economists polled
by The Wall Street Journal anticipated a drop to minus 2.5
points.
Qatar Airways Sues Airbus in A350 Surface Defect Dispute
Qatar Airways said late Monday it has filed legal proceedings
against European plane maker Airbus SE related to fuselage surface
degradation on some of its A350 widebody jets.
Qatar Airways said it has so far grounded 21 A350 jets because
of the issue, which couldn't be solved through discussions between
the two companies.
Turkey's Borrowing Costs Soar as Crisis Enters New Phase
ISTANBUL-Turkey's financial strains worsened and the country's
business community went into revolt, signs that the currency crisis
dogging the economy was heading into a dangerous new phase.
The lira plunged nearly 9% on Monday to more 17.86 against the
dollar, a record low, after President Recep Tayyip Erdogan vowed to
cut interest rates further in defiance of business leaders who have
spoken out against the government's monetary policy in recent
days.
Novavax's Covid-19 Vaccine Approved by EU
Novavax Inc.'s Covid-19 vaccine was recommended for use by the
European Medicines Agency, marking the first endorsement by a major
regulator of a shot that uses an established technology.
A scientific committee said the Novavax shot, dubbed Nuvaxovid,
was safe and effective. The European Commission almost immediately
granted conditional marketing authorization in the European Union.
The approval applies to adults only.
Davos Economic Forum Is Postponed as Omicron Leads to Further
Cancellations, Travel Bans
Israel is set to bar its citizens from traveling to the U.S. and
Canada because of the spread of the Omicron variant-as the World
Economic Forum said it would postpone next month's annual meeting
in the Swiss mountain resort of Davos for the second successive
year.
As Omicron continues to drive new restrictions on travel and
social interactions, Israel's government said it would place the
U.S. and Canada along with eight other nations on a growing list of
countries to which its citizens are barred from traveling.
Egyptian Court Sentences Three Activists Despite International
Pressure
CAIRO-An Egyptian court sentenced three prominent activists
charged with joining a terrorist group and spreading false news to
up to five years in prison, defying international pressure to
release them in a case that has drawn scrutiny of the country's
human-rights record.
A state security court in Cairo on Monday sentenced political
dissident Alaa Abdel-Fattah to five years in prison, according to
his family and state media. Rights lawyer Mohamed el-Baqer and
blogger Mohamed Ibrahim were sentenced to four years each on the
same charges.
GLOBAL NEWS
Booming U.S. Economy Ripples World-Wide, Straining Supply Chains
and Driving Up Prices
FRANKFURT-A booming U.S. economy is rippling around the world,
sucking in imports, straining global supply chains and pushing up
prices.
The force of the American expansion is also inducing overseas
companies to invest in the U.S., betting that the growth is still
accelerating and will outpace other major economies.
Wall Street Had a Red-Hot Year, But Can It Last?
Wall Street has enjoyed a second straight year of feverish
revenue growth. As 2022 approaches, however, big banks face a major
challenge in maintaining that torrid pace of business.
A white-hot market for deals, coupled with strong capital
markets and steady demand for financial services from wealthy
clients, have led to record results at large banks. At Goldman
Sachs Group Inc., revenue reached $46.7 billion this year through
Sept. 30 and Morgan Stanley booked $45.2 billion, both record
highs. The final quarter of the year is expected to be strong for
banks' revenue as well.
Davos Economic Forum Is Postponed as Omicron Leads to Further
Cancellations, Travel Bans
Israel is set to bar its citizens from traveling to the U.S. and
Canada because of the spread of the Omicron variant-as the World
Economic Forum said it would postpone next month's annual meeting
in the Swiss mountain resort of Davos for the second successive
year.
As Omicron continues to drive new restrictions on travel and
social interactions, Israel's government said it would place the
U.S. and Canada along with eight other nations on a growing list of
countries to which its citizens are barred from traveling.
U.S. Sets 55-Mile-a-Gallon Fuel-Efficiency Standard for 2026
Models
WASHINGTON-The Biden administration on Monday raised
fuel-efficiency standards for passenger cars and light duty trucks,
saying the new standards will reduce pollution and save consumers
billions of dollars at the gas pump.
Auto makers must meet a fleetwide average of 55 miles a gallon
for cars and light trucks by model year 2026, up from the 43 mpg
standard set by the Trump administration for that year. The
fleetwide mileage standard for the current 2021 model year is 40
mpg.
Schumer Plans Build Back Better Vote Next Year
WASHINGTON-Sen. Joe Manchin's opposition to the party's roughly
$2 trillion education, healthcare and climate package left
Democrats grasping for a new path forward Monday, with Senate
Majority Leader Chuck Schumer saying that the Senate would vote on
the bill early next year despite the pivotal lawmaker not being on
board.
After broadcasting his opposition to the bill a day earlier, the
West Virginia Democrat said Monday that lawmakers should start from
square one to rebuild a potential package and criticized the White
House for its handling of the talks. Mr. Manchin's position
effectively killed the bill in its current form and put President
Biden's economic agenda in jeopardy.
To Track Covid-19 Surges, Scientists Are Studying Sewage
Public-health experts traditionally track the spread of an
infectious disease through clinical data such as test results,
hospitalizations and deaths. As Covid-19 continues to spread,
scientists are turning to an alternative measure: wastewater
analysis. SARS-CoV-2, the virus that causes Covid-19, can be shed
in an infected person's feces. By sampling sewage at
waste-treatment plants, scientists can get a picture of how
widespread Covid-19 has become in a community, and how its
prevalence changes over time.
The extent of Covid-19 testing has varied throughout the
pandemic. Because wastewater can be sampled at regular intervals,
it may provide a reliable adjunct to data from clinical tests.
Biden Administration to Distribute 500 Million At-Home Covid-19
Test Kits
WASHINGTON-The Biden administration will distribute 500 million
free at-home Covid-19 testing kits to Americans and take steps to
deploy federal medical personnel to overburdened hospitals this
winter, as the Omicron variant spreads around the country.
President Biden will outline the plan during a speech at the
White House on Tuesday. His administration is grappling with how to
publicly underscore the urgency surrounding the highly
transmissible variant, while seeking to convey that the U.S. is
better prepared to battle the pandemic than it was a year ago.
NASA's Webb Telescope to See Deeper Than Hubble to Edge of
Universe
Move over, Hubble. On Friday, NASA will launch the largest and
most powerful space telescope ever built.
Omicron Variant Accounts for 73% of U.S. Covid-19 Cases, CDC
Says
The Omicron variant caused more than 70% of recent Covid-19
cases in the U.S., the Centers for Disease Control and Prevention
said Monday, highlighting its substantial increase in
infectiousness compared with earlier versions of the virus.
The CDC said Monday that Omicron had overtaken the Delta variant
of the coronavirus in the U.S. and accounted for an estimated 73%
of infections for the week ending Dec. 18.
New Zealand Delays Start of Border Reopening Due to Omicron
WELLINGTON, New Zealand-New Zealand's plan to gradually reopen
its border has been delayed until March to slow the arrival of the
Omicron variant of Covid-19, the government said Tuesday.
The country, which closed its border in March last year as part
of measures to halt the spread of the coronavirus, had planned to
allow vaccinated citizens to return from mid-January without
undergoing quarantine.
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(END) Dow Jones Newswires
December 21, 2021 06:28 ET (11:28 GMT)
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