MARKET WRAPS

Stocks:

European markets rose as oil prices increase and as investors digest the outcome of the German elections.

The DAX, Germany's benchmark stock index, rose 1% in the best intraday performance among Western European indexes. Germans voted for a new chancellor over the weekend. The initial results showed a tight race that will likely mean lengthy coalition talks and no major changes to policy, according to Peter Schaffrik, a global macro strategist at RBC Capital Markets.

"For markets this means continuity. At the end of the day, it will remain a centrist government in all cases," Mr. Schaffrik said. "Germany's fiscal stance will remain within the boundaries of what the market will find easily acceptable."

German policies will continue to evolve but not shift dramatically, Berenberg chief economist Holger Schmieding said.

In the first federal election in 16 years without Merkel, Germans don't seem to yearn for fundamental change, he said.

Both a traffic light and a Jamaica coalition--the two most likely options--would continue the German tilt of the last eight years toward a more relaxed, centre-left and greener policy stance, characterized by more spending on digital, infrastructure, climate protection and health, and a new attempt to complete the European banking union without softening Germany's position very much.

"Differences in the overall fiscal stance between traffic light and Jamaica wouldn't be big enough to change the outlook for German or Eurozone aggregate demand," Schmieding said.

The pan-continental Stoxx Europe 600 advanced 0.7%, with stocks that benefit from the loosening of pandemic restrictions leading the index higher.

Shares on the move:

Office-landlord and WeWork competitor IWG rose nearly 7%. Travel stocks rallied. International Consolidated Airlines Group rose 3.7% and Aeroports de Paris climbed 4.8%. Rolls Royce jumped 7%, rising for a second trading session after the jet-engine maker won a deal to supply the U.S. Air Force fleet of B-52 bombers.

Data in focus:

Financial markets are assuming that German coalition negotiations will drag on for a long time and this might spark some volatility, said Lale Akoner, senior market strategist at BNY Mellon Investment Management.

"We know markets do not like uncertainty and should therefore expect higher volatility," she said. Coalition outcomes do have implications for bonds markets, she added. A "traffic light" coalition--one with SPD, FDP and Greens--"may result in a material change in political regime and higher fiscal spending--meaningfully deviating from [Chancellor Angela] Merkel's frugal era."

U.S. Markets:

Stock futures rose, and oil hit its highest level in nearly three years, as fears about China Evergrande Group 's debt problems waned and investors bet on further economic reopening from the pandemic.

Stocks swung last week as fears about Evergrande's debt problems weighed on markets. Despite the Chinese property developer missing a bond coupon payment, the S&P 500 still finished the week up 0.5%.

Federal Reserve Chairman Jerome Powell helped boost confidence when he said the U.S. economy has recovered sufficiently for the central bank to potentially announce the start of bond-purchase tapering at its next meeting.

"People have had time to think over the weekend and have decided that this is another occasion to buy the dip," said Sebastien Galy, a macro strategist at Nordea Asset Management, referring to the practice of buying after stocks fall. "The high levels of liquidity in the market changes our view of the world and how fast we fade the fear."

At 8:30 a.m. ET Monday, fresh data on new U.S. orders for durable goods in August is set to be released. Economists are expecting an increase, as business investment and consumer spending was strong.

There are a number of Federal Reserve officials due to speak this week, with Monday including speeches from Chicago Fed President Charles Evans, New York Fed President John Williams and Fed Gov. Lael Brainard.

Forex:

Germany's federal elections, where the center-left SPD party won a narrow victory and a government is unlikely to be formed for weeks, likely won't have any immediate impact on the euro, Commerzbank said.

The issues affecting the euro "will only begin to emerge slowly," said currency analyst Ulrich Leuchtmann. A government favoring greater EU fiscal consolidation would be euro-positive, and a SPD-Green-Liberal coalition could take this route, depending on concessions made to the Liberals.

A tougher stance towards China might strain Europe-China relations, which is likelier if the Greens and Liberals have a big influence. "The example of the U.S.-Chinese trade war suggests that this might lead to appreciation potential for the euro," Leuchtmann said.

The U.K.'s supply constraints could send the pound lower even though the market has recently priced in more interest rate rises by the Bank of England for next year, MUFG Bank said.

The seriousness of supply side bottlenecks was underlined by the U.K. government's decision to offer temporary visas to fuel tanker and food truck drivers, and to poultry workers, MUFG currency analyst Lee Hardman said.

"The latest developments are creating a more negative combination of weaker growth and higher inflation in the U.K. which we believe is a bad mix for pound performance." GBP/USD could weaken, especially if it falls below the 1.3600 support level, he said.

Bitcoin recovered after falling in reaction to Friday's news that China will ban all cryptocurrency transactions and mining. Bitcoin rose 5.6% to $43,858, having fallen as low as $41,120 on Friday, according to CoinDesk.

"The impact of the latest Chinese news on Bitcoin's price was significant but not dramatic as the $40K support held well during the kneejerk drop and during the weekend," Swissquote Bank analyst Ipek Ozkardeskaya said.

"But Bitcoin is still in the bearish consolidation zone and should make a move above the $44/45K mark to step back to the positive trend, otherwise we may see the price of a coin fluctuating between $40K and $45K range without too much excitement for traders."

Bonds:

The yield on the 10-year benchmark U.S. Treasury note ticked down to 1.447% Monday, from 1.459% Friday, capping a four-day rise that drove the biggest weekly increase since March.

Investors are likely to continue to sell U.S. Treasurys and U.K. government bonds, pushing their yields higher, as they price in the possibility of higher interest rates, said Mizuho.

"The move higher in yields should continue in U.S. Treasurys and more forcefully in GBP rates," analysts at the Japanese bank said.

The Bank of England's surprise comments last week that the latest developments had strengthened the case for modest tightening makes foreign selling of gilts more likely, they said.

Corporate bond purchases by the European Central Bank are likely to partially offset supply pressure this month, said UniCredit.

In particular, ECB's bond-buying activity should support euro investment-grade nonfinancial senior debt, alleviating the technical pressure from the strong new-bond supply this month, analysts at the bank said.

Sales of new debt by companies tracked by the iBoxx nonfinancial corporate bond index reached EUR27 billion so far this month, they added.

A rebound in risk-on sentiment Monday may lead to tighter credit spreads, unwinding some of last week's spread widening in hybrid debt and high-yield corporate bonds, said UniCredit.

"Despite ongoing concerns about developments in the Chinese real estate sector, appetite for risk looks to be up this morning," analysts at the bank said, adding that market sentiment is in the driver's seat this morning.

This may lead to at least a partial reversal of last week's spread widening in hybrids of about 6 basis points and of 4 bps for high-yield debt, they said.

Commodities:

Oil prices rose thanks in part to broader concerns over the tightness in energy markets, with oil demand expected to get an additional boost from gas to oil switching over the course of this winter, according to DNB Markets' Helge Andre Martinsen.

Those gains also come after Goldman Sachs on Sunday increased its year-end Brent forecast by $10 to $90 a barrel.

"The current global oil supply-demand deficit is larger than we expected, with the recovery in global demand from the Delta impact even faster than our above consensus forecast and with global supply remaining short of our below consensus forecasts," Goldman Sachs's Damien Courvalin said.

Gold prices traded sideways as investors shun the metal in favor of other assets. Investors continued to wind down their gold positions last week as the precious metal's lackluster price performance made other assets more appealing, Commerzbank said.

Gold exchange-traded funds tracked by FactSet saw a net outflow of $464 million last week. Speculative investors also slashed their exposure to gold futures, according to CFTC data. Money managers cut their net long positions in gold futures by 24,000 lots in the week to 21 September. That is equivalent to selling 76 metric tons of gold in one week, noted Commerzbank.

Copper prices edged lower as the dollar rises and investors weigh risks from central bank tightening and the Evergrande saga. Three-month copper on the LME edged down 0.4% to $9,317 a metric ton.

Other base metals also begin the week on the ropes. Aluminum fell 1.2% to $9,316.50 a ton while nickel fell 1.6% to $18,900 a ton.

"Deleveraging and regulatory pressures will continue to see tailwinds morph to headwinds in the coming months," TD Securities said in a note.

The Fed is likely to begin tapering next month, "[suggesting] that macro forces will increasingly point to the downside as the path of least resistance in the coming months," the bank said.

EMEA HEADLINES

Google Pushes to Overturn EU's $5 Billion Antitrust Decision on Android

BRUSSELS-Alphabet Inc.'s Google begun its appeal Monday to overturn a $5 billion antitrust fine imposed by the European Union, contending that its Android operating system for mobile devices has boosted competition rather than foreclosing it.

The tech giant presented oral arguments in Luxembourg before the EU's second-highest court, in its appeal to overturn the 2018 decision from the bloc's antitrust enforcer. In that case, EU authorities found Google had illegally abused the market power of Android to push companies that manufacture and distribute Android phones into agreements aimed at entrenching and expanding the dominance of the Google search engine on mobile devices.

Center-Left Wins Narrow Victory in German Elections

BERLIN-Germany faces weeks and perhaps months of uncertainty as Sunday's narrow victory for the center-left in national elections left open the shape and agenda of its next government and offered little clarity about who would succeed Chancellor Angela Merkel.

At least initially, the world's fourth-largest economy and the European Union's biggest member could find itself without strong leadership, then with a weakened government in the following four years.

How France Overcame Covid-19 Vaccine Hesitancy

PARIS-When France started vaccinating its population at the start of the year, it had one of the highest rates of hesitancy in the world. Today, it has one of the highest vaccination rates among larger Western countries, after a mix of enticements and government pressure pushed millions of French to receive the shot this summer.

The success of the French campaign is such that the government has floated the idea of loosening in parts of the country some of the restrictions it put on this summer. Notably, that includes the requirement to show a health pass with the holder's vaccine status or test results to eat out, go to nightclubs or attend sports events. On Sept. 22, France announced plans to end the requirements for children to wear masks in primary schools in some parts of the country.

Prudential to Raise $2.4 Billion From Hong Kong Offer

Prudential PLC will raise $2.4 billion by issuing new shares, proceeds of which will be used by the insurer to redeem high-coupon debt due in six months and invest for growth.

The U.K. insurer will sell 130.8 million new shares in the Hong Kong offer at a maximum price of 143.8 Hong Kong dollars per share (US$18.46), Prudential said late Sunday.

At Deutsche Bank's DWS, Issues With Data Were at Heart of Sustainable-Investing Problems

In its latest annual report, Deutsche Bank AG's DWS Group said, "ESG data is the cornerstone of our ESG analysis," referring to the asset-management firm's push to be a leader in one of the hottest segments of Wall Street: using environmental, social and governance criteria to make investments.

Inside DWS, executives questioned the data, and fund managers ignored calls to use the information to judge which investments to make, according to previously undisclosed internal emails and the company's former sustainability chief, Desiree Fixler.

Tech Boom Floods Israel's Silicon Valley With Cash, Exposing Divisions

TEL AVIV-Nir Zohar started at Wix.com in 2007 as office gopher. Today, he is chief operating officer at the Tel Aviv-based website designer, with a shareholding worth at least $56 million at current valuations.

The 43-year-old, who routinely wears shorts and a T-shirt to work, is one of a generation of Israelis who have become millionaires through the country's red-hot technology industry, and who are transforming Tel Aviv.

U.S., Russia Should Deepen Military Communications, Mark Milley Says

WASHINGTON-Army Gen. Mark Milley, chairman of the Joint Chiefs of Staff, said the U.S. and Russian militaries need to expand and deepen their communication and stressed that dialogue between the two adversaries could help de-escalate a future crisis.

Gen. Milley, fresh from a meeting in Helsinki this week with his Russian counterpart, said that adding to existing communication channels already in effect would help each side understand the other's plans and moves.

Covid-19 Vaccine Gap Between Rich and Poor Nations Keeps Widening

The central African nation of Burundi has yet to administer a single Covid-19 vaccine. In Kinshasa, a megacity of 12 million in the Democratic Republic of Congo, healthcare workers have given out fewer than 40,000 Covid-19 shots. In Uganda, people line up for hours outside hospitals only to be turned away amid dwindling vaccine supplies.

Nearly 10 months after the first Covid-19 vaccine became available to the public, the divide between nations that have shots and those that don't is starker than ever. The U.S. and other rich countries such as Israel and the U.K. are doling out third shots, while in low-income countries-the vast majority of which are in Africa-just 2.2% of people have received even a single dose.

GLOBAL NEWS

Commodity Boom Is Too Much of a Good Thing for Many Traders

It has been a banner year for fossil-fuel, metals and agricultural markets. For many commodity traders, the boom in prices has had an unexpected effect: a credit crunch that is reshaping the industry in favor of the largest players.

Higher prices are requiring traders to borrow more money to finance the same volume of oil, copper or coffee. In some instances, extreme or unusual weather is causing gyrations in commodity prices, prompting traders to amass cash in a pinch.

After Early Investors Flee SPAC Deals, Day Traders Rush In

Day traders are targeting some companies that recently closed SPAC mergers, reinvigorating some of the meme-stock excitement that helped make such deals popular early in the year.

The latest special-purpose-acquisition-company excitement focuses on firms like cybersecurity firm IronNet Inc. that suffered significant investor withdrawals ahead of going public by closing SPAC mergers. High withdrawals leave the companies going public with less cash to put into their businesses and can make it harder for them to meet the growth projections they made as part of the deals with so-called blank-check companies.

Economy Week Ahead: Consumer Spending, Inflation, Manufacturing

The Commerce Department's monthly report on U.S. consumer spending highlights this week's economic data.

Cargo Piles Up as California Ports Jostle Over How to Resolve Delays

Nike Inc. doesn't have enough sneakers to sell for the holidays. Costco Wholesale Corp. is reimposing limits on paper towel purchases. Prices for artificial Christmas trees have jumped 25% this season.

Despite mounting shipping delays and cargo backlogs, the busiest U.S. port complex shuts its gates for hours on most days and remains closed on Sundays. Meanwhile, major ports in Asia and Europe have operated round-the-clock for years.

In a Troubled U.S.-China Relationship, Moments of Pragmatism Emerge

Behind-the-scenes dealings that freed a Chinese executive from U.S. prosecution removed a stumbling block between the nations and demonstrated a little-noticed pragmatic dimension to the relationship.

The U.S. and China are at loggerheads on numerous fronts, from technology and human rights to Beijing's territorial claims; the United Nations secretary-general this month termed the nations' relationship as "completely dysfunctional."

Debt-Limit Standoff Could Force Fed to Revisit Emergency Playbook

A crisis-management playbook Federal Reserve officials created years ago could guide their response this fall if the federal government can't pay all its bills because of a political standoff over raising the federal debt limit.

The options include the Fed buying Treasury securities in default on the open market and selling Treasurys owned by the Fed to counteract potentially severe strains in financial markets, according to the transcript of an October 2013 conference call.

Bitcoin Miners Eye Nuclear Power as Environmental Criticism Mounts

Bitcoin miners, under fire for their sizable environmental footprint, are forging partnerships with owners of struggling nuclear-power plants with electricity to spare.

The matchups have the potential to solve key issues facing each industry, executives and analysts say: Electricity-hungry bitcoin miners want stable and carbon-free power, while nuclear plants facing competition from cheaper power sources need new customers.

U.N. Members Seek New Cyber Discussions Amid Rising Ransomware Attacks

The future of United Nations-led efforts to create rules around how nations should behave in cyberspace is unclear, researchers and experts say, even as countries respond to a growing number of ransomware attacks.

U.N. member states in a cyber discussion group struck an agreement in March on a set of so-called norms, or nonbinding principles that include a prohibition on attacking critical infrastructure in other countries. Russia and France, however, proposed two competing groups to replace that forum, which was scheduled to end this year.

Center-Left Wins Narrow Victory in German Elections

BERLIN-Germany faces weeks and perhaps months of uncertainty as Sunday's narrow victory for the center-left in national elections left open the shape and agenda of its next government and offered little clarity about who would succeed Chancellor Angela Merkel.

At least initially, the world's fourth-largest economy and the European Union's biggest member could find itself without strong leadership, then with a weakened government in the following four years.

Congress Heads Into Tumultuous Week Pressured by Converging Deadlines

WASHINGTON-A slew of high-stakes deadlines will collide on Capitol Hill this week, setting up potentially chaotic negotiations against the backdrop of expiring government funding and the threat of a possible U.S. default.

Even by the standards of a Capitol used to operating under pressure, this week's maelstrom of legislative and fiscal crosscurrents is setting the stage for an extraordinary sprint. Democratic leaders are trying to shepherd two complicated legislative packages: a roughly $1 trillion bipartisan infrastructure bill and a sprawling healthcare, education and climate package whose proposed $3.5 trillion price tag and contents are still under intense debate within the party.

WHO Seeks to Revive Stalled Inquiry Into Origins of Covid-19 With New Team

The World Health Organization is reviving its stalled investigation into the origins of the Covid-19 virus as agency officials warn that time is running out to determine how the pandemic that has killed more than 4.7 million people world-wide began.

A new team of about 20 scientists-including specialists in laboratory safety and biosecurity and geneticists and animal-disease experts versed in how viruses spill over from nature-is being assembled with a mandate to hunt for new evidence in China and elsewhere.

Covid-19 Panel of Scientists Investigating Origins of Virus Is Disbanded

Columbia University professor Jeffrey Sachs said he has disbanded a task force of scientists probing the origins of Covid-19 in favor of wider biosafety research.

Dr. Sachs, chairman of a Covid-19 commission affiliated with the Lancet scientific journals, said he closed the task force because he was concerned about its links to EcoHealth Alliance. The New York-based nonprofit has been under scrutiny from some scientists, members of Congress and other officials since 2020 for using U.S. funds for studies on bat coronaviruses with the Wuhan Institute of Virology, a research facility in the Chinese city where the first Covid-19 outbreak occurred.

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(END) Dow Jones Newswires

September 27, 2021 06:37 ET (10:37 GMT)

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