UKX FTSE 100 Index

MARKET WRAPS

Stocks:

European stocks fell as investors gave a downbeat response to Chinese economic data, though oil stocks gain as crude prices increase.

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."

All eyes remain on inflation, with attention in Europe focused on comments from Andrew Bailey over the weekend, after the Bank of England governor said the central bank would act to curb inflation.

Inflationary fears were stoked by higher commodity prices, as oil continued its apparently inexorable march higher.

Shares on the move: French banks' stocks have flown under the radar recently, but investors should see this as an opportunity to increase their exposure, as their returns potential makes them attractive, Deutsche Bank analysts said.

The German bank expects Societe Generale, Credit Agricole and BNP Paribas to signal higher payouts in their new mid-term targets and calculates a dividend yield of 7%-8% for the three banks over 2021-23, excluding potential catch-up dividends.

This is a premium of about 40% over European banks, Deutsche Bank noted.

"In our view, consensus estimates reflect a conservative view on shareholder payouts, given the ample capital buffers in place at all French banks, coupled with a vastly improved profitability outlook, and limited alternatives for the excess capital," it said.

U.S. Markets:

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.

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.

The euro remains one of the preferred funding currencies as the European Central Bank maintains a loose policy stance at a time when other major central banks are looking to withdraw stimulus, ING said.

"Clearly, the ECB is on a very different chapter in the monetary normalisation story than, for example, the Bank of England," ING analysts said. "We favor EUR/USD pressing the lower end of its 1.1525-1.1625 trading range."

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:

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.

U.K. borrowing costs rose Monday after Bank of England governor Andrew Bailey said over the weekend that the central bank will "have to act" to curb price pressures despite the uptick in inflation likely being temporary.

The yield on the 10-year benchmark gilt rises almost four basis points to 1.140% relative to Friday's close, according to FactSet.

Bailey warned that higher energy prices means inflationary pressures will last longer.

German Bunds seem torn between factors that drive yields in opposite direction, said Commerzbank's rates strategists. Comments from the ECB aiming to soothe fears of early tightening points to lower Bund yields, while bearish lift-off adjustments in the US and the U.K. push Bund yields higher.

"The coming days should show whether the bullish correction in European markets has scope to resume," said Commerzbank's rates strategists.

They added that a further acceleration of ECB rate hike expectations would risk undermining the credibility of the ECB's forward guidance which would probably trigger verbal interventions.

Weaker-than-expected Chinese gross domestic product data released this morning are weighing on market sentiment, primarily challenging European cyclicals and highly volatile corporate credit, said UniCredit.

"Within European corporate credit, Automobiles & Parts and Basic Resources may face headwinds, given their substantial exposure to China, " analysts at the bank sais, adding that technical support from moderate new-bond euro supply coupled with bond purchases by the ECB should limit the downside pressure.

Given their improved metrics and appealing returns versus the cost of funding, the Italian bank said it sticks to its recommendation to hold a bigger allocation to both sectors than the benchmark at this stage.

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.

EMEA HEADLINES

Philips 3Q Sales Missed Market Views, Lowers FY Guidance

Koninklijke Philips NV reported on Monday a rise in net profit for the third quarter but sales declined and it lowered its full-year growth and margin guidance.

The Dutch medical-technology group said its results were hit by supply-chain issues, which led to longer lead times to convert its strong order book to revenue during the period. It expects the problems to continue in the fourth quarter.

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.

German Reinsurers Eye Higher Prices After Flood-Hit Year

German reinsurers said Monday that they expect higher prices in Europe in January renewals as the industry handles major natural-catastrophe losses and higher inflation.

Muenchener Rueckversicherungs-Gesellschaft AG and Hannover Rueck SE's local subsidiary E+S Rueckversicherung AG said disastrous flooding in Germany, alongside losses due to the pandemic and rising inflation, will result in higher prices for primary insurance and reinsurance.

Siemens To Carve Out Large-Drives Applications Unit

Siemens AG said Monday that it will carve out its large-drives unit as it continues its strategy to refocus the group.

The German industrial and technology company will spin off the activities of its Large Drives Applications division, which makes heavy-duty drive systems for ships, mines and mills, into separate legal entities, a spokesman told Dow Jones Newswires.

Playtech Agrees to GBP Bln Aristocrat Leisure Takeover

Playtech PLC said late Sunday that it has agreed to a 2.1 billion-pound ($2.89 billion) takeover from Australian-listed gaming content and technology company Aristocrat Leisure Ltd. through its subsidiary Aristocrat (UK) Holdings Ltd.

Under the offer, accepting shareholders of the FTSE 250-listed gambling-technology company will get 680 pence in cash for each share owned. The offer price is a 58% premium to Playtech's closing price of 429.20 pence on Friday.

U.K. House Prices Hit Record High Across All Market Segments in October

U.K. house prices in October rose 1.8%, with every region and market segment delivering increases, according to new data from property portal Rightmove PLC.

The average price of property coming to the market rose by 5,983 pounds ($8,181) in October, the largest percentage jump for this time of year since 2015 and bringing the national average to an all-time high of GBP344,445, Rightmove said. The portal measured 88,694 prices across the U.K over the period from Sept. 12 to Oct. 9.

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.

Nigeria's Gangs Raised Millions by Kidnapping Children. Now the Government Can't Stop Them.

GUSAU, Nigeria-The masked men emerged from the forest on motorbikes, surrounding a young intelligence officer clutching a cash-filled bag. The ransom, nearly $50,000 in crisp Nigerian bank notes, wasn't for a person, but to retrieve a weapon that directly threatened the country's president.

A kidnapping gang encamped in Nigeria's Rugu forest had seized an antiaircraft gun in a clash with a military unit. That posed a threat to President Muhammadu Buhari, who had been planning to fly to his hometown about 80 miles away, and the government needed to buy it back.

British Police Question Alleged Attacker in Killing of Conservative Lawmaker David Amess

LONDON-British police Sunday were questioning a 25-year-old man they say stabbed to death a Conservative member of parliament as authorities sought to determine whether he was motivated by Islamic extremism.

The suspect in the killing of Tory lawmaker David Amess on Friday was identified as Ali Harbi Ali, a U.K. citizen of Somali descent, according to a British official. Authorities haven't officially named him. He was being held at a London police station under the Terror Act.

As Afghanistan Sinks Into Destitution, Some Sell Children to Survive

HERAT, Afghanistan-Desperate to feed her family, Saleha, a housecleaner here in western Afghanistan, has incurred such an insurmountable debt that the only way she sees out is to hand over her 3-year-old daughter, Najiba, to the man who lent her the money.

The debt is $550.

GLOBAL NEWS

China Faces Slower Growth Path as It Pursues Longer-Term Reforms

HONG KONG-With its pandemic recovery in the rear-view mirror, China now faces a prolonged period of slower growth with increasing policy uncertainties as Beijing attempts to carry out ambitious long-term reforms.

China's economy recorded a steeper-than-expected economic slowdown in the third quarter of the year, expanding 4.9% from a year earlier. The disappointing growth rate reflected a host of headwinds: Tighter rules on the property market that have chilled activity in the sector, widespread power shortages and continued concerns about Covid-19 that have weighed on consumer spending.

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.

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.

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.

'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.

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.

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.

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.

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.

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

(END) Dow Jones Newswires

October 18, 2021 06:37 ET (10:37 GMT)

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