MARKET WRAPS

Watch For:

UK monthly retail sales figures, UK Public sector finances; Euro area balance of payments; ECB's Lagarde speaks; updates from Saint-Gobain, Kingfisher.

Opening Call:

Another record close on Wall Street could lift European stocks at the open on Friday. In Asia, stocks were mixed, with most in the region higher, while Hong Kong stocks were down. The dollar strengthened, while Treasury yields and oil prices declined and gold edged higher.

Equities:

European stocks are set to open higher Friday, tracking gains on Wall Street and in most of Asia.

U.S. stocks hit another record Thursday on strong department store earnings and unemployment data showed the labor market is continuing to recover.

Stocks have wavered this week as earnings rolled in and concerns about rising consumer prices continued. Results have overall been strong, but some major companies such as Target have been hit by supply-chain snarls and rising costs.

"Markets are trying to figure inflation out, and maybe part of that is just how temporary the situation will be," said Jim Polk, head of equity investments at Homestead Funds. "Concerns about congestion and how much that's impacting inflation-those are really the big things."

Some investors are closely watching for a Federal Reserve chair nomination after President Joe Biden hinted to reporters Tuesday he could reveal his choice around the end of the week. President Biden will be making his pick between current chair Jerome Powell or Fed governor Lael Brainard.

Forex:

The number one investment opportunity in the U.K. is sterling as the Bank of England looks set to raise interest rates before other central banks, UBS Global Wealth Management said.

"We would expect that the BOE is more hawkish than say Europe or Switzerland," UBS chief investment officer Mark Haefele said. UBS expects EUR/GBP to fall to 0.82 by December 2022 from 0.8417 currently as it sees the BOE raising rates modestly while the European Central Bank stands pat.

However, it sees GBP/USD little changed at 1.34 by December 2022 as it anticipates the dollar will be lifted by safe-haven flows on slowing global growth and the Federal Reserve tapering asset purchases.

The U.S. dollar, sterling, Canadian dollar, Norwegian krone and New Zealand dollar should rise against the Swiss franc, euro, Japanese yen and Swedish krona on monetary policy divergence in 2022, UBS Global Wealth Management said.

"We group global central banks into relative hawks who are in the process of withdrawing stimulus or hiking rates, and doves, who favor maintaining accommodative policy and low rates for longer," UBS analysts said.

"As such, we expect appreciation for the USD, GBP, CAD, NOK, and NZD--currencies exposed to tightening monetary policies--relative to CHF, EUR, JPY, and SEK, which are still bound to relatively loose policies."

Asian currencies consolidated against the U.S. dollar in the early Asian session, and could trade in a narrow range for the rest of the day. There's a lack of any policy-relevant economic data, CBA said.

Bonds:

The decline in Treasury yields is likely to revert soon, asset manager Louis Navellier tells WSJ, as the US remains "an oasis" in the global economy.

Navellier noted that the reduction of yield-depressing bond buying by the Fed turned out to be less than he expected, but that could change as inflation remains strong.

"I still think the probability of seeing a 2% print on the 10-year by the end of the year is very high," he said.

UBS says investors seeking to boost their income will need to look for unconventional yield sources next year, as central banks are likely scaling back monetary accommodation. Those yield sources include US senior loans, private credit, synthetic credit and dividend-paying stocks, the bank said.

High-yield bonds from China, which have been underperformers amid the country's policy tightening on the property sector, are another source, as recent measures have been more supportive, UBS said.

Energy:

Oil declines in early Asia trade, pulling back from gains due to Europe's renewed Covid-19 restrictions that may hurt demand. German Chancellor Merkel is considering new measures to combat a surge in cases, while a more infectious variant is also said to be spreading in the U.K., ANZ said.

Meanwhile, the prospect that the U.S., China and possibly some other countries may be releasing oil from their strategic reserves, will likely hang over the market, CBA said. China has already said that it is preparing for a release of oil reserves.

Metals:

Gold edged higher, but may consolidate amid a lack of fresh catalysts after monetary-policy decisions from some central banks showed a diverging view of how they're fighting inflation.

The precious metal is stuck in a wait-and-see Fed mode, which could stay intact until year-end, Oanda said. Gold may consolidate between $1,850/oz and $1,880/oz until Wall Street gets a better handle on where risk appetite is heading next, Oanda added.

Copper rose in the early Asian session amid lingering signs of a tight market. Stockpiles of the metal at LME warehouses are down 45% since the start of October, ANZ said.

Also, most base metals are in deep backwardation, where spot prices are higher than futures, amid supply disruptions and strong demand following a recovery in economic activity, ANZ added.

Silver demand this year could rise to its highest level since 2015, outpacing supply and adding momentum to a recent price rebound, the Silver Institute projected. Silver is up about 13% this quarter, trimming its loss for the year to roughly 5.5%.

The climb in demand is expected to come from green projects, industrial applications and haven-seeking investors, Commerzbank analysts said in a note.

While inflation concerns have boosted silver and gold lately, some analysts expect those fears to moderate next year, potentially limiting investor demand for precious metals. The Silver Institute is a group of miners and traders that tend to be bullish on the metal.

TODAY'S TOP HEADLINES

House Set to Pass $2 Trillion Social Spending and Climate Bill

WASHINGTON-The House was poised to pass a roughly $2 trillion education, healthcare and climate package late Thursday, with Democrats looking to corral their slim majority to send the centerpiece of President Biden's economic agenda to the Senate after months of wrangling.

The sprawling bill calls for creating a universal prekindergarten program, capping child-care costs for many families, negotiating lower prescription drug prices and expanding tax credits for reducing carbon emissions, among other programs. In addition to expanding tax enforcement efforts at the Internal Revenue Service, the legislation raises taxes on some corporations and very high-income Americans.

Political Calculus Confronts Biden on Fed Pick of Powell vs. Brainard

Looming in the background of President Biden's choice for Federal Reserve chair is a political question: How much of a fight would Chairman Jerome Powell or governor Lael Brainard face to garner 50 votes in the U.S. Senate.

Mr. Biden hinted Tuesday that he could reveal his choice around the end of the week, though a White House official suggested the decision could slip into early next week. Advisers are making sure they have enough support for either candidate, according to people familiar with the matter.

Covid-19 Surge Prompts Renewed Lockdown in Parts of Europe

BERLIN-Parts of Europe are again locking down to prevent hospitals from becoming overwhelmed by a steep rise in Covid-19 patients as data shows a rise in infections among vaccinated people who are passing on the disease.

The German state of Saxony declared it would go into a partial lockdown for two or three weeks starting Monday, closing bars, restaurants and clubs and canceling all large events. Other badly hit German states are considering similar measures and may announce them in the coming days.

In Post-GameStop Reform Push, SEC Seeks More Disclosure of Stock Lending

The Securities and Exchange Commission is moving to bring greater transparency to the securities-lending market, where short-selling hedge funds borrow shares to bet against companies' stocks.

A new rule proposed by the SEC on Thursday would require firms that lend securities to report data on each loan to an oversight body such as the Financial Industry Regulatory Authority within 15 minutes of making the loan. Data on the loans would be made public.

Fed's Williams Flags 'Roaring' Recovery While Acknowledging Inflation Jump

Federal Reserve Bank of New York President John Williams said Thursday the U.S. economy's recovery is proceeding at a solid pace but stopped short of providing any hints on how he would like central bank policy to navigate the rebound from the depths of the coronavirus pandemic.

"The good news is the economy is roaring back," Mr. Williams said at a virtual event. "We're having huge gains in employment, unemployment is falling very quickly," he added.

U.S. Pushes Arms-Control Talks as China's Nuclear Arsenal Grows

TAIPEI-Washington is pushing for arms-control talks with China as the country, long an atomic also-ran, has rapidly expanded its nuclear arsenal with more warheads and more weapons to carry them.

U.S. officials say President Biden and his counterpart, Chinese leader Xi Jinping, this week agreed at a virtual summit to explore talks on what White House national security adviser Jake Sullivan described as strategic stability.

Unilever to Sell Lipton Tea to CVC Capital for $5 Billion

LONDON-Unilever PLC has agreed to sell the bulk of its tea business to CVC Capital Partners for EUR4.5 billion, equivalent to more than $5 billion, the consumer-product giant's latest move to jettison slower-growing parts of its business.

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11-19-21 0028ET