MARKET WRAPS
Watch For:
EU New Commercial Vehicle Registrations in Europe statistics; Germany Foreign trade price indices.
Opening Call:
European stocks could extend gains as investors remain upbeat. U.S. stock futures were pointing higher. Stocks in Asia rise. Oil and gold edge higher.
Equities:
European stocks are set to open higher Thursday after stocks advanced on Wall Street with encouraging reports about the potential impact of the omicron variant of coronavirus and stronger U.S. economic data.
Major indexes are still on track for a Christmas week gain, with trading thinning as the holidays approach. Many world markets will be closed Friday in observance of Christmas.
"A cocktail containing better US Q3 GDP data, along with positive omicron headlines further inoculated financial markets against a year-end sell-off," said Jeffrey Halley at OANDA.
The latest surge in coronavirus cases because of the omicron variant has been hanging over markets, along with concerns about rising inflation and its impact on economic growth.
Meanwhile, the eurozone economy is set to hit a speed bump over the winter, Credit Suisse said. A renewed surge in coronavirus cases is leading to new restrictions and the sharp rise in gas prices has been sustained, which may crimp household and corporate incomes, Credit Suisse said.
The bank now expects the eurozone economy to grow 3.8% next year, lower than its previous projection of a 4.2% expansion. Looking further ahead, however, rising vaccine penetration should bring the new wave of Covid-19 cases to an end, while the acute squeeze on gas prices should abate in the spring, economists at Credit Suisse said.
"We expect the eurozone economy to quickly make up any ground lost over the winter," Credit Suisse said.
The U.K. economy remains among the hardest hit in the G-7 as the country's EU exit and the Omicron coronavirus variant weigh on trade and business spending, Pantheon Macroeconomics said.
Third-quarter business investment fell by a downwardly-revised 2.5% on quarter, while exports dropped 3.5%, due to continuing Brexit-related weakness and supply-chain disruption, official data cited by Pantheon show. Imports rose 1.1%, revised down from 2.5%.
"Net trade likely will continue to be a drag [in 2022], as British manufacturers continue to be slowly cut out of global supply chains due to Brexit," Pantheon economist Gabriella Dickens said. Meanwhile, Pantheon predicts Omicron will fuel a slowdown in on-quarter GDP growth in 4Q and 1Q 2022.
Forex:
The US dollar was slightly weaker in early Asia trading. "Yields were down a little today, the risk-on environment pervaded for the most part today," Ed Egilinsky, managing director and head of alternatives at Direxion, told WSJ.
"I don't know if it's the Santa Claus rally coming into full effect today." He thinks the Fed's increased hawkishness has lifted the dollar recently. "The Fed has acknowledged inflation isn't transitory," he said, and that's "led people to thinking there will be higher rates, and has been an impetus for a stronger dollar."
JPY weakened against most G-10 and Asian currencies, reflecting risk-on sentiment driven by abating concerns over the Covid-19 Omicron variant.
Studies continue to indicate that the Omicron variant is far below the Delta variant in terms of hospitalization risk and the U.S.
FDA has provided clearance for an oral Covid-19 treatment for emergency use, IG said.
The Norwegian krone could experience big moves in the coming days depending on the direction of risk appetite amid poor liquidity and a relatively empty domestic economic-data calendar, Danske Bank analyst Lars Sparreso Lykke Merklin said.
The krone is currently supported by improved market sentiment and a rebound in commodity prices, but Danske Bank remains "negative" on the currency, he said. Danske Bank expects EUR/NOK to rise to 10.30 in the next three months on "shakier" risk appetite, tighter global liquidity conditions and the Norges Bank making fewer purchases of the currency.
Bonds:
The 10-year Treasury yield was unchanged in Asian trading after it had its biggest drop in almost a week on Wednesday, despite data showing U.S. consumer confidence improved this month.
"We suspect Thursday's most tradable new information will be the recommended early close as trading volumes thin and investors head for the exit ahead of the long weekend," BMO's Jeffery and Ian Lyngen wrote in a note. In a period of thin liquidity in the Treasury market, "the technicals may play a greater role in dictating the immediate price action."
Energy:
Oil edged higher in the early Asian session, supported by data showing a bigger-than-expected decline in U.S. crude inventories. EIA said that inventories fell by 4.7 million barrels last week, compared with analysts' average estimate for a drop of 3.9 million barrels.
The growing use of oil, gas and coal to generate energy brings expectations of lower inventories and higher prices in absence of higher production, IG said.
Metals:
As year-end approaches, the spot gold market lacks momentum and is likely to consolidate in its current range, according to Phillip Futures. "With trading volume thin and major players away ahead of the year-end holidays, the gold market is expected to be choppy and noisy within a $50 trading range between resistance at $1,810 and support at $1,760," it said.
Silver and other precious metals, which have greater industrial uses, might be set for bigger moves as Omicron fears ease, which could spark "a revival" in those markets, Phillip Futures said.
Aluminum was higher in early Asian trading, supported by low inventories and rising demand in China, CreditSights said.
The earlier Chinese production curbs on energy-intensive companies, to meet its carbon-emission and energy-consumption goals, had caused a shortage of the industrial metal, it said.
Combined with rising consumption amid China's economic recovery, these are helping push aluminum prices up, CreditSights added.
TODAY'S TOP HEADLINES
Two Studies Show Much Lower Risk of Hospitalization With Omicron
LONDON-New data from Scotland and South Africa suggest people infected with the Omicron variant of coronavirus are at markedly lower risk of hospitalization than those who contracted earlier versions of the virus, promising signs that immunity as a result of vaccination or prior infection remains effective at warding off severe illness with the fast-spreading strain.
The findings begin to fill in unknowns around the severity of the disease caused by Omicron, a major variable critical to health authorities around the world as they gauge how to react to the new variant.
Pfizer's Covid-19 Pill Is Authorized in U.S.
U.S. health regulators cleared use of a Covid-19 pill from Pfizer Inc., the first drug that newly infected patients can now take at home to stay out of the hospital.
The authorization by the U.S. Food and Drug Administration on Wednesday permits doctors to prescribe the medicine to high-risk patients age 12 and older early in the course of disease, shortly after they develop symptoms.
Elon Musk's Share-Selling Spree Tops $15 Billion
Elon Musk on Wednesday unloaded more Tesla Inc. stock, bringing the total value of his share sales to more than $15 billion since the billionaire last month began a string of such transactions.
The sales came as Mr. Musk exercised more than 2.1 million Tesla stock options, according to regulatory filings late Wednesday. He sold more than 934,000 of the shares in the company he runs, valued at around $928.6 million, to cover tax withholdings, the disclosures state.
U.S. Consumer Confidence Improved in Early December as Inflation, Pandemic Fears Eased
American consumers felt more optimistic about the economy heading into the last weeks of the holiday season, despite higher inflation and rising Covid-19 case counts.
The Conference Board, a private research group, said its consumer confidence index rose to 115.8 in December from 111.9 in November.
Europe Moves Ahead on Minimum Corporate Tax as U.S. Stalls
The European Union Wednesday outlined its plans for implementing a global minimum tax rate on corporate profits in 2023 and said it is still confident the U.S. will be able to join it despite a recent setback in Congress.
The plan to impose a tax of at least 15% on the profits of large, international companies was agreed by 136 countries in early October and approved by President Biden and the other leaders of the Group of 20 leading economies later that month.
European Banks Prepare for Pullback in ECB Stimulus
Banks in Europe are issuing a particular type of bond in droves, locking in super low borrowing costs ahead of possibly tighter monetary policy in 2022.
Issuance of covered bonds-a type of debt sold by lenders-recently rose to the highest monthly level since before the pandemic began, according to data from Natixis. Banks sold 20.8 billion euros' worth, equivalent to around $23.5 billion, in September and 13.6 billion euros in October. In December, banks sold more than last year, although issuance typically slows during this month.
Aging Germany Is Running Out of Workers, Putting Europe's Largest Economy at Risk
BERLIN-Germany has long been ahead of the curve as a source of technical innovation and manufacturing. Now it is leading much of the developed world toward a demographic cliff edge that could put a damper on Europe's largest economy, raising pressure on its pension system and pushing inflation higher for years to come.
Economists forecast that Germany's workforce could peak as soon as 2023 and then shrink by up to five million people by the end of the decade. While the pandemic has exacerbated the trend, it is the impending retirement of the baby boomers that is fueling the labor crunch, economists say.
Santa Shopped Early in Spain Amid Supply-Chain Disruptions and Virus Fears -- Talking Markets
(MORE TO FOLLOW) Dow Jones Newswires
12-23-21 0039ET
