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EUROPEAN MIDDAY BRIEFING - Stocks Edge Lower on -2-

03/18/2022 | 05:39am EDT

"While focus will be on the telephone conference between the U.S. and Chinese presidents today, at the same time, a further escalation of the Russian-Ukraine conflict cannot be excluded and bears the risk of triggering another flight to quality," analysts at the Italian bank said, adding that it could potentially lead investors to demand duration rather than credit risk, at least temporarily.

Duration is a measurement of a bond's interest-rate risk.

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U.K. borrowing costs fall for a second consecutive day after the BOE's policy statement Thursday was perceived as softer than expected.

Bank officials raised interest rates by 25 basis points to 0.75% in a decision that had been widely anticipated.

However, one policymaker unexpectedly voted to leave rates on hold and the tone of the press release was more cautious than previous communication in February, given an uncertain economic outlook.

The 10-year gilt yield traded last at 1.553%, down from Thursday's close at 1.572%, according to Tradeweb.

Commodities:

Oil prices remained volatile, holding above $100 a barrel amid warnings on supply tightness and pessimism on Russia-Ukraine peace breakthroughs.

Sanctions on Russia have disrupted energy supply chains and oil has spiked as much as 30% in the span of a few weeks.

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U.S. natural gas prices could gain on higher demand for liquefied natural gas exports, said Goldman Sachs, noting high gas utilization rates at U.S. LNG export plants.

It said the Ukraine war spurred European end-users to wean themselves off Russian natural gas supply and U.S. LNG exports could fill the gap. The market also appears tight, Goldman Sachs said.

"With producer discipline still keeping supply growth well below pre-pandemic levels, we believe U.S. natural gas prices should be supported."

Other News:

The positive correlation between commodity prices and the dollar is likely to persist, said Goldman Sachs.

It said a strong dollar has historically weighed on commodities but this doesn't seem to be the case now. The current energy shortage is pushing up prices of many commodities. At the same time, the U.S. is a beneficiary of the shortage due to its position as a net energy exporter, Goldman Sachs said. This in turn is giving a boost to the dollar.

"We continue to believe that commodities will defy a strong dollar and expect the FX-commodity correlation to remain positive."

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Fears are mounting about the continued flow of Ugandan gold exports after the U.S. Treasury Department imposed sanctions on the country's largest gold refiner, African Gold Refinery, and its owner in a bid to remove conflict gold from global supply chains.

Sasha Lezhnev, policy consultant at The Sentry said the measures targeting the Ugandan entity, one of Africa's largest refiners that exports around 10 tons of gold every year, will shake up the global gold supply chain. "Turning a blind eye to conflict gold now carries a heavy price," Lezhnev said.

Ugandan gold dealers have already been embroiled in a standoff with the Ugandan government since the start of the year over new levies on gold exports.


EMEA HEADLINES

EDF Aims to Earn $3.4 Bln in New Rights Issue

Electricite de France SA said Friday that it is aiming to secure more than 3.1 billion euros ($3.44 billion) via a capital increase to gain more financial flexibility and to help fund development operations in the coming years.

The state-controlled utility company will issue around 500 million new shares at a subscription price of EUR6.35, a discount of 28% to Wednesday's closing price, EDF said. Existing shareholders will be given preference in the subscription, and will receive one subscription right a share held, the company said.


Vonovia Targets Growth in 2022

Vonovia SE on Friday said it is planning to further grow revenue and funds from operations this year after the company acquired rival Deutsche Wohnen SE in 2021.

The German real-estate company said for 2022 it is targeting total segment revenue of between 6.2 billion euros ($6.88 billion) and EUR6.4 billion. It also guides for group funds from operations--the company's key figure for operational profitability also called FFO--between EUR2.0 billion and EUR2.1 billion.


How the U.S. and EU Cut Russia Off From the Global Economy

Shortly before Thanksgiving, Treasury Secretary Janet Yellen met with senior officials in the White House Situation Room to discuss a Russian troop buildup on the border of Ukraine. The meeting included top intelligence advisers, defense officials and diplomats, who concluded Russia might be preparing to invade.

Ms. Yellen said she would contact counterparts in Europe and elsewhere to urge them to begin preparations for an economic response, according to people familiar with the meeting, and she started making calls to coordinate after the holiday.


U.K.-based Ferguson Builds Its U.S. Finance Team Ahead of Move to NYSE

Ferguson PLC, a U.K.-based plumbing- and heating-supply company, is expanding its U.S.-based finance team and revamping its financial reporting ahead of the planned transfer of its primary listing to the New York Stock Exchange.

Ferguson shareholders last week voted in favor of shifting the company's primary listing to the NYSE from the London Stock Exchange. The move, set to take place on May 12, follows a yearslong effort by the company to shed businesses outside of North America. Following its sale last year of Wolseley, its U.K.-based business and former namesake, the company is generating all of its revenue in the U.S. and Canada.


Russia Averts Default After Investors Receive Foreign-Debt Payments

Russia made good on payments to foreign bondholders, according to investors and traders, averting default on its foreign debt in the face of the war in Ukraine and punishing Western sanctions.

Holders of two Russian dollar bonds said coupon payments arrived Thursday, a day late, but well within the 30-day grace period granted under the terms of the bonds.


Putin Rails Against Alleged Traitors as Economic Pain Begins to Bite

For weeks, Russian President Vladimir Putin has railed against foes in the West and in Ukraine, where his bloody invasion is bogged down after three weeks.

Now, with no clear end to the hostilities in sight and the Russian economy coming under enormous strain, Mr. Putin has issued an ominous warning: The Kremlin will tolerate no dissent. Moreover, those with ties to the West are squarely in the Kremlin's sights.


Desperation Mounts for Ukrainians in Mariupol as Russia Tries to Capture Key City

LVIV, Ukraine-Rescuers dug through the debris of a bombed theater in Mariupol where hundreds of Ukrainian civilians had sought shelter as Russian forces continued to shell the southern port city and other urban areas across the country.

The entrance to a bomb shelter under the theater in Mariupol was blocked when the building partially collapsed from a Russian airstrike late Wednesday night, said Pavlo Kyrylenko, head of military administration in the eastern region of Donetsk. Former governor Sergiy Taruta said on Thursday the shelter had remained intact and there were survivors.


Macron Proposes Increasing France's Retirement Age to 65

PARIS-French President Emmanuel Macron said Thursday he planned to increase the legal retirement age to 65 from the current 62, raising a controversial issue three weeks before national elections.

Mr. Macron proposed an overhaul of the country's pension system about two years ago, which led to a transport strike that lasted more than a month. The government shelved its plan when the Covid-19 pandemic hit.


GLOBAL NEWS

Eurozone Posted Record Trade Deficit in January as Energy Prices Jumped

The eurozone's trade balance swung to a record deficit in January from a surplus a year earlier as the cost of imported energy increased sharply, according to data from the European Union's statistics agency, Eurostat, released Friday.

The eurozone's trade deficit in goods--the difference between exports and imports--was 27.2 billion euros ($30.17 billion) in January, compared with a EUR10.7 billion surplus the same month a year earlier.


Inside the Nickel Market Failure: Massive Trades the Exchange Didn't See

LONDON-The war in Ukraine broke the nickel market. The risks had been building for years.

Banks and brokers lent heavily to producers and speculators eager to take a position on the humble metal, a key ingredient in stainless steel and electric-vehicle batteries.


The End of Zero: Prepare for a World With Higher Rates

This is the first column in a Heard on the Street series about the end of zero interest rates.

Warren Buffett has compared interest rates to gravity. That is an especially useful way to think about them right now.


Americans Are Having an Inflation 'Aha' Moment

The highest inflation in four decades became real for Matthew Rivera when he ordered a plate of chicken wings last month at a restaurant in the Catskill Mountains. He normally pays $8-10, and this time it was $20. The old, lower price was crossed out on the menu.

" 'Inflation,' " was the explanation from the waitress, he said. He ordered wings for his children but pledged not to do it again. "It wasn't worth it."


Bank of Japan Maintains Ultra-Easy Monetary Policy

TOKYO-The Bank of Japan on Friday kept its ultra-easy policy in place, distancing itself from a global wave of monetary tightening because inflationary forces remain weak in Japan.

The bank maintained its target for short-term interest rates at minus 0.1% and its target for the 10-year Japanese government-bond yield at around zero.


Overwhelmed by Omicron, Hong Kong Runs Out of Space for Its Dead

HONG KONG-People are dying from Covid-19 in Hong Kong at a rate that surpasses most of the world's worst pandemic peaks, with almost 300 deaths a day overwhelming the city's ability to cope.

(MORE TO FOLLOW) Dow Jones Newswires

03-18-22 0638ET

Stocks mentioned in the article
ChangeLast1st jan.
BERKSHIRE HATHAWAY INC. 3.75% 417401.44 Delayed Quote.-7.38%
BRITISH POUND / US DOLLAR (GBP/USD) 0.21% 1.23082 Delayed Quote.-9.29%
CANADIAN DOLLAR / US DOLLAR (CAD/USD) 0.28% 0.77698 Delayed Quote.-2.00%
DEUTSCHE WOHNEN SE 1.49% 23.09 Delayed Quote.-38.48%
ELECTRICITÉ DE FRANCE 2.02% 7.88 Real-time Quote.-21.77%
EURO / US DOLLAR (EUR/USD) 0.14% 1.058 Delayed Quote.-7.18%
INDIAN RUPEE / US DOLLAR (INR/USD) -0.08% 0.012773 Delayed Quote.-4.81%
LONDON BRENT OIL 1.23% 113.33 Delayed Quote.44.36%
LONDON STOCK EXCHANGE PLC 1.13% 7688 Delayed Quote.9.67%
NEW ZEALAND DOLLAR / US DOLLAR (NZD/USD) 0.01% 0.63172 Delayed Quote.-7.66%
S&P GSCI NATURAL GAS INDEX -1.97% 288.2293 Real-time Quote.68.39%
US DOLLAR / RUSSIAN ROUBLE (USD/RUB) -0.66% 53.623 Delayed Quote.-28.47%
VONOVIA SE 1.96% 32.31 Delayed Quote.-34.64%
WTI 1.07% 107.585 Delayed Quote.38.53%
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