Eurozone government bond yield spreads are under close scrutiny for the impact of prospective tighter monetary policy, said Eric Theoret, global macro strategist and European Central Bank specialist at Manulife Investment Management.
While financial conditions remain supportive of growth, "a reversal in trend seems likely, and we're watching intra-European bond spreads closely as ECB officials debate the future of the central bank's asset purchase program in the context of hotter-than-expected inflation."
Theoret points to uncertainty around the outlook for the ECB's balance-sheet policy that has caused bond-spread widening, most notably in Italy.
Yields on 30-year German Bunds have risen to "fairly attractive positive" positions from negative over the past month, said Mizuho's rates strategists ahead of Germany's auction in this maturity segment on Wednesday.
They expect the offer to be taken down fairly well, even as the EUR1.5 billion offer volume of the 0% August 2052 Bund is slightly larger than the typical EUR1 billion at this tenor, they added.
Sales of new euro-denominated corporate bonds have fallen drastically in volume so far this year as uncertainty over the speed of interest-rate rises in the U.S. shakes markets, said UniCredit.
Although supply is picking up, investment-grade non-financial firms have raised EUR9.5 billion so far this year, marking a 20% drop relative to the same period the year before. The fall is even more dramatic for riskier corporate debt. High-yield nonfinancial bond issuance plunged 70% to EUR5.5 billion in the same time frame.
Despite some signs that deal-making activity picking up, supply is likely to remain constrained. "The new-issue pipeline suggests a pickup in primary market activity in the coming weeks, but...there will be some limited supply pressure going forward," UniCredit cautioned.
Oil futures rose on a broad risk-on rally after Jerome Powell's testimony, with expectations that supply will remain constrained also supporting prices.
Powell's reassurances that the Fed can fight inflation were buoying risk assets including oil, said DNB Markets. At the same time, skepticism that OPEC can meet its production quotas was also supporting prices, said Joel Hancock, energy analyst at Natixis.
OPEC has pledged to increase supply each month but some members are failing to meet their quotas, Hancock said. "The real question is, what is the actual spare capacity of the group?"
Fitch Solutions said jet fuel demand could recover over the subsequent quarters after weakness in the first 3 months of the year, forecasting prices of the oil product to rise 2.4% to average $79.50/bbl in 2022 as global air-travel setbacks ease.
Fitch said the recovery in air travel stalled in December, which could set the stage for continued weakness in the first quarter. However, "barring a significant resurgence in global lockdown efforts and wider border closures, jet fuel demand should return to trend" upwards.
That said, Fitch said the long-term jet-fuel demand outlook is uncertain as international business travel may decline, despite pent-up demand likely boosting holiday air travel.
Gold edged lower with high inflation a key argument for firmer bullion prices but the prospect of higher U.S. interest rates to tame inflation seen as a negative, said analysts.
Goldman Sachs said the global aluminum market is likely to experience a "copper-style scarcity" this year, as energy shortages force European metal smelters to curb their operations.
Goldman Sachs estimates production losses of 340,000 tons in the first half, pushing the aluminum market into deficit. "Aluminum's projected global deficit [1.8 million tons] now just surpasses total visible global inventories, which increases the risk to a near-depletion of LME units this year as part of solving metal requirements."
DOW JONES NEWSPLUS
Philips 4Q Sales Hurt by Supply-Chain Issues, Customer Equipment Delays
Koninklijke Philips NV said Wednesday that sales for the last quarter of the year were below its expectations, blaming global supply-chain shortages and the postponement of customer equipment installations.
The Dutch health-technology group said group sales for the fourth quarter of 2021 are expected to be about 4.9 billion euros ($5.57 billion), around EUR350 million below the company's previous expectations. For the year, sales are now expected to fall 1% on a comparable basis to EUR17.2 billion.
Sainsbury Upgrades FY 2022 Views on Lower Costs, Higher Christmas Grocery Volumes
J Sainsbury PLC said Wednesday that like-for-like sales including fuel for the third quarter of fiscal 2022 fell, but upgraded its full-year market expectations on lower costs, market-share growth and higher grocery volumes during Christmas.
The U.K. grocer said like-for-like sales excluding fuel fell 4.5% in the 16 weeks ended Jan. 8. Like-for-like sales including fuel rose 0.6%, it said.
BMW Group 2021 Sales Advanced Despite 4Q Setback
Bayerische Motoren Werke AG said Wednesday that it sold more cars in 2021 compared with the previous year, helped by strong growth in its BMW brand and its electric-car offering.
The German auto maker sold a total of 2.5 million vehicles in 2021, up 8.4% from the year before. Sales at the BMW brand rose 9.1% to 2.2 million units, reaching their highest-ever level.
Volkswagen Group 2021 Deliveries Fell Amid Semiconductor Shortage
Volkswagen AG delivered fewer vehicles last year than in 2020 despite high customer demand and full order books due to the semiconductor shortage, but the group nearly doubled deliveries of its battery-electric vehicles.
The German car maker said Wednesday that it had delivered 8,882,000 vehicles to customers around the world in 2021, a 4.5% decline from 2020.
"2021 was very challenging due to global semiconductor shortages," said Christian Dahlheim, head of Volkswagen Group sales.
Whitbread 3Q Total Sales Rose 5%
Whitbread PLC said Wednesday that total sales for the third quarter of fiscal 2022 grew 5% and that its performance in the U.K. to Jan. 6 has been resilient despite the Omicron Covid-19 variant.
The FTSE 100-listed hotel-and-restaurant company said that in the six week period to Jan. 6, total U.K. sales were just 4.4% behind the same period in fiscal 2020--before the pandemic struck. However, it added that total food and beverage sales were down 17% due to the effect of the Omicron variant and increased government restrictions on eating-out in Scotland, Wales and Northern Ireland.
Just Eat Takeaway.com Orders Rose 14% in 4Q, Expects 2021 to Meet Views
Just Eat Takeaway.com NV said Wednesday that orders rose 14% in the fourth quarter of 2021, and that it expects to meet guidance for the full year.
The Amsterdam-headquartered food-delivery group said it processed 273.7 million orders in the fourth quarter compared with 240.4 million orders for the same period a year earlier, when treating the Grubhub business it acquired in June as if it had been consolidated earlier. Gross transaction value for the period was 7.3 billion euros ($8.3 billion), up from EUR6.2 billion a year before.
Equinor to Book $1.8B Impairment Amid Lower Reserves at U.K.'s Mariner Field
Equinor ASA said Wednesday it has cut its estimate of total recoverable reserves at the Mariner field, resulting in an impairment of around $1.8 billion in the fourth-quarter 2021 results.
The Norwegian energy major said recoverable reserves at the Mariner field, in the U.K. North Sea, are now estimated at about 180 million barrels, compared with an earlier assessment of around 275 million barrels.
AP Moeller-Maersk Accelerates Net-Zero Emission Targets
A.P. Moeller-Maersk said Wednesday that it is accelerating its net-zero emission targets, aiming to achieve net-zero greenhouse-gas emissions in 2040--a decade ahead of its initial 2050 ambition.
The Danish shipping company said its new emissions targets are expected to align the company with the net-zero criteria of the Science Based Targets initiative, the nonprofit organization that assesses whether corporate targets align with the 1.5 degrees Celsius limit on global warming.
Inside a Ransomware Hit at Nordic Choice Hotels
Nordic Choice Hotels, a chain with more than 200 hotels across Scandinavia and the Baltic countries, is still dealing with technology problems and the fallout from a data leak after a Dec. 1 ransomware attack.
U.S. Strikes Deal for Additional Supply of Covid-19 Antibody Treatment
U.S. officials on Tuesday ordered 600,000 doses of Covid-19 treatment sotrovimab, the only monoclonal antibody therapy thought to work against the Omicron variant, as a record number of cases puts hospitals under increasing pressure in parts of the U.S. and Europe.
Sotrovimab, made by GlaxoSmithKline PLC and Vir Biotechnology Inc., is now the only Covid-19 monoclonal antibody available for patients in the U.S. The government paused distribution of two other treatments, made by Regeneron Pharmaceuticals Inc. and Eli Lilly & Co. in late December, after early laboratory tests suggested they lost effectiveness against the new strain.
Downing Street Lockdown Parties Leave Headache for Boris Johnson
LONDON-British Prime Minister Boris Johnson is under growing pressure from Conservative lawmakers as a string of allegations about parties in Downing Street during Covid-19 lockdowns contribute to the ruling party's sharp fall in the polls.
This week an email surfaced from a senior adviser to Mr. Johnson inviting around 100 people to a "bring your own booze" event at the garden outside the prime minister's Downing Street residence in May 2020. At the time, English rules permitted meeting with only one other person outdoors.
2021 Is Expected to Rank as Biggest Year for Inflation in Four Decades
(MORE TO FOLLOW) Dow Jones Newswires