MARKET WRAPS
Stocks:
European stocks rose Friday, led by retail, technology and basic-resource stocks.
Oil prices recovered some lost ground after retreating when a Chinese government agency said it would release crude from strategic reserves to ease strains on refiners. Futures for West Texas Intermediate, the main grade of U.S. crude, rose 0.8% to $68.67 a barrel.
China has already sold from state stockpiles of metals to curb the rally in commodity prices, which pushed factory-gate prices to their fastest monthly rise in 13 years in August.
Metal prices rallied after a phone call between Presidents Biden and Xi Jinping raised hopes of a cooling in tensions and potential reduction in tariffs between the U.S. and China. Copper prices, which are sensitive to relations between the world's two largest economies, rose 1.5% to $9,536 a metric ton on the London Metal Exchange.
Aluminum prices rose 1.9% to $2,889.50 a metric ton, their highest level since 2008. A coup in Guinea, a major bauxite producer, has added fresh impetus to aluminum prices that were already on the rise due to snarled supply chains and strong demand.
Data in focus:
The U.K.'s sharp economic-growth slowdown in July sparks worries about stagflation amid inflation concerns, Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown, said.
Official data showed growth slowed to 0.1% in July from 1% in June, and compared with 0.5% growth expected by economists polled in a WSJ survey.
"This reading on the health of the economy is significantly worse than expected, and a particular worry is that many of the supply-chain issues have exacerbated since July, with companies in industries right across the board warning of problems," Streeter said.
Recruitment difficulties, product shortages and an increase in Covid-19 infections raise the possibility of stagflation, or lower economic growth combined with higher unemployment amid rising prices, she said.
U.S. Markets:
Stock futures rose suggesting major indexes may open with muted gains at the end of a choppy week on Wall Street.
Stocks remain close to record highs, but have turned volatile in September after climbing for much of the summer. Money managers point to an array of factors behind the choppiness.
They include high valuations and the prospect that the Federal Reserve may soon start to unwind some of the stimulus it lavished on markets near the start of the coronavirus crisis.
The spread of the Delta variant has added to investor jitters by raising the prospect of a coronavirus-induced slowdown in the economy this fall, said Jane Foley, head of foreign-exchange strategy at Rabobank.
"There are good reasons to make investors a little bit nervous," she said.
Investors will parse data on producer-price inflation in the U.S., due at 8:30 a.m ET. Cleveland Fed President Loretta Mester is scheduled to speak on monetary policy at a Bank of Finland event at 9 a.m. ET.
Forex:
The dollar fell on reduced flows into safe havens on optimism over news of a constructive discussion between U.S. President Joe Biden and his Chinese counterpart Xi Jinping.
The two leaders spoke for the first time in seven months on Friday amid continuing attempts to ease tensions. They discussed their shared responsibility to ensure competition doesn't "veer into conflict," according to a White House statement.
After the news, "invigorated risk sentiment" saw the dollar lose ground moderately across the board, RBC Capital Markets forex analyst Alvin Tan said.
There is no reason for the foreign-exchange market to reassess euro exchange rates after the European Central Bank announced plans to slow its emergency bond-buying program, Commerzbank said.
Analysts at the German bank said the ECB doesn't want to change the purchase volumes "too violently so that the bond market does not react in a huff" and an end to the Pandemic Emergency Purchase Programme next March seems quite unlikely.
The overall muted reaction in the single currency versus the U.S. dollar reinforces Commerzbank's view that it is the U.S. Federal Reserve, and not the ECB, that remains the decisive factor for EUR/USD.
The pound made headway against the dollar and the euro, with GBP/USD rising 0.3% to a one-week high of 1.3886 and EUR/GBP falling 0.2% to 0.8533, according to FactSet.
Bank of England Governor Andrew Bailey's remarks Wednesday, that he in the camp that deems minimum conditions for considering an interest rate rise have been met, "seem to be resonating," ING analysts said.
Bonds:
In the bond market, the yield on 10-year Treasury notes ticked up to 1.312% from 1.300% Thursday. Yields are on track to snap two weeks of gains. Analysts say strong demand from investors in Treasury auctions has bolstered prices.
Commodities:
Oil futures rose in Europe, recovering most of Thursday's losses mainly caused by China saying it had tapped into its state oil reserves to ease some pressure in raw-material prices.
Demand worries are also likely to persist, with U.S airlines warning of a travel slowdown, ANZ said.
"United, Southwest and other airlines said that a surge in Covid-19 cases is likely to hamper their recovery, with customer bookings slowing recently," it said.
Gold futures were up in Europe but set to end the week lower amid concerns about central banks' tapering plans. The metal has traded in a narrow range in recent months, caught between still-elevated inflation concerns and the prospect of tapering, analysts at Fitch Solutions said.
Tapering, "as well as the continued easing of restrictions as vaccination rates continue to rise, a strong global economic growth outlook and the temporary strengthening of the U.S. dollar will put a lid on gold prices," they said.
EMEA HEADLINES
Modest U.K. GDP Growth Sparks Stagflation Fears
London stocks inched higher on Friday, bouncing back from sharp losses, but investors were facing downbeat data that showed the economy struggling against continued fallout from the pandemic.
Gross domestic product rose just 0.1% in July, and remains 2.1% below its pre-pandemic peak, said the Office for National Statistics. It also fell short of consensus forecasts for 0.6% growth.
Holcim Divests Itself of Brazil Business
Holcim Ltd. has inked an agreement with Companhia Siderurgica Nacional to divest itself of its business in Brazil, a move the company says should strengthen its balance sheet and reduce its debt ratio.
The Swiss cement maker said Friday that it is selling its business in the country for an enterprise value of $1.03 billion, with the proceeds to be invested in its solutions and products business.
German Consumer Prices Increased Further in August, in Line With Forecasts
German consumer prices rose strongly in August, confirming preliminary data, statistics office Destatis said Friday.
Consumer prices rose 3.9% on year measured by national standards, in line with the forecast of economists polled by The Wall Street Journal. They rose 3.4% on year by European Union-harmonized standards, also in line with forecasts.
Cineworld Reaches Deal With Dissenting Regal Shareholders
Cineworld Group PLC said Friday it has reached an agreement with the dissenting shareholders of Regal Entertainment Group, which was acquired by Cineworld in 2018.
The U.K.-based cinema operator said it will pay $170 million to the dissenting shareholders.
Shell Weighs Mandating Covid-19 Vaccines for Workers
Royal Dutch Shell PLC is considering requiring that workers in select locations, including the Gulf of Mexico, receive Covid-19 vaccines, according to a company document.
The oil major considered the pros and cons of mandating vaccinations in the document, which was shared with Shell's executive committee earlier this month, though no decision has been taken, a person familiar with the matter said. The company's current policy is to strongly encourage vaccination but not require it, according to the document, which was viewed by The Wall Street Journal.
Russia, Belarus Agree on Economic Integration Pacts
MOSCOW-Russian President Vladimir Putin and his Belarusian counterpart, Alexander Lukashenko, signaled plans to deepen ties between Russia and Belarus, a major step forward in the Kremlin's long-held goal of exerting greater influence over its smaller neighbor.
The two presidents said Thursday that they met in Moscow to agree upon a series of more than two dozen agreements, including the free movement of goods and people, that will bind Belarus more tightly to Russia.
Italy Tries to Fix a Chronic Problem: Slow Courts
ROME-In 2009, Italian prosecutors began investigating Bank of America Merrill Lynch and one of its employees after a regional authority suffered losses on a derivative contract it had signed with the bank.
A full decade later, after spending years in court under the threat of heavy fines and long jail terms, everyone accused was acquitted, with judges ruling that no crime had taken place.
GLOBAL NEWS
Fed Officials Prepare for November Reduction in Bond Buying
Federal Reserve officials will seek to forge agreement at their coming meeting to begin scaling back their easy money policies in November.
Many of them have said in recent interviews and public statements that they could begin reducing, or tapering, their $120 billion in monthly purchases of Treasurys and mortgage-backed securities this year. While they are unlikely to do so at their meeting on Sept. 21-22, Fed Chairman Jerome Powell could use that gathering to signal they are likely to start the process at their following session, on Nov. 2-3.
Democrats Float Partnership, Buyback Taxes to Fund $3.5 Trillion Spending Plan
WASHINGTON-Senate Democrats offered proposals Friday for tighter tax rules on partnerships and an excise tax on stock buybacks, as lawmakers look to plug gaps in their fast-moving, $3.5 trillion healthcare, education and climate legislation.
(MORE TO FOLLOW) Dow Jones Newswires
09-10-21 0637ET
