Global stocks moved slightly Monday in what is expected to be a quiet trading session, with U.S. markets closed in observance of the Martin Luther King Jr. Day holiday.
China's economy and central-bank policy and what this means for global growth is a key driver of market sentiment, said Florian Ielpo, head of macro at Lombard Odier Investment Managers.
"China is on a very different path than the rest of the world, it is a striking difference," Mr. Ielpo said. "We are nervous about what's happening in China right now."
Other analysts saw the rate cuts in a more positive light. Chinese authorities are likely to step up policy support, both monetary and fiscal, said Dong Chen, head of Asia macroeconomic research at Pictet Wealth Management.
Shares on the move: Unilever shares tumbled over 6% after the consumer-goods giant said over the weekend that it had approached GlaxoSmithKline and Pfizer about buying their consumer-health joint venture.
Its latest proposal valued the unit at $68.4 billion. U.K.-listed GlaxoSmithKline shares rose 5.5%. Track what the analysts are saying here .
Credit Suisse shares declined 1.5% after the bank's chairman resigned following an investigation into his personal use of a corporate jet and breaching of Covid-19 quarantine rules.
Credit Suisse Chairman Antonio Horta-Osorio's departure leaves the company with a lack of strong characters at the top and could prompt leadership questions, Citi analysts say as shares in the Swiss bank slip.
The scandal-ridden bank has named Axel Lehmann, who only joined the bank in November to chair the risk committee, as its new chairman. Lehmann has already backed the strategic course set by his predecessor, "which we understand, as a period of continuity is now a must for the bank," Citi said.
The U.S. bank expects Lehmann to adopt a more traditional, less hands-on approach to his role, in contrast with Horta-Osorio.
Data in focus: Strong industrial production numbers for the eurozone in November offer some hope the worst is over, supporting Oxford Economics' view of a gradual resolution of supply-side issues.
Moreover, the strong gains in Spain and Italy could very likely result in some positive surprises for fourth quarter GDP, Oxford Economics' chief Italian economist Nicola Nobile said.
But the bigger picture is of a slowing eurozone economy in 1Q, with a series of downside risks to Oxford Economics' call of pick-up from 2Q. "In particular, a big chunk of our forecast for 2022 continues to rest heavily on the shoulders of consumers and specifically on normalizing saving ratio," Nobile says.
The Covid-19 pandemic's drag on economic activity has lessened from wave to wave, Berenberg said.
Even if most people who are infected don't fall seriously ill, they still need to be in quarantine. Against the backdrop of the Omicron variant, staff shortages may be a major factor for about four to six weeks, shaving around 0.5 percentage point off 1Q GDP in the U.K. and the eurozone, according to Berenberg's estimates.
Together with restrictions and more-cautious consumer behavior, this suggests that economies may roughly stagnate in 1Q, Berenberg said.
However, if supply shortages start to ease in early 2022, gains in manufacturing output could still underpin GDP growth of around 0.7% in 1Q in both the U.K. and the eurozone, Berenberg forecasts.
Norges Bank will keep the key rate unchanged at 0.5% this week and confirm that it will rise further in March, said Nordea. The central bank announces a decision on Thursday and will only describe the main developments since the previous meeting in relation to their expectations from December, without concluding on the effects on the rate path, Nordea said.
Overall, the developments since December have so far been better than expected by the central bank, while the Norwegian krone is in line, it said.
"Although Norges Bank will not conclude on the effects on the rate path, our own assessment is that the sum of news warrants a higher rate path vis-a-vis the rate path from December."
The New York Stock Exchange and Nasdaq are closed Monday for the holiday that honors King's Jan. 15 birthday, with U.S. bond markets similarly shut. CME Group, which overseas commodities markets including Nymex-traded crude and Comex-traded gold, said there will be no regular trading or settlements Monday.
Investors are gearing up for another big week of U.S. corporate earnings, with Goldman Sachs scheduled to report Tuesday and Bank of America and Morgan Stanley on Wednesday. Household names such as Procter & Gamble and UnitedHealth are slated to post results Wednesday, followed by American Airlines and Netflix on Thursday.
"One of our major calls for 2022 is that banks will surprise to the upside," said Lale Akoner, a market strategist at BNY Mellon Investment Management.
More broadly, "wages are going higher, energy costs are still very elevated so inflation overall is going to pressure margins. This will definitely show in earnings in 2022," Ms. Akoner said. "Large-caps usually weather this better than small-caps."
The dollar recovered some ground Friday after a rough week and there is some room for further gains this week, ING said.
The dollar will be supported by the prospect of imminent monetary policy tightening by the Federal Reserve and a positive U.S. economic growth narrative, possibly combined with more balanced positioning after a recent trimming of speculative bets on the dollar rising, ING analysts said.
"We expect [the DXY dollar index] to rise back to the 96.00 level as we approach the 26 January Fed meeting."
Sterling has been little moved by U.K. political uncertainty amid calls for Prime Minister Boris Johnson to resign and that is unlikely to change, ING said.
"We think that even in the event of a change in leadership, the downside risks for the pound (which is currently being supported by aggressive Bank of England tightening expectations) should be contained," ING analysts said.
Meanwhile, a slew of U.K. economic data this week including labor market figures on Tuesday and inflation on Wednesday should support sterling, although mostly against non-dollar currencies as the U.S. currency is likely to rise, they said.
Bitcoin fell 1.2% from its level at 5 p.m. Friday and traded at around $42,800. It has declined 38% from the all-time high it notched in November.
It should only be a matter of time for 10-year German Bund yields to bounce to positive territory, for the first time in nearly three years, LBBW's senior fixed-income analyst Elmar Voelker said.
Bonds' weak start to 2022 points the way for this, he said. "Under the assumption that weakness will remain valid overall for the month of January, the ideal historical progression over the year...suggests that yields will increase further over the following months," he said.
The 10-year Bund yield last traded in positive territory in May 2019, according to Tradeweb.
LBBW raises its forecasts for the year-end level of the 10-year Bund and 10-year U.S. Treasury yields, seeing them at 0.20% and 2.25% at the end of 2022, versus the 0% and 1.90% it previously expected, senior fixed income analyst Elmar Voelker said.
Ten-year UST yield levels above 2% "may well serve as an additional incentive to buy for foreign investors and could therefore slow the upward yield trend more sustainably," he said.
As for Bund yields above zero, LBBW remains of the view that yield levels significantly above zero will not be maintained over longer stretches of time, "since investors with long-term horizons will likely take advantage of this yield level to top up their long-term bond positions to an increased extent."
Oil wavered as traders weigh signs of new supply against robust demand. Data from Baker Hughes late Friday showed that active rigs in the U.S. rose by 11 last week.
Meanwhile, U.S. fracking crews rose by 10. Both figures suggest a steady increase in supply, though analysts are expecting supply will remain tight as OPEC struggles to meet its production quotas and the Omicron variant of Covid-19 has a limited impact on demand.
"What the market is focused on right now is the potential lack of spare [OPEC] capacity because of underinvestment for years," said Helge Andre Martinsen, oil analyst at DNB Markets.
Base metals prices weakened after mixed signals on the health of China's economy.
Credit Suisse Chairman to Leave After Breaking Covid Travel Rules
Credit Suisse Group AG Chairman António Horta-Osório is leaving the global bank following a board investigation into his travel and personal conduct, according to people familiar with the bank.
Credit Suisse said late Sunday that Mr. Horta-Osório had resigned following an investigation commissioned by the board. The people said the investigation examined his conduct, including travel that breached Covid-related government rules and his personal use of corporate aircraft. He joined the Credit Suisse board less than a year ago.
Unilever Makes Approach for Glaxo's Consumer-Healthcare Business
LONDON-Unilever PLC said it had approached GlaxoSmithKline PLC and Pfizer Inc. about an acquisition of their consumer-healthcare joint venture, a potential $68 billion deal that would reshape the consumer-products giant's portfolio at a time when it is under pressure to accelerate growth.
Unilever said in a statement Saturday that the business, known as GSK Consumer Healthcare, was "a leader in the attractive consumer health space" and would be a "strong strategic fit," though cautioned there was no certainty that any agreement would be reached.
Unilever Sets Out Ambition to Expand in Health Products
Unilever PLC said it wants to significantly expand its footprint in health, beauty and hygiene, and plans to sell off slower-growing parts of its ice cream-to-soap consumer brands empire to fund major acquisitions.
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