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North American Morning Briefing: Dow Futures Jump as Rebound from Omicron Worries Continues

12/07/2021 | 06:02am EST

MARKET WRAPS

Watch For:

Trade for October; Revised Productivity & Costs for 3Q; Canada Trade for October

Opening Call:

Stock futures pointed to a second day of gains on Tuesday, as investors continued to focus on the latest news on the Omicron variant of coronavirus.

Traders seem to be taking the view expressed by Dr. Anthony Fauci that early indications about Omicron are that it's less dangerous than the delta variant.

Further good news on the virus came as GlaxoSmithKline said that new preclinical studies demonstrated that its sotrovimab antibody retains activity the variant.

"Part of the recovery is no doubt due to growing optimism about the omicron variant, which may be extremely contagious but doesn't seem to be extremely dangerous," said Marshall Gittler, head of investment research at BDSwiss Holding.

Also buoying sentiment was China's decision on Monday to lower reserve requirements for banks.

More concerning to traders, however, is Russia's buildup of troops along the border of Ukraine. President Biden is due to hold a video call on Tuesday with Russian President Vladimir Putin.

On the corporate front, Intel shares surged in premarket trade on a plan to list shares in its Mobileye self-driving-car unit.

Forex:

EUR/USD was flat even as the dollar weakened on reduced safe-haven demand after early hospital data from South Africa suggested Omicron could result in less severe illness than previous waves.

ING said the euro's role as a funding currency limits its scope to rise versus the dollar as investors return to risky assets following an easing of concerns about Omicron, said ING.

"With the eurozone growth outlook already partly compromised by restrictions in Germany and other eurozone countries, and the European Central Bank sticking to a broadly dovish tone, the euro may be facing more pressure regardless of Omicron-related sentiment," said ING, adding EUR/USD could re-test 1.1200 this week.

The Bank of England is likely to hold off on raising interest rates at its Dec. 16 meeting but that won't have a material impact on sterling, said Commerzbank.

"The current coronavirus situation and the uncertainty in this context make a rate hike in December seem increasingly unlikely," said Commerzbank currency analyst You-Na Park-Heger. However, this is largely priced in by the market so sterling could stabilize at current levels for now, she said.

Bonds:

Morgan Stanley Wealth Management estimates the 10-year Treasury yield will rise to 2.1% by December 2022, given forecasts for strong growth, receding but above-normal inflation and the Fed's patience over interest-rate hikes.

It attributes most of the expected upward move to 10-year real yields resetting to -0.30% from -1.06%, as inflation breakeven rates have likely peaked.

Commodities:

Crude futures rose more than 2% in Europe as fears over the impact of the Omicron variant eased and as Iranian oil seems unlikely to reach the market any time soon.

According to Commerzbank, prices are continuing their recovery after an almost 5% rebound on Monday, with Omicron appearing to be less severe than the previously dominant variant. "If this is confirmed, the effects on oil demand are likely to be far less severe than suggested by the dramatic collapse in price."

As far as Iran goes, Commerzbank said it expect U.S. sanctions to remain in place still for quite a while after last week's talks.

Gold gained ground as the dollar weakened. Oanda said the precious metal may consolidate in a $1,750-$1,800 trading range on growing optimism over Omicron.

TODAY'S TOP HEADLINES

Intel to List Shares in Mobileye Unit

Intel Corp. is planning to publicly list shares in its Mobileye self-driving-car unit, the latest move by Chief Executive Pat Gelsinger to revive the semiconductor giant's fortunes.

Intel said it would take the unit public in the U.S. in mid-2022 through an initial public offering of new Mobileye stock. The move, earlier reported by The Wall Street Journal, could value Mobileye at north of $50 billion, according to people familiar with the matter.

Glaxo Says Its Covid-19 Antibody Drug Works Against Omicron

GlaxoSmithKline PLC and Vir Biotechnology Inc. said their Covid-19 antibody treatment retained effectiveness against the Omicron variant in laboratory studies, even as early data suggests that similar treatments work less well against the highly mutated strain.

The results provide hope that at least one monoclonal antibody therapy-a form of treatment that has proven useful in blunting severe disease-will remain effective against Omicron, which has been detected in dozens of countries including the U.S. since it was identified by scientists in South Africa two weeks ago.

Elon Musk Comes Out Against Federal Electric-Vehicle Spending

Elon Musk took aim at a signature Biden administration legislative proposal and said China is adjusting to its growing position as a dominant world power in an interview with The Wall Street Journal.

The Tesla Inc. chief executive criticized federal efforts meant to spur electric-vehicle adoption, including a bill that would boost incentives for buying battery-powered cars.

Instagram Unveils Tools to Keep Teens Safe, Including Parental Controls

Instagram unveiled a raft of new features on Tuesday that it said will make its site safer for teenagers.

Among the measures, the popular photo-sharing service will be implementing tools to help users take breaks, or view new topics if they've been dwelling on one thing for too long, said Instagram head Adam Mosseri in a blog post.

Omicron Sends Bank Stocks Seesawing

Fears about the economic impact of the new Covid-19 variant have hit bank stocks hard, but they are still on track for their best year in more than two decades.

The KBW Nasdaq Bank Index, which measures the performance of big lenders including JPMorgan Chase & Co. and Bank of America Corp., was up nearly 44% in 2021 before Thanksgiving. At that rate, the KBW far outpaced the gains in the broader S&P 500 index, which was up about 25%.

Europe Tops China in Spawning $1 Billion Tech Startups

BRUSSELS-Europe has overtaken China in creating billion-dollar tech startups, according to a new analysis that points to Europe's rising status in the field and the effect of Beijing's crackdown on capitalist entrepreneurialism.

Over the past year, China has reined in its most successful and freewheeling tech giants, including Alibaba Group Holding Ltd., Tencent Holdings Ltd. and Didi Global Inc., casting a chill across the whole sector. Europe, meanwhile, has attracted further investment in its expanding tech industry, particularly from U.S. funds.

SEC Opens Probe Into Tesla Involving Solar-Cell Activity

The U.S. Securities and Exchange Commission has opened an investigation into Tesla Inc. that touches at least in part on the company's solar-cell activity.

The SEC acknowledged the probe in response to a Freedom of Information Act request filed by a former Tesla employee who previously filed a complaint with the SEC, according to documents viewed by The Wall Street Journal. The person alleged in the complaint to the regulator back in 2019 that Tesla and SolarCity, the solar-cell business it acquired, failed to properly notify shareholders and the public of fire risks associated with its equipment, according to one of the documents.

Samsung Replaces CEOs, Merges Mobile and Consumer Electronics Businesses

SEOUL-Samsung Electronics Co., in a surprise move, replaced the heads of its three major business units and merged the company's mobile and consumer electronics businesses into a single unit.

The shake-up leaves two co-CEOs atop the world's largest maker of smartphones, televisions and semiconductors. Samsung has ambitious investment plans to compete against Taiwan Semiconductor Manufacturing Co. on advanced chipmaking, while striving to fend off Chinese rivals with phones and other gadgets.

Alibaba Shares Rise on Shakeup Plans, Beijing Moves

Shares of Alibaba Group Holding Ltd. are leading tech shares higher in Hong Kong, tracking gains in the company's US-listed ADRs following a business reorganization as well as fresh moves by Beijing to stimulate China's slowing economy.

Alibaba's shares were up 10% at HK$124.20 on Tuesday afternoon. The company is on pace for its biggest one-day gain in more than a year, albeit still down 47% in the year to date.

Stellantis Aims for EUR20 Bln in Additional E-Vehicle Revenue by 2030

Stellantis NV said Tuesday that it is targeting around 20 billion euros ($22.57 billion) in additional annual revenue by 2030 through a rollout of new e-vehicle platforms.

The car maker said it would target EUR4 billion in incremental annual sales by 2026, generated by software-enabled products and subscriptions, rising to EUR20 billion by the end of the decade.

Elliott Calls on SSE to Restore Investor Confidence

Elliott Advisors (UK) Ltd., one of the largest shareholders in SSE PLC, on Tuesday called for the board to restore investor confidence and continued its push for the energy company to spin off its renewables division.

The Elliott Management Corp. subsidiary, which has been pushing for the separation of SSE's renewables business from the rest of the company, said in a letter to Chairman John Manzoni that it was challenging the energy company to provide a plan to address investor concerns around its corporate governance, its ability to fund growth in the long term, and its "persistent undervaluation."

Chinese Property Stocks Rally as Beijing Signals Support for Sector

Shares of Chinese developers are broadly higher in Hong Kong on Beijing's plans to stimulate China's slowing economy, a move that could add liquidity to the country's debt-laden property sector.

Sunac China Holdings Ltd. is leading gains, rising 14% in early afternoon trade, followed by China Aoyuan Group Ltd. with a gain of 12%.

(MORE TO FOLLOW) Dow Jones Newswires

12-07-21 0601ET

Stocks mentioned in the article
ChangeLast1st jan.
S&P 500 -3.72% 4231.29 Delayed Quote.-7.73%
TAIWAN SEMICONDUCTOR MANUFACTURING COMPANY LIMITED 1.87% 653 End-of-day quote.6.18%
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