MARKET WRAPS
Watch For:
Canada International Securities Transactions for October; U.S. Secretary of the Treasury Janet Yellen hosts Financial Stability Oversight Council meeting; Federal Reserve Board Governor Christopher Waller speaks at Forecasters Club of New York event; Federal Reserve Bank of San Francisco President Mary Daly participates in a virtual Wall Street Journal question-and-answer session on the 2022 economic outlook.
Opening Call:
Stock futures paused, while technology companies looked set for further losses, as investors assessed the potential impact on inflation and growth from policy shifts by the world's largest central banks.
Investors are assessing the outlook for 2022 after a week of significant changes to global central banks' monetary policy. Market participants broadly welcomed the Federal Reserve's move to speed up the tapering of its pandemic-era stimulus measures, paving the way to raise interest rates next year. But concerns have turned to the knock-on impact to economic growth, while fast-growing tech names have been pressured by the prospect of higher interest rates.
It also didn't entirely dispel investors' concerns about inflation, said David Donabedian, chief investment officer at CIBC Private Wealth. The central bank may need to signal an even faster pace to rate rises early next year, if data suggest inflation is quickening still, he said.
"The underlying, primary fear in the market is inflation. What the Fed did is the old saying: to solve a problem you have to first acknowledge there is one," he said. "It's a wise move but just a temporary respite for the markets' concerns over inflation.
The Bank of Japan said Friday it would wind down its holdings of commercial paper and corporate bonds, but kept monetary policy ultraloose overall. The benchmark Nikkei 225 index fell 1.8%. Other Asian indexes were mostly lower, with Hong Kong's Hang Seng down 1.2% and the Shanghai Composite Index 1.2% lower.
On Thursday, the Bank of England raised interest rates, taking investors and analysts by surprise. The European Central Bank said it would phase out an emergency bond-buying program, while ramping up other stimulus measures.
Investors are watching the spread of Covid-19 cases and the virus' latest variant. Omicron has prompted fresh restrictions in Europe ahead of the holidays, but for now, investors are betting that higher vaccination rates will mean governments hold back from significantly tougher measures.
"You have to put that down as a risk, but it is also pretty clear that the political reaction is still very unlikely to lead to major impediments to the economy," said Mr. Donabedian. "We don't think that's going to be a major force in knocking the economy or the market off its course."
Forex:
The dollar should stay firm over the holiday period, UniCredit said after the Fed this week flagged the prospect of interest rates rising three times next year, while rates in the eurozone are unlikely to rise next year.
"Given the hawkish Fed turn that emerged at the FOMC meeting, we expect the dollar to remain broadly firm throughout the holiday season, helped by prospects of interest-rate differentials moving further in its favor, " UniCredit said.
There is room for EUR/USD to fall further, albeit slowly after the ECB said it would gradually reduce asset purchases next year, it said.
Bonds:
The yield on the benchmark 10-year U.S. Treasury note rose to 1.429% Friday from 1.420% Thursday.
Commerzbank expects government-bond curves to diverge further after this week's series of central bank meetings, said Christoph Rieger, head of rates and credit research.
The front-end of the euro yield curve is well protected, peripheral government bond yield spreads are more at risk, while U.S. real yields are higher amid a Fed that is determined to get ahead of the curve, the strategist said.
The Bank of England is expected to raise its base interest rate again in February after a surprise increase Thursday, said Mizuho. It expects the BOE to raise rates by 25 basis points in February and by another 25 basis points in August.
Noting that the market is pricing three 25 basis-point increases in 2022, Mizuho expects rate rises will be more gradual than this but that the BOE will eventually raise interest rates higher than the market is currently pricing in.
Commodities:
Oil prices were down, with both benchmarks on course for moderate losses this week. In the course of the week, China's easing energy crunch and worries about the spread of the Omicron coronavirus variant have offset the continuing economic recovery outside of China and the threat of a sudden move by OPEC+ to cut production or pause production increases, said OANDA's Jeffrey Halley.
"That has left oil markets looking for a more settled equilibrium price until the narrative convincingly changes one way or the other," he added.
Gold prices are set for their best weekly performance in five weeks after the Fed's move to speed up its tapering. Gold is on course to end the week up 1.4%, putting it on course for its best week since the week commencing Nov. 5.
Copper was higher after production at a major mine in Peru was halted amid protests by locals. Miner MMG said Thursday that it would shut down production at the Las Bambas copper mine after it failed to reach an agreement with local activists.
Locals have been blockading the mine since late November, saying the mine is helping pollute their crops. Las Bambas is a major producer and helps make Peru the world's second-largest supplier of copper.
The supply risk is helping lift other base metals, while the Fed's meeting this week has also fueled risk appetite and with it, demand for metals, said TD Securities.
TODAY'S TOP HEADLINES
Oracle in Talks to Buy Cerner
Oracle Corp. is in talks to buy electronic-medical-records company Cerner Corp., according to people familiar with the matter, a deal that could be worth around $30 billion and push the enterprise-software giant further into healthcare.
An agreement could be finalized soon, some of the people said, assuming the talks don't fall apart or drag out. Should a deal come together, it would rank as the biggest ever for Oracle, which has a market value of more than $280 billion.
Pfizer Seeks Approval of Covid-19 Shot for 12-to 15-Year-Olds
Pfizer Inc. and BioNTech SE say they have asked U.S. regulators to fully approve their Covid-19 vaccine for adolescents ages 12 to 15.
The vaccine was fully approved by the U.S. Food and Drug Administration in August for people 16 years and older.
Blackstone Nears Deal Valuing Manhattan Office Tower at $2.85 Billion
Blackstone Inc. is in advanced talks to acquire a 49% stake in a new Manhattan office tower in a deal that values the skyscraper at $2.85 billion, providing a shot of confidence for New York during tough times.
A venture led by Brookfield Asset Management could reach an agreement to sell the stake in the One Manhattan West property to Blackstone in the next few days, said people familiar with the matter.
Kellogg, Union Reach New Tentative Agreement
Kellogg Co. said it has reached a new tentative agreement on a five-year contract with about 1,400 workers who have been on strike at four plants where Frosted Flakes, Froot Loops and other consumer brands are made.
The workers have been on strike for more than two months, demanding better pay and enhanced benefits after working longer hours during the Covid-19 pandemic. Workers were also upset over a two-tiered system of pay in which newer employees are paid less than veteran employees, and have to pay more for health insurance.
Electric-Truck Startup Rivian Plans New $5 Billion Factory Complex in Georgia
Electric-vehicle startup Rivian Automotive Inc. plans to start construction next year on a second U.S. manufacturing facility in Georgia, placing a hefty bet on its ability to steadily increase sales in the coming years.
The $5 billion manufacturing investment, which Rivian announced on Thursday, follows the company's blockbuster IPO last month, where it raised nearly $13.5 billion in fresh capital. It also comes as competition in the electric-vehicle market is heating up with established car companies such as General Motors Co. and Ford Motor Co. getting ready to roll out new plug-in models that will compete with Rivian's offerings.
Spider-Man Fights for Sony in the Streaming Wars
The streaming war requires some big guns-even for those who've chosen to sit it out.
The new Spider-Man movie swinging into theaters this week is nearly as big as they come. Theater chains Cinemark and AMC Entertainment both reported that advance ticket sales for "Spider-Man: No Way Home" have been second only to 2019's "Avengers: Endgame"-now the second highest-grossing movie of all time. Current projections have the new movie ultimately grossing about $450 million in domestic box office, according to Alicia Reese of Wedbush. That would have been considered a very strong performance even before the global pandemic that hobbled the movie-theater market.
Nauticus Robotics to Go Public in $560 Million SPAC Merger
Nauticus Robotics Inc. is combining with a blank-check company in a deal that would take the ocean-task-automation firm public at a valuation of about $560 million, company officials said.
Nauticus is merging with special-purpose acquisition company CleanTech Acquisition Corp. in a deal that is set to be unveiled Friday.
Judge Throws Out Purdue Pharma's Deal to Shield Sacklers From Opioid Lawsuits
A federal judge in Manhattan overturned a roughly $4.5 billion settlement between OxyContin maker Purdue Pharma LP and members of the Sackler family who own the drugmaker, a surprising decision that raises questions about the future of the company and its owners, who have been accused of fueling the nation's opioid crisis.
(MORE TO FOLLOW) Dow Jones Newswires
12-17-21 0607ET
