European stock markets posted solid gains Tuesday, partially
rebounding from the previous session's selloff, as investors
awaited the start of the Federal Reserve's two-day policy meeting
and looked ahead to another batch of U.S. corporate earnings.
In London, the FTSE 100 was lifted by the oil majors as BP and
Shell advanced following a rally in the price of Brent crude.
Miners were also on the rise.
Stocks on the Move:
Shares in Royal Mail rose 5% as investors welcomed moves by the
company to cut costs despite reducing full-year profit
The company now expects an adjusted operating profit of around
GBP430 million for the year ending March, compared with previous
guidance of GBP500 million, due to a restructuring charge.
"Royal Mail's latest update showed the firm is continuing to
drive efficiencies with plans to cut a further 700 management
jobs," said AJ Bell investment director Russ Mould.
"In streamlining the business, Royal Mail needs to ensure it
doesn't go too far and diminish its operational capability or spark
widespread industrial action, the threat of which has hung over the
business in the past."
Germany's Ifo business climate index rose to 95.7 in January
from 94.8 in December, and together with the increases in the
purchasing managers index and ZEW surveys this month, suggest that
while the economy is losing momentum, it may not fare as badly as
it was feared in the first quarter, said Pantheon
The increase in the Ifo index, however, still leaves it pointing
to a further slowdown in the first quarter, Pantheon said. "We will
need to see at least another increase next month, across all
surveys, to change our view that, the Germany economy will have
barely expanded in first quarter after a probable 0.2% to 0.3%
increase in GDP in the fourth quarter," said senior Europe
economist Melanie Debono.
Oxford Economics said the Ifo index surprised to the upside. The
uptick was driven by solid improvement in future expectations,
while current conditions eased further amid coronavirus-related
headwinds, said Oxford Economics' senior economist Ricardo
Mobility data remains on a more disappointing footing and
continues to justify a cautious view on the near-term performance
of the German economy, he warned. Oxford Economics forecasts the
German economy will avoid a technical recession, expecting a
fourth-quarter GDP contraction followed by a 0.5% rise in the first
Italy's presidential elections put focus on the country's
political stability, but the situation today is significantly
different from the years before the pandemic when political
uncertainty in Italy spilled over into financial markets, said
Katharine Neiss, chief European economist at PGIM Fixed Income.
"The difference is due to the dual supporting pillars provided
by Next Generation EU funds flowing into the country, and continued
flexibility coming from the European Central Bank in terms of its
asset purchases," she said.
It might not stop markets from testing the boundaries "as we
progress through the uncertain presidential election process
period, but it should limit the extent to which political
uncertainty in Italy feeds through to financial market
After a wild day of trading that saw a 1,000-point swing by the
Dow, U.S. stock futures fell early Tuesday, though they already
moved off their overnight lows.
Monday's sharp selloff and surprise rally came amid market
uncertainty stoked by rising inflation, disappointing earnings,
anxiety about the Fed's expected policy changes, fears of a Russian
invasion of Ukraine and the ongoing Covid-19 pandemic.
Still, Dan Eye, chief investment officer at Fort Pitt Capital
Group in Pittsburgh, told MarketWatch on Monday that the market is
acting normally - it's just that we're not used to it after such a
long bull market.
"The volatility we're seeing is normal. As the Fed pivots toward
fighting inflation, we're going to see an environment of more
push-and-pull and drawdowns in the stock market than we've seen
over the last two years," he said.
The euro looks unappealing amid a stand-off between Russia and
the West over fears of a Russia attack against Ukraine, said
"Until events in Ukraine become clearer, we would presume the
much greater exposure of European economies to the crisis and the
fact that one is still charged for holding euros, does not make the
euro a particularly attractive vehicle to ride out the current
storm," said ING.
EUR/USD could fall to 1.1265 heading into the Federal Reserve's
policy meeting on Wednesday, unless there is a substantial
de-escalation of tensions over Ukraine, ING said.
ING also said that calls for U.K. Prime Minister Boris Johnson
to resign are reaching "fever pitch" but sterling is likely to
remain little moved by the political uncertainty.
"Should Johnson leave, his successor would likely be seen as a
safe pair of hands and we do not see any political risk premium
being built into GBP," ING said.
The prospect of the Bank of England raising interest rates
further and general risk appetite are far more important for
sterling, ING said, noting that the pound fell on Monday in
reaction to Russia-Ukraine tensions.
Deutsche Bank expects the European Central Bank to initiate
policy rate liftoff with a 25 basis point increase in December
2022, rising more and earlier than the previously expected 10bp
rise in December 2023.
Deutsche Bank's latest inflation forecasts show that the liftoff
criteria could be met as soon as December 2022 and as late as June
2023, expecting the ECB to act at the start of this window.
Deutsche also expects a faster pace for the ECB's tightening, with
the first 25bp rate increase in December 2022 to be followed by
25bp increases each quarter until rates reach 0.50% in September
Oil prices rallied on tensions in Eastern Europe and the Middle
East that pose a risk to supply in a tight market.
"The potential sources of geopolitical crisis such as the
Russia-Ukraine conflict and the tense security situation in the
Middle East, and the associated risks to supply, are likely to
preclude any more pronounced price slide," said Carsten Fritsch, an
analyst at Commerzbank.
European gas prices were steady as continued tensions in Ukraine
balanced a moderate increase in gas supplies from Russia.
While the threat of conflict between Ukraine and Russia lingers,
flows of gas through the Velke Kapusany gas station on the
Ukrainian-Slovak border were expected at 454,175.179 MWh/day
Tuesday, the highest amount since Jan. 1, according to data from
Still, gas flows remain well below normal levels, and a smaller
gas metering station on the Polish-German border continues to
register gas supplies flowing eastward, rather than the usual
westward direction into Western Europe.
DOW JONES NEWSPLUS
Credit Suisse Investment Bank Set for Loss after Legal Hit
Credit Suisse is set to post a loss for its investment bank for
the final three months of 2021, as a slow down in trading revenues
and a CHF500m (GBP405m) hit from legal costs prove to be another
blow to the Swiss bank after a series of crises.
The bank said that provisions for legal costs of CHF500m, more
"normal trading conditions" and the closure of its prime services
unit would hit profits in its investment bank in the fourth
quarter. Credit Suisse is due to report its results on 10
Ericsson Posts 4Q Net Profit Beat as 5G Momentum Continues
Ericsson AB on Tuesday posted a fourth-quarter net profit that
beat expectations, as strong sales of 5G equipment in North
America, Europe and Latin America helped offset a hefty sales
decline in mainland China.
The telecommunications-equipment company reported net profit
attributable to shareholders of 10.08 billion kronor ($962.4
million), compared with SEK7.52 billion a year earlier.
Rio Tinto Reaches Deals to Break Mongolia Copper Logjam
ADELAIDE, Australia-Rio Tinto PLC renegotiated agreements with
the Mongolian government to advance a delayed and costly expansion
of the Oyu Tolgoi copper mine, a sign of resource nationalism's
impact on the mining sector.
Mongolia, Rio Tinto and Turquoise Hill Resources Ltd., the
Toronto-listed, Rio Tinto-controlled company that owns most of the
Oyu Tolgoi operation, have been in fighting for years over how to
split the cost of an underground expansion that is several years
late and more than $1 billion over budget.
German Business Sentiment Rises After Half a Year of
German business sentiment has brightened at the beginning of the
year, despite inflation, supply bottlenecks and rising coronavirus
The Ifo business-climate index increased to 95.7 points in
January from 94.8 points in December, data from the Ifo Institute
showed Tuesday. This rise follows six consecutive decreases of the
indicator after it peaked at 101.8 in June.
Remy Cointreau Posts Higher 3Q Sales; Backs Guidance
Remy Cointreau SA said Tuesday that sales rose in the third
quarter of fiscal 2022, and it backed its full-year views.
Revenue came to 440.5 million euros ($498.9 million) for the
three months to Dec. 31, up 21% on an organic basis from EUR350
million a year earlier, it said.
Swatch Swung to 2021 Profit as Sales Rise
Swatch Group AG swung back to profit in 2021 after a tough 2020
as sales rose on year, though didn't fully reach 2019 levels before
the pandemic hit.
The Swiss watch maker on Tuesday posted net profit for the year
of 765 million Swiss francs ($837 million) compared with a loss of
CHF51 million the previous year, on sales which grew to CHF7.31
billion from CHF5.60 billion in 2020.
Modern Times Group Sells ESL Gaming to Savvy Gaming Group in
$1.05 Bln Deal
Swedish gaming group Modern Times Group MTG AB said late Monday
that is selling esports company ESL Gaming to Savvy Gaming Group in
an all-cash deal worth $1.05 billion.
Following the sale, MTG will focus fully on accelerating growth
in its pure-play gaming business, it said.
Royal Mail Downgrades FY 2022 Guidance on Plan to Cut Around 700
Royal Mail PLC said Tuesday that it plans to cut 700 manager
jobs, and that it is reducing its guidance for fiscal 2022 because
of the launch of a consultation process for its restructuring.
The British letter-and-parcel courier said that on a
year-to-date basis, it has spent more than 340 million pounds
($458.7 million) on overtime, additional temporary staffing and
sick pay during the coronavirus pandemic, which has been a headwind
to delivering its productivity targets.
Unilever Plans Job Cuts as Activist Investor Trian Takes
Unilever PLC plans to cut thousands of jobs as part of a
reorganization aimed at speeding up its decision making, according
to a person familiar with the matter, a move that comes as the Ben
& Jerry's owner looks for ways to jump-start growth.
Unilever's chief executive, Alan Jope, has been under pressure
to buoy sales growth for months but that has ratcheted up in recent
weeks. The Wall Street Journal and others reported over the weekend
that Nelson Peltz's Trian Fund Management LP had acquired a stake
in Unilever, just days after the company abandoned its $68 billion
bid for GlaxoSmithKline PLC's consumer-healthcare business, after
being rebuffed on price.
NATO to Send Ships, Jet Fighters to Eastern Europe Amid Standoff
BRUSSELS-NATO allies are bolstering the alliance's eastern flank
in response to Russia's military buildup around Ukraine, as the
European Union set out plans for loans and grants for Kyiv worth
more than $1.3 billion and the Pentagon ordered thousands of troops
to prepare for possible deployment.
The moves are part of efforts by the U.S. and its allies to gird
for what they believe could be an imminent military invasion of
Ukraine, which Russia denies it is planning. President Biden held a
videoconference with European leaders Monday afternoon to
coordinate the trans-Atlantic response to the Russian troop
Differences Splinter U.S. Team Negotiating With Iran on Nuclear
With talks to restore the 2015 nuclear agreement with Iran
reaching a critical phase, differences have emerged in the U.S.
negotiating team over how tough to be with Tehran and when to walk
away, according to people familiar with the negotiations.
U.S. officials confirmed over the weekend that Richard Nephew,
the deputy special envoy for Iran, has left the team. Mr. Nephew,
an architect of previous economic sanctions on Iran, had advocated
a tougher posture in the current negotiations, and he hasn't
attended the talks in Vienna since early December.
Treasury Wants Banks to Loop in Foreign Affiliates on Suspicious
The U.S. Treasury Department's Financial Crimes Enforcement
Network has proposed a new rule that would allow banks to share
so-called suspicious activity reports more readily with foreign
The proposed rule, which FinCEN announced Monday, would create a
pilot program to allow banks to share SARs with foreign branches
and affiliates, a bid to improve financial institutions' ability to
counter money laundering. The new program was mandated under the
Anti-Money Laundering Act, which came into force in January
Investors Lose Appetite for Stocks of Unprofitable Companies
The prospect of rising interest rates has been especially hard
on the Russell 2000 small-cap index, in large part because of the
high proportion of small-caps that aren't making money.
During the market selloff of recent weeks, investors have been
shedding speculative investments from tech stocks to
cryptocurrencies. Speculative investments with their promise of
higher returns thrived in the ultra-low-rate environment of 2021.
Now that the Federal Reserve may raise interest rates as soon as
March to combat inflation, investors are less comfortable with
Glynn's Take: RBA Set to Entertain Interest Rate Rise in 2022,
Exit QE in Feb
SYDNEY-In a significant rethink of the economic outlook, the
Reserve Bank of Australia is set to concede that an interest-rate
increase is now highly possible by late 2022, but reject
money-market bets that it will keep pace with U.S. interest rate
The RBA's first policy meeting for 2022 on Feb. 1 will also see
its program of government bond buying wound up entirely, as it
publishes revised economic forecasts that include the unemployment
rate soon falling below 4.0%, its lowest since the 1970s.
Singapore Central Bank Tightens Policy in Surprise Move
Singapore's central bank on Tuesday unexpectedly tightened its
currency policy as a pre-emptive move to stem the inflationary
impact of supply-side constraints and rising commodity prices.
In an announcement before its scheduled policy meeting in April,
the Monetary Authority of Singapore said it would slightly raise
the rate of the Singapore dollar's appreciation against a basket of
SEC Looks to Bolster Market's Cyber Defenses
WASHINGTON-The Securities and Exchange Commission is exploring
ways to improve cybersecurity in capital markets, including by
extending compliance obligations to companies that currently don't
have to meet them, Chairman Gary Gensler said Monday.
"The economic cost of cyberattacks is estimated to be at least
in the billions, and possibly in the trillions, of dollars," Mr.
Gensler said in a virtual speech to the Northwestern Pritzker
School of Law's annual Securities Regulation Institute conference.
"We at the SEC are working to improve the overall cybersecurity
posture and resiliency of the financial sector."
North Korea Launches Suspected Cruise Missiles
SEOUL-North Korea launched two suspected cruise missiles on
Tuesday, South Korea's military said, in what would be the Kim Jong
Un regime's fifth weapons test of the month.
The missiles were believed to be launched from an unspecified
inland location, South Korea's military said, without providing
further details. North Korea's state media didn't immediately
Biden Curses at Fox News Reporter After Inflation Question
WASHINGTON-President Biden called a reporter who asked him about
the potential political consequences of inflation a "stupid son of
a bitch" at a White House event on Monday.
Mr. Biden's comments came after Peter Doocy, a White House
correspondent for Fox News, asked the president if inflation would
be a political liability ahead of the midterm elections.
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(END) Dow Jones Newswires
January 25, 2022 06:07 ET (11:07 GMT)
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