European stocks rose Friday, cheered by news that troubled property group Evergrande had made an overdue interest payment to international bondholders.

"An early payment from the Chinese property giant reassured investors, as the likelihood of a default and associated risk to the financial system faded. However, this optimistic mood may be short-lived as investors' biggest concern remains inflation," said ActivTrades analyst Pierre Veyret.

Shares on the move:

London Stock Exchange dropped 3.6% after earnings showed revenue rose 2% in the last quarter, and the company said it expects growth to slow in the final quarter of the year.


L'Oréal rose 6.3% after reporting sales for the third-quarter of EUR8 billion, ahead of analyst expectations of EUR7.7 billion. Sales growth at the personal-care company was driven by strong demand for luxury products, which jumped 20%, amid sustained growth in China.


Renault fell 0.7% after it said the global chip shortage would lower production more than forecast, with yearly losses now at 500,000 vehicles from the 220,000 previously forecast.


Vivendi rose 2.6% after the media giant reported sales of EUR2.5 billion in the third quarter, up 10% from a year ago and ahead of analyst consensus.

Economic news:

Eurozone business activity growth slowed sharply to a six-month low in October amid increasing supply bottlenecks and ongoing pandemic concerns, flash purchasing managers index data by IHS Markit showed.

The eurozone flash composite PMI fell to 54.3 in October from 56.2 in September, posting a decline for the third consecutive month. Although October's expansion was the weakest since April, the latest reading remains above the survey's pre-pandemic long run average of 53.0.

"The ongoing pandemic means supply chain delays remain a major concern, constraining production and driving prices ever higher, both in manufacturing and in the services sector," IHS Markit's chief business economist Chris Williamson said.

U.S. Markets:

The U.S. stock market was pausing near record highs Friday, as investors turned their attention to growth data at the end of an upbeat week of trading.

Stocks rallied this week on the back of strong corporate earnings, helping investors shrugging off wider concerns that have weighed on markets in the past month-such as inflation, central bank stimulus, and supply-chain disruptions.

Companies reporting financial results in the day ahead include American Express and Honeywell.


The euro slightly remained higher versus the dollar, shrugging off the latest eurozone purchasing managers' index survey.

The composite PMI, which measures manufacturing and services activity, fell to a six-month low of 54.3 in October from 56.2 in September with a level above 50 signalling growth. Economists polled by the WSJ expected a reading of 55.2.

The euro has been "quite unreactive" to recent PMI releases, said ING analysts. "We think we saw the short-term peak around 1.1660 in EUR/USD this week, and we are expecting the pair to move back below 1.1600 into the Fed November meeting."

The dollar might be poised to recover after the DXY Index dropped to its lowest in more than three weeks on Thursday, as investors turned their attention to the prospects of the Fed scaling back monetary easing, said ING.

"A quite convincing U.S. earnings season is set to leave space for the more structural concerns about higher inflation and the prospect of Fed tightening, which, in our view, should provide the basis of a new gradual re-appreciation of the dollar in the next few weeks," said ING.

Sterling pared losses after data showed growth in U.K. services and manufacturing activity accelerated by more than expected in October.

The composite PMI rose to a three-month high of 56.8 in October from 54.9 in September and above forecasts of 54.0.

"The U.K. economy picked up speed again in October, but the expansion is looking increasingly dependent on the service sector, which in turn looks prone to a slowdown amid the recent rise in Covid-19 cases," said Markit economist Chris Williamson.


Eurozone government bond yields were trading higher, with the 10-year Bund yield edging up to a new 2021 high of -0.070%, according to Tradeweb data, on market expectations of early interest rate rises by the European Central Bank. However, the Bund pared the selloff quickly, with the yield last trading at -0.091%.

"Bearish rates momentum [is] still in place," said Mizuho's rates strategists.

Eurozone government bond yield spreads over German Bunds have remained broadly intact as bond yields have been rising due to inflation expectations, but the chance for spread widening is growing from next year, said DZ Bank.

It expects an asymmetric risk-return environment to prevail from next year. "The probability of increasing spreads over Bund is rising."

DZ Bank has forecast a much lower return on eurozone sovereign bonds on a six-month horizon compared with other eurozone bond classes.

Given this view, DZ Bank has kept sovereign bonds underweight in a fixed-income asset allocation and turned more cautious on non-financial corporate bonds, lowering them to neutral weight from overweight. Its recommendation for bank bonds is unchanged at overweight and neutral weight for agency and covered bonds.

Eurozone governments have raised over 85% of gross government bond issuance planned for the year, while in net terms less than EUR40 billion remains for the remainder of the year, said Barclays' rates strategists.

This estimated net government bond issuance, which compares to around EUR600 billion for the year as a whole, will be easily offset by the European Central Bank's asset purchases, Barclays said. It has forecast the ECB's overall QE pace, including purchases under the PEPP and the APP to average EUR80 billion-EUR90 billion per month in the fourth quarter.


Oil futures were down 0.2% in Europe, with Brent on course to close at a weekly loss for the first time since late August, after prices came under pressure on Thursday following a broader selloff in commodities.

In addition, reported "comments from the Russian president that OPEC+ was increasing output slightly more than agreed [have] probably not helped sentiment," said ING's Warren Patterson.

Despite what might be a blip this week, inventories look to fall during the remainder of 2021, he added, meaning "oil prices will remain well supported."

Gold prices rose 0.6% as the dollar weakened and rising inflation expectations counteracted the impact of higher bond yields.

"Because market-based inflation expectations rose to a nine-year high...real yields actually fell slightly," said Daniel Briesemann, an analyst at Commerzbank. Still, investors continue to shun gold exchange traded funds, he added.

Gold ETFs tracked by FactSet had net outflows of roughly $459 million in the week through Thursday.




Supply Bottlenecks Curb Eurozone Economic Growth to Six-Month Low in October

Eurozone business activity growth slowed sharply to a six-month low in October amid increasing supply bottlenecks and ongoing pandemic concerns, flash purchasing managers index data by IHS Markit showed.

The eurozone flash composite PMI fell to 54.3 in October from 56.2 in September, posting a decline for the third consecutive month.


Renault 3Q Revenue Fell, Expects Further Production Losses

Renault SA on Friday said that revenue fell in the third quarter and expects further production losses, but confirmed guidance for its full-year operating margin.

The French car maker's quarterly revenue came in at 8.99 billion euros ($10.45 billion) down from EUR10.37 billion a year earlier. An analysts' consensus forecast provided by FactSet had forecast the figure at EUR8.93 billion.


Remy Cointreau 2Q Sales Rose Sharply; Sees Strong FY Earnings

Remy Cointreau SA said Friday that sales rose above expectations in its second quarter and that it is targeting strong growth in operating profit for the full fiscal year, but declined to set out numerical guidance.

The French drinks group's sales for the July-September period increased 24% at constant currency, taking the first-half total 52% higher to 645.3 million euros ($750.3 million) following a strong first quarter. Cognac sales increased at a rate of 27% in the second quarter.


L'Oreal Shares Rise on 3Q Sales Beat, Outweighing Cost-Inflation Concerns

L'Oreal's shares rose on Friday after the company reported a strong beat in third-quarter sales across the board, suggesting operating leverage would more than compensate for cost inflation.

The French cosmetics and consumer-products company's quarterly sales were up 13.1% organically, compared to consensus expectations of 7.6%. The beat was driven by the active, professional and luxe divisions.


Stellantis, Samsung SDI to Make EV Batteries in North America

French-Italian car maker Stellantis NV has entered into a memorandum of understanding with South Korean electronic component maker Samsung SDI Co. to make battery cells and modules for North America, it said Friday.

The move is part of Stellantis's plan to make electric cars represent 40% of its sales in the U.S. by 2030, the company said.


J Sainsbury Ends Talks to Sell Banking Arm

J Sainsbury PLC said Friday that it has ended talks to sell its banking arm as it believes the business will deliver better value for shareholders being kept within the group.

The U.K.'s second-largest grocer by market share said it continues to make progress strengthening and simplifying its financial-services business, and remains comfortable with consensus profit forecasts for the unit.


U.K. Consumer Confidence Fell in October to Eight-Month Low on Worsening Economic Outlook

Consumer confidence in the U.K. declined in October for the third straight month as expectations for the economy over the coming year deteriorated sharply.

GfK's consumer-confidence barometer decreased to minus 17 in October from minus 13 in September, missing economists' expectations and falling to the lowest level since February. Economists had expected the barometer to fall to minus 15.


European Leaders Urge Caution in EU Clash With Poland

European Union leaders urged Brussels to act cautiously in an escalating fight with Poland's nationalist government over its judiciary as the bloc's heads of government gathered Thursday for a summit.

The latest fight centers on a ruling by Poland's constitutional tribunal two weeks ago that EU treaty law has become incompatible with Polish law-an unprecedented ruling from a national court. The ruling was delivered in response to a legal question posed by Polish Prime Minister Mateusz Morawiecki.


Global Finance Watchdog Censures Turkey Over Money Laundering, Terrorist Financing

WASHINGTON-A global watchdog on Thursday added Turkey to its list of countries requiring special regulatory oversight for failing to stop money laundering and terrorist financing, a designation analysts say will rattle Ankara's already shaky economy.

The action means Turkey joins a group of 23 countries-including Zimbabwe, Haiti and Syria-that the Financial Action Task Force determined "have strategic deficiencies in their regimes to counter money laundering, terrorist financing, and proliferation financing."


Deutsche Bank Whistleblower Gets $200 Million Bounty for Tip on Libor Misconduct

A whistleblower whose information helped U.S. and U.K. regulators investigate manipulation of global interest-rate benchmarks by Deutsche Bank AG was awarded nearly $200 million for assisting the probe, according to people familiar with the matter.

The payout is the largest ever by the Commodity Futures Trading Commission, which along with the Justice Department and U.K. Financial Conduct Authority settled enforcement actions against Deutsche Bank in 2015.



China Evergrande Makes Overdue Interest Payment on Dollar Bonds, State Media Says

China Evergrande Group made an overdue interest payment to international bondholders, the state-owned Securities Times reported Friday, an unexpected move that allows the property company to stave off a default.

The Chinese real-estate developer on Thursday sent $83.5 million to the trustee for the dollar bonds, and that financial institution will in turn pay bondholders, the Securities Times reported. The financial paper is run by the Communist Party's flagship People's Daily newspaper.


Biden Could Use National Guard to Help With Supply Chain Bottlenecks

WASHINGTON-President Biden said he would consider deploying the National Guard to assist with supply-chain bottlenecks that have led to shortages and higher consumer costs, if his administration is unable to ease the problem.

"The answer is yes, if we can't move-increase the number of truckers, which we're in the process of doing," Mr. Biden said during a CNN town hall on Thursday when asked about deploying the National Guard.


U.S. Issued $100 Billion in Export Licenses to Suppliers of Huawei, SMIC

The U.S. Commerce Department issued more than $100 billion worth of export licenses for semiconductors and other products to suppliers of Huawei Technologies Co. and another blacklisted Chinese tech company, as a global chip shortage started to bite.

The Commerce data, released Thursday by a Republican member of Congress, shows the department granted 113 export licenses worth about $61 billion for suppliers of telecom giant Huawei and 188 licenses valued at $42 billion for suppliers of Semiconductor Manufacturing International Corp., China's largest chip maker, from Nov. 9, 2020, through April 20 this year.


Investors Bet Inflation Pressures Will Linger

A key measure of investors' inflation expectations has climbed in recent weeks, adding fuel to concerns about rising consumer prices.

As of Wednesday, the gauge known as the 10-year break-even rate suggested that the consumer-price index will rise by an annual average of 2.57% over the next decade, according to Federal Reserve Economic Data, or FRED. That is up from a recent low of 2.28% in late September and the highest level since 2013.


Natural-Gas Prices Fall From Peak as Warm Autumn Buoys Stockpiles

Natural-gas prices have shed 19% since hitting a 13-year high earlier this month, reversing some of a run-up that has prompted fears of exorbitant heating bills and higher manufacturing costs at a time of already high prices.

A warm start to autumn is behind the decline. With most of the country yet to turn the heat on, gas has accumulated in storage facilities faster than expected and shrunk a deficit that prompted worries over winter price surges and even potential shortages.


Moderna and J&J Covid-19 Boosters, Mixing and Matching Backed by CDC

Centers for Disease Control and Prevention Director Rochelle Walensky recommended Covid-19 booster shots from Moderna Inc. and Johnson & Johnson and backed mixing vaccines with a different booster dose.

With Dr. Walensky's greenlight Thursday, the vaccine doses can now become available at doctor's offices, pharmacies and vaccination sites on Friday, a CDC spokeswoman said. It follows unanimous recommendations from a panel of experts advising the CDC.


Biden Signals Openness to Ending Filibuster on Some Issues

WASHINGTON-President Biden signaled he is open to doing away with the filibuster to pass legislation to overhaul election rules nationwide and may be amenable to eliminating the 60-vote threshold for other bills as well.

Asked if he would consider establishing a filibuster carve-out to advance voting legislation, Mr. Biden said during a CNN town hall on Thursday night: "And maybe more."


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This article is a text version of a Wall Street Journal newsletter published earlier today.


(END) Dow Jones Newswires

October 22, 2021 05:51 ET (09:51 GMT)

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