European stocks fell more than 1% Tuesday, as downbeat comments
on coronavirus variants from vaccine manufacturer Moderna unsettled
investors. Oil- and travel-related stocks were among the biggest
"It only took one comment from the boss of drug firm Moderna to
derail markets once again. Stephane Bancel said he believed
existing vaccines would struggle with the Omicron variant, leading
to a renewed selloff in shares and oil," AJ Bell investment
director Russ Mould said. "Markets hate uncertainty and this is
precisely what we have now."
Shares on the move:
Air France-KLM shares were down 4%, with other stocks in the
sector also weaker. HSBC has downgraded the Franco-Dutch airline to
reduce from hold on the back of the Omicron news.
The bank said Air France-KLM has a large amount of debt and was
planning to further restructure its balance sheet before the
emergence of Omicron, which could make a recapitalization more
dilutive than it would have been otherwise.
"In practical terms, we believe there is a risk that the balance
sheet restructuring could be more dilutive than we previously
anticipated" due to a more depressed trading environment, HSBC
Schneider Electric stock rose 1.1% and Berenberg said the
company's new medium-term forecasts, issued ahead of its capital
markets day, are bullish.
Targets to 2024 guide for organic-revenue growth of 5%-8% on
average, ahead of company-compiled consensus forecasting 5.4% and
4.9% for FY 2022 and FY 2023, respectively, Berenberg said.
Longer-term ambitions are for organic-revenue growth of 5% across
the economic cycle, though something closer to around 3% is priced
in, according to Berenberg.
Since the company delivered on its 2019 objectives 18 months
ahead of schedule, estimates shouldn't need to move much higher for
shares to perform, the bank added. Berenberg has kept its buy
rating on the stock, with a EUR175 target price.
Markets are set to face increased volatility in 2022, even as
central banks will probably approach the tapering of asset
purchases and changes to interest rates in a controlled and prudent
manner, said Christel Rendu de Lint, deputy head of investment at
"Indeed, taking a controlled and prudent approach to bond
purchases and interest rates will play a central role in ensuring
that the economy has a soft landing without an abrupt end to
growth," she said. For central banks, this will be a "tightrope
act." The Federal Reserve, which has a dual mandate of price
stability and maximum sustainable employment, is probably the
best-positioned among central banks to perform this balancing act,
In the favorable scenario in which existing vaccines are
effective against the new Omicron variant, the travel recovery in
Europe should only be delayed by a quarter due to the renewed
restrictions put in place to fight the more contagious Covid-19
strain, HSBC has forecast.
"The current outlook for aviation stocks will likely be shaped
by the effectiveness of vaccines against the new Omicron variant."
Less favorable scenarios on vaccines effectiveness could mean that
recovery could be delayed by up to one full year, HSBC said.
Eurozone inflation rose by 4.9% year-on-year in November, driven
mainly by higher energy prices, even when all components saw marked
accelerations, said Oxford Economics.
There isn't much the European Central Bank can do about higher
energy prices and supply bottlenecks in the short-term, but the
latest data will add to the debate on the appropriate level of
policy support, said Oxford Economics' economist Katharina
Oxford Economics still expects energy and goods price pressures
to ease next year thanks to supply constraints fading. Therefore,
the economic research group sticks to its view that inflation will
slow meaningfully over the course of 2022.
Germany's labor-market recovery continued in the fourth quarter,
consistent with the headline business survey data, and despite
clear evidence that GDP growth is now slowing sharply, Pantheon
Macroeconomics' senior Europe economist Melanie Debono said.
Jobless claims fell by 34,000 on month after declining by 40,000
in October. The fall in jobless claims is positive, especially
given softening leading labor market indicators, Debono added. The
smoothed trend in claims is now weakening, however, and Debono says
she doubts jobless claims will continue to fall by 35,000 to 40,000
per month through the rest of the fourth quarter.
Pantheon forecasts a slowdown in the pace of decline in jobless
claims, to between 15,000 to 20,000 a month.
Stock futures fell and investors sheltered in government bonds
after drugmakers raised concerns that Covid-19 vaccines won't work
as well against the new Omicron strain.
Investors awaited testimony from Jerome Powell for clues on how
the new variant might impact the outlook for inflation and
interest-rate rises. Powell is expected to say that the new strain
could intensify the supply-chain issues that have fueled a spike in
Should the Omicron strain prompt fresh lockdowns it would put
the central bank in a difficult position by worsening inflation and
strengthening calls for rate rises just as the economy and markets
take a hit, said Seema Shah, chief strategist at Principal Global
"We had been starting to see this glimmer of hope that some of
the supply-side constraints were starting to ease," she said. "If
we go back into fear mode you would be looking at those supply-side
bottlenecks being exacerbated."
Also in focus will be data on house prices and consumer
confidence. Earnings from Salesforce.com and Hewlett Packard
Enterprise are due after markets close.
Swings in market sentiment related to the Omicron coronavirus
variant are likely to be the main driver of the euro Tuesday, ING
"A popular funding currency before the Omicron-induced
correction, it is likely that we need to see some confidence being
re-built into risk trades to see the EUR depreciate across the
board," ING forex strategist Francesco Pesole said. The
low-yielding euro is used to fund the purchase of more risky
currencies with higher yields in so-called carry trades.
The dollar was lower, particularly against the euro, yen and
Swiss franc, as market sentiment was jolted by renewed concern
about the Omicron variant. The buck's fall was exacerbated by
Jerome Powell's comments that the variant could exacerbate
inflation uncertainty and slow labor-market progress.
"Omicron fears have prompted market participants to scale back
expectations for tighter Fed policy, which is also helping to
trigger the correction lower in U.S. yields and USD/JPY," said MUFG
currency analyst Lee Hardman.
ING said Omicron poses a threat to the pound's outlook. "A
worsening of the virus situation globally and specifically in the
U.K. may not only put upward pressure on EUR/GBP due to the pound's
higher sensitivity to risk sentiment but may also mean markets
could increasingly price out a December [interest] rate hike by the
Bank of England."
While it's too early to draw conclusions on that, a "choppy risk
environment" may lift EUR/GBP on Tuesday, ING forex strategist
Francesco Pesole said.
Eurozone 10-year government bond yields were lower as the market
shifted into a risk-off mood.
"Relief sentiment faded on sobering vaccine news," Michael
Leister, head of interest rates strategy at Commerzbank, said.
Deutsche Bank said the 10-year German Bund yield is set to turn
into positive territory for the first time in years in 2022,
forecasting the end-2022 level at 0.20%.
Long-term Treasury yields should continue to be driven by the
continuing recovery in economic indicators, particularly on the
labor side, Deutsche added.
Ulrich Stephan, chief investment strategist for private and
corporate clients sees the yield on the 10-year Treasury yield at
2% by the end of 2022, but he doesn't rule out an overshooting of
that level in the first half of the year.
Oil fell sharply in Europe, with prices now around flat for the
week so far after volatility Friday and Monday over the feared
effects of the Omicron coronavirus variant.
However "it is still too early to sensibly assess the risk that
Omicron poses and this uncertainty is likely to add further
volatility to the oil market," said ING's Warren Patterson. "The
uncertainty of this latest variant will also make the job of OPEC+
OPEC's preliminary meetings have been delayed to later in the
week, and with the full meeting going ahead Thursday "we would not
rule out the group pausing its supply increases over January,"
Copper prices also fell, with ING saying that while the severity
of Omicron remains a big uncertainty, it casts a shadow over demand
growth in the near future and further complicates the supply
DOW JONES NEWSPLUS
EasyJet FY 2021 Pretax Loss Narrowed, Revenue Fell Due to
EasyJet PLC said Tuesday that its fiscal 2021 pretax loss
narrowed, beating market expectations on the back of reduced costs
and that it expects to recover further in the new year, though
The U.K. budget airline said that for the year ended Sept. 30,
its pretax loss was 1.04 billion pounds ($1.38 billion) compared
with a loss of GBP1.27 billion for fiscal 2020, and consensus of a
loss of GBP1.13 billion based on the forecasts of seven analysts
taken from FactSet. EasyJet said its restructuring of its cost base
led to line-by-line cost savings in every area of its business,
with further cost savings under way.
Volvo Cars 3Q Net Profit Fell; Backs Full-Year Guidance
Volvo Cars AB on Tuesday reported a drop in third-quarter net
profit as semiconductor shortages and Covid-19 outbreaks in
Southeast Asia led to temporary production halts, though the auto
maker backed full-year guidance amid strong demand.
In its first quarterly report since listing on Nasdaq Stockholm,
Volvo Cars said third-quarter production was approximately 50,000
cars lower than a year earlier, while preliminary figures for
November show sales volumes of about 52,000 cars, down on the year
due to lower production and build-up of in-transit inventory.
SAS 4Q Net Loss Narrowed as Demand Continued to Increase
Scandinavian airline SAS AB said Tuesday that its fiscal
fourth-quarter net loss narrowed as customer demand and ticket
sales continued to increase, but cautioned that uncertainties over
the development of the Covid-19 pandemic remain.
For the quarter ended Oct. 31, the carrier posted a net loss of
744 million kronor ($81.7 million) compared with a loss of SEK2.57
billion a year earlier, as revenue rose 90% to SEK5.76 billion.
Schneider Electric Sets Targets for 2022-24
Schneider Electric SE on Tuesday set targets for the 2022-24
period ahead of the start of its capital markets day.
The French energy-management and automation specialist said it
will target 5%-8% organic revenue growth on average for the period,
and that it expects to have free cash flow of about 4 billion euros
($4.52 billion) by 2024.
Inditex Appoints Founder's Daughter as Chairwoman
Industria de Diseno Textil SA on Tuesday said Marta Ortega
Perez, the daughter of the Spanish fashion group's founder, is set
to become its chairwoman.
Ms. Ortega will succeed Pablo Isla Alvarez, executive chairman
since 2011, who will resign his position effective March 31, 2022,
the company said. Ms. Ortega's father, Amancio Ortega, founded the
La Coruna-based company, which owns fashion brands including Zara
and Pull & Bear.
U.S., Allies Weigh Response to Russian Military Buildup Around
RIGA, Latvia-NATO foreign ministers are meeting here Tuesday to
calibrate a response to Russia's military buildup around Ukraine,
seeking to deter the Kremlin from any potential assault while
making clear the limits of its support.
Concern over the Russian buildup has risen in recent weeks. The
U.S. has briefed allies that Moscow could launch a new military
operation in Ukraine, following its seizing of Crimea and covert
invasion of its neighbor's east in 2014. Russia, which wants to
draw the former Soviet republic back into its orbit, says it has no
plans to invade and can move troops as it wishes on its sovereign
Iran Doubles Down on Demands as Nuclear Talks Resume
VIENNA-Iran made many demands as it resumed talks Monday with
the U.S. and other world powers aimed at salvaging the 2015 nuclear
deal, doubling down on its position before negotiations first
started in the spring and raising doubts over an early
The talks, taking place in the Austrian capital amid a strict
coronavirus lockdown, are intended to agree on the steps Iran and
the U.S. will take to return into compliance with the 2015 deal,
which lifted most international sanctions on Tehran in exchange for
strict but temporary restrictions on Iran's nuclear work.
Omicron Variant Drives Rise in Covid-19 Hospitalizations in
South Africa Hot Spot
JOHANNESBURG-The emergence of the Omicron variant of the
coronavirus in South Africa has driven a sharp increase in Covid-19
hospitalizations in the country's hot-spot province over the past
two weeks, although fewer patients are being treated for severe
disease than in previous surges, the country's National Institute
for Communicable Diseases said.
There has also been an unusually high number of hospitalizations
of children under 2 years old around the capital, Pretoria, where
cases started rising first, although some of these may be
precautionary, the institute said.
Turkey's Lira Crisis Exposes Reliance on Imported Energy
Turkey's currency crisis has exposed a key weakness in its
economy: a near total dependence on imported energy to keep
households warm and factories humming.
Turkey is surrounded by some of the world's richest reserves of
fossil fuels, in the Middle East and Central Asia, but produces
little oil, gas or coal of its own. The country imports 93% of the
oil and 99% of the gas it consumes, a vulnerability when energy
prices in dollars climb and the lira slides.
Covid-19 Variant Omicron Threatens U.S., Global Economies
The global economy could suffer a modest blow from the Omicron
variant of Covid-19, though the scale of damage will hinge on the
potency of the strain itself, economists say.
Tourism spending will likely weaken, and perhaps so too will
restaurant spending and shopping at stores. But compared with the
initial wave of Covid-19 in March 2020 and the Delta variant this
summer, Omicron's threat to economies will likely be less severe,
economists say, in part because each new virus strain has had a
diminished economic impact.
Gas Prices Pressure Drivers' Finances
Rachel Gould spends $50 on gas taking her two special-needs
children on the three-hour trip from her home in Central Illinois
to a hospital in St. Louis. That is roughly a 60% increase from the
same time last year.
"You have to have gas and have to pay for it either way you look
at it," said Mrs. Gould, who drives a Dodge Caravan that gets 23
miles to the gallon.
America's Power Plants Are Low on Coal
A lump of coal would be a welcome gift for many U.S.
Coal piles at power plants have dwindled to their lowest point
since the 1970s, and the race to build up inventories ahead of
heating season has sent domestic thermal coal prices to their
highest levels in more than a decade.
New Omicron Variant Exacerbates Inflation Uncertainty, Powell
The new Omicron coronavirus variant risks intensifying
supply-chain disruptions that have fueled a surge in inflation this
year, Federal Reserve Chairman Jerome Powell said in testimony
released Monday afternoon.
Mr. Powell is set to appear before the Senate Banking Committee
alongside Treasury Secretary Janet Yellen on Tuesday morning.
China Manufacturing Gauge Shows Rebound in November
BEIJING-An official gauge of China's manufacturing unexpectedly
rebounded to expansion in November, ending a two-month contraction
resulting from a power crunch.
The official manufacturing purchasing managers index rose to
50.1 in November from October's 49.2, the National Bureau of
Statistics said Tuesday.
FDA Moving to Authorize Pfizer-BioNTech Booster for 16-,
The Food and Drug Administration could authorize Covid-19
boosters from Pfizer Inc. and BioNTech SE for use in 16- and
17-year olds as soon as next week as concerns rise over a new,
possibly more transmissible variant, according to a person familiar
with the planning.
The agency is planning to move rapidly to take action on a
request by the companies to authorize boosters for 16- and-17 year
olds, according to a person familiar with the matter. So far, only
people 18 years and older are eligible for boosters.
Omicron Crept Into Australia After Strict Border Rules Were
Two days before Australia tightened border controls in response
to the new Omicron variant of Covid-19, a woman arrived in Sydney
on a one-stop flight from southern Africa and visited several shops
before heading up the coast.
Health officials in New South Wales, the country's most populous
state, said the woman was infected with the Omicron variant of
Covid-19. They are now racing to map her movements and identify
contacts in an effort to prevent the virus from spreading in the
Pentagon to Investigate 2019 Syria Airstrike That Killed Women
WASHINGTON-Defense Secretary Lloyd Austin has ordered an
investigation into a 2019 U.S. strike in Syria that killed dozens
of people, including women and children, but that wasn't publicly
acknowledged by the military until this year, the Defense
Department said Monday.
Gen. Michael X. Garrett, who is in charge of Army Forces
Command, will lead the inquiry and will look at the number of
civilians killed, whether the U.S. complied with the laws of war in
launching the attack, how the military records such events, and
whether anyone should be held accountable for the deaths, Pentagon
spokesman John Kirby said.
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(END) Dow Jones Newswires
November 30, 2021 06:18 ET (11:18 GMT)
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