The Spanish bond outperformance versus Italy and France is justified, among others, by the yet-to-be-concluded presidential elections and parliamentary elections in early 2023 in Italy, and with presidential elections in France in the spring. In addition, Italian bonds tend to suffer more than Spanish ones when Bund yields rise and credit spreads widen, Societe Generale said.
Investors may be forced to price in a higher peak for U.S. interest rates than 2%, UniCredit said. The Fed's statements and dot plot, a chart that summarizes the central bank's outlook for the federal funds rate due in mid-March, should shine a light on the issue, analysts at the bank said.
The focus remains the prospect of the first rate-rise in March "seemingly cast in stone," while Treasury yield curve movements are likely to be predominantly determined by shifts in views about the pace of rate hikes this year, they added.
Oil prices were on course for a sixth weekly rise amid tight supplies and geopolitical tensions in Eastern Europe and the Middle East. For the week, Brent is on course for a 0.7% gain while WTI is set for a 2.2% gain.
Tensions between Russia--a major oil producer--and Ukraine--a major conduit for natural gas supplies--have helped drive prices higher this week. At the same time, producing nations in OPEC are struggling to keep pace with their own supply targets.
"In effect, spare capacity is at a level which may not be enough to cover any geopolitical disruptions," said ANZ.
As tensions between Ukraine and Russia mount, energy prices are likely to push higher. The situation in Eastern Europe increases geopolitical premium in oil prices, causing more inflation, Rob Thummel from TortoiseEcofin said.
However, the biggest concern for Europe at the moment could be regarding natural gas supply security, as the continent is highly dependent on Russia.
"Given that there's a lot of winter left, I think there are scenarios where it could become really challenging, and inventories could go really low," Thummel said.
Conversely, the U.S. has a large supply of gas and exports LNG to Europe. "Post conflict between Russia and Ukraine, post winter and when Covid cases have lessened, I think there's potential for [U.S.] gas prices to fall to around $3.00 [per million British thermal units] by the end of 2022," Thummel said.
Gold fell in European trade and Oanda said gold is vulnerable to further technical selling now that the $1,800 level has been breached, risk aversion should provide price support for the safe-haven asset. Oanda puts support for the precious metal at $1,760 an ounce.
Most base metals are on course for a weekly loss as a stronger dollar and equity market jitters have weighed on prices. Three-month copper is down 0.9% Friday and set for a nearly 3% weekly loss.
All other base metals with the exception of aluminum are also set for weekly losses, with the largest being nickel at more than 7%. "A stronger dollar, high energy prices and wobbly equity markets--all occurring against a backdrop of a hawkish Fed and lingering geopolitical tensions--are creating a feeling of unease," said Ed Meir, a metals consultant for ED&F Man.
Chinese manufacturing PMI data is due Sunday, while Tuesday is the start of China's Lunar New Year holidays, which could sap liquidity from the market and heighten volatility.
UniCredit 4Q Net Loss Widened as Revenue Rose
UniCredit SpA reported a bigger loss in the fourth quarter of 2021, but posted higher-than-expected revenue.
The bank, Italy's second-largest by assets, on Friday reported a net loss of 1.44 billion euros ($1.60 billion), from a EUR1.18 billion loss a year earlier and compared with an expected EUR1.32 billion loss, according to a company-provided median consensus estimate.
Henkel to Merge Businesses, Launch EUR1 Bln Share Buyback
Henkel AG & Co. KGaA said Friday that it intends to merge its laundry-and-home-care and beauty-care divisions into one unit to be called Henkel Consumer Brands, and that it will launch a share-buyback program with a total value of up to one billion euros ($1.11 billion).
The German home and personal-care products company also reported preliminary results for 2021, and set targets for 2022 and for the mid-to-long term.
Hennes & Mauritz to Focus on Growth Again After Posting 4Q Earnings Beat
Sweden's Hennes & Mauritz AB said Friday it will now focus on growth again, after posting a forecast-beating rise in fourth-quarter net profit as sales returned to pre-pandemic levels.
The fashion retailer posted a net profit of 4.62 billion Swedish kronor ($493.6 million) for the fiscal quarter ended Nov. 30, compared with SEK2.49 billion a year earlier. Analysts polled by FactSet had expected a profit of SEK3.99 billion.
German Economy Contracted in 4Q
Germany's economy contracted in the fourth quarter due to a rise in coronavirus cases and the related re-imposition of restrictions, according to a first estimate published Friday by the German Federal Statistical Office.
Gross domestic product fell by an adjusted 0.7% from the previous quarter, Destatis said. This contraction was larger than economists' expectations of a 0.5% drop in a Wall Street Journal survey.
France's GDP Growth Slows Down at the End of 2021
The French economy grew in the fourth quarter, although at a slower pace than in the previous quarter because of a surge in coronavirus infections, an intensification of supply-chain problems and rising inflation.
The eurozone's second-largest economy expanded by 0.7%, following 3.1% growth in the previous quarter, French statistics agency Insee said Friday in a first estimate for the period. Economists polled by The Wall Street Journal had forecast the economy would grow by 0.5% on quarter.
LVMH Shares Rise After Results Show Revenue Growth Continues to Accelerate
Shares in LVMH Moet Hennessy Louis Vuitton SE jumped in early trading Friday after the luxury-goods giant said revenue growth continued to accelerate at the end of 2021, leading to a much higher annual profit.
At 0813 GMT, shares traded 3.4% higher at EUR717.60, having risen as high as EUR733.90 early in the session.
Electrolux Expects Continuing Hit From Supply-Chain Constraints
Electrolux AB on Friday reported a drop in fourth-quarter net profit, and said global supply-chain constraints will continue to affect the ability to fully meet demand, with sequential improvements expected starting in mid-2022.
The Swedish home-appliance manufacturer posted a net profit of 596 million Swedish kronor ($63.7 million), compared with SEK1.86 billion a year earlier, as sales rose 4.3% to SEK35.37 billion.
Volvo 4Q Beat Forecasts, but Cautions on Continued Supply Disruptions
Volvo AB on Friday posted forecast-beating fourth-quarter earnings amid strong truck demand, though it cautioned that production stoppages due to component shortages and supply-chain disruptions will continue.
The Swedish truck maker reported net profit of 8.0 billion Swedish kronor ($854.8 million), compared with SEK9.2 billion a year earlier, and beating a FactSet consensus forecast of SEK7.43 billion.
JCDecaux Shares Rise on Better-Than-Expected Revenue
Shares in JCDecaux SA jumped Friday after the French outdoor-advertising company posted revenue ahead of market expectations for the fourth quarter.
At 0832 GMT, JCDecaux shares traded 9.2% higher at EUR23.34.
Givaudan Shares Slide on Weak Profitability, Costs Impact
Shares of Givaudan SA dropped Friday after the Swiss flavor-and-fragrance company posted earnings below market expectations amid an increase in input costs.
At 1010 GMT, Givaudan shares traded 5% lower at CHF3880.00.
SSAB 4Q Net Profit Beat Forecasts Amid High Steel Prices
Swedish steelmaker SSAB AB on Friday posted a bigger-than-expected rise in fourth-quarter net profit, driven by high steel prices.
The company said fourth-quarter net profit rose to 5.46 billion Swedish kronor ($583.4 million) from SEK343 million a year earlier, as sales rose 61% to SEK27.34 billion.
Telia Lifts Dividend After 4Q Earnings Beat Expectations
Telia Co. AB on Friday lifted its dividend after posting a better-than-expected fourth-quarter net profit.
The Swedish telecommunications operator said it made a fourth-quarter net profit of 1.19 billion kronor ($126.7 million), compared with a loss of SEK24.5 billion a year earlier and the SEK1.1 billion expected in a FactSet poll.
Consumer Spending Could Be Slowed by Inflation, Omicron
Consumer spending, a key engine of economic growth, has shown signs of stalling heading into 2022, amid rising prices and the Omicron wave.
Economists surveyed by The Wall Street Journal estimate that consumer outlays declined by 0.7% in December from the prior month, as prices rose at their fastest pace in nearly four decades. The Commerce Department will release a report on consumption and inflation in December at 8:30 a.m. ET Friday. The report comes on the heels of separate data showing retail sales declined last month.
U.S. Employers Confront Highest Labor Costs in 20 Years, Fueling Inflation
The cost of hiring new employees and retaining existing ones in the nation's tight labor market is growing at nearly its fastest pace in a generation. That is helping to fuel inflation as employers pass labor costs to customers.
The U.S. employment-cost index-a quarterly measure of wages and benefits paid by employers-is expected to show that costs continued to rise at the highest rate in two decades of available records. Economists surveyed by The Wall Street Journal expect a seasonally adjusted increase of 1.2% in the fourth quarter of 2021 over the prior three months, which experienced a similar increase. The third-quarter gain, when compared with the same quarter from a year earlier, rose 3.7% on a nonseasonally adjusted basis.
IMF Says China's Economic Imbalances Have Worsened
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