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    SP500   US78378X1072

S&P 500

Delayed Quote. Delayed USA - 01/21 04:52:58 pm
4397.94 PTS   -1.89%
4383.35 PTS
06:43aSOCIAL BUZZ : Wallstreetbets Stocks Decline Premarket Monday on Russia-Ukraine Conflict
06:42aEuropean Bourses Sag Midday In Tech Rout
06:10aWall Street Leans Back Pre-Bell; Futures Red, Europe Lower, Asia Choppy
SummaryMost relevantAll NewsOther languagesNews of the index componentsMarketScreener Strategies

EMEA Morning Briefing : Hawkish Fed Tilt to Drag on Stocks

10/20/2021 | 12:21am EST


Watch For:

Eurozone Balance of Payments, Harmonised CPI; Germany PPI; U.K. Producer Prices, Monthly Inflation; Italy Balance of Payments; updates from TechnipFMC, Flughafen Wien, Danone, Vinci, Akzo Nobel, ASML, EQT, SEB, SEGRO, ASML, Antofagasta, Avast

Opening Call:

Europe faces a cautious open following some hawkish comments from a Fed official and despite solid gains in the U.S. and Asia. Elsewhere, the dollar remained under pressure, Treasury yields continued to rise, oil was lower on profit-taking and gold was firmer.


European equities are likely to struggle for momentum at Wednesday's open, after a Fed official cautioned that a more aggressive monetary policy might be needed next year if inflation readings stay high.

Federal Reserve Gov. Christopher Waller said the central bank could move forward the timeline for raising short-term interest rates to restore price stability if high levels of inflation don't start cooling soon, adding that he supports the Fed slowing its asset buying stimulus effort starting next month.

"The next several months are critical for assessing whether the high inflation numbers we have seen are transitory," Waller said. "If monthly prints of inflation continue to run high through the remainder of this year, a more aggressive policy response than just tapering may well be warranted in 2022.".

Despite the hawkish direction of the remarks, U.S. stocks closed higher, as corporate earnings largely overshadowed worries about inflation and supply-chain disruptions. And Asian markets tracked Wall Street's advance, with most major benchmarks posting solid gains early Wednesday.

A handful of strong earnings reports have helped calm fears of how badly those headwinds would affect corporate results, said Lamar Villere, portfolio manager at investment firm Villere & Co. "I wouldn't say the fog has been lifted or the fear is gone, but at least you've got some reasonably positive data points," he said.


The dollar was little changed in Asia amid a generally risk-on mood.

Healthier risk conditions and the repricing of expectations for central banks' monetary policies worldwide could send the dollar lower in coming days, although any losses might ultimately prove modest, said Westpac.

The European Central Bank is likely to underscore its dovish guidance next week, while the Federal Reserve is expected to announce QE tapering at its Nov. 2-3 meeting, a backdrop that should underpin the dollar, Westpac added.

Rabobank said the dollar's current declines could reflect a trimming of speculative bets on the currency strengthening but the weakness won't last given the prospect of the Fed raising interest rates in 2022.

"We are viewing the current pullbacks in the dollar as corrective and continue to expect it to push higher over the medium-term," said Rabobank forex strategist Jane Foley.

Following a build-up of long dollar positions, some consolidation is to be expected and should allow investors to "catch their breath and take stock of the current batch of fundamental factors."

Positioning in sterling options suggests the market sees the risk of the Bank of England making a policy mistake by raising interest rates too soon, said TD Securities.

Risk reversals show a rising premium for sterling call options, which bet on a stronger currency, in the short-term but expect a "notable erosion" next year, said TD Securities forex strategist Mazen Issa. "This may be the clearest indication that markets are explicitly pricing in a policy mistake if the BOE hikes [interest rates] near-term."

The BOE is likely to lift rates in November, which is largely because of Governor Andrew Bailey's urgency to act to contain inflation as opposed to economic growth reasons, which would suggest more caution, Issa said.


U.S. Treasury yields continued to climb in Asia, extending Tuesday's gains which pushed the yield on the 10-year note back to its highest level since around May.

Investors continued to a respond to a hawkish shift in Fed monetary policy following Christopher Waller's speech.

Tim Duy, chief U.S. economist at SGH Macro Advisors, said comments from the Fed are moving in an overall hawkish direction. He said it will be important to see if Jerome Powell pushes back on such talk at his upcoming speech on Friday.

J.P.Morgan has forecast eurozone gross government bond issuance to drop to around EUR1.05 trillion in 2022 versus record EUR1.2-EUR1.3 trillion in 2020 and 2021, while net issuance should drop by almost EUR250 billion to around EUR350 billion because of lower budget deficits.

JPM still expects the balance of eurozone's net bond issuance versus net purchase by the ECB to remain "quite favorable" in 2022. JPM's base case is an average of EUR40 billion-EUR50 billion of net purchases after the end of the Pandemic Emergency Purchase Programme in March 2022. The ECB is set to decide in December on how to increase or supplement the regular Asset Purchase Programme.


Oil prices were lower in the Asian session on possible profit-taking. Given their relentless winning streak, they're ripe for significant rounds of profit-taking, said Oanda.

While WTI crude oil seems ripe for a pullback, any declines may be limited as the short-term outlook remains very bullish, Oanda added.

Analysts said relatively low global production of crude oil, along with Europe's energy crisis and rising Chinese demand for fossil fuels are fueling the price gains. "An energy crunch [is] bringing energy security back onto the global agenda," said Robin Winkle at Glenloch Energy. "European nations [are] bringing coal and oil-fired power back on line ... just before the start of the UN Climate Change Conference in Glasgow."

Late Tuesday, the American Petroleum Institute reported inventories of crude oil in the U.S. rose by 3.3 million barrels in the latest week, a source citing the data said, while gasoline supplies fell by 3.5 million barrels.

The results, bearish for crude but bullish for refined fuels, were released ahead of official inventories data from the Department of Energy set to be published Wednesday. Average forecasts in a WSJ survey indicate the DOE report will show crude supplies rose by 700,000 barrels from the previous week and that gasoline supplies decreased by 1.1 million barrels.


Gold edged higher, extending Tuesday's gains, helped by a weaker dollar.

Oanda said trading in the precious metal could stay choppy as investor expectations on the Fed rate-increase timing will be dictated over the next few inflation reports. Complicating gold's short-term outlook is the inability of U.S. lawmakers to get President Biden's infrastructure deal and economic package done, Oanda added.

Copper prices were 1.5% lower as the focus returned to the impact of power and other energy shortages in countries such as China, on global economic growth.

"Rising commodity prices could accelerate inflation, worsen supply chain bottlenecks and subsequently be a drag on global growth," said ANZ. However, a tight physical market should limit any downside, ANZ added, noting copper inventories on the LME have fallen 30% since the start of September.


Waller: If Inflation Doesn't Cool by Year-End, Fed Could Bring Rate Increases Forward

Federal Reserve Gov. Christopher Waller said the central bank could move forward the timeline for raising short-term interest rates to restore price stability if high levels of inflation don't start cooling soon, adding that he supports the Fed slowing its asset buying stimulus effort starting next month.

Mr. Waller said in a virtual appearance Tuesday that when it comes to moving up what is now a near zero federal-funds rate target range, "the pace of continued improvement in the labor market will be gradual, and I expect inflation will moderate, which means liftoff is still some time off." But he also said there is some amount of flux in the path forward for interest rate policy amid unexpectedly high inflation readings.

First Bitcoin Futures ETF Rises in Trading Debut

The first bitcoin-focused exchange-traded fund rose in its trading debut Tuesday after getting a warm reception from investors.

The ProShares Bitcoin Strategy ETF climbed most of the day, gaining nearly 5% to settle at $41.94. About $981 million of shares changed hands over the session, making it the second-most highly-traded ETF debut ever, according to Elisabeth Kashner, director of ETF research at FactSet.

Biden Identifies Cuts to Social Policy and Climate Bill

WASHINGTON-Democrats accelerated efforts to strike a deal on their social-policy and climate legislation, as President Biden identified programs that party lawmakers could eliminate or slim down during a flurry of meetings at the White House Tuesday.

Mr. Biden said that two years of tuition-free community college likely won't be in the bill, according to several attendees and people familiar with the meetings. He also acknowledged that opposition from Sen. Joe Manchin (D., W.Va.) to a clean electricity program would require Democrats to abandon it, according to lawmakers at the meetings.

China's New Home Prices Edged Down in September Amid Speculation Curbs

BEIJING-China's September new home prices declined for the first time since March 2015, amid tighter measures to curb housing speculation and cool the property sector.

Average new home prices in China's 70 major cities edged down 0.08% in September from the previous month, compared with a 0.16% increase in August.

U.S. Lawmakers Turn Spotlight on Private Equity

U.S. lawmakers this week will subject the private-equity industry to fresh scrutiny over its practices, and some members of Congress plan to revive a bill to increase federal regulation of buyout firms.

(MORE TO FOLLOW) Dow Jones Newswires

10-20-21 0020ET

All news about S&P 500
06:43aSOCIAL BUZZ : Wallstreetbets Stocks Decline Premarket Monday on Russia-Ukraine Conflict
06:42aEuropean Bourses Sag Midday In Tech Rout
06:10aWall Street Leans Back Pre-Bell; Futures Red, Europe Lower, Asia Choppy
06:02aEUROPEAN MIDDAY BRIEFING - Stocks Hit with Fed -3-
05:38aAsian Stock Markets Choppily Lower on Tech, Pandemic Outlooks
04:54aNikkei 225 Up 0.2% on Bargain-Hunting, Wall Street Futures
04:41aSingapore Shares Close Lower; ESR-REIT Drops Over 3% on Raising Offer for ARA Logos
04:32aHong Kong Stocks Begin Week Lower; Fosun Pharma Slides 5%
04:27aSingapore Shares Start Week in Red on US Fed Concerns
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