EuroCOIN indicator of euro area economic activity; EU Unemployment; EU PPI; ECB General Council meeting; Bank of England Decision Maker Panel data; OECD CPI.
European stocks could open lower as investors brace for more volatility. Stock markets in Asia are mixed, U.S. stock future are pointing to a higher open for major indices. Dollar is steady. Oil edges higher, while gold prices softened.
European stocks are set to open lower Thursday after a turbulent day on Wall Street as traders tried to forecast the impact of the coronavirus’s omicron variant.
All three major U.S. indexes finished lower in a stark turnaround from earlier in the day. Markets were sliding when the White House announced the discovery of the first omicron case in the United States. It is unclear whether omicron is more dangerous, but governments have responded by tightening travel controls, fueling unease about the outlook for a global economic recovery.
“Volatility in the short run should be expected. Ultimately, we’re dealing with a little more uncertainty than we have been,” said Chris Zaccarelli, chief investment officer of Independent Advisor Alliance. “There’s enough cause for concern that people are shooting first and asking questions later.”
The latest data “painted an optimistic picture for economic conditions, but that seems to be taking a backseat as the Omicron variant can potentially shift the landscape,” said Yeap Jun Rong of IG in a report.
On Wednesday, the Institute for Supply Management reported U.S. manufacturing growth activity accelerated faster than expected in November. Payroll processor ADP said employers hired more people than expected. That might raise expectations for Friday’s U.S. government jobs data.
Stocks to watch: Investors are too conservative over Thyssenkrupp’s valuation, Credit Suisse said.
At its fourth-quarter earnings, adjusted EBIT at EUR232 million was 17% above consensus, but the bigger surprise came from the industrial company’s FY 2022 EBIT guidance of EUR1.5 billion-EUR1.8 billion, amid confidence in the recovery of the steel segment and reducing losses in its multi-tracks division as it divests itself of loss-making businesses, the bank said.
CS increases its own EBIT forecasts for 2022 and 2023 by 51% and 37%, respectively, to reflect stronger steel prices from annual negotiations with the auto sector, more than doubling its EPS expectations for those years.
The bank reiterates its outperform rating and raises its target price to EUR16.60 from EUR15.70.
Thyssenkrupp will host a capital markets day on Thursday.
The dollar strengthened against the euro and weakens against the yen. The chairman of Navellier & Associates notes that since late June, the WSJ Dollar Index has appreciated almost 6% against major currencies.
“The primary reason the US dollar is rallying is due to higher government bond yields than Japan and Europe, plus a strong economic outlook,” Louis Navellier said.
“Eventually, a stronger U.S. dollar helps to lower the prices on most imported goods as well as commodities (since they are priced in U.S. dollars). So the Fed’s argument that inflation is ‘transitory’ has some merit, since a strong US dollar will help to push down the prices of imported goods and some commodities.” The strong dollar is also keeping Treasurys low, he said..
The euro could fall to $1.10 next year from $1.1337 currently given the prospect of the Fed raising interest rates sooner, Rabobank said.
While the dollar’s gains could be limited by speculators potentially trimming bets on the currency rising in the coming month, it should still rise versus the euro next year given the scope for more “hawkish” action by the Fed, Rabobank forex strategist Jane Foley said.
Rabobank maintains its medium-term EUR/USD 1.12 target for now due to the risk of further dollar pullbacks, she said. “That said, the possibility of a break lower to 1.10 during the course of next year has increased.”
USD/JPY may fall below the recent support of a 112.50-112.60 band, as the spread of the Omicron variant leads to drops in stocks and falls in U.S. Treasury yields, IG said.
Once that support is breached, the pair may test the next key level of 112.00, it said. USD/JPY has been trending lower amid concerns about the Omicron variant over the past few sessions and is at 112.91, compared with 112.78 as of Wednesday 5 p.m. Eastern Time. Investors are closely watching U.S. weekly jobless claims figures due later in the day to gauge the strength of the current U.S. labor market.
Barclays now believes the Fed will raise rates three times in 2022 and slow the pace of asset buying faster than is currently planned. But the firm also notes that even as the Fed raises rates, money markets remain flooded with cash, which could blunt the impact of the policy shift.
“With reserves balances over $4 trillion and nearly $1.5 trillion in the [reverse repo facility,] we expect it will be difficult for short-term interest rates to trade much above the interest rate floor,” said the bank.
Oil prices were higher in early Asian trade as market concerns about the Omicron variant seem to have eased, ANZ said. In focus is a meeting between OPEC+ members that will determine whether the group will halt planned production increases, the bank said.
The current plan being discussed is whether OPEC+ should increase production to 400,000 barrels a day in January.
Gold prices were slightly lower in early Asian trade. The precious metal could trade sideways during the session, Oanda said: While the dollar has eased in recent days and the uncertainty surrounding the Omicron variant should give prices a boost, rising Treasury yields could put pressure on gold.
Copper prices were slightly lower in Asia’s early trade, as the commodity extends a broad downturn in recent sessions due to rising concerns over Omicron.
Huatai Futures pointed out that orders for some copper products weakened substantially in November, signalling falling end demand that will weigh on prices.
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