European shares suffered steep falls on Wednesday, tracking
In the U.K., the FTSE 100 shed 1.5% as concerns remain about
last week's debt-funded budget. Investors are wary of potential
aggressive interest-rate rises by the Bank of England to counteract
the impact of the spending proposals.
"The U.K. situation continues to provide concern, as the IMF
waded in last night with a fairly blunt warning about the country's
financial situation," IG said.
European steelmakers were sharply lower, squeezed by lower
prices, falling volumes due to weak demand and materially higher
costs, especially for energy, UBS said.
"It is a really challenging environment at the moment," UBS
Other Stocks to Watch:
Shares of Apple suppliers STMicroelectronics, Infineon and AMS
fell on a report that said the tech giant was scrapping plans to
increase production of its latest iPhones this year due to
STMicro led the decliners, falling more than 5% in early
European trading. Apple accounted for around 20% of the company's
total revenue in 2021.
Read more here.
Renault's overhaul of its operations is progressing well and
shows in the car maker's strong first-half results, Berenberg said,
as it upgraded the company to buy from hold.
"[W]e believe the shares should now further benefit from better
sequential production volumes and resilient mix benefits,"
Berenberg said, raising its price target to EUR34 from EUR27.
Renault's strategic plan called Renaulution includes deep
fixed-cost cuts--more than EUR2 billion since 2019--and strict
pricing discipline, and the auto maker is one to two years ahead on
the most important metrics.
Danske Bank said U.K. gilt markets and sterling are currently
reacting in a way that is normally preserved for emerging market
A recent rise in gilt yields has accelerated significantly since
Prime Minister Liz Truss's government presented its new mini budget
"The market is now speculating that the BOE may hike policy
rates by 100bp at its next rate meeting, or even deliver an
emergency rate hike," Danske said.
Read: BOE Could Raise Rates by 150Bps in November as it Seeks to
The fall in Germany's forward-looking consumer confidence
indicator took it to its fourth record low in a row, Pantheon
The GfK index dropped to minus 42.5 for October from a revised
minus 36.8 for September. With the squeeze on consumers' real
incomes set to intensify, as the energy levy comes into force this
month, Pantheon doesn't expect a rebound in consumer confidence
Consumers are saving more and foregoing spending, Pantheon
noted. This supports its view that household consumption will have
fallen in the third quarter in Germany, dragging GDP down.
Stock futures slid and bond yields rose as investors focused on
signs of slowing economic growth, including a Bloomberg report that
Apple had dropped plans to boost iPhone production.
The drop in U.S. futures suggested the S&P 500 could be on
course to fall for a seventh straight session.
Elsewhere, the yield on the benchmark 10-year Treasury note
edged up to 3.992% from 3.963% on Tuesday, climbing for a third
consecutive trading session. It briefly traded above 4% earlier in
As the dollar rises to another 20-year high against a basket of
currencies and against the euro, MUFG said it may be reaching
extreme levels and risks destabilizing markets further.
"If the current speed of dollar strength persists, the contagion
effect destabilizing markets globally will only intensify further
and heighten risks of a deeper global recession," MUFG said.
Coordinated intervention to tame dollar strength looks unlikely
for now, but "we should never rule anything out."
Sterling could visit new lows ahead of speeches by some "dovish"
members of the Bank of England, Mizuho said.
Huw Pill, chief economist of the BOE, has advocated "significant
monetary policy response," thus speaking a "hawkish" language, but
upcoming speeches by Jon Cunliffe and Swati Dhingra could tilt the
tone in the "dovish" direction, Mizuho said.
"We wouldn't be surprised to see cable testing lows in
anticipation of Dhingra's remarks," Mizuho said.
A selloff in German Bunds accelerated after the German Finance
Agency increased its debt issuance target in the fourth quarter to
accommodate the financing of the government's energy measures.
The rise in Bund yields also impacted yields of eurozone peer
issuers' bonds, too, according to Tradeweb data.
Read: Germany Raises Debt Issuance in 4Q
Long-dated government bond yields are expected to continue
rising over the next three months as high inflation figures keep
ticking in, central banks tighten monetary policies further and
concern about growing supply increases, Danske Bank said.
On a three-month horizon, the 10-year German Bund yield is
expected to rise to 2.35%, while the 10-year Treasury yield should
increase to 4.05%, Danske Bank said, adding that risks to these
forecasts skew to the upside.
Danske expects bond yields to peak in 2022 and decline slightly
Oil prices reversed Tuesday's gains in early trade, as the
dollar scaled a fresh high and risk assets sold off further.
DNB Markets said the declines in global equity markets are
weighing on investor sentiment, which is undermining oil
The stronger dollar makes oil crude contracts more expensive for
foreign buyers, pushing down on prices. Other factors weighing on
the market include reports that inventories rose last week and
Goldman Sachs lowering its forecast for prices next year on
prospects for weaker demand.
Read: European Natural Gas Prices Jump on Fears for Ukrainian
Russian backing for an OPEC+ production cut would boost the
chances that one will follow at the cartel's meeting next week.
Moscow has thrown its weight behind a 1 million barrel a day
cut, Reuters reported. With an EU embargo on Russian oil set to
come into force later this year, and Russia already significantly
under producing its quota, Moscow "has every incentive...to try to
orchestra a significant output cut," DNB Markets said.
With Brent prices continuing to tumble, defying OPEC's
insistence that demand remains robust, the motives for a sizable
cut from the group are growing.
"Given the decline in oil prices and the deteriorating
macroeconomic outlook [Russia] might succeed in its effort."
Base metals were lower, with copper retreating for a fourth
session, but losses were contained on hopes for a pickup in Chinese
Norway's Norsk Hydro said it would cut aluminum production at
two of its plants due in part to weaker European demand.
"The market remains concerned about the impact of rising
interest rates on economic activity and thus demand," ANZ said.
Still, an easing of Covid-19 restrictions in China is boosting
hopes of a pickup in demands, it added.
DOW JONES NEWSPLUS
U.K. Seeks to Calm Investors Over Clash Between Inflation Fight
and Truss Tax Cuts
The U.K. government, after a punishing week for the pound and
bond market in London, tried Tuesday to reassure investors that it
is working to better coordinate with the Bank of England as Prime
Minister Liz Truss's tax cuts and energy subsidies complicate
efforts to control spiraling inflation.
U.K. Chancellor of the Exchequer Kwasi Kwarteng said he was
meeting Bank of England Governor Andrew Bailey daily.
U.K. Market Turmoil Ripples Into Home Loans
LONDON-Some British banks paused new mortgage lending Tuesday,
the latest fallout from market turbulence fueled by the new
government's plans for sweeping tax cuts and energy subsidies.
At least six mortgage lenders stopped offering some loans, or
briefly halted lending to home buyers altogether, according to UK
Finance, an industry trade group.
German Consumer Sentiment Expected to Hit Record Low in
Consumer confidence in Germany is set to fall in October to an
all-time low as income expectations plunge due to high
Market research group GfK's forward-looking consumer-sentiment
index forecasts confidence declining to minus 42.5 in October from
a revised figure of minus 36.8 in September. October's figure is
worse than a forecast from economists polled by The Wall Street
Journal of minus 38.5.
Chip Stocks Fall on Report Apple Is Scrapping Boost to iPhone
Shares of Apple suppliers STMicroelectronics and Taiwan
Semiconductor fell Wednesday on a report that said the tech giant
was scrapping plans to increase production of its latest iPhones
this year due to weaker-than-expected demand.
Dutch-Swiss chipmaker STMicro (ticker: STM) led the decliners,
falling more than 5% in early European trading. Apple (AAPL)
accounted for around 20% of the company's total revenue in 2021. In
Asian trading, Taiwan Semiconductor (TSM) slipped 2.2%, while
iPhone assembler Hon Hai Precision Industry, also known as Foxconn,
was close to 3% lower.
Wall Street to Pay $1.8 Billion in Fines Over Traders' Use of
Banned Messaging Apps
WASHINGTON-Eleven of the world's largest banks and brokerages
will collectively pay $1.8 billion in fines to resolve regulatory
investigations over their employees' use of messaging applications
that broke record-keeping rules, regulators said Tuesday.
The firms include brokerage units of Bank of America Corp.,
Barclays PLC, Citigroup Inc., Credit Suisse Group AG, Deutsche Bank
AG, Goldman Sachs Group Inc., Morgan Stanley, UBS Group AG and
Nomura Holdings Inc. Brokerage firms Jefferies LLC and Cantor
Fitzgerald & Co. also settled the claims with the Securities
and Exchange Commission and the Commodity Futures Trading
Hertz, BP Partner to Bring EV Charging Stations Across North
Car-rental company Hertz Global Holdings Inc. and energy firm BP
PLC said they signed a deal to develop and manage a network of
electric-vehicle charging stations across North America.
BP Pulse, which is BP's EV charging business, would power and
manage Hertz's charging infrastructure under the memorandum of
understanding, the companies said. The charging infrastructure will
be open to taxi and ride-sharing drivers, as well as the general
public, the companies said.
U.S., Europe Prepare New Sanctions on Russia After Kremlin's
The U.S. and European Union are poised to adopt new sanctions on
Russia, though some EU members are questioning existing
restrictions and the economic pain in Europe is growing.
The European Commission, the EU's executive body, is likely to
propose new import and export controls on Russia as soon as
Wednesday, according to officials involved in the talks, including
an import ban on some Russian diamonds. It will also propose
placing additional Russian officials and pro-Kremlin separatists on
its sanctions list in the coming days, in a modest new package of
measures to increase pressure on the Kremlin.
Russia Prepares to Annex Parts of Ukraine as Staged Votes
MYKOLAIV, Ukraine-Russia is set to formally annex occupied
territories in Ukraine after staging referendums that involved
coercion, threats and, in some places, soldiers going door to door
and forcing people to vote at gunpoint.
Kyiv and Western governments have described the votes as a sham
designed to confer a veneer of legitimacy to Moscow's seizure of
Ukrainian land seven months on from its invasion. They could also
enable Moscow to claim that any effort by Ukrainian forces to
recapture the territories, in the south and east of the country,
amounts to an attack on Russia itself.
Iran Targets Celebrity Supporters of Protests as Movement
As protests in Iran over the rights of women expand, the Islamic
establishment is now attempting to suppress the voices of the most
visible supporters of a movement that so far has been leaderless:
Many prominent Iranian actors, directors, artists, poets and
sports professionals have publicly backed those protesting the
Islamic Republic's morality laws, after the death of 22-year-old
Mahsa Amini in police custody for allegedly violating the country's
strict dress code.
10-Year Treasury Yield Hits 4%
The yield on 10-year U.S. government bonds hit 4% for the first
time in more than a decade Wednesday, the latest leg of a
historically steep rise that has jolted financial markets this
Yields, which rise when bond prices fall, have been climbing at
their fastest pace in four decades because of escalating
expectations for how high the Federal Reserve will raise short-term
interest rates to tamp down the worst inflation since the
China's Offshore Currency Hits Record Low Against Dollar
China's currency hit its weakest ever offshore trading level
against the U.S. dollar, with the yuan falling below 7.2 to the
dollar for the first time since a separate system for trading the
currency outside mainland China was launched more than a decade
The move caps a fall of about 12% for the offshore yuan against
the dollar this year and comes despite repeated attempts by China's
central bank to support its currency. The U.S. dollar has gained
against currencies around the world amid a campaign of aggressive
interest rate increases by the Federal Reserve.
Senate Advances Stopgap Funding Bill After Removing Joe
Manchin's Permitting Overhaul
WASHINGTON-Sen. Joe Manchin (D., W.Va.) on Tuesday threw in the
towel on including his contentious proposal to speed up permitting
of energy projects in a must-pass funding bill, clearing the way
for the Senate to advance the legislation needed to keep the
With the permitting language out, the Senate voted 72 to 23 to
advance the stopgap bill, which would extend current government
funding levels until Dec. 16 and prevent a partial shutdown this
weekend, when the fiscal year ends. The bill now moves to final
passage in the Senate and will also need approval in the House,
which returns Wednesday, before heading to President Biden's
Kashkari Says Fed Needs to Keep Tightening Until There's
Compelling Evidence of Declining Inflation
Federal Reserve Bank of Minneapolis President Neel Kashkari said
the U.S. central bank needs to tighten monetary policy until
underlying inflation is declining, and then wait to see whether it
has done enough.
"The one mistake that I'm acutely aware of-that I want to avoid
repeating from the 1970s-is when policy makers saw the economy
weakening, saw inflation start to tick down, and then they cut
rates, thinking they had done the job. And then inflation flared
back up again-that, I believe, is a mistake we cannot make and will
not make," Mr. Kashkari said Tuesday during an online event hosted
by The Wall Street Journal.
Stopgap Funding Bill Includes $12.3 Billion in New Ukraine
WASHINGTON-Senate Democrats have included another $12.3 billion
in economic and military aid for Ukraine in a must-pass government
funding bill, a proposal that would bring U.S. spending on Kyiv's
efforts to repel Russia's invasion to more than $65 billion this
Congress has until Friday, the end of the fiscal year, to pass
the bill and keep the government funded through Dec. 16.
China's Xi Jinping Re-Emerges in Public After Quarantine
BEIJING-Chinese leader Xi Jinping got out of quarantine and made
his first public appearance since visiting Central Asia, trumpeting
his governance record over the past decade as he prepares to extend
his rule for a third term.
Until Tuesday, Mr. Xi hadn't appeared in public since his trip
earlier this month to Central Asia, where he met with Russian
President Vladimir Putin, because he was abiding by quarantine
protocols that China imposes on people returning from overseas
travel, according to people familiar with the matter.
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(END) Dow Jones Newswires
September 28, 2022 05:30 ET (09:30 GMT)
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