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EUROPE'S SHARES SLIDE, BUT STILL SET FOR WEEKLY GAINS (0725 GMT)
European shares are falling amid concerns about the fate of embattled property developer
China Evergrande Group and a sudden spike in bond yields. But after three days of strong
performance, the STOXX 600 is still set for weekly gains.
The top fallers this morning are sport clothing brands and retailers Adidas, Puma
and JD Sports after rival Nike reported a Q4 results miss and cut its
FY 2022 sales expectations due to a supply chain crunch brought in by months-long factory
closures in Vietnam.
On a brighter note, shares in Astrazeneca rise around 3% after the company reported
positive results from the PROpel Phase III trial.
(Joice Alves)
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MOVE OVER EVERGRANDE, TIME TO WATCH SOARING BOND YIELDS (0705 GMT)
World markets remain on edge on Friday as simmering concerns about the fate of embattled
property developer China Evergrande Group and a sudden spike in bond yields remind investors
that the final quarter of 2021 will be tricky to navigate.
European and U.S. stock futures fluctuated between gains and losses after U.S. stocks posted
their biggest two-day rise since July.
While a large part of those gains can be attributed to easing concerns about Evergrande
contagion, Thursday's spike in yields in the global $60 trillion plus government debt markets
raised the prospects of tighter monetary policy sooner than later.
Long-term U.S. Treasury yields have surged the most in 18 months as traders brought forward
expectations for the first Fed rate hike to the end of 2022 and the Bank of England opened the
door to a 2021 rate increase -- sparking the biggest jump in two-year UK gilt yields since March
2015.
Yield curves from Australia to Germany bear steepened in response and the dollar sprung to
the top of its 2021 trading range. While it remains to be seen whether the rise in yields can be
sustained, some signs of weakness can be detected in the “buy the dip” trade from investors.
Value stocks, a beneficiary of higher yields, outperformed growth ones on Thursday while
FAANG stocks have underperformed broader markets so far this month. And if investors are hoping
quiet weekend, think again.
Sunday's election in powerhouse European economy Germany will provide food for thought as
Chancellor Angela Merkel steps down after 16 years in charge.
Her successor will play a new role in shaping domestic and broader EU policy and have to
steer Germany's economy through a still uncertain post-COVID environment.
Thursday's flash PMIs for September pointed to a sharp slowdown in economic activity from
the previous month from rising energy prices and difficulty in sourcing parts and materials,
headwinds that are unlikely to abate in the coming days.
Key developments that should provide more direction to markets on Friday:
- ECB's Lagarde says many causes of inflation spike temporary: CNBC
- Nike warns on holiday delays, cuts full-year sales estimate
- Daimler's Mercedes-Benz to take a 33% stake in battery cell manufacturer
Automotive Cells Company
- Germany's IFO survey for September
- Fed speaker corner: Powell, Clarida
(Saikat Chatterjee)
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EUROPE SET FOR WEEKLY GAINS (0635 GMT)
Futures are pointing to a flat open for European bourses but the STOXX 600 is set for strong
weekly gains, with analysts saying investors bought the dip this week after a sharp Monday fall,
amid uncertainty around the fate of debt-ridden China Evergrande.
The risk on sentiment was also supported by a rate hike by the Norwegian central bank and
hawkish remarks from the Bank of England reinforced market expectations that the Federal Reserve
would begin tapering by year end.
Capping the enthusiasm, property developer Evergrande missed an interest payment deadline on
Thursday and has entered a 30-day grace period.
(Joice Alves)
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