Eurozone Inflation May Be at a Peak
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Consumer-price inflation in the eurozone likely hit a record high in November, but many economists think that might mark a peak for now, and therefore don't expect the European Central Bank to raise its key interest rate next year. As in the U.S., consumer prices in the eurozone have risen faster over recent months than most economists and policy makers had expected. With inflation set to remain well above the ECB's target for the first six months of 2022, a self-reinforcing round of wage rises and further price increases remains a possibility, while the ultimate severity and duration of supply-chain problems and their effect on prices is uncertain. The European Union's statistics agency is expected to estimate Tuesday that prices were between 4.3% and 4.5% higher in November than a year earlier. That would mark the fastest annual rise in prices since records began in 1997. During those 24 years, the inflation rate has only exceeded 4% in two months, the first of those being July 2008, and the second October of this year. The ECB is scheduled to set out in December its expectations for 2022, most likely to reiterate the view that the eurozone's inflation rate will fall through 2022 and will be back below their 2% target in 2023.
Following the significant declines on Friday, the Swiss stock exchange recovered only slightly on Monday: the SMI gained 0.2 per cent to 12,221 points. Among the 20 SMI stocks, there were 10 price losers and 10 price winners. 38.21 million shares were traded (previously: 56.57 million). Shares of luxury goods manufacturer Richemont (+4.1 per cent) and Swatch (+1.9 per cent) were at the top of the gainers' list. These had been among the biggest losers on Friday. In contrast, the shares of the two index heavyweights Roche and Novartis fell again slightly. The papers lost 0.3 and 0.6 per cent respectively. The day's losers were the shares of Holcim with a discount of 1.6 per cent to 45.48 francs. Analysts at Jefferies lowered the price target by nine francs to 50.30 francs and confirmed the "Hold" rating. In contrast, the Sika target was increased to 422 from 353 francs and the buy recommendation was reiterated. Sika gained 1.8 per cent. Sulzer improved by 2.2 per cent. The analysts at Credit Suisse resumed coverage with an "outperform" rating after the spin-off of Medmix, the former "Applicator Systems" division.
European shares posted modest gains Monday, recouping some losses from Friday's steep selloff as investors continued to monitor the likely implications of a new variant of Covid-19. The pan-continental Stoxx Europe 600 edged 0.7 percent higher to 467.2 points, after falling 3.7 percent on Friday. In Paris, the CAC 40 and the SBF 120 gained 0.5% each. In Frankfurt, the DAX 40 gained 0.2%, while the FTSE 100 in London rose 0.9%. Faurecia (-7.9%) again lowered its outlook for 2021, due to several difficulties, including those related to its new project in Michigan. In the wake of Faurecia's decline, Valeo and Plastic Omnium lost 3.9% and 3.1%, respectively. At the other end of the SBF 120 scale, Valneva gained 9.5%. The vaccine maker announced after the market close an agreement with IDT Biologika for the production of its Covid-19 vaccine candidate, which could be approved in April in the European Union. Eurofins Scientific (-0.6%) reported on Friday evening the launch of a PCR test for the new B.1.1.529 variant of Covid-19, also known as Omicron. Telecom Italia shares were down more than 2% following news of the CEO's resignation. Bryan Garnier said the exit of Luigi Gubitosi as the company starts examining a takeover offer by KKR highlights how much power Vivendi has over the deal. Telecom Italia received a friendly and non-binding indication of interest from KKR to buy out the company at EUR0.505 a share, a price which Vivendi believes doesn't reflect the value of the company. Vivendi has a 23.75% stake in Telecom Italia. BT shares rose 6.1% after a media report that Indian conglomerate Reliance may bid for control for the U.K. company, AJ Bell said. The report about BT comes after Reliance was recently outbid on a deal for control of a Dutch unit of T-Mobile. French billionaire and Altice founder Patrik Drahi has built up a stake in BT and Deutsche Telekom also has a sizeable holding, so a bidding war may be afoot, the brokerage said. "Despite its substantial pension liabilities and debts and iffy track record, it has a near-monopoly position in the U.K.'s broadband network. And, for all its recent woes, BT has the capacity to generate substantial cash flows," AJ Bell said.
Stocks and oil prices bounced back from Friday’s selloff, with investors betting the Omicron Covid-19 variant will cause less damage to the global economic recovery than initially feared. The S&P 500 jumped 60.65 points, or 1.3%, to 4655.27, recouping some of its losses after the index suffered its worst one-day percentage decline in nine months. The Nasdaq Composite advanced 291.18, or 1.9%, to close at 15782.83 on Monday, boosted by investor appetite for technology stocks. The Dow Jones Industrial Average added 236.60, or 0.7%, to 35135.94. Moderna shares shot up $38.88, or 12%, to $368.51, adding to their gains after the stock surged more than 20% on Friday. The biotech company has said it is working to rapidly advance an Omicron-specific booster candidate. U.S.-listed shares of BioNTech, which produces a Covid-19 vaccine with Pfizer, added $14.52, or 4.2%, to $362.52 on Monday. Some travel and leisure stocks rebounded after steep losses on Friday. Royal Caribbean Group shares added $1.91, or 2.8%, to $69.89 while shares of rival cruise operator Carnival rose 21 cents, or 1.2%, to $18.16. But Delta Air Lines and American Airlines Group both closed slightly lower after swinging between gains and losses. Technology was the best-performing sector of the S&P 500. Apple and Microsoft both rose more than 2%. Twitter fell $1.29 per share, or 2.7%, to $45.78 after the social-media company said Jack Dorsey was stepping down as CEO, effective immediately, and being replaced by Parag Agrawal, who was previously Twitter’s chief technology officer.
Major stock indexes in Asia fell. Tokyo’s Nikkei 225 index dropped 1.1% to its lowest closing level in a month and a half. The benchmark declined 2.5% Friday. Hong Kong’s Hang Seng Index and South Korea’s Kospi each fell 1.8%, and 2.2%.
The 10-year Treasury note rose 5 basis points to 1.530%, from 1.479% Friday night. The yield on the 10-year German Bund rallied to -0.316%, from -0.334% Friday night.
Jefferies increases Sika target to CHF 422 (353) - Buy
Jefferies lowers Heidelbergcement to Hold (Buy ) - Target EUR 65.50 (100.50)
Dt. Bank raises Medios target to EUR 60 (50) - Buy
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