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Daily Market Report | December 13, 2021

US FINANCIAL MARKET

Stocks Down Ahead of Federal Reserve Decision – Wall Street Journal, 12/13/2021

  • U.S. stock indexes retreated ahead of a busy week of central-bank decisions in major economies.
  • The S&P 500 fell 0.4% in Monday morning trading, after the benchmark gauge closed last week at its 67th record high of 2021.
  • The Dow Jones Industrial Average, which sits just shy of its own all-time high, slid 0.6%.
  • The technology heavy Nasdaq Composite Index declined 0.3%.
  • Investors are sitting tight ahead of a monetary-policy decision by the Federal Reserve and announcements from the Bank of England, European Central Bank and Bank of Japan later in the week. The Fed is expected to move more quickly to wind down its bond-buying program and signal that it will raise interest rates next year to tap the brakes on inflation.
  • Data published Friday showed consumer prices increased in November at the fastest annual rate since 1982.
  • In the bond market, the yield on benchmark 10-year Treasury notes ticked down to 1.443% Monday from 1.487% Friday.
  • Vaccine makers were among the best-performing stocks in the S&P 500 as the Omicron variant of Covid-19 has increased demand for booster shots. Moderna shares jumped 6.4%, while Pfizer advanced 4.4%.
  • Anthony Fauci, chief medical adviser to President Biden, on Sunday encouraged Americans to get Covid-19 boosters, while the U.K. government said it planned to offer a booster shot to every adult in England by the end of the year.
  • European and U.K. natural-gas prices jumped more than 9% Monday after Germany’s new foreign minister cast doubt on the imminent startup of a controversial pipeline from Russia, adding to traders’ concerns over slim supplies of the heating and power-generation fuel. U.S. natural-gas futures rose 3.2% to $4.03 per million British thermal units.
  • Futures on benchmark Brent crude oil fell 0.6% to $74.73 per barrel. The Organization of the Petroleum Exporting Countries said some of the recovery in oil consumption that the cartel had expected to take place this year would shift into early 2022 due to fallout from the Omicron variant.
  • Overseas stock markets were mixed. The Stoxx Europe 600 slipped less than 0.1%. In Asia, Japan’s Nikkei 225 rose 0.7%, the Shanghai Composite Index added 0.4% and Hong Kong’s Hang Seng declined 0.2%.

U.K. Sees First Omicron Death; China’s First Case: Virus Update – Bloomberg, 12/13/2021

  • One person has died from the omicron variant in the U.K., Prime Minister Boris Johnson confirmed, as demand for booster shots and rapid at-home Covid-19 tests surged in the face of the fast-spreading mutation.
  • U.K. Prime Minister Boris Johnson repeatedly declined to rule out imposing further coronavirus restrictions before Christmas to tackle the spread of omicron, as he confirmed the first U.K. death linked to the new strain. Johnson also said omicron would account for the majority of cases in London by Tuesday.
  • Australia recorded its first hospitalization from the omicron variant, according to New South Wales state health officials.
  • The state has found at least 64 cases of the variant stemming from outbreaks in western Sydney, nightclubs and a party cruise on Sydney Harbor. Overall case numbers are also rising.
  • South African hospitals have 6,198 Covid-19 patients, of which 6.8% are in intensive-care units, the National Institute for Communicable Diseases said in a report on Monday.
  • Of the 420 people in ICU, 167 are on ventilators, the institute said. Of the admissions 2,685 are in Gauteng, the province that includes Johannesburg and Pretoria.
  • The numbers compare with the 5,563 who were in the hospital a day earlier, with 7.3% of those in ICU. Covid-19 hospitalizations reached nearly 20,000 in January and July, the peaks of the country’s second and third waves, respectively.
  • Norway’s health system will come under strain if tighter measures aren’t implemented soon to counter omicron, the Norwegian Institute of Public Health warned.
  • There are now 958 proven cases of the more infectious type of the virus to date in the country, up from 33 cases on Dec. 7. Almost 90% of Norwegian adults have received two shots of vaccine.
  • The city of Tianjin reported the first case of omicron in mainland China Monday, the Global Times reported, citing the city.

OPEC upbeat on 2022 oil demand, says Omicron impact to be mild – Reuters, 12/13/2021

  • OPEC on Monday raised its world oil demand forecast for the first quarter of 2022 and stuck to its timeline for a return to pre-pandemic levels of oil use, saying the Omicron coronavirus variant would have a mild and brief impact.
  • The upbeat view from the Organization of the Petroleum Exporting Countries comes as oil prices have recovered some of the slide seen when the variant emerged last month. Still, the World Health Organization says Omicron poses a “very high” global risk.
  • In a monthly report, OPEC said it expects world oil demand to average 99.13 million barrels per day (bpd) in the first quarter of 2022, up 1.11 million bpd from its forecast last month.
  • “Some of the recovery previously expected in the fourth quarter of 2021 has been shifted to the first quarter of 2022, followed by a more steady recovery throughout the second half of 2022,” OPEC said in the report.
  • In the report, OPEC maintained its forecast that world oil demand will grow by 4.15 million bpd in 2022. This year’s growth forecast was also kept unchanged.
  • World consumption is expected to surpass the 100 million bpd mark in the third quarter of 2022, in line with last month’s forecast. On an annual basis according to OPEC, the world last used over 100 million bpd of oil in 2019.

Pfizer bets on Arena’s promising bowel disease treatment in $6.7 bln deal – Reuters, 12/13/2021

  • Pfizer said on Monday it would buy drug developer Arena Pharmaceuticals for $6.7 billion in cash, to add a promising treatment candidate that targets diseases affecting the stomach and intestine.
  • The $100 per share offer is double the last closing price of Arena’s shares, which surged 92% to $95.90 in premarket trading.
  • This is the latest deal Pfizer has struck this year to expand treatment pipeline. The company last month acquired immuno-oncology company Trillium Therapeutics for about $2.22 billion to strengthen its arsenal of blood cancer therapies.

Shareholders Press Facebook for Governance Changes – Wall Street Journal, 12/13/2021

  • Facebook is facing more calls from shareholders to address harm on its platforms and overall governance as the company, now known as Meta Platforms, responds to pressure from lawmakers and others.
  • Shareholders, including the New York State Common Retirement Fund and Illinois State Treasurer, are among an investor group that collectively filed eight shareholder proposals for consideration at the company’s annual meeting.
  • The resolutions include calls for board oversight of efforts to reduce harmful content, an assessment of the risk of the company’s metaverse efforts and a review of the social media company’s audit and risk committee, according to the Investor Alliance for Human Rights, an initiative of the faith-based investor group Interfaith Center on Corporate Responsibility.
  • Members of the same group last year submitted six proposals that were defeated by shareholders at the company’s annual meeting, including a call for an independent board chair.

Ford expects to triple electric Mustang output by 2023 – Reuters, 12/13/2021

  • Ford Motor expects to triple the output of its all-electric Mustang Mach-E SUV to over 200,000 units per year by 2023 for North America and Europe, its Chief Executive Officer Jim Farley said in a tweet on Friday.
  • “It’s hard to produce Mustang Mach-Es fast enough to meet the incredible demand, but we are sure going to try.” Farley added.
  • Last week, a top Ford executive said that the company was aiming for annual EV production capacity of nearly 600,000 within the next two years, which would also include its Lightning pickup and E-Transit van.
  • Automotive News reported earlier on Friday that Ford was postponing the production of electric versions of the Explorer and Lincoln Aviator crossovers by about one and a half years to increase manufacturing of its Mustang Mach-E SUVs.
  • Ford told its suppliers that production of these new EVs is now scheduled to start in December 2024, according to the report.

GM eyes investments of more than $4 billion in Michigan EV plants – Reuters, 12/13/2021

  • General Motors is considering investing more than $4 billion in two Michigan plants to boost its electric vehicle production capacity, according to sources and documents made public on Friday.
  • GM has proposed building a $2.5 billion battery plant near Lansing with partner LG Energy Solution, the documents show.
  • The largest U.S. automaker is separately considering a $2 billion overhaul of its Orion Township assembly plant north of Detroit to build next-generation electric vehicles. The total investments could top $4 billion, a source familiar with the plan told Reuters.

Malaysia says U.S. chipmaker Intel to invest $7 bln in new facility – Reuters, 12/13/2021

  • American chip manufacturer Intel will invest 30 billion ringgit ($7.10 billion) in a new, state-of-the-art facility, Malaysian authorities said on Monday.
  • The Malaysian Investment Development Authority, in a media invitation, said Intel had chosen Malaysia to expand manufacturing capabilities for its advanced semiconductor packaging technologies in the northern state of Penang.

Trucker Central Freight Lines to Close After Years of Losses – Wall Street Journal, 12/13/2021

  • Trucking company Central Freight Lines will wind down its business in the coming weeks after failing to halt years of losses despite strong demand in freight markets during the pandemic, the company said Sunday.
  • The privately held company based in Waco, Texas, has about 1,200 trucks and is a large operator in the less-than-truckload business, a slice of the trucking sector in which carriers move shipments from multiple customers on a single trailer.
  • Most operators in that business have thrived over the past two years under heavy demand from retailers and manufacturers and the pandemic-driven boom in online shopping.
  • Central Freight planned to stop picking up freight on Monday and will no longer deliver freight by the end of this week or early next, company President Bruce Kalem said.
  • Most of its 2,130 employees will be laid off, except for a handful who will wind down the business and sell off its fleet.

Netflix Leads Nominees for Scandal-Ridden Golden Globes – Bloomberg, 12/13/2021

  • The Hollywood Foreign Press Association announced the nominees on Monday for the annual ceremony celebrating the year’s best work in film and TV, an event that has been tarnished by a year of scandal.
  • The organization has come under fire for not having a diverse membership, and was also criticized for favoring movies and TV shows when the studios lavished free trips and other perks on the journalist voting body.
  • Netflix, which has said it won’t participate in the event until the HFPA institutes reforms, received the most nominations of any studio.
  • The streaming service was nominated in categories including best dramatic film, for “The Power of the Dog,” and dramatic series, for “Squid Game”

US ECONOMY & POLITICS

Biden Aims to Win Pivotal Democrat’s Support for $2 Trillion Spending Plan – Wall Street Journal, 12/13/2021

  • President Biden this week will lobby Sen. Joe Manchin, the centrist West Virginia Democrat, in an attempt to lock in a deal on a roughly $2 trillion social-policy and climate bill that Democrats hope to finish by Christmas.
  • Passage hinges largely on the support of Mr. Manchin, who hasn’t endorsed the legislation. He has repeatedly raised concerns about the cost of the bill and the potential effect of new government spending on inflation. Messrs. Biden and Manchin plan to talk early this week, a Senate aide said.
  • Last week, Mr. Manchin criticized Democrats’ plan to calculate revenue over 10 years but make programs in the bill last for a shorter time, which has the effect of making the bill’s cost appear smaller than the Democrats’ ultimate ambitions. Many lawmakers say they will try to extend the programs later.
  • He hasn’t commented publicly since the Labor Department reported on Friday that the consumer-price index rose 6.8% in November from the same month a year ago, the highest reading in nearly 40 years.
  • The Congressional Budget Office on Friday released an estimate of the bill requested by Republicans that analyzed the cost of its provisions if they were extended indefinitely, rather than on the temporary basis Democrats have proposed.
  • Under that assumption, the CBO analysis found that the legislation’s provisions under that would add roughly $3 trillion to the deficit over a decade.

Fed to pivot on inflation fears in the face of another uncertain year – Reuters, 12/13/2021

  • The U.S. Federal Reserve, stung by persistently high inflation and encouraged by lower-than-expected unemployment, is set on Wednesday to chart a path of higher interest rates next year as policymakers show their hands on just how soon and how much they think borrowing costs will need to increase to keep the economy on an even keel.
  • Fed Chair Jerome Powell has already flagged the rate-setting committee will likely announce at its policy meeting this week that it will accelerate the end of its bond-buying program, wrapping it up by March instead of June, in order to clear the way for the Fed to lift off interest rates from near zero, where they have been held since March 2020 when the coronavirus pandemic triggered a short but deep recession.
  • It will lead to policymakers’ bringing forward their projections for interest rate rises, in their so-called “dot plot,” as part of their forecasts, released quarterly, for economic growth, employment and inflation as well as the timing of interest rate rises.
  • Most analysts expect the Fed to stick to forecasting three rate hikes in 2023 and 2024, given officials still expect a rapid abatement of price pressures in the latter half of next year as the pandemic recedes from view.
  • How soon the Fed actually starts liftoff is less certain. Economists polled by Reuters expect the Fed to raise interest rates in the third quarter of next year, but as with other analysts, also note the risk is a hike comes sooner.
  • Investors currently see a greater-than 50% probability that the Fed will raise its benchmark overnight lending rate in May, according to CME Group’s FedWatch tool.

Some Hospitals Drop Covid-19 Vaccine Mandates to Ease Labor Shortages – Wall Street Journal, 12/13/2021

  • Some of the largest U.S. hospital systems have dropped Covid-19 vaccine mandates for staff after a federal judge temporarily halted a Biden administration mandate that healthcare workers get the shots.
  • Hospital operators including HCA Healthcare and Tenet Healthcare as well as nonprofits AdventHealth and the Cleveland Clinic are dropping the mandates.
  • Many hospitals already struggled to find workers, including nurses, before the pandemic. The shortages were compounded by burnout among many medical workers and the lure of high pay rates offered to nurses who travel to hot spots on short-term contracts.
  • More recently, thousands of nurses have left the industry or lost their jobs rather than get vaccinated. As of September, 30% of workers at more than 2,000 hospitals across the country surveyed by the Centers for Disease Control and Prevention were unvaccinated.
  • A federal judge in Louisiana ruled in November that the Centers for Medicare and Medicaid Services didn’t have the authority to mandate vaccines for healthcare workers, blocking a Biden administration rule that affected some 10 million workers.
  • “I don’t think the mandates were helpful and I think the court in Louisiana did everyone a service,” said Alan Levine, chief executive officer of Ballad Health, which runs 21 hospitals in Tennessee and Virginia.

EUROPE & WORLD

Some Chinese companies suspend production in Zhejiang province on virus outbreak – Reuters, 12/13/2021

  • More than a dozen Chinese-listed companies said they had suspended production in coronavirus-hit parts of China’s eastern Zhejiang province in response to local government’s tightened COVID-19 curbs, causing their share prices to plunge.
  • Zhejiang reported a total of 173 locally transmitted cases with confirmed symptoms during the Dec. 6-12 period, official numbers showed on Monday, marking the province’s first domestic cluster outbreak this year.
  • A slew of companies, including Ningbo Homelink Eco-Itech, Zhejiang Zhongxin Fluoride Materials, Zhejiang Jingsheng Mechanical & Electrical and Zhejiang Fenglong Electric, announced the production suspension through exchange filings over the weekend.
  • Ningbo Homelink, which makes plastic products, said in an exchange filing late on Sunday that it had halted production in its home city Ningbo at the request of local authorities, and is taking measures to minimise the negative impact on its business.
  • Zhejiang Jindun Fans, a Chinese maker of ventilation system equipment, said on Sunday that production at its subsidiary in Zhejiang’s Shaoxing city had been suspended due to local government’s anti-virus measures.
  • All the companies that announced production halt vowed to fully cooperate with the local government, which will decide when production can be resumed.

G-7 Officials Warn of ‘Massive Consequences’ if Russia Invades Ukraine – Wall Street Journal, 12/13/2021

  • Foreign ministers from the Group of Seven countries warned of severe consequences if Russia invades Ukraine, in a show of unity that they hope will deter Russian President Vladimir Putin from ratcheting up military pressure on the country and defuse tensions in Eastern Europe.
  • Following a meeting in Liverpool, England, the ministers from the group of wealthy democracies said in a joint statement that any invasion of Ukraine would have “massive consequences” for Russia.
  • “We call on Russia to de-escalate, pursue diplomatic channels, and abide by its international commitments on transparency of military activities,” the G-7 foreign ministers said in a joint statement Sunday.
  • However the G-7 stopped short of laying out what measures they would take to punish Russia should it launch military action. Officials at the meeting said that these still needed to be decided at the national level.
  • One U.S. State Department official said penalties could be implemented very quickly if needed.

China Seen Adding Fiscal Stimulus After Setting 2022 Targets – Bloomberg, 12/13/2021

  • Economists predict China will start adding fiscal stimulus in early 2022 after the country’s top officials said their key goals for the coming year include counteracting growth pressures and stabilizing the economy.
  • Curbs on the property industry are expected to remain, while there could be fewer regulatory surprises compared with sudden moves in 2021 to rein in sectors from technology to education and entertainment, the economists said.
  • At the end of their three-day annual Central Economic Work Conference, the Communist Party’s top decision makers on Friday said the top priority for next year is “ensuring stability.” They also vowed to “front load” policies and keep the monetary stance flexible and appropriate.
  • The economy has slowed in recent months because of the worsening property market slump, weak consumption growth, and repeated outbreaks of Covid-19, which have damaged businesses and consumers’ confidence. The meeting’s relatively hawkish language on real estate suggests that the drag from property will mostly persist.

Abandoned Projects Shatter Confidence in China’s Home Market – Bloomberg, 12/13/2021

  • Construction cranes stand idle in China’s Yunnan Province, on the easternmost edge of the Himalayas. Building has ground to a halt on Hainan, off the coast of Vietnam, and up in Heilongjiang, along the Russian border.
  • Across China, tens of millions of square feet of unfinished apartment buildings — the legacy of a real estate boom gone awry in 2021 — are derailing countless dreams of owning a home.
  • In a country where private homeownership was only legalized two decades ago, ordinary Chinese are discovering how quickly fortunes can turn in the housing market. Creeping price declines and plummeting sales in recent months have called into question the way freewheeling property developers have financed, built and marketed homes to the masses.
  • The result is a mirror image of the 2008 subprime fiasco. Back then, in the U.S., it was homebuyers who got in over their heads. This time, in China, it’s builders.
  • President Xi Jinping wants to crack down on what he sees as debt-fueled excess in the real estate industry without hurting the many millions who’ve scrimped and saved to buy homes. City dwellers tend to have roughly 80% of their assets tied up in housing.

Alibaba Fires Female Employee Who Accused Then-Supervisor of Sexual Assault – Wall Street Journal, 12/13/2021

  • Alibaba Group has fired a female employee who accused her then-supervisor of molestation and rape during a business trip earlier this year, according to the woman and her lawyer, refocusing attention on a sexual-assault case that sent ripples through China’s tech sector.
  • The woman, identified in public only by her surname Zhou, was sent a dismissal notice on Nov. 25 for allegedly spreading false information and damaging the company, according to a copy of the notice reviewed by The Wall Street Journal.
  • Ms. Zhou’s accusations in July triggered widespread debate about the prevalence of sexual misconduct in the workplace, prompting a pledge from Alibaba Chief Executive Daniel Zhang to work to change systemic cultural issues at the e-commerce giant. Several Chinese tech giants also instituted sexual-harassment policies.

Volkswagen plans to decide new gigafactory locations in H1, 2022 – Reuters, 12/13/2021

  • Volkswagen said on Monday it was looking at locations for planned battery cell plants in Spain and eastern Europe and the exact sites for its third and fourth gigafactories would be determined in the first half of 2022.
  • “By 2030, Volkswagen plans to open two more cell factories in Europe,” the group added in a statement.
  • Volkswagen also said it was founding a European company to bundle activities in its battery related business, aiming to optimise their efficiency as it eyes becoming the world’s leading electric car manufacturer.

Factmonster – TODAY in HISTORY

  • President Wilson arrived in France, becoming the first U.S. president to visit Europe while in office. (1918)
  • The Polish government imposed martial law in an attempt to crush the Solidarity movement. (1981)
  • George W. Bush accepted presidency 36 days after election; Al Gore, Jr., conceded. (2000)
  • American forces captured Saddam Hussein who was hiding in a hole near his hometown of Tikrit. (2003)

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