North American Morning Briefing: Stock Futures Inch Up Ahead of GDP Data

MARKET WRAPS

Watch For:

U.S. Advance Estimate GDP for 3Q; U.S. Weekly Jobless Claims; Merck & Co. Inc. 3Q results; Caterpillar Inc. 3Q results; Mastercard Inc. 3Q results; Comcast Corp. 3Q results; Apple Inc. 4Q results; Amazon.com Inc. 3Q results; Starbucks Corp. 4Q results.

Opening Call:

Stocks headed for muted opening gains as investors awaited data on U.S. economic growth and earnings from Apple and Amazon.com, among other major companies.

Ahead of the bell, shares of Ford Motor jumped 9%. The car maker late Wednesday restored its dividend and raised guidance for profits in 2021. eBay shares slid more than 5% premarket after the online marketplace gave projections for earnings that fell short of Wall Street expectations.

Forecast-beating results have soothed worries that supply-chain difficulties would dent profits, sending stocks higher in October. Earnings season continues at pace, with private-equity firm Carlyle Group and chocolate maker Hershey among those due to file before the opening bell, followed by Amazon and Apple after markets close.

"Earnings growth has been very strong," said Kiran Ganesh, multiasset strategist at UBS Global Wealth Management, adding that investors had also taken succor from slow progress in Washington toward legislation that would raise taxes on companies and wealthy individuals.

Still, the market has remained jittery at times as investors, lawmakers and central banks navigate the uneven economic recovery from the pandemic. Stocks fell Wednesday, for example, after the Bank of Canada's decision to end quantitative easing sparked volatility in global bond markets.

Data on how fast the U.S. economy grew in the third quarter will be released at 8:30 a.m. ET. Growth likely cooled as households and businesses confronted supply-chain disruptions, labor-market mismatches and the Covid-19 Delta variant. There is a range of estimates as to how much the economy slowed.

Overseas markets were broadly lower. The Stoxx Europe 600 fell 0.2%, led lower by shares of energy, travel and leisure companies. Anheuser-Busch InBev, the world's largest brewer, reported a rise in revenue and profits, boosting shares 7.2%.

Royal Dutch Shell shares slipped 2.4% after the energy company said it would halve emissions by 2030. The stock jumped Wednesday when The Wall Street Journal reported that Daniel Loeb's Third Point had taken a big stake in Shell and urged the company to break up.

Investors will also pay attention to the European Central Bank's decision on asset purchases and interest rates at 7: 45 a.m. ET. Officials are expected to stick to loose-money policies, following the Bank of Japan, which maintained its target for short-term interest rates at minus 0.1% and its target for 10-year government bond yields at around zero on Thursday.

Forex:

The dollar could fall in reaction to data later that are expected to show U.S. economic growth slowed in the third quarter, although only temporarily, ING said.

ING analysts said their forecasts are broadly in line with the consensus estimate of 2.6% quarter-on-quarter annualised growth for third quarter gross domestic product, compared to the second quarter's 6.7% growth, but they don't rule out a weaker number.

"Yet we are confident of the fourth-quarter U.S. rebound--the consumer and businesses are in good shape--such that any dollar weakness on the GDP data should find good buying interest," they said.

The euro edged lower as investors await the ECB's policy decision later. The ECB is likely to err on the side of caution and stick to its expansionary monetary policy so the market's expectations for the withdrawal of stimulus will be "disappointed," Commerzbank currency analyst Antje Praefcke said. "In my view the downside risks in EUR dominate today."

Sterling's appreciation potential looks limited as the Bank of England is likely to accept a "fairly significant" overshoot of its 2% inflation target given the headwinds facing the economy, Commerzbank said.

The 100 basis points of interest rate rises priced in by the market over the course of a year is unlikely, Commerzbank currency analyst Esther Reichelt said.

"The headwinds to be expected in the coming months from supply bottlenecks, the consequences of Brexit and the pandemic situation seem too substantial."

If the BOE doesn't counter rising price pressures with sufficient policy tightening, higher inflation will weigh on sterling's purchasing power, Reichelt said.

The Japanese yen seems "unattractive," particularly against the dollar, as the Bank of Japan is unlikely to change its loose policies any time soon, Commerzbank said after the central bank's interest rate decision.

Thursday's policy decision illustrated that the BOJ's "hands are tied" when it comes to monetary policy and that the market might be correct with its view that inflation will remain subdued, Commerzbank currency analyst Antje Praefcke said.

The BOJ left its policies unchanged and cut its inflation and economic growth forecasts, while the central bank's governor Haruhiko Kuroda said the yen's recent weakness wasn't "bad" for the economy.

Bonds:

The yield on 10-year U.S. Treasury notes rose to 1.556% Thursday from 1.528% Wednesday.

Santander Asset Management expects the first interest rate rise by the U.S. Federal Reserve by June 2023 and anticipates three rate hikes that year, with this outlook pulling U.S. Treasury yields higher, it said.

"We expect the 10-year [Treasury yield] to trade in the range 1.50%-1.70% in the coming months," the asset manager said. It also upgrades its view on U.S. government bonds slightly as yields have increased and closed part of the gap to its target.

That said, even after the upgrade, Santander AM views U.S. Treasurys as "underweight" versus "strong underweight" before.

Pimco expects the ECB to reduce asset purchases gradually in the coming months, it said. Pimco forecasts a monthly asset purchase pace between EUR40 billion-EUR60 billion over the second quarter of next year, following the phasing out of the Pandemic Emergency Purchase Programme in March 2022, said portfolio manager Konstantin Veit.

The current pace is around EUR90 billion, with around EUR70 billion bought under the PEPP and EUR20 billion under the Asset Purchase Programme. The ECB is also likely to continue to review the asset purchases quarterly, with a view to gradually relegating them from a duration extraction tool to a pure policy rate signaling device over time, Veit said.

Commodities:

Oil prices were lower, with both benchmarks extending this week's losses to between 2% and 3% after EIA inventory data showed a larger build up in U.S. crude inventories than either the market or Tuesday's API data predicted, said ING's Warren Patterson.

Also pressuring oil during the past couple of sessions has been the growing prospect that Iran and the EU could resurrect nuclear talks which have the potential to see oil export sanctions on Iran lifted.

European benchmark gas prices were down 11% after Russian President Putin told Gazprom to increase supplies to Europe once the country fills its own stocks in early November.

Metals prices were edging higher ahead of U.S. GDP and unemployment data. Investors are awaiting the U.S. economic data for insight into the strength of the economy.

The data could also inform how quickly the Fed moves to raise interest rates. Copper is often seen as a barometer for economic growth, while gold is highly sensitive to investors' interest rate expectations.

TODAY'S TOP HEADLINES

Profit Falls at GM and Ford as Chip Shortage Takes Toll

The two largest U.S. auto makers reported steep drops in third-quarter profit as the computer-chip shortage dented factory output, and each said the problem would leave dealership lots nearly bare well into 2022.

Executives from General Motors Co. and rival Ford Motor Co. said the supply-chain disruptions should slowly improve in the fourth quarter and throughout next year, although strong car demand will make it difficult to restock dealership lots.

Hertz Links Up With Uber to Offer 50,000 Tesla Rentals

Hertz Global Holdings Inc. said Wednesday it is linking up with Uber Technologies Inc. to make 50,000 Teslas available in Uber's ride-sharing network by 2023, the latest in the rental-car company's efforts to build momentum postbankruptcy.

The deal comes days after Hertz, which collapsed into bankruptcy at the start of the Covid-19 pandemic last year, said it is making a significant investment in an EV rental fleet, including an initial order of 100,000 Teslas by the end of 2022 and new EV-charging infrastructure across the globe. The company exited Chapter 11 in June and has a stock listing planned for this year.

Shell 3Q Adjusted Earnings Fell as Hurricane Ida Hurt Business -- Update

Royal Dutch Shell PLC on Thursday reported that its earnings fell 25% in the third quarter after Hurricane Ida hurt its operations in the Gulf of Mexico.

The Anglo-Dutch oil-and-gas major said its adjusted earnings were $4.13 billion for the period, down from $5.53 billion in the second quarter and below market expectations of $5.31 billion, provided by Vara Research and averaged from 22 analysts' estimates.

WPP 3Q Revenue Grew in All Regions and Markets; Lifts 2021 Guidance

WPP PLC said Thursday that its third-quarter revenue grew and raised its full-year guidance.

Total revenue for the quarter was 3.24 billion pounds ($4.45 billion), up 9.1% on a reported basis and 14.7% on a like-for-like basis on year.

BOJ Lowers Outlook for Japan Growth, Inflation

TOKYO-The Bank of Japan lowered its growth forecast, reflecting supply-chain constraints that have weighed on exports and production, and said it didn't see significant inflation coming.

In its quarterly outlook report released Thursday, the bank's policy board projected the Japanese economy would expand 3.4% in the current fiscal year ending March 2022, compared with its previous projection of 3.8% released in July. It said it expects 2.9% growth in the year ending March 2023, up from a previous projection of 2.7% growth.

Iran to Return to Nuclear Deal Talks in Vienna Next Month

Iran will return to nuclear talks before the end of November, its chief negotiator said Wednesday, restoring the Biden administration's hopes that it can revive the 2015 nuclear deal.

Iran's return to the negotiations would end a five-month hiatus in talks that has enabled Tehran's new hardline government to press ahead with its nuclear program.

Democrats Drop Paid Leave From $1.75 Trillion Proposal

WASHINGTON-Democrats abandoned plans to include a paid-leave program in their social spending and climate bill, according to people familiar with the talks, while prospects for a billionaires' levy to help fund the package faded and a potential surtax on wealthy Americans' income gained traction.

The White House is pushing for Democrats to come together around the bill, expected to cost around $1.75 trillion, by the end of the week, which could also unlock possible passage of a parallel bipartisan infrastructure package that has been held up by progressives in the House. President Biden is set to attend the Glasgow climate conference next week, and the Virginia and New Jersey gubernatorial elections end Tuesday, making the White House eager to show progress on his agenda.

SEC Won't Approve Leveraged Bitcoin Fund

The Securities and Exchange Commission asked at least one asset manager not to proceed with plans for a leveraged bitcoin exchange-traded fund, according to a person familiar with the matter.

The SEC indicated it wants to limit new bitcoin-related products to those that provide unleveraged exposure to bitcoin futures contracts, such as the ProShares Bitcoin Strategy ETF, which was launched last week, the person said.

CFTC Chief Says Recent Crypto Cases Are 'Tip of the Iceberg'

WASHINGTON-The acting head of the Commodity Futures Trading Commission said Wednesday that he plans to continue aggressively policing cryptocurrency markets and called on Congress to consider expanding his agency's authority to do so.

Rostin Behnam, the CFTC's acting chairman, noted that the agency has settled two enforcement actions against cryptocurrency companies totaling $140 million. "But this is the tip of the iceberg," he said in a confirmation hearing before the Senate Agriculture Committee.

Antidepressant Significantly Reduces Covid-19 Hospitalization

A widely available antidepressant holds promise as a treatment for Covid-19, according to a new study.

Covid-19 patients who received fluvoxamine were significantly less likely to require hospitalization than those who didn't, in the largest clinical trial evaluating the antidepressant's effect on Covid-19 to date.

Democrats Drop Paid Leave From $1.75 Trillion Proposal

WASHINGTON-Democrats abandoned plans to include a paid-leave program in their social spending and climate bill, according to people familiar with the talks, while prospects for a billionaires' levy to help fund the package faded and a potential surtax on wealthy Americans' income gained traction.

The White House is pushing for Democrats to come together around the bill, expected to cost around $1.75 trillion, by the end of the week, which could also unlock possible passage of a parallel bipartisan infrastructure package that has been held up by progressives in the House. President Biden is set to attend the Glasgow climate conference next week, and the Virginia and New Jersey gubernatorial elections end Tuesday, making the White House eager to show progress on his agenda.

More Travelers Are Heading to Europe in 2022 After the Pandemic Sank Vacation Plans

More travelers are starting to think big about vacations again.

After a long stretch of mainly short-term travel planning, inquiries are picking up for trips well into 2022, according to data from hotels and travel-industry analysts. The booking rates are starting to trend closer to pre- pandemic levels, analysts say.

Write to sarka.halas@wsj.com

TODAY IN CANADA

Earnings:

Aecon Grp Inc. (ARE.T) 3Q

AltaGas Ltd. (ALA.T) 3Q

ATCO Ltd. (ACO.Y.T) 3Q

ATCO Ltd. Class I (ACO.X.T) 3Q

Bombardier Inc. Class A (BBD.A.T) 3Q

Bombardier Inc. Class B (BBD.B.T) 3Q

Canadian Utilities Ltd (CU.T) 3Q

Canadian Utilities Limited (CU.X.T) 3Q

Crescent Point Energy (CPG.T) 3Q

Eldorado Gold Corp. (ELD.T) 3Q

Newmont Corp.(NGT.T) 3Q

Nexa Resources S.A.(NEXA.T) 3Q

OceanaGold Corp. (OGC.T) 3Q

Secure Energy Svcs (SES.T) 3Q

Shopify Inc. Class A (SHOP.T) 3Q

Taseko Mines Limited (TKO.T) 3Q

TFI Intl Inc. (TFII.T) 3Q

Whitecap Resources Inc. (WCP.T) 3Q

Yamana Gold Inc.(YRI.T) 3Q

Economic Indicators (ET):

0830 Aug Payroll employment, earnings & hours

Stocks to Watch:

Waste Connects Raises 2021 Outlook

Waste Connections Inc. raised its outlook for 2021 following a favorable third quarter.

The Toronto-based solid waste services firm said it now expects revenue of $6.11 billion, compared with its previous outlook of roughly $5.98 billion.

It expects its adjusted earnings before interest, taxes, depreciation, and amortization to be $1.91 billion. It had previously guided for an adjusted EBITDA of $1.875 billion.

It also said it expects net income of $633 million.

For the third quarter, the company reported adjusted earnings of 89 cents a share on revenue of $1.6 billion, with both measures beating analysts' expectations.

Other News:

*Bank of Canada Gov. Tiff Macklem: Labor Market Frictions, Supply Disruptions More Pronounced Than Expected

Market Talk:

No items published

Expected Major Events for Thursday

00:30/JPN: Sep Detailed Import & Export Statistics

07:55/GER: Oct Labour market statistics (incl unemployment)

08:00/GER: Oct Bavaria CPI

08:00/ITA: Oct Consumer Confidence Survey

08:00/ITA: Oct Business Confidence Survey

08:00/GER: Oct Brandenburg CPI

08:00/GER: Oct Hesse CPI

08:00/GER: Oct Baden-Wuerttemberg CPI

08:30/GER: Oct North Rhine Westphalia CPI

08:59/JPN: Japan Monetary Policy Meeting decision

09:00/GER: Oct Saxony CPI

10:00/ITA: Sep PPI

12:00/GER: Oct Provisional CPI

12:30/US: 3Q Advance estimate GDP

12:30/CAN: Aug Payroll employment, earnings & hours

12:30/US: 10/23 Unemployment Insurance Weekly Claims Report - Initial Claims

12:30/US: U.S. Weekly Export Sales

13:00/RUS: Weekly International Reserves

13:45/US: Bloomberg Consumer Comfort Index

14:00/US: Sep Pending Home Sales Index

14:30/US: 10/22 EIA Weekly Natural Gas Storage Report

15:00/US: Oct Federal Reserve Bank of Kansas City Survey of Tenth District Manufacturing

20:30/US: Foreign Central Bank Holdings

20:30/US: Federal Discount Window Borrowings

23:01/UK: 3Q BRC-LDC Vacancy Monitor

23:30/JPN: Oct CPI (Tokyo), CPI ex-Food (Tokyo)

23:30/JPN: Sep Labour Force Survey

23:50/JPN: Sep Preliminary Industrial Production

All times in GMT. Powered by Kantar Media and Dow Jones.

Expected Earnings for Thursday

AllianceBernstein Holding LP (AB) is expected to report $0.90 for 3Q.

Amalgamated Financial Corp (AMAL) is expected to report for 3Q.

American Electric Power Co Inc (AEP) is expected to report $1.45 for 3Q.

Baxter International Inc (BAX) is expected to report $0.90 for 3Q.

Bryn Mawr Bank Corp (BMTC) is expected to report $0.66 for 3Q.

Capitol Federal Financial (CFFN) is expected to report $0.12 for 4Q.

Carpenter Technology (CRS) is expected to report $-0.43 for 1Q.

Caterpillar Inc (CAT) is expected to report $2.17 for 3Q.

Comcast Corp (CMCSA) is expected to report $0.68 for 3Q.

Diebold Nixdorf Inc (DBD) is expected to report $0.21 for 3Q.

Eagle Financial Services (EFSI) is expected to report for 3Q.

First Financial Northwest Inc (FFNW) is expected to report $0.29 for 3Q.

Huntington Bancshares (HBAN) is expected to report $0.31 for 3Q.

Illinois Tool Works (ITW) is expected to report $2.03 for 3Q.

Intercontinental Exchange Inc (ICE) is expected to report $1.03 for 3Q.

J.W. Mays Inc (MAYS) is expected to report for 4Q.

Laboratory Corp of America Holdings (LH) is expected to report $4.54 for 3Q.

Lincoln Electric Holdings (LECO) is expected to report $1.50 for 3Q.

Mastercard Inc (MA) is expected to report $2.19 for 3Q.

Merck & Co Inc (MRK) is expected to report $1.43 for 3Q.

Molson Coors Brewing Co - Class B (TAP,TAPA) is expected to report $1.46 for 3Q.

Northrop Grumman Corp (NOC) is expected to report $6.06 for 3Q.

Old Republic International Corp (ORI) is expected to report $0.60 for 3Q.

Oshkosh Corp (OSK) is expected to report $1.07 for 4Q.

PBF Energy Company LLC (PBF) is expected to report $-0.18 for 3Q.

PBF Logistics LP (PBFX) is expected to report $0.62 for 3Q.

Patterson-UTI Energy Inc (PTEN) is expected to report $-0.45 for 3Q.

Reliance Steel & Aluminum Co (RS) is expected to report $5.98 for 3Q.

Richmond Mutual Bancorporation Inc (RMBI) is expected to report for 3Q.

Sirius XM Holdings Inc (SIRI) is expected to report $0.07 for 3Q.

SolarWinds Corp (SWI) is expected to report for 3Q.

Stanley Black & Decker Inc (SWK) is expected to report $2.39 for 3Q.

Summit Financial (SMMF) is expected to report $0.83 for 3Q.

T Rowe Price Group Inc (TROW) is expected to report $3.30 for 3Q.

Tradeweb Markets Inc (TW) is expected to report for 3Q.

Valley National Bancorp (VLY) is expected to report $0.30 for 3Q.

WNS (Holdings) Ltd - ADR (WNS) is expected to report $0.59 for 2Q.

West Bancorporation Inc (WTBA) is expected to report $0.71 for 3Q.

West Pharmaceutical Services Inc (WST) is expected to report $1.81 for 3Q.

Whitecap Resources (WCP.T) is expected to report for 3Q.

Powered by Kantar Media and Dow Jones.

ANALYST RATINGS ACTIONS

AGNC Investment Cut to Equal-Weight From Overweight by Barclays

Carrols Restaurant Cut to Hold From Buy by Craig-Hallum

Cloudflare Cut to Hold From Buy by Jefferies

CommVault Systems Cut to Market Perform From Outperform by William Blair

Cortexyme Cut to Underperform From Neutral by B of A Securities

Ecolab Cut to Underweight From Neutral by JP Morgan

Entegris Raised to Buy From Hold by Craig-Hallum

Kennametal Raised to Neutral From Underperform by B of A Securities

Medical Properties Trust Raised to Buy From Neutral by B of A Securities

Omega Healthcare Cut to Underperform From Neutral by B of A Securities

Toro Cut to Underperform From Neutral by B of A Securities

Trex Co Raised to Overweight From Equal-Weight by Stephens & Co.

United Parcel Service Cut to Hold From Buy by Loop Capital

This article is a text version of a Wall Street Journal newsletter published earlier today.


  (END) Dow Jones Newswires
  10-28-21 0609ET
  Copyright (c) 2021 Dow Jones & Company, Inc.

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