To express this view, Citi opens a new trade, selling Austria's October 2040 government bonds on a "fly"--a trade position where investors bet on the shape of the curve--with February 2031 and March 2051 bonds at 22 basis points, targeting 32 basis points and a stop at 17 basis points, he said.

"The expected heavy increase in 15-20-year supply vs 10-30-year supply in February and March might help reverse its historical richness," Bansal said.

Commodities:

Oil rose to its highest level since October. A weaker dollar supports dollar-denominated oil by making it cheaper for holders of other currencies. Brent is on course for a more than 4% weekly gain and is within striking distance of hitting its highest level since 2014.

"The combination of Omicron making a limited negative impact on global oil demand, continued supply issues, and OPEC+ struggling to increase production in line with production quota increases have pushed Brent above" $85 a barrel, Helge Andre Martinsen, senior oil analyst at DNB Markets, said.

Investors can look to commodities for more stability in a period of concern that interest-rate rises could hurt equity valuations, Goldman Sachs said. In contrast to equities, which are driven by expectations of demand growth, commodities are primarily driven by current demand levels.

"This distinction is critical as early rate hikes impact growth rates, and hence financial market valuations, but not today's demand levels," which are the bigger driver of commodities

Electric vehicle companies are facing much higher costs for the lithium metal used in the batteries that give the cars power, Rystad Energy said.

"Battery-grade lithium are poised to skyrocket. Prices for the metal are already trading at a record high of $35 per kilogram in Asia, and are likely to keep climbing to $50 per kilogram in the second half of 2022."

Rystad said interest in lithium iron phosphate batteries has taken off since early 2021, and it expects the supply of lithium salts "to remain tight through the first half of 2022 at least, due to lagging production in China and South America."

European natural gas jumped over 8% to EUR92.50 a megawatt hour as supplies from Russia hover close to record lows. The rally last year pushed prices above Asian LNG prices, which prompted some tankers heading for Asia to change course mid-journey and head to Europe instead, Hans van Cleef at ABN Amro said.

Prices have now fallen back in line with Asian LNG prices, suggesting that extra tanker-borne supply could now fade. He expects prices to remain elevated but to ease gradually throughout the year. However, significant risks are presented by the threat of conflict in Ukraine.

"It is hard to predict how high prices could go in such a situation as it is uncharted territory," he said.


EMEA HEADLINES

Eurozone Trade Balance Swung to Deficit in November

The eurozone's trade balance swung to a deficit in November, recording a deficit for the first time since January 2014, data from the European Union's statistics agency, Eurostat, showed Friday.

The eurozone's trade deficit in goods--the difference between exports and imports--stood at 1.5 billion euros ($1.72 billion) in November, sharply down from the EUR25.0 billion surplus registered the same month a year earlier.


German Economy Grew 2.7% in 2021

Germany's gross domestic product grew 2.7% in 2021, compared with the previous year, Germany's statistics office Destatis said Friday.

This follows a 4.6% contraction in 2020 due the coronavirus pandemic.


Google Doubles Down on the Office, Buying London Site for $1 Billion

LONDON-Google plans to spend $1 billion buying office space it already uses in central London, saying it believes office work will remain vital for the tech giant.

The purchase of the site, called Central Saint Giles, near the British Museum, comes as the Alphabet Inc. unit is building a separate, massive new U.K. headquarters about a mile and a half away, next to London's King's Cross train station.


EDF Hit by French Measures to Limit Electricity Prices Surge

Electricite de France SA said the French government's new measures to curb the rise of electricity bills will have an estimated impact of up to 8.4 billion euros ($9.62 billion) on the company, and withdrew its earnings guidance for the year.

The French state-controlled utility said late on Thursday that the measures' final impact on earnings will depend on the market prices over the implementation period. It said it will consider steps to strengthen its balance sheet and safeguard its interests.


KLM's CEO Pieter Elbers to Step Down After Second Term

Air France-KLM said late Thursday that it backed the decision of KLM's supervisory board meaning that Pieter Elbers, the chief executive officer of its Dutch arm, won't serve a third term.

The decision was taken by KLM after close consultation with Mr. Elbers, who is the Dutch flag carrier's CEO and president, the company said.


Generali's Second-Largest Investor Caltagirone Resigns From Board

Assicurazioni Generali SpA said late Thursday that its second-largest shareholder has resigned from the board, amid a boardroom battle over the direction of Chief Executive Philippe Donnet.

Industrial and media magnate Francesco Gaetano Caltagirone chose to step down citing disagreements with the board's presentation and approval of the company's strategy, approach to privileged information, and handling of the media and other major shareholders, Generali said in a statement.


UK Firms Spearhead Morocco's Gas Ambitions -- Talking Markets

Whilst Europe struggles to secure enough natural-gas supply for its factories, businesses and households, a neighboring country is aiming to multiply its own gas production.

As Morocco's domestic demand for gas grows, the country aims to expand its production while reducing reliance on coal power, offering tax breaks to exploration companies. Several U.K. firms currently have projects to develop the African nation's gas riches. Potentially, some of that production may be able to supply the Old Continent through the Gazoduc Maghreb-Europe pipeline, which crosses Morocco and the Mediterranean into Spain.


Iran Seeks Closer Ties With China as Nuclear Talks Drag On

As talks between Iran, the U.S. and other world powers to revive the 2015 nuclear deal continue, the Islamic Republic is trying to strengthen ties with China, Russia and other nations that could help it get around American sanctions that are battering its economy.

Iranian Foreign Minister Hossein Amir-Abdollahian met his Chinese counterpart on Friday to discuss a wide-ranging economic and security cooperation agreement signed between the two countries in Tehran early last year, among other issues, according to his ministry. Implementing the 25-year agreement to boost trade and the nuclear talks in Vienna, of which China is a part, are high on the agenda, an Iranian official said.


Senate Rejects Nord Stream 2 Sanctions Bill

WASHINGTON-The Senate voted Thursday to defeat a bill sponsored by Sen. Ted Cruz (R., Texas) that would have imposed sanctions on Nord Stream 2 AG, the company behind a pipeline built to deliver Russian natural gas to Germany.

Fifty five senators voted in favor, with 44 against. Sixty votes were needed to pass the bill, under an agreement reached with Senate Majority Leader Chuck Schumer (D., N.Y.). In exchange for a vote this week, Mr. Cruz had agreed with Mr. Schumer to lift his hold on dozens of ambassador nominees before the Christmas recess.


GLOBAL NEWS

Retail Sales Seen Leveling Off as Record Holiday Shopping Season Ended

Sales at U.S. retail stores, online vendors and restaurants are expected to have leveled off in December, ending a record holiday shopping season that included a resurgent Covid-19 pandemic, historically high inflation and supply-chain snags.

Economists surveyed by The Wall Street Journal estimate that retail sales fell a seasonally adjusted 0.1% in December from the prior month. Such a reading would mark a subdued end to record retail sales that started with a 1.8% gain in October.


Bond Market Forecasts Bad Economic News

With the best job growth in over 40 years, inflation a national obsession and the Federal Reserve preparing to raise interest rates, it is easy to forget how different the world was before the pandemic. The global environment then was marked by sluggish growth, lackluster investment, worryingly low inflation and low interest rates.

Which could be where the U.S. is headed again.


Hedge Funds Keyed to Growth Stocks Stall Out

A major bright spot for the hedge-fund industry in recent years has suddenly darkened as stocks of technology and other fast-growing companies sell off, handing out large losses to some big investors.

Hedge funds investing in growth stocks turned in their worst performance in years in 2021, according to portfolio managers and their clients. Many funds were hit by large losses late in the year, with the drubbing continuing into early this week.


Fed's Christopher Waller Says High Inflation Caught Central Bank Off Guard

A Federal Reserve official warned that the central bank would have to move interest rates up more aggressively this year if inflation stays high through the first half of the year.

Fed governor Christopher Waller said he still thought it was reasonable to pencil in three rate increases this year, but that the rate path would ultimately depend on "what inflation looks like in the second half of the year. If it continues to be high, the case will be made for four, maybe five hikes," he said in an interview on Bloomberg TV. "But if inflation falls back in the second half of the year, as many of us think it will...then you could actually pause and not even go the full three."


Fed's Evans: Time to Move Toward Tighter Monetary Policy

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