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EUROPEAN MIDDAY BRIEFING - Stocks Hit with Fed -2-

01/24/2022 | 06:03am

The UAE said Monday that it intercepted two missiles over its capital, which it said were launched by Iran-backed Houthi militants. Last week, the militants claimed a drone attack that targeted a state-owned oil facility. The threat of conflict between Ukraine and Russia also remains high.

Oil supplies are already tight, with OPEC+ nations struggling to meet strong demand. Traders are worried that a hit to oil supplies in the Middle East or reduced Russian gas supplies to Europe could tighten markets even further.


European natural gas rose over 5% as the tensions in Ukraine showed no sign of abating. The New York Times reported that the U.S. was considering deploying troops to the Baltic states and elsewhere in Eastern Europe.

"Should tensions between Russia and the Ukraine escalate, the initial uncertainty around its impact on gas flows would likely lead the market to once again add a significant risk premium to European gas prices," Samantha Dart at Goldman Sachs said.


Copper prices weakened as global risk assets tumbled, while a stronger dollar also weighed on the red metal. China's Lunar New Year Holiday begins next week, which could also dampen demand for metals in the short term as economic activity slows, ANZ said.



Activist Investor Nelson Peltz Buys Stake in Unilever

LONDON-Trian Fund Management LP, the activist hedge fund run by Nelson Peltz, has acquired a stake in Unilever PLC, according to people familiar with the matter, adding pressure to the packaged food and consumer goods giant in the wake of its failed $68-billion bid for GlaxoSmithKline PLC's consumer-health business.

The size of the stake couldn't be learned. Trian started buying Unilever shares well before its bids for the GSK unit surfaced earlier this month, one of the people said.

Eurozone Economic Growth Slows as Omicron Hits Services

Eurozone business activity growth slowed for a second consecutive month in January, as the spread of the Omicron variant took an increasing toll on the region's economy, IHS Markit says.

The eurozone composite PMI fell to 52.4 in January from 53.3 in December, according to the flash estimate. The latest reading indicates the slowest rate of output growth since the recovery from lockdowns started in March 2021.

Royal Philips 4Q Sales, Net Profit Fell Amid Supply Chain, Covid-19 Issues

Royal Philips NV said Monday that sales and net profit for the last quarter of the year fell as it continued to experience challenges related to the supply chain and Covid-19.

The Dutch health-technology company said group sales for the fourth quarter of 2021 were 4.9 billion euros ($5.56 billion) compared with EUR6.00 billion a year earlier.

Accell Accepts EUR1.56 Bln Takeover by KKR-Led Consortium

Accell Group NV said Monday that it has agreed on a 1.56 billion euro ($1.77 billion) takeover by a consortium led by Kohlberg Kravis Roberts & Co. LP.

Under the deal, accepting shareholders of the Netherlands-based bicycle company will get EUR58 for each share held, a 26% premium to the company's closing price on Friday.

Italy to Decide on Its Leadership-and Draghi's Future

ROME-Italy faces a political puzzle this week: It must fill its two most important leadership positions, but it has only one Mario Draghi.

Mr. Draghi is both the widely respected prime minister of Italy's bipartisan government and the most credible contender to become head of state, or president of the republic.

Germany's Reliance on Russian Gas Limits Europe's Options in Ukraine Crisis

BERLIN-Germany's dependence on Russian gas has left Europe short of options to sanction Moscow if it invades Ukraine-and itself vulnerable should Russia stop gas exports to the West.

A two-decade-old decision to phase out nuclear power and more recent moves to cut reliance on coal in an effort to bring down CO2 emissions mean Germany is now more reliant on Russian gas than most of its neighbors, not just for heating but also for power generation.

NN IP Will Continue to Shun Gas, Nuclear Projects Despite 'Green' Endorsement by EU

The European Union's proposal to temporarily classify investments in some natural-gas and nuclear projects as sustainable will not change NN Investment Partners' decision to shun fossil fuels from its green portfolios.

The draft recommendation from the European Commission, the EU's executive arm, is part of an EU classification scheme to help financial markets decide what counts as a sustainable investment, known as green taxonomy.

U.A.E. Intercepts Two Ballistic Missiles Over Capital as Gulf Tensions Escalate

DUBAI-The United Arab Emirates said it intercepted two ballistic missiles launched by the Houthi rebels in the most recent attack targeting its capital of Abu Dhabi that threatens to widen Yemen's yearslong civil war across the region.

The U.A.E said early Monday that the attack resulted in no casualties but scattered shards of missiles across Abu Dhabi. Videos posted to social media Monday before dawn showed bright lights in the sky above the city, and residents reported hearing explosions.

State Department Tells Families of U.S. Diplomats in Ukraine to Leave

The State Department instructed the families of U.S. diplomats in Ukraine to leave the country and authorized some embassy staff members to also depart, while the Biden administration considers sending several thousand troops to Europe amid a Russian military buildup.

The State Department decision, announced Sunday, comes as U.S. officials have warned that an attack could come at any time.

Russia Hatching Plot to Replace Ukraine Government, U.K. Says

The U.K. said it has exposed a plot by Russia to install a friendly government in Ukraine, supporting an earlier U.S. assessment suggesting that the Kremlin is laying plans to oust its neighbor's leadership.

The allegations, announced Saturday by the British Foreign Office, come in the midst of warnings that Russia could invade Ukraine with the around 100,000 troops it has gathered near the border.

F-16 Sale Could Mend U.S., Turkey Ties, but Tension With Russia Intrudes

The Biden administration is weighing a Turkish proposal to buy a fleet of F-16 jet fighters that officials in Ankara say would mend ruptured security links between the countries, but the sale faces opposition from members of Congress critical of Turkey's growing ties to Russia.

Senior Turkish officials say the deal could be a lifeline for their relationship with the U.S., which has suffered for years over Turkey's purchases of Russian arms, clashing interests in the war in Syria and U.S. criticism of Ankara's human-rights record. And in both countries, analysts say blocking the sale could push Ankara closer to Russia.

U.S.-Backed Forces Struggle to Contain Islamic State in Battle Over Syrian Prison

Syrian fighters backed by American airstrikes struggled to retake control of a prison attacked by Islamic State in northeastern Syria on Sunday, as the militant group's attempt to replenish its ranks with freed prisoners sparked the area's worst sustained fighting in years.

The prison attack, which began last week, was one of the most complex and brazen Islamic State operations in Syria and Iraq in the past three years. It involved sleeper cells, suicide bombers and an insurrection inside the prison, said the Syrian Democratic Forces, the U.S.-backed, Kurdish-led militia that controls a section of northeastern Syria that is autonomous from the regime in Damascus.


Inflation Poses Risks of Faster, Less Predictable Fed Rate Increases

The Federal Reserve is entering an unfamiliar environment at the start of 2022. For the first time in decades, officials are preparing to raise interest rates when inflation is uncomfortably high rather than very low.

The last time the Fed lifted rates from near zero, at the end of 2015, inflation was running below its 2% target and the unemployment rate-a measure of labor slack-was declining gently.

Fed Steps Up Deliberations on Shrinking Its $9 Trillion Asset Portfolio

Federal Reserve officials are set to resume discussions this week over how fast they will shrink their nearly $9 trillion bond portfolio when the time comes, which would serve as a tool for tightening monetary policy as they try to curb high inflation.

Officials are on track at their meeting Tuesday and Wednesday to approve a final tranche of bond purchases, allowing them to end the stimulus program by March-when they are likely to raise interest rates to cool the economy, according to their recent public comments.

Tech Rout Fueled by Bond-Market Turn

Shifts within the bond market are removing a key pillar of support for Wall Street's more speculative bets, dragging down major stock indexes as investors flee everything from tech stocks to cryptocurrencies.

Spooked in large part by rising bond yields, investors continued to dump stocks last week, extending early-year losses that have taken many off guard with their speed and severity. Once again, tech shares were at the forefront. Selling also broadened to include sectors such as banking and energy, sending the S&P 500 to its worst stretch of declines since the onset of the Covid-19 pandemic.

State Department Tells Families of U.S. Diplomats in Ukraine to Leave

The State Department instructed the families of U.S. diplomats in Ukraine to leave the country and authorized some embassy staff members to also depart, while the Biden administration considers sending several thousand troops to Europe amid a Russian military buildup.

The State Department decision, announced Sunday, comes as U.S. officials have warned that an attack could come at any time.

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