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"Inflation Everywhere", P&G Earnings, Sony in Shock - What's Moving Markets

EconomyJan 19, 2022 06:40AM ET
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© Reuters.

By Geoffrey Smith 

Investing.com -- Bond yields and oil prices march higher on signs of what Goldman Sachs CEO David Solomon called "wage inflation everywhere" as he presented a disappointing set of fourth-quarter earnings on Tuesday. Procter & Gamble (NYSE:PG) will cast more light on that phenomenon when it reports earnings later. U.S. bond yields grind higher, dragging their German 10-year counterpart above 0% for the first time in nearly three years. U.K. inflation hits a 30-year high too. And Sony (NYSE:SONY) is in shock after Microsoft (NASDAQ:MSFT) swooped to snap up Activision Blizzard (NASDAQ:ATVI), transforming its position in the videogames market. Here's what you need to know in financial markets on Wednesday, 19th January. 

1 Inflation, inflation everywhere

Bond yields across the developed world hit fresh highs amid further evidence that inflation is rising faster and staying around for longer than central banks had expected last year.

The yield on the U.S. 10-year Treasury bond edged up another 2 basis points to 1.90% overnight, its highest level in more than two years. That came a day after Goldman Sachs CEO David Solomon complained of “wage inflation everywhere” – not least at his own bank, where higher compensation ate into profits and sent its stock down 7%.

Elsewhere, the yield on the 10-year German bond rose above 0% for the first time since May 2019 as German inflation was confirmed at 5.3% in December, while U.K. inflation also rose more than expected to a near-30-year high of 5.4%. Two senior Bank of England officials will speak later and may give clues as to the likelihood of another BoE rate hike at its meeting in early February.

2. Ready, Player 2?

Sony (NYSE:SONY) stock plummeted 13% in Tokyo trading in response to Microsoft’s acquisition of video games publisher Activision Blizzard.  The $69 billion deal, Microsoft’s largest ever, will pose a serious challenge to the Japanese company’s status as the world’s second-largest video gaming company by revenue.

Whether or not the deal will end up restricting access to Activision’s games on Sony’s PlayStation console – the big rival to Microsoft’s Xbox – is yet to be seen. Antitrust regulators are certain to review the deal. Traders in Tokyo weren’t waiting for regulators to tell them how bad it would be for Microsoft’s competitors, however.

3. Stocks set to open with dead-cat bounce; P&G earnings eyed, ASML shines

Earnings season broadens out in scope on Wednesday, with reports due from UnitedHealth (NYSE:UNH) and, of special interest given the current focus on inflation, consumer giant Procter & Gamble.  They report before the start of trading, while Dutch-based ASML already posted a big increase in profits and dividends.

United Airlines (NASDAQ:UAL), Prologis (NYSE:PLD) and pipeline operator Kinder Morgan (NYSE:KMI) are also due to report, while Morgan Stanley (NYSE:MS) and Bank of America (NYSE:BAC) will flesh out the details of Wall Street’s fourth quarter.

Stocks in general are set to recover only a little of their heavy losses on Tuesday. By 6:20 AM ET (1120 GMT), Dow Jones futures were up 62 points, or 0.2%, while S&P 500 futures were up 0.2% and Nasdaq 100 futures were up 0.3%.

The data calendar is relatively light, with housing starts and building permits for December the only data of note.

4. Blinken to meet Lavrov as war clouds gather

U.S. Secretary of State Anthony Blinken will meet his Russian counterpart Sergey Lavrov for talks later this week in an effort to avert another Russian invasion of Ukraine.

Talks so far at more junior level have yielded scant results, and German Foreign Minister Annalena Baerbock also returned home from Moscow empty-handed on Tuesday.

Fears of a Russian invasion and occupation were stoked on Tuesday by news that Russian forces would conduct joint maneuvers in southern Belarus, less than 100 miles from the Ukrainian capital Kyiv.

5. Oil hits new highs after Iraq-Turkey pipeline blast; API eyed

Crude oil prices remained close to seven-year highs despite easing slightly on the back of news that a key export pipeline that takes oil from Iraqi Kurdistan to the Mediterranean has resumed limited operations.

The Kirkuk-Ceyhan pipeline, which runs through what has been one of the world’s most unstable regions for the last 20 years, was damaged by a mystery blast on Tuesday. Capable of carrying 450,000 barrels a day to world markets, it is currently operating at 75,000, according to Turkish officials quoted in newswire reports.

By 6:30 AM ET, U.S. crude futures were still up 1.2% on the day at $85.83 a barrel, while Brent crude was up 1.0% at $88.35 a barrel. The American Petroleum Institute releases its weekly estimate of U.S. stockpiles at 4:30 PM ET, a day later than usual owing to Monday’s holiday.

"Inflation Everywhere", P&G Earnings, Sony in Shock - What's Moving Markets
 

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Comments (8)
Dominic Mazoch
Dominic Mazoch Jan 20, 2022 7:46PM ET
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Instrad of 25 points, why not 10 at shorter intervals. Not as much as a shock. And thatbcould have started last fall...
Ac Tektrader
Ac Tektrader Jan 19, 2022 6:27PM ET
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pratt... your up against uneducated trolls they know nothing about macro economics or market history ...
Iyarin Boonnum
Iyarin Boonnum Jan 19, 2022 10:03AM ET
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Real US inflation was 15% but govt figure discount 50%. Lol
ben sc
ben sc Jan 19, 2022 8:18AM ET
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small rate hikes won't help. if we cannot increase energy supply and add workers inflationary pressures will remain. if the Biden admin plan to build Beijing back better ever gets passed we're looking at a global collapse never before seen.
Tom Sc
Tom Sc Jan 19, 2022 8:18AM ET
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small rate hikes make CPI inflation worse because it's an added cost that needs to be paid by the consumer.
som sithy
som sithy Jan 19, 2022 7:53AM ET
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hello
Matt Kay
Matt Kay Jan 19, 2022 7:38AM ET
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wage inflation? we need to eat the rich
Mark Fr
Mark Fr Jan 19, 2022 7:38AM ET
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Eat the rich and continue to watch your portfolio decrease into oblivion. Makes sense. 👍
Jon Bal
Jon Bal Jan 19, 2022 7:06AM ET
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"complained of wage inflation"...i know right? whats wrong with these slaves? always wanting to buy food and pay rent
Puk Pups
Puk Pups Jan 19, 2022 6:50AM ET
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European central bank will hike this year !  Bank of England will rise rates at least 3 more times this year  ! INFLATION real and you can't stop it without those hikes
Peter ONeill
Peter ONeill Jan 19, 2022 6:50AM ET
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The problem with ECB is it has a balancing act of 19 different and diverse economies (would be like the Fed setting Interest Rates not just being set for the USA but North and South America at the same time). While inflation 100% is a problem - so is raising rates and cutting off-market access to some of the weaker southern economies that may well enter a recession as a result (esp as most of the Southern countries are far more reliant on tourism revenue). Current thinking seems to be to let inflation run high - northern countries who want lower inflation may have to take the pain to allow Southern countries the time to repair their economy.
Puk Pups
Puk Pups Jan 19, 2022 6:50AM ET
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Peter ONeill  Agree with you 100%. The task facing the central bank of Europe is not an easy one, and in no case should one lose sight of the state of the weaker economies of the European Union and thereby inflict any damage on them. It is necessary to quickly lift all restrictions and give people the opportunity to travel south so that the economies of Italy, Spain, Greece, .... fill up with money until the fall of 2022, and then still have to raise rates if inflation remains at a high level.
 
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