MARKET WRAPS

Watch For:

U.S. Employment Trends Index for November.

Opening Call:

U.S. stock futures were mixed on Monday, as investors digested the latest news on the spread of the coronavirus and prepared for new inflation data later in the week.

In recent days, markets have swung on conflicting signals from scientists and vaccine makers regarding the severity of the Omicron variant and how well existing vaccines may work against it. It still may be weeks before a more definitive picture forms.

Some positive news emerged over the weekend, boosting market sentiment. A small study of people hospitalized from Omicron in South Africa found a pattern of milder illness than in previous waves of Covid-19, though scientists cautioned that it was too early to say for sure.

U.S. chief medical advisor Anthony Fauci said on CNN that there didn't appear to be a "great deal of severity" to Omicron, adding the same caveat. Meantime, regulators said Sunday that the Food and Drug Administration planned to streamline authorization for revamped vaccines.

"It seems like this is not going to lead to the worst-case scenario. I wonder if we're being complacent, but the early indicators suggest we're not," said Fahad Kamal, chief investment officer at Kleinwort Hambros.

Science Applications International is scheduled to report Monday ahead of the opening bell and Coupa Software and Healthequity after markets close.

Earnings from home builder Toll Brothers are planned for tomorrow and Campbell Soup and GameStop are scheduled for Wednesday. Companies including Lululemon, Costco and Oracle are expected to post earnings Thursday.

Stocks to Watch:

Compagnie de Saint-Gobain said Monday that it has agreed to acquire GCP Applied Technologies in a deal valued at around $2.3 billion.

The French construction-materials company plans to take over all outstanding shares of GCP for $32 a share in cash. The price represents a premium of 39% above the volume-weighted average price of each GCP share for the 30 trading days ended on Nov. 30, it said.

The boards of both companies have approved the deal but it still is subject to GCP shareholders' approval. GCP investors Starboard Value LP and Standard Industries Inc. have pledged to vote their respective stakes in favor of the deal, Saint-Gobain said.

Forex:

The dollar rose as investors bet on the Federal Reserve accelerating asset purchase tapering at its next policy meeting after data showed U.S. unemployment fell sharply in November even as jobs growth slowed.

"The release of the latest non-farm payrolls report on Friday provided further evidence that the U.S. economy is continuing to recover from the initial negative Covid-19 shock," MUFG Bank currency analyst Lee Hardman said.

"The developments support the Fed's plans to speed up tightening and are encouraging a stronger U.S. dollar." The Fed holds its next meeting on December 14-15.

Sterling could weaken against the dollar if the Fed accelerates its tapering of asset purchases and the Bank of England delays raising interest rates this month, MUFG Bank said.

In that case "the timing of the gap between the first Fed and BOE and rate hikes could be a lot shorter than expected and keeps risks tilted to the downside for [GBP/USD] in the near-term," MUFG's Lee Hardman said.

Fed policymakers have signalled a faster withdrawal of asset purchases at the December 14-15 meeting despite the emergence of the Omicron coronavirus variant, while BOE policymaker Michael Saunders on Friday said there could be advantages to assessing the variant's impact before raising rates.

Bitcoin and other cryptocurrencies including ether and Solana edged up from weekend lows. Bitcoin traded at around $48,400, nearly 10% down on its level at 5 p.m. ET Friday, but up from Saturday's low of $42,000.

Bitcoin's price action in the past couple of weeks help rule out the idea that the cryptocurrency is a safe haven and a hedge against inflation, Swissquote Bank analyst Ipek Ozkardeskaya said. "Bitcoin is a very high-risk asset, and it is not a proven hedge against inflation," she said.

Bonds:

The yield on the benchmark 10-year Treasury note ticked up to 1.382% Monday from 1.342% Friday.

HSBC expects German Bunds to rally next year, bringing the 10-year yield down to -0.50% by the end of 2022, said strategist Chris Attfield. Bund yields may be slow to fall in the first half of 2022, however, as headline inflation is likely to remain high. This creates a more neutral short-term outlook, he said.

"Unless the European Central Bank terminal rate is significantly positive, we do not think Bund valuations greater than zero are sustainable," he said. HSBC expects early rate rise expectations to be priced out in 2022, causing renewed curve steepening.

Commodities:

Oil prices rose after Saudi Arabia raised its official selling prices for crude sold to Asia and the U.S. over the weekend. Higher premiums can be viewed as a sign of robust demand, according to analysts at Commerzbank, supporting last week's decision by the Organization of the Petroleum Exporting Countries and their allies to raise oil production by 400,000 barrels a day in January in spite of concerns related to the Omicron variant.

Prices are also supported by slimming prospects of an imminent rise in Iranian oil exports following indirect talks between the U.S. and Iran last week.

TODAY'S TOP HEADLINES

Johnson & Johnson Prepares to Untangle Finances Ahead of Planned Split

Johnson & Johnson is trying to figure out how to divide its supply chain and substantial financial holdings as part of a planned split into two publicly-traded businesses.

The New Brunswick, N.J.-based healthcare and consumer-goods giant last month said it would split off its consumer-health business, which sells Tylenol medicines, Band-Aid bandages and Johnson's Baby Powder, into a so-far unnamed company in 18 months to two years. The company is considering spinning out the unit and holding a stock offering.

Advertising Market Keeps Growing Much Faster Than Expected, Forecasters Say

The advertising market is continuing to expand much more quickly than forecasters earlier predicted.

Global advertising spending will grow 22.5% to $763.2 billion this year, excluding U.S. political ad spending, according to the latest forecast from GroupM, which houses the media-buying agencies and data operations of ad giant WPP PLC.

Alibaba Reshuffles E-Commerce Teams Amid Competition, Slowing Growth

Alibaba Group HoldingLtd. said it would reorganize its e-commerce teams and appointed a new chief financial officer, as the tech giant faces increasing competition in China, slowing growth and a plummeting stock price.

The company said Monday that its various Chinese e-commerce units would be combined into one from next year, and that it would form a new international digital commerce team.

China Evergrande Shares Fall After Warning on Possible Dollar Bond Defaults

China Evergrande Group's shares fell Monday, following the property developer's warning of possible cross-defaults on its dollar bonds after it was asked to repay a US$260 million debt obligation.

"In light of the current liquidity status of the group, there is no guarantee that the Group will have sufficient funds to continue to perform its financial obligations," Evergrande said in a statement late Friday.

Kohl's Urged to Consider Sale by Activist Investor

An activist investor is urging department-store chain Kohl's Corp. to consider a sale of the company or a separation of its e-commerce business.

New York-based hedge fund Engine Capital LP wants the retailer to examine the two alternatives to improve its lagging stock price, according to a letter sent to Kohl's board Sunday and viewed by The Wall Street Journal. Engine owns a roughly 1% Kohl's stake.

Saint-Gobain Agreed to Buy GCP Applied Technologies

Compagnie de Saint-Gobain SA said Monday that it has agreed to acquire GCP Applied Technologies in a deal valued at around $2.3 billion.

The French construction-materials company plans to take over all outstanding shares of GCP for $32 a share in cash. The price represents a premium of 39% above the volume-weighted average price of each GCP share for the 30 trading days ended on Nov. 30, it said.

China's Central Bank Cuts Reserve Requirement Ratio for Banks

BEIJING-China's central bank said Monday it would lower the amount of funds banks have to set aside, replenishing liquidity into the financial system in a bid to support the economy and cut financing costs for businesses.

The People's Bank of China said in a statement that it would cut banks' reserve requirement ratio by 0.5 percentage point, which will bring the weighted average RRR level for the whole banking system to 8.4%. The cut won't apply to county-level rural lenders whose RRR stands at 5%, the central bank added.

High Inflation, Falling Unemployment Prompted Powell's Fed Pivot

Just four weeks ago, the Federal Reserve set in motion carefully telegraphed plans to gradually wind down a bond-buying stimulus program by June. Officials are making plans to accelerate the process at their policy meeting next week, ending it by March instead.

The abrupt shift opens the door to the Fed raising interest rates next spring rather than later in the year to curb inflation, marking a significant policy pivot by Chairman Jerome Powell shortly after President Biden offered him a second four-year term leading the central bank.

Nasdaq Is On Track to Beat NYSE in Record Year for IPOs

Nasdaq Inc. is poised to beat the New York Stock Exchange in initial public offerings this year, far outpacing its crosstown rival during a record year for capital raised in U.S. public markets.

IPOs at Nasdaq have raised $191 billion this year through Friday, compared with $109 billion for new listings at the NYSE, according to Dealogic. Nasdaq's commanding lead with only a few weeks left in 2021 means it is likely to beat the Big Board for the third year in a row.

High-Income Business Owners Escape $10,000 Tax Deduction Cap Using Path Built by States, Trump Administration

Congressional Democrats are debating whether increasing the $10,000 cap on the state and local tax deduction would benefit the rich too much, but some of America's top earners-including private-equity managers and law firm partners-are already legally circumventing the cap on much of their income.

That is because state governments and the Trump administration blessed a cap workaround for owners of closely held businesses that is proliferating around the country. So far, about 20 states have enacted versions of it, including New York, California, Connecticut, New Jersey and Illinois.

German Manufacturing Orders Dropped in October

German manufacturing orders fell in October, missing expectations of an increase amid continuing supply chain disruptions that is curtailing factory activity.

Manufacturing orders declined 6.9% on month in October in adjusted terms, following a revised 1.8% rise in September, according to data from federal statistics office Destatis released Monday.

Small-Cap Stocks Hit Hard by Covid-19 Omicron Variant

The emergence of the Covid-19 Omicron variant has pummeled small-cap stocks.

The Russell 2000 benchmark has dropped 7.4% since Thanksgiving, when the fast-spreading new variant made headlines. Last week, the index fell into a correction, declining more than 10% from its November record. The S&P 500 large-cap index, by comparison, has shed 3.5% since the variant news.

China Seeks First Military Base on Africa's Atlantic Coast, U.S. Intelligence Finds

BATA, Equatorial Guinea-Classified American intelligence reports suggest China intends to establish its first permanent military presence on the Atlantic Ocean in the tiny Central African country of Equatorial Guinea, according to U.S. officials.

The officials declined to describe details of the secret intelligence findings. But they said the reports raise the prospect that Chinese warships would be able to rearm and refit opposite the East Coast of the U.S.-a threat that is setting off alarm bells at the White House and Pentagon.

Putin Troop Buildup Near Ukraine Raises Concerns of Potential 2022 Invasion, U.S. Officials Say

WASHINGTON-Russian President Vladimir Putin is amassing a force expected to total 175,000 troops near Russia's border with Ukraine, giving him the capability for a potential invasion of his neighbor by early 2022, administration officials said Friday.

The officials, citing new intelligence reports that include images from spy satellites, said the Russian military buildup differs markedly from an earlier massing of troops in the spring. When completed, they said, it will be twice the size of that previous buildup. In addition, Russia has embarked on a rapid mobilization of reservists.

Venezuela's U.S.-Backed Opposition Movement in Danger of Breaking Up

The political movement the U.S. has backed in Venezuela to challenge the country's authoritarian government is on the verge of breaking up after a major faction announced its withdrawal on Sunday.

Julio Borges, a leading figure in the antiregime coalition, called for an end to the leadership of Juan Guaidó, whom the U.S. and dozens of allies have backed as Venezuela's legitimate president since January 2019 in a strategy to remove strongman President Nicolás Maduro. Until now, Mr. Guaidó has been leader of a movement that calls itself an interim government, complete with a bureaucracy and diplomats.

Write to sarka.halas@wsj.com TODAY IN CANADA

Earnings:

None scheduled

Economic Indicators:

None scheduled

Stocks to Watch:

Alimentation Couche-Tard: All of Its Outstanding Class B Subordinate Voting Shrs Will Be Automatically Converted Into Class A Multiple Voting Shrs of the Corp on a One-For-One Basis on Dec 8, 2021, Contrary to mid-Dec as Previously Communicated; All Class B Shrs of the Corp Will Be Delisted From the Toronto Stk Exchange at the Close of Trading on Dec 7, 2021

Expected Major Events for Monday

00:01/UK: CBI Economic Forecast

02:00/JPN: Nov Imported Vehicle Sales

07:00/GER: Oct Manufacturing orders

07:00/GER: Oct Manufacturing turnover

09:00/ITA: Oct Retail Sales

09:00/UK: Nov UK monthly car registrations figures

09:30/UK: Nov CIPS / Markit Construction PMI

09:30/UK: 3Q Household Finance Review

15:00/US: Nov Employment Trends Index

23:30/JPN: Oct Household Spending

23:50/JPN: Nov International Reserves / Foreign Currency

23:50/JPN: Nov Provisional Trade Statistics for 1st 20 days of Month

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

Expected Earnings for Monday

Citius Pharmaceuticals Inc (CTXR) is expected to report $-0.04 for 4Q.

Coupa Software Inc (COUP) is expected to report $-1.41 for 3Q.

DLH Holdings (DLHC) is expected to report $0.22 for 4Q.

Electrovaya (EFL.T) is expected to report for 4Q.

Fastenal Co (FAST) is expected to report.

GitLab Inc (GTLB) is expected to report for 3Q.

Healthequity Inc (HQY) is expected to report $-0.03 for 3Q.

Malvern Bancorp Inc (MLVF) is expected to report $0.25 for 4Q.

MongoDB Inc (MDB) is expected to report $-1.35 for 3Q.

Mullen Automotive Inc. (MULN) is expected to report for 3Q.

Science Applications International Corp (SAIC) is expected to report $0.99 for 3Q.

Star Group LP (SGU) is expected to report for 4Q.

Sumo Logic Inc (SUMO) is expected to report for 3Q.

Powered by Kantar Media and Dow Jones.

ANALYST RATINGS ACTIONS

Accel Entertainment Raised to Outperform From Neutral by Macquarie

DocuSign Cut to Neutral From Buy by UBS

DocuSign Cut to Neutral From Outperform by Wedbush

DocuSign Cut to Neutral From Overweight by Piper Sandler

DocuSign Cut to Underweight From Neutral by JP Morgan

Eagle Materials Cut to Hold From Buy by Loop Capital

Fastly Raised to Outperform From Market Perform by Raymond James

JOANN Cut to Equal-Weight From Overweight by Wells Fargo

Marvell Technology Raised to Buy From Neutral by Goldman Sachs

Marvell Technology Raised to Outperform From Market Perform by Cowen & Co.

Morgan Stanley Raised to Buy From Neutral by Citigroup

Ollies Bargain Outlet Cut to Hold From Buy by Craig-Hallum

Ollies Bargain Outlet Cut to Underweight From Neutral by JP Morgan

PNM Resources Raised to Equal-Weight From Underweight by Wells Fargo

Ryman Hospitality Raised to Hold From Sell by Truist Securities

Smith & Wesson Brands Cut to Market Perform From Outperform by Cowen & Co.

Sportsman's Warehouse Raised to Buy From Hold by Craig-Hallum

Stitch Fix Raised to Equal-Weight From Underweight by Morgan Stanley

TopBuild Cut to Neutral From Buy by BTIG

UiPath Raised to Overweight From Equal-Weight by Morgan Stanley

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

(END) Dow Jones Newswires

December 06, 2021 06:15 ET (11:15 GMT)

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