Last checked at 
* Europe's STOXX 600 down ~0.1%
* Frankfurt closed for Whit Monday
* Bitcoin steadies after Sunday sell-off, up ~9%
* U.S. equity index futures point to opening gains
May 24 - Welcome to the home for real-time coverage of
markets brought to you by Reuters reporters. You can share your
thoughts with us at markets.research@thomsonreuters.com
ALL ABOUT INFLATION PROTECTION (1240 GMT)
As labor and material shortages shed light on the risk of
higher inflation, strategists at Deutsche Bank are seeing strong
inflows into inflation-protected bond funds as well as into
equity funds focused on energy, materials and financials, seen
as beneficiaries of rising inflation.
"Positioning in commodities is not particularly high, likely
as volatility also remains elevated, and commodity-focused funds
have mostly been seeing outflows," they say.
Data from Deutsche Bank shows inflation-protected bond funds
saw large outflows in March 2020 as the pandemic struck, but
began seeing inflows pick up sharply then in May 2020, at the
strongest pace since 2010.
After several years of heavy outflows, funds for energy and
materials equity sectors have been seeing strong inflows over
the last year, the strategists say, especially since November of
last year. The financial sectors has also seen large inflows
over this period.
The S&P 500 energy sector has outperformed all 11
major S&P sector indexes, rising 36.3% so far this year.
Financials are the second biggest YTD gainer, while
materials are third.
(Shreyashi Sanyal)
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MORE ON THE BULLISH SIDE (1152 GMT)
While a sort of consolidation phase in equities has been
underway since around mid-April, analysts continue to spread
their bullish comments.
Nobody argues on the fact that the economy has been staging
a solid rebound along with company results. The debate is mostly
about how much of it is already priced in.
Credit Suisse analysts point out that growth in Europe will
surprise on the upside as mobility data continue to trend
higher, while equity valuations are “undemanding.”
“The savings ratio and household net worth have both surged
over the past year, and consumers are more optimistic and have
indicated they plan to spend more,” they say.
They estimate a fiscal boost of 2% in GDP and excess savings
as much as 4.5% of GDP.
They see “the P/E discount – using 12-month forward earnings
– at the lower end of its historical range.”
Here are some stocks that, they say, stand to benefit from
the opening, while “the story is not played out in valuations
terms.” ABF, Adecco, Assa Abloy,
Brenntag, Easyjet, Heineken,
Informa, ING, BNP Paribas.
But we also have the reflation believers. Today UBS analysts
say “there is still an upside story to be told,” as long as
central banks keep policy loose. They advocate reflation trade
positioning and have upgraded Japan to the most preferred.
(Stefano Rebaudo)
*****
HERE ARE THE MOST AND LESS CROWDED STOCKS (1025 GMT)
Following the money is always an effective way to understand
what is going on in the financial markets.
So, we can use a UBS weekly analysis about the most
overweight and underweight stocks by global active fund managers
across different regions and countries.
Here below the top overweight with Visa, Facebook
and Alphabet at the top of the list.
The table below shows the top underweight, which include
Apple and Tesla.
Using institutional ownership data by FactSet, UBS forms an
active trading portfolio by aggregating positions across global
active managers.
They sum up all the holdings, calculate the weights of
stocks in this active trading portfolio and they compare them
with the relevant index benchmark.
(Stefano Rebaudo)
*****
WHAT'S THE NEXT POSITIVE CATALYST? (0920 GMT)
With European equities unable to break above the record
levels they have been hovering at since mid-April, JPMorgan has
taken a look at what could help them conquer new ground.
Unsurprisingly perhaps, the next positive catalysts centre
around central bank policy in the U.S. and essentially boil down
to the preservation of a Goldilocks environment.
"For the next meaningful leg higher in equities the key is
that fundamental Growth-Policy sweet spot is reconfirmed, after
the uncertainty that was creeping in recently," say strategists
at the U.S. bank led by Mislav Matejka.
In this respect and with tapering risks elevated, the U.S.
May inflation data release on June 10 and the Fed meeting on
June 16 are going to be key for market direction, they say.
"We are likely to get another very high CPI print... Post
that though, the core CPI spike could appear to be peaking.
Further, the Fed meeting.. is needed to reassure investors that
policymakers are unlikely to change course anytime soon".
If that happens and the economy steam on then equities could
witness the next leg higher going into year end, JPM concludes.
In the chart you can see how the Euro STOXX 50
benchmark has stalled around 4000 points for more than 1 month,
having gained almost 14% since the start of the year.
(Danilo Masoni)
*****
EU PERIPHERY BANKS: LESS TAPERING WORRIES (0858 GMT)
A yield rise is supposed to be good for bank stocks, as it
usually improves lenders’ margins besides being a sign of a
solid economic outlook.
But a tapering by the European central bank (ECB) works the
other way around for EU periphery banks.
It’s a simple mechanism. Tapering by the ECB will widen
peripheral spreads as Southern European countries are the ones
that benefit more from the ultra-accommodative monetary policy,
with an adverse impact on the valuation of banks’ government
bond portfolios and on their share price.
This negative correlation between interest rates and share
prices will stay in place but will be “somewhat weaker,” Credit
Suisse analysts say, mentioning Intesa Sanpaolo and
Unicredit.
Both banks are “well-capitalized”, and the “impact of the
spread widening on capital, while negative, is unlikely to
create a meaningful dent in their respective excess capital
stories,” they add.
“Politically, Mr Draghi is offering a much more robust
near-term outlook, with limited – in our view – opportunities
for instability.”
The holding of Italian/Spanish government debt across our
Southern European bank coverage is highest at CaixaBank
and Unicredit and lowest and Santander
, which is Credit Suisse most preferred stock among
Southern European bank shares.
The chart shows Unicredit stocks underperforming the
European bank Stoxx index, while Santander shares have
been outperforming it.
(Stefano Rebaudo)
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FTSE, CAC, IBEX ADD UP (0738 GMT)
While a big part of Europe is enjoying a long weekend --
being markets in Austria, Denmark, Norway, Switzerland and
Germany on holiday -- the bourses that started regular trading
were mostly posting small gains.
The UK's FTSE, the CAC of France and the
IBEX in Spain are all up around 0.3% each while a bunch
of stocks going ex dividend mean that Italy's FTSE MIB
is being left behind with a 0.2% drop.
Activity will likely remain subdued due to the holiday mood
but also the lack of any major corporate news that could liven
things up. Here's your opening snapshot:
(Danilo Masoni)
*****
BITCOIN AND BELARUS IN THE HEADLINES (0710 GMT)
Taper talk is not going away and nor is Bitcoin volatility.
But the global economy continues to steam on and COVID-19
infections are dropping, seemingly having peaked even in India.
So as the last full week of May kicks off, markets don't
look eager to move beyond well-trodden trading paths, perhaps
reflecting investors' wariness but also holidays in many parts
of Europe.
Stock futures in Europe are up and Wall Street too looks set
to hold ground after Friday's a mixed show. The dollar is
languishing just off three-month lows and, at 1.62%, 10-year
U.S. yields are at the midpoint of their 11-week range -- bond
investors may keep powder dry ahead of a series of Treasury
auctions and Friday's U.S. core PCE inflation reading.
But there are several Fed speakers to look forward to on
Monday, most notably Lael Brainard who is due to speak on
central bank digital currencies against the backdrop of the
bitcoin storm. There is also a virtual CoinDesk gathering, which
will feature Ray Dalio and Cathie Wood.
Crypto enthusiasts might hope Wood will be able to soothe
crypto markets; remember her prediction last week of bitcoin at
$500,000? Currently though, the world's biggest crypto coin is
licking its wounds after falling as much as 17% on Sunday.
Cryptocurrency miners, including HashCow and BTC.TOP have
halted their China operations after Beijing on Friday vowed
further crackdowns on bitcoin mining.
Finally, Belarus dollar bonds are down as much as 0.7 cents
after the government forced an airliner to land on Sunday,
arresting an opposition-minded journalist on board and drawing
condemnation from Europe and the United States.
Key developments that should provide more direction to
markets on Monday:
* BOJ Governor Kuroda speaks
* Emerging market: central bank meetings in Indonesia,
Nigeria,
Ghana
* Auctions: U.S. 6-month and 3-month t-bills
* Fed speakers: Lael Brainard on CBDCs, Cleveland Fed’s
Loretta
Mester, Atlanta Fed’s Raphael Bostic, Kansas City’s Esther
George
(Danilo Masoni)
*****
EUROPE SET TO EDGE UP (0526 GMT)
European shares look set to start the week slightly higher
as optimism about the economic and corporate profit recovery
keeps the region's equities near their record peaks.
Futures on the euro STOXX 50, DAX and FTSE 100 indices were
all rising around 0.2%, while Wall Street futures also pointed
to mild gains at the open later on.
Stocks in Asia, though, dipped as investors awaited key U.S.
inflation readings (the core PCE on Friday) for guidance on
monetary policy, while Bitcoin sought to stabilise after another
sell-off over the weekend.
(Danilo Masoni)
*****
