Last checked at 
* European Stoxx 600 down 0.5%
* Autos stock index best performer, up 1.8%
* BMW shares jump after strong 2021 forecast
* Verbund shares fall after results
March 17 - 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
A MEDIUM-TERM VIEW ON THE U.S. DOLLAR (1244 GMT)
The dollar is holding steady ahead of today’s Fed policy
meeting outcome after rising recently as a fresh spike in
Treasury yields re-ignited inflation fears and sparked a
sell-off in riskier currencies.
But this kind of relationship might change, if we take a
broader angle.
A Fed on hold well into 2023 is likely to see greater
pressure on the dollar on “deteriorating external account and
negative real yields,” according to Deutsche Bank, which sees
EUR/USD “rising and exceeding medium-term measures of purchasing
power parity of around 1.25.”
A new framework adopted by the central bank last year means
it will allow inflation to rise above its target for a period to
make inflation average 2% over time.
“Rising back-end yields and a weaker dollar are entirely
consistent with historical experience: the correlation between
the two has in the past been close to zero, and what matters
most for the dollar is front-end real yields,” according to
Deutsche Bank analysts.
A central bank that endorses a controlled overshoot of
inflation, as the Fed is supposed to do for a foreseeable
future, “is likely to do significant damage to the dollar.”
With U.S. fiscal stimulus targeting low income households
with high marginal propensity to consume, rising domestic demand
is expected to widen the current account deficit.
In the chart below the euro dollar rate (green)
recently falling as U.S. yields (orange) rise.
(Stefano Rebaudo)
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ESG FLOWS HYPE, BUT PERFORMANCE SLOWS (1152 GMT)
Flows into ESG strategies continue to gather momentum.
In the first two months of the year, $16.7 billion went into
long-term retail funds in the U.S. and $99.7 billion into non-US
funds, according to figures from Jefferies.
"In addition to positive flow momentum, new product launches
with ESG designations also continue to flourish," the analysts
add.
March marked a milestone for sustainable finance in Europe,
they add, with the launch of the Sustainable Finance Disclosure
Regulation (SFDR).
"It is designed to curb "greenwashing" throughout the entire
investment value chain (asset managers, pension funds, insurers
and advisers)".
From now on, products that do not take account of ESG
criteria will need to say so, while products promoting
environmental or social characteristics will need to say if they
are meeting their goals.
But so far in 2021, ESG investment performance has slowed
down compared to the previous year.
"The resurgence in value strategies, small caps and cyclical
industries have all been factors," Jefferies notes.
(Joice Alves)
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CHALLENGING TESLA IN THE STOCK MARKET (1058 GMT)
German carmakers' efforts to challenge the the world’s
leader in electric vehicles Tesla are starting to pay
off also in the stock market, it seems.
Deutsche Bank analysts recall that yesterday big tech stocks
did well despite rising interest rates, with retail favourites
still on the rise with one notable exception.
"One such favourite Tesla (-4.39%) was down on the day
though and it must be significant that VW's preferred shares
rose +6.71% on the company's plans of how they can beat Tesla to
be the world's leader in electric vehicles," they say.
Below the chart of Volkswagen (orange) and Tesla (blue)
stocks in the recent days.
It seems that retail investors have targeted Europe after
Volkswagen announced its ambitious plans on electrical driving.
BMW said today it expects at least half of its
sales to be zero emission vehicles by 2030, setting a more
conservative target than some rivals in the race to embrace
cleaner driving.
(Stefano Rebaudo)
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AUTOS STOCKS PROP UP THE STOXX 600 (0853 GMT)
European STOXX 600 index is just below the floating line
with autos stocks still on the rise after yesterday’s jump,
while commodities related stocks are in negative territory.
More good news is boosting the autos stock index,
which is up 1.4%, hitting a fresh two-year high.
Shares in BMW are up 4.4% after the company said
it expects a significant year-on-year increase in group pretax
profit in 2021.
Volkswagen’s ambitious expansion plans in electric driving
are also boosting the sector. Its shares are rising 2.3%.
Basic materials and oil and gas are among the
worst performers after their recent rally.
The STOXX 600 index is down 0.2%.
Financial markets across the globe are on hold ahead of the
Fed policy meeting outcome, which is expected to give clues
about next central bank’s moves on interest rates.
Eyes also on this week's first high-level, in-person contact
between Beijing and Washington since U.S. President Joe Biden
took office.
(Stefano Rebaudo)
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WHAT'S THE (DOT) PLOT, CHAIR POWELL? (0858 GMT)
It's Federal Reserve day and market focus is on the central
bank's rate-hike projections for 2023 in the so-called "dot
plot."
Some economists expect this to show the Fed now expects one
rate hike for 2023 versus none in December. An unchanged median
dot for 2023 could be interpreted as the Fed pushing back
against higher bond yields and markets' pricing of rate hikes.
The Fed will deliver its statement and economic forecasts at
1800 GMT, followed with a news briefing. Until then, barring
unforeseen events, markets will likely stay calm. Ten-year U.S.
yields are just off 13-month highs, the dollar index
is little changed and equity futures are a touch lower
.
The tone across world stocks is cautious too, with Asian
stocks tracking Wall Street's Tuesday fall and European markets
too set to open softer.
In the euro zone, it's the final day of voting in the Dutch
national election -- the first major general election in the EU
since the pandemic began.
Prime Minister Mark Rutte's VVD Party is expected to secure
a fourth term, but there is a risk markets are not adequately
pricing gains at the ballot for anti-establishment forces.
Some good news for AstraZeneca as Australia's
pharmaceutical regulator said the rollout of the company's
COVID-19 vaccine would continue, despite many European nations
pausing vaccinations to investigate reported side-effects.
The EU regulator will release findings on Thursday.
Elsewhere, Credit Agricole Italia has secured a
green light from European Central Bank supervisors for its
planned takeover bid of third-tier Italian lender Credito
Valtellinese .
Key developments that should provide more direction to markets
on Wednesday:
- Fed monetary policy decision and news conference.
- German, UK German new car registration data.
- US housing starts data due.
- Corporates: BMW said it expects a significant year-on-year
increase in pretax profit; Raiffeisen Bank aims to distribute
20%-50% of consolidated net profits; retail investment platform
Hargreaves Lansdown 2021 profit to beat expectations.
- Italy's biggest insurer Generali is studying an
acquisition in Russia worth nearly 2 billion euros ($2.4
billion), according to a media report.
(Dhara Ranasinghe)
*****
ON HOLD BEFORE THE FED (0628 GMT)
European stock futures are broadly unchanged along with
their U.S. peers as financial markets across the globe are on
hold before the U.S. Federal Reserve policy meeting outcome.
Investors are waiting for cues about central bank’s future
moves on interest rates after a jump in government bond yields
triggered by expectations of stronger than expected economic
growth and inflation.
Market will be closely watching also the first high-level
in-person contact between Beijing and Washington since U.S.
president Joe Biden took office. The meeting among Chinese and
U.S. officials will take place in Alaska on March 18 and 19.
(Stefano Rebaudo)
*****
