Last checked at 
* European shares up 0.2%
* Deliveroo flops on market debut
* DAX hovers around 15,000 points
* Eyes on Biden infrastructure plan
March 31 - 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
TIME TO START SOME DEFENSIVE ROTATION? (1157 GMT)
It’s not easy to make the right choice in the stock markets,
amid cyclicals increasingly stretched valuations versus
defensives and expectations of stronger growth and inflation,
coupled with higher bond yields.
Morgan Stanley analysts see “potential catalysts for a
bigger tactical defensive rotation later in the year,” while
they are wary of “rotating too hard just yet.”
“Our expectation for continued strong growth data, prevents
us from wanting to get too defensive just yet, but we think it
makes sense to start to reduce the size of our underweight
stance,” they say in a research note.
Bottom line, they upgrade pharma stocks to neutral, which
they say trade “at a rare PE discount to the wider market,”
while downgrading to neutral consumer services and transport,
“where valuations look increasingly rich.”
BofA says cyclicals “are already pre-pricing an improvement
in macro momentum.”
But “if PMIs rebound to unusually strong levels by Q3 and
bond yields continue to rise, as we expect, this would imply a
further 15% upside for cyclicals versus defensives by Q3,” it
adds. In the table below BofA's forecast overview.
(Stefano Rebaudo)
*****
EUROPE: IN THE MOOD FOR LOVE (1130 GMT)
This has been a fine quarter for European equities which are
set to exit Q1 with a rise of over 8%.
Worth noting that for the first time since Q3 2019, the
STOXX 600 has outperformed the S&P 500 which is up 'only' 5.4%.
Europe, however, remains unloved, Barclays analysts point
out.
"Despite their good relative performance ytd, European
equities remain ignored by global investors", the bank's
analysts write.
"We believe that improving vaccine rollout later this year
and reopening could be the triggers for the region to see
inflows again", they argue, adding that because Europe is
overweight on popular value stocks, it could benefit from
managers rotating their portfolios.
(Julien Ponthus)
*****
NEW RECORD HIGH FOR AMSTERDAM (1018 GMT)
There's been a lot of chatter about the 15,000 points
snatched by the DAX but other indexes in Europe are also
enjoying the end of Q1.
Amsterdam's AEX has just reached a record high of 703.44
points, its highest level since September 2000!
The STOXX 600 is also very close to testing unchartered
highs, just 2 points below its February 2020 record of 433.90
points.
Here's the AEX since 1995:
(Julien Ponthus)
*****
DELIVEROO UNDERDELIVERS (0832 GMT)
Horrible, disastrous... there's no shortage of adjectives
out there to describe the fiasco of Deliveroo which a few
minutes after its London debut saw its shares hit a 271 pence
low, 30% below their 390 pence IPO price tag.
Here is a round up of comments we got so far.
Russ Mould, Investment Director at AJ Bell: "How could a
company that was valued at $3 billion in November, $5 billion in
January, be magically worth 8-9 billion in March - particularly
when according to its own statements it was potentially
requirement in need of emergency funding last year. I guess the
question now is does this mean that we’re about to enter a more
difficult period for these IPOs that loss-making companies
become with very high valuations, which would be an interesting
shift of tone".
Angelo Meda, portfolio manager at Banor SIM: "The wind has
turned on all growth stocks. I don't know if this is a stock
that will recover anytime soon. We stayed out of the IPO because
of concerns over valuation and regulation. Until there is
clarity on riders' rights it will be difficult to invest in this
sector".
Connor Campbell, analyst at Spreadex: "Deliveroo has been
able to grow to the point of launching on the stock market in
part thanks to the exploitation of its workers. Now, said
exploitation is one of the main reasons behind its sour start to
life as a public company, with multiple leading fund managers
expressing concern over its labour practices. It is maybe a case
of a perfectly zeitgeisty company in one sense – Deliveroo is a
primary pandemic beneficiary – coming of age in the wrong
moment, i.e. in the era of ostensible environmental, social and
corporate governance".
James Athey, investment director at Aberdeen Standard
Investments: "The number of institutions lining up to say no on
ESG grounds always looked like it was going to make it a tricky
debut".
Stephane Ekolo global equity strategist at Tradition: "It
stings. Some UK asset managers had warned about work conditions
and the business model and had flagged regulation risks".
Neil Wilson, analyst at Markets.com:
"Chiefly though it reflects the fact that even pricing the IPO
at the bottom of the range, Deliveroo was demanding too high a
price tag for a loss-making delivery platform in a very
competitive space with a questionable path to profitability. The
books were covered, it was just plain mis-priced".
(Julien Ponthus, Danilo Masoni, Elizabeth Howcroft)
*****
DAX RESISTS ABOVE 15K, DELIVEROO FLOPS (0726 GMT)
European shares are off to a muted start this morning with
the main regional benchmark trading just above parity and no
sector taking the lead in either direction.
Germany's DAX is flat but it's managing to hold above the
15,000 points mark it breached yesterday for the first time.
In London, Deliveroo delivered a disappointing debut,
falling as much as 30% from its IPO prices in the first minutes
of life.
Elsewhere, a couple of downgrades are making videogame maker
CD Projekt the biggest faller on the STOXX, down 11%.
Here's your snapshot.
(Danilo Masoni)
*****
SO LONG Q1, U.S. LEADS GOING INTO Q2 (0702 GMT)
The first quarter draws to a close and what a quarter it's
been: an 82 basis-point surge in U.S. Treasury yields on a
stimulus boost the size of which few would have anticipated, a
25% oil price jump, amateurs taking on seasoned hedge funds and
big banks taking big hits from trouble at hedge funds.
But having added some $2.6 trillion in value over the first
three months, MSCI's global equity index is ending the quarter
in a defensive mood. Asian stocks, outside Japan, are down 0.3%,
the Nikkei shed 0.9% and futures point to a weak open for
European bourses. Wall Street futures are flat.
The outlier is the dollar, riding at fresh one-year peaks
against the yen and at multi-month highs versus other major
currencies.
Its gains come as the United States races ahead of the rest
in terms of vaccinations, economic growth and the sheer size of
government spending. And U.S. President Joe Biden will outline
later on Wednesday how he intends to pay for a $3-$4 trillion
infrastructure plan.
That kind of spending will benefit the rest of the world
too; the IMF will raise global growth forecasts for 2021 and
2022, Managing Director Kristalina Georgieva said on Tuesday.
But the Biden plan, and the likelihood of more debt
issuance, also explains this week's bond selloff that's taken
10-year Treasury yields towards 14-months highs at around 1.78%.
In UK markets, trading starts in food delivery company
Deliveroo, whose shares will list at 390 pence each, valuing the
company at 7.6 billion pounds ($10.5 billion). It's the biggest
London IPO for a decade, yet its valuations lag continental
peers Just Eat and Delivery Hero.
Key developments that should provide more direction to
markets on Wednesday:
- Euro zone flash inflation data due; data on Tuesday showed
German inflation topped ECB target in March.
- China's manufacturing expands at the quickest pace in
three months in March.
- Britain's economy grows a stronger-than-expected 1.3% in
Q4.
- Hitachi to buy U.S. software firm GlobalLogic Inc for $9.6
billion.
- Germany to limit the use of AstraZeneca COVID-19
vaccine to people aged 60 and above
- OPEC+ oil producing group is concerned that uncertainties
may impact the recovery in oil demand
- Gold set for worst quarter since 2016.
- U.S. ADP national unemployment, Chicago PMI data due.
- Sweden's H&M swings to Q1 loss
(Dhara Ranasinghe)
*****
DELIVEROO FOR BREAKFAST (0625 GMT)
Today is Deliveroo day!
The food delivery company is making its debut on the London
stock market this morning in what is set to be the biggest IPO
since Glencore back in 2011.
Now, with the Nasdaq easing 0.1% yesterday and tech/growth
shares under pressure, the context is perhaps not ideal.
The S&P technology sector ended down 1% and was
the biggest drag on the S&P 500.
The Nasdaq is on track for its first monthly loss since
November with 10-year U.S. Treasury yields rising
to 1.77%, their highest since Jan. 22.
European futures are also in the red, losing about 0.3% at
the time of writing.
(Julien Ponthus)
*****
