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Jan 28 - 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
VACCINE RACE: WINNERS AND LOSERS (1230 GMT)
The European Union is battling to secure COVID-19 vaccine
supplies as its inoculation programme is lagging behind the
vaccine rollout in the UK, the U.S. and Israel.
As big drugmakers are facing production problems, the EU
which made its orders after the UK and the U.S. are facing real
challenges delivering its vaccination rollout plan.
The delays in the vaccination rollout is a key element
defining when countries will be able to kick start their
economies.
JP Morgan notes that contracts between AstraZeneca,
Pfizer/BioNtech and the U.S. and U.K. were agreed in May (AZ)
and July (Pfizer), while the EU only signed an agreement with AZ
in August and with Phizer in November.
Then there's Israel, a "special case" as it secured
"preferential supply" of the Pfizer/BioNtech vaccine paying more
per dose, and agreeing to exchange data with the drugmakers,"
JPM says.
"Israel is also of small enough size to provide a test case
as to whether ‘herd immunity’ could be reached, and was willing
to ensure borders were tightly controlled".
Opinions differ on what caused the delays in the contracts
signed by the EU.
"Hesitations over cost, institutional inertia, lobbying from
other producers, the lull in the pandemic over the summer, and
inability to agree among member states have all been cited,"
writes JPM.
For the time being, the EU has asked AstraZeneca to
divert supplies from the UK, which meantime demands it receives
all the shots it paid for.
(Joice Alves)
*****
BOND YIELDS? LOWER FOR MUCH LONGER (1135 GMT)
Some investors are worried about a possible rise of U.S.
yields as it happened in 2013, when suggestions that Fed
purchases would be reduced sent long rates soaring.
But according to Oddo analysts we are far from that kind of
scenario and also the prospect of a strong recovery, with the
pandemic under control “may encourage a long rates rise” but in
the region of 1% at a 10-year maturity, which means not far from
the current levels.
First difference from 2013 is that the market has become
accustomed to the idea of ‘QE-infinity’, seen as the only way to
support equity markets,” Oddo analysts say in a research note.
Besides, Fed’s strategy now justifies a certain tolerance to
inflation and most importantly, in 2013, it was Ben Bernanke’s
mention of future tapering to trigger a “brutal adjustment.”
“Nothing of the sort at present,” they add.
“In the long term, the equilibrium level of short rates is
expected to be at 2.5%, barely more than zero in real terms.”
(Stefano Rebaudo)
*****
MORE UPSIDE FOR EQUITIES (1053 GMT)
Concerns about vaccine delays and their adverse impact on
the economy are stealing the stage depressing stock markets and
making volatility soaring to 3-month high.
Are we close to the rising rates-falling equities trap?
Not at all according to UBS, which sees a medium term rise
as focus will shift to earnings, stimulus and vaccine rollout.
Here are some reasons why equity path remains positive,
according to UBS.
. The market is not in a bubble as stocks are not expensive
in the contest of current level of bond yields;
. Big Pharma raised their output targets after a slow start
of vaccine production;
. The U.S. fiscal stimulus package, though it will be
smaller than the $1.9 trillion first proposal, will be enough to
support corporate earnings growth;
. Over 90% of U.S. companies beat estimates in the current
earnings season, while UBS expects earnings to grow by 26% in
2021 and 11% in 2022;
. The Fed made clear once again it is too early to consider
exiting its accomodative policy.
In the chart below, today's volatility jump to an almost
3-month high.
(Stefano Rebaudo)
*****
BACK TO 2020! (0853 GMT)
The STOXX 600 is back to where it was at the end of 2020 and
that's below 399 points.
There's just too much negative wind coming from Wall Street
and Asia at the moment and with a 1.2% fall, it's fair to say
that the pan-Europen index isn't having a great morning.
While there were good results from Microsoft, Apple and
Facebook, the short squeeze scare in the U.S. has spoilt the
party and the sector in Europe is the worst performing one,
falling 2.2%.
ASM International, Dialog and Infineon are notably all
losing in the region of 5%.
Nice set of results from Diageo which is the top performer
among blue chips with a 3% rise. That's clearly lifting the food
and beverage sector which is the best performing one, just up
0.01%.
See below the STOXX 600 falling below its 2020 close:
(Julien Ponthus)
*****
HOW FAR FROM GAMESTOP TO GAME OVER? (0803 GMT)
Last night on Wall Street was probably when the short
squeeze battle between a herd of solo traders and seasoned hedge
funds over GameStop GME.N stopped being funny, at least for
investors looking on from the sidelines,
The S&P 500 and the Nasdaq indexes lost about 2.6% each as
funds scrambled to sell their positions in stock market darlings
such as the FAANGs to make up for surging losses from bets made
against struggling smaller companies.
It all spoiled any parties lined up to celebrate bumper
results from Microsoft and Facebook; caught up in the broader
slump, shares in the two mega-caps stars posted only modest
gains. And Apple, despite beating expectations, saw shares
retreat in after-hours trade.
Tesla, with a 670% share price surge over the past year,
disappointed Wall Street meanwhile, with lacklustre Q4 profits
and lack of a target for 2021 deliveries.
Anyway, the New York spillover dragged down Asian bourses on
and European futures are 1% lower; a weaker session could mean
the pan-European STOXX 600 index kisses goodbye to remaining
2021 gains.
The Fed meeting was, not entirely unexpectedly, a sideshow;
it pledged in short to keep policy support intact until a full
economic rebound was in place.
But its downbeat assessment of the economy added to fears
for the recovery. Indeed, data later in the day is expected to
show the U.S. economy contracted at its sharpest pace since
World War Two in 2020.
Ten-year U.S. Treasury yields falling below 1% for the first
time in three weeks is probaly all that one needs to know about
today's risk-off mood.
(Julien Ponthus)
*****
MORNING CALL: SAY BYE BYE TO 2021 GAINS? (0626 GMT)
With European futures trading down between 0.7% and 1%, it
is most likely that the STOXX 600 will open in negative
territory year-to-date, kissing all remaining 2021 gains
goodbye.
The pan-European index settled at 402.98 points yesterday
and all it needs to do this morning is lose 4 points to go under
the 399.03 points it closed 2020 with.
Frankfurt's DAX, France's CAC 40, Milan's FTSE MIB and
Madrid's IBEX are already in red for 2021.
Even if Europe isn't set to get the same beating than Wall
Street yesterday, with the S&P and the Nasdaq losing 2.6%, the
old continent's bourses are bound to feel some pain of the short
squeeze frenzy hitting hedge funds.
In Asia, MSCI's broadest index of Asia-Pacific shares
outside Japan skidded 2% while Japan's Nikkei fell 1.5%.
(Julien Ponthus)
*****
