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* Stoxx 600 index flat
* Basic materials stocks lead gains up 2.5%
* Shares in Temenos jump 15% on 2025 targets
* Varta stocks down 14% after results
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WHAT TO DO WHILE EQUITIES PAUSE (1034 GMT)
Whether the current pause in equity markets is temporary is
anyone's guess, but investors could use some advice about what
to do in the meantime.
Inflation concerns triggered by a large stimulus package in
the U.S. will be transitory, UBS says.
Meanwhile the bank's analysts see potential for
outperformance from small and mid-cap stocks, which will
“benefit disproportionately from a cyclical upswing and look
attractively valued.”
UBS says that on a price-to-book basis, global small-caps
have traded on an average 18% discount to large-caps over the
last 15 years, but are currently trading at a 30% discount.
Asia bonds offer some of the most attractive yields in
credit space, it adds mentioning the JACI High Yield Index now
at 7.1% but expected to rise to 8-10% by end of 2021. Risks of
potential defaults “are manageable,” it adds.
Net short positions on the U.S. dollar came off in recent
weeks, “but we don’t think the rise in yields will prevent a
longer-term decline in the US currency.”
Then reflation trade will likely send commodity-linked
currencies higher.
UBS likes Asian currencies with a high yield, such as the
Indian rupee and Indonesian rupiah, and those with cyclical
exposure, such as the Singapore dollar and Chinese yuan.
(Stefano Rebaudo)
*****
EUROPE'S TECH SHINES AT THE OPEN (0835 GMT)
The Nasdaq's overnight pull back didn't weigh that much on
the open in Europe this morning with the tech index up 1.15%,
boosted by Switzerland's Temenos 2025 targets and the ongoing
rally on Sweden's Sinch.
Overall the STOXX 600 is flat, in line with what the futures
were pointing to earlier.
There's a slightly risk-on feel to the start of the session
however with autos rising 0.7% thanks to Daimler which is up 2%
following its results.
The top performers are miners, with the basic material index
up 2% as commodities continue to make gains.
Same trend for energy groups, which are benefiting for the
rise in oil prices.
A big miss for Smith & Nephew means the UK medical producer
is the worst performer on the STOXX 600 with a 8% fall.
Banks are perfectly flat despite quite a lot of news in the
sector this morning: Barclays is down 1% after its announced it
would resume dividend payments.
(Julien Ponthus)
*****
IN SHORT, I LIKE REFLATION (0807 GMT)
The testimony of Gamestop super-bull Keith Patrick Gill, aka
Roaring Kitty, went instantly viral after it was published by
the U.S. House Financial Services Committee last night.
It contained the pithy phrase "In short, I like the stock"
-- a reference to the popular sarcastic meme used on social
networks used by retail stock traders on social networks.
Still 'Gamestonk' has long stopped being at the center of
action on Wall Street which was relieved at the sudden pull back
of 10-year Treasury yields to 1.27%, a whole five
basis points off recent 11-month highs.
It was down to the Fed again; its meeting minutes reassured
markets it would not taper stimulus purchases until there was
"substantial further progress" on its twin goals.
That softened the impact of forecast-beating economic data,
including a 5.3% rise in retail sales and producer inflation
doubling from the previous month.
In any case, it was a lacklustre session on Wall Street
though investors kept the reflation trade in play, rotating
further out of technology shares, a trend tracked in Asia this
morning. Futures indicate a weaker open for Europe too.
The dollar index meanwhile is holding its own,
indicating a faster economic recovery for the United States.
Commodity traders have embraced the reflation trades too,
with oil prices at new 13-month highs (supported also by Texas
production outages) while copper is at its highest in nearly a
decade.
Key developments that should provide more direction to markets
on Thursday:
-Barclays resumes dividend payouts as annual profit halves;
Credit Suisse targets lending volume after better-than-expected
Q4 loss
-Daimler sees significant revenue, earnings gains amid pandemic
recovery
-Italian PM Mario Draghi won a confidence vote in the upper
chamber of parliament.
-Turkish central bank meeting
-Policymakers speaking: ECB Board member Isabel Schnabel, Norway
central bank governor Olsen, Fed governor Lael Brainard
-U.S. weekly jobless/Philly Fed index for Feb
-US Treasury auctions 30-year inflation-linked bonds
(Julien Ponthus)
*****
EUROPEAN FUTURES HOLD THE LINE (0617 GMT)
European futures are trading just slightly in positive
territory, holding the line as Asian bourses end their day hit
by profit taking.
Wall Street's performance overnight was also a mixed bag
with The Nasdaq retreating as investors rotated out of
technology shares amid concerns about inflation.
For the moment though, the rise in yields seems to be taking
a breather with the benchmark U.S. 10-year easing to 1.27% after
reaching a high of 1.33% yesterday.
Anyhow if risk appetite can be gauged through crypto
currencies, then things look quite positive with bitcoin trading
above $52,000.
(Julien Ponthus)
*****
