Last checked at 
* European shares flat
* Mining and travel stocks lift by recovery hopes
* Britain to announce green list of holiday countries
May 4 - 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
BUBBLE EXPOSURE? IT'S NOT SO BAD (0908 GMT)
The risk of a bubble burst is at the top of investors'
concerns after massive stimulus fuelled an unprecedented equity
rally in addition to supporting the real economy.
But according to JP Morgan analysts, one shouldn’t be too
worried as valuations are not that stretched.
History also tells us that when extreme corrections occur,
sooner or later, prices go back to square one, namely to levels
seen before the bubble burst.
Data from the last 40 years indicate overshooting from
extreme valuations are common in all asset classes, and they can
“endure for an average of 9-12 months but sometimes for many
years’” JP Morgan analysts say in a research note.
But “80% of expensive markets that crash spectacularly
eventually make new all-time highs,” they add.
Then, “only a few markets (U.S. large and small-cap stocks,
Copper) even begin to meet this research note’s simple test of
extreme expensiveness.”
But suppose you feel uncomfortable owning every expensive
assets. In that case, JP Morgan suggests focusing on those “with
a policy backstop that will renew the cycle – developed market
equities and credit -- rather than those which no policymaker
feels obliged to support – crypto.”
(Stefano Rebaudo)
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ITALIAN BANKS MERGERS: GAME ON (0837 GMT)
Dealmaking across the fractured Italian banking industry may
heat up again and with Rome looking at ways to further support
M&A, brokers have dusted off their spreadsheets to assess the
impact of potential deals.
According a draft decree seen by Reuters, Italy is
considering extending tax breaks to help tie-ups to mid-2022
while also boosting the size of the incentives.
"If approved, the rule would provide further impetus to the
consolidation process in the sector," says Andrea Lisi at
Italian brokerage Equita.
And Citi is upbeat too.
"We expect further consolidation to come in the Italian
banking market, following the ISP/UBI and CASA/Creval deals,
with more clarity possibly in coming quarters," they say. "Most
banks could be involved either as consolidator or as target".
Among possible combinations, analysts at both houses cite
UniCredit/Monte Paschi and UniCredit-Banco BPM.
In the snapshot, simulated merger scenarios by Citi.
Reprinted with permission of Citi Research. Not to be
reproduced.
(Danilo Masoni)
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AIM: AN UNEXPECTED SUCCESS STORY (0822 GMT)
London's junior market has weathered the pandemic storm
quite gracefully, with only seven companies leaving AIM due to
financial stress or insolvency in 2020, while businesses have
become attractive M&A targets.
According to data from UHY Hacker Young Group, the figure is
a record low and an astonishing success compared to 82 during
that left after the global financial crisis in 2009. (See UHY
data in the chart)
"The pandemic year has turned into an unexpected success
story for AIM," Daniel Hutson, Partner at UHY Hacker Young.
This is because, compared with the previous financial
crisis, more AIM companies are in the later stage in their
development and in the position to ask for support from
shareholders during stressful times, UHY says.
Better corporate governance also played a role in keeping
these companies away from trouble, UHY adds.
Another sign that the AIM market managed relatively well
during the pandemic is the fact that M&A deals are staging a
comeback.
In the six months to March 2021, 15 AIM M&A deals were
completed, compared to just seven in the previous six months,
UHY data shows.
Big deals in 2021 included the 650 million pounds
acquisition of Applegreen by a Blackstone-led consortium, and
the 860 million pounds purchase of game developer Codemasters by
Electronic Arts.
"It is also encouraging to see that the M&A deals in recent
months have been growth acquisitions by PE and trade buyers
rather than purchases of distressed assets".
(Joice Alves)
*****
EUROPE SUPPORTED BY RECOVERY BETS, LONDON CATCHES UP
European shares open in positive territory with economy
sensitive sectors leading the way on hopes for recovery, while
London outperforms after an extended weekend.
Investors are betting on a strong global rebound helped by
massive stimulus and ongoing vaccination programmes in developed
countries.
Heavyweight oil majors BP and Royal Dutch Shell
are providing the biggest boost to the FTSE.
The pan European index started the day slightly up
and was last flat, with miners and oil and gas
indexes rising 0.6% and 0.8%, respectively.
Among top performers, travel and leisure sector rose
as it is benefiting from Britain's expected announcement of a
green list for countries that people can travel to on holidays.
(Joice Alves)
*****
DRIVING DOWN THE RECOVERY HIGHWAY (0658 GMT)
With the U.S. economic recovery story firmly entrenched into
the market mindset, Monday's softer-than-expected U.S.
manufacturing report pushed Treasury yields lower and toppled
the dollar from multi-week highs. On the other hand, there were
upbeat earnings, news of cities reopening, and a dovish Federal
Reserve, all of which are keeping the tone relatively positive.
What's more, the data from the Institute of Supply
Management (ISM) showed that rising costs and capacity pressures
undermined output rather than any hit to demand. South Korean
export data and German retail sales figures have broadly
confirmed that trend.
Until U.S. services data and monthly payrolls numbers offer
further guidance later this week, markets are scratching around
in well-worn ranges; the dollar is a touch firmer and U.S. stock
futures are treading water.
Meanwhile, Australia kicked off a busy week for central
banks. It kept policy rates unchanged but upped economic
forecasts. Norway, UK, Turkey and Brazil will also announce
monetary policy decisions this week, with many expecting the
Bank of England to announce a cut to its bond-buying QE.
In corporate news, Italy's Mediaset and its second-largest
investor, Vivendi ended years of legal sparring, agreeing for
the French group to cut its stake in the Italian broadcaster.
Shares in travel and leisure firms such as TUI, Carnival and
EasyJet are up in pre-market on news the EU will ease travel
curbs on vaccinated holidaymakers.
But don't forget the virus. India's infections caseload
surged past 20 million, the second nation after the United
States to pass the milestone. And a sudden spurt in Taiwan's
infections numbers pushed shares there 3% lower.
Key developments that should provide more direction to markets
on Tuesday:
-Corporate news: Verizon is ditching its media businesses
that include iconic brands Yahoo and AOL for $5 billion; German
meal-kit delivery company HelloFresh grew its active customer
base by 74% in Q1; Norway's Telenor has written off the value of
its Myanmar operation.
-UK April final PMI readings
-Bank of France Governor Villeroy speaks
-U.S., Canada March trade data
-Dallas Fed President Robert Kaplan to speak. He caused a
stir on Friday by calling for a conversation about tapering.
-China Caixin PMI final
-US durable goods/factory orders
-US earnings: Thomson Reuters, Pfizer, ConocoPhilips,
Western Union, Herbalife, Prudential
(Saikat Chatterjee)
EUROPEAN BOURSES LOOKING FOR RECOVERY SIGNALS (0538 GMT)
European bourses are seen open little changed mirroring
Asian shares as investors look for signs of recovery as major
economies around the world reopen.
The mildly positive tone in Asia was broadly in line with
that on Wall Street overnight, where upbeat earnings, news of
cities reopening and a dovish Federal Reserve helped offset a
disappointing report on manufacturing activity.
In the corporate news, Italy's Mediaset and its
second-largest investor, Vivendi, on Monday ended years of legal
sparring with an accord under which the French group will
drastically cut its stake in the Italian broadcaster.
(Joice Alves)
****
