Last checked at 
April 27 - 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
CREDIT: WHAT ABOUT AN AT1? (0904 GMT)
Usually, in times of economic growth, the risk-reward ratio
for corporate bonds is expected to be positively skewed, with
credit spreads tightening.
But it seems that this time it will not happen, although
most analysts expect the economy to get off the coronavirus hook
pretty soon.
“High yield spreads are expected to widen to 350 basis
points over 3-6 months,” according to UBS.
EU credit has been following the 2017 playbook when strong
growth plus an accommodative ECB led to a rapid tightening in
spreads. “But this analogy has been taken too far,” they say.
UBS flags that lending standards granted on new business
loans are “tighter than experienced in 2017”, while business
loan rejection rates are “near the worst levels of the ECB bank
lending survey.”
Furthermore, suppose a robust economic rebound is in place.
In that case, markets will price in a reduction of policy
support, with the ECB tapering bond purchases in the second and
third quarters this year.
UBS prefers euro denominated Additional Tier 1 Contingent
Convertible (AT1) for higher yields as they trade relatively
cheap despite the resilience in Non Performing Loans (NPL).
Besides, in the case of ECB taper, interest rates will rise,
boosting bank profitability and share price.
(Stefano Rebaudo)
*****
BP VERSUS UBS TUG OF WAR (0850 GMT)
The broad European market does seem suspiciously quiet with
the STOXX 600 perfectly flat 50 minutes after the open.
That said, it's a big earnings day and there, as one could
expect, big moves both in the dark and the red.
Looking at the heavyweights, oil major BP is leading the
pack with a 2% rise following its profits tripling in Q1. At the
same time UBS is the top loser, down 2.1% with its surprise
Archegos loss.
There isn't much of a read-across though with financial
services and banks limiting their losses to -0.4% while autos
are down 0.8%, weighed down by France's Michelin, losing over 3%
post-earnings.
At the top, travel and leisure shares are doing well, up
1.8% thanks to Sweden's Evolution Gaming Group, +9.4%, which
beat expectations as pandemic lockdowns boosted demand for
online casino games.
(Julien Ponthus)
*****
MAIN STAGE: EARNINGS - SIDESHOW: FED (0707 GMT)
Three central bank meetings but it's the huge wave of
corporate earnings that's grabbing all the attention.
Policy status quo is expected at the U.S. Federal Reserve
which starts its two-day meeting begins today, while Japan's
central bank too made few waves as it maintained its massive
stimulus and projected inflation would miss its 2% target for
years.
Little news expected from Sweden's central bank either.
Meanwhile the earnings torrent so far vindicates the stock
market bulls who are regularly accused of stampeding their way
to record highs with no regard to the sustainability of the
recovery.
Monday's Wall Street session saw the S&P 500 closing at
uncharted highs and the Nasdaq confirming the end of an 11%
correction as growth stocks made a swift comeback, boosted, must
be said, by the retreat in Treasury yields.
The benchmark 10-year Treasury yield is at
1.57%, well below the 1.77% hit at the end of March.
The index is heading now for its moment of truth, with
companies that constitute about 40% of the S&P 500's market
capitalization reporting from Tuesday through Thursday.
The list for Tuesday includes Microsoft, Google
parent Alphabet, Starbucks and.
In Europe, it's the banking sector which is in focus, with
HSBC, UBS and Swedbank posting profit gains.
At the time of writing, futures both on Wall Street and
across Europe are flat as heavyweights continue to unveil Q1
results, from Swiss drugmaker Novartis, UK oil major BP
and Norwegian aluminium maker Norsk Hydro.
Bitcoin meanwhile rose 1.4% to $54,823 boosted by
reports JPMorgan may offer a managed Bitcoin fund, recoupinh
some recent losses fuelled by a would-be capital gains tax in
the United States.
Finally ripples from the collapsed Archegos fund are being
felt -- UBS revealed it lost $774 million dealing with it while
Japan's Nomura slipped to its biggest quarterly net loss since
2008, with a 245.7 billion yen ($2.3 billion) Archegos-linked
hit.
Key developments that should provide more direction to markets
on Tuesday:
* China's industrial profits rise as upstream firms benefit
from raw materials demand
* HSBC profit rises 79%; UBS Q1 profit up 14%
* BP profit soars on strong oil, buybacks loom
*Electric carmaker Tesla Q1 revenues marginally beat
expectations
* Auction of $62-billion of seven-year U.S. Treasuries
* U.S. consumer confidence
* US earnings: GE, Invesco, Alphabet, Microsoft, Ely Lilly,
Hasbro, Texas Instruments, Starbucks, Visa, Jetblue Airways
(Julien Ponthus)
*****
LOTS OF EARNINGS, LITTLE EXCITEMENT (0523 GMT)
European bourses seem set for a quiet open despite a flurry
of earnings coming their way this morning.
HSBC, UBS, ABB, Novartis and Norsk Hydro are among the blue
chips already out with their numbers.
Futures for the main indexes in Europe are trading down just
about 0.1% while their Wall Street peers are doing the same but
in positive territory.
Not much momentum going in the East either with MSCI's
index of Asia-Pacific shares outside Japan
easing about 0.2%.
(Julien Ponthus)
*****
