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THE RISKS OF A VACCINE TRADE WAR (1135 GMT)
Though expectations are for a sensible approach by UK and
the EU on the vaccine trade, we could use some insight about the
impact of possible restrictions.
“The supply chain is highly interdependent with some key raw
materials supplied from the U.S. and UK but finished vaccine
largely manufactured in the EU,” according to Credit Suisse.
For the UK, any controls on the export of Pfizer/BioNTech
vaccine "would leave a cohort of around 10 million UK patients
at risk of missing their second dose,” CS analysts say.
A compromise is seen as likely with the UK lending some of
its vaccine to Europe, they add, recalling that 17 million of
Moderna dosed are due to be delivered to the UK from April.
Such a move might slow the first dose vaccination rate of
low-risk adults under-50, but would secure the second dose for
high risk patients.
With a modest acceleration, EU would hit the key 50% 1st
dose vaccination threshold in 3Q21.
Prime Minister Boris Johnson said on Thursday the UK does
not want restrictions on the exchange of COVID-19 vaccines with
the European Union, after the EU tightened its oversight of
coronavirus vaccine exports on Wednesday, giving it greater
scope to block shipments.
(Stefano Rebaudo)
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CHINA BOYCOTT AIN'T PRETTY FOR EUROPEAN LUXURY (1020 GMT)
Things ain't looking pretty for some big Western brands as
they come under attack on Chinese social media, with local
celebs dropping them, over past comments about labour conditions
in Xinjiang.
Shares at Burberry, Adidas fell around
8% since Monday with analysts attributing the slip to fears of a
Chinese boycott.
Some businesses are facing negative sentiment for refusing
to source cotton produced in Xinjiang over claims of forced
labour in the region by joining the Better Cotton Initiative,
explains UBS in a note.
Here is the full list of companies that have joined the
Better Cotton initiative https://bettercotton.org/find-members/
The anxiety is real as China is one top market for Europe's
luxury sector.
Mainland China increased dramatically its importance for the
European luxury space last year. Mobility and travel
restrictions in 2020 meant Chinese luxury domestic spend soared
from 14% to 37% of the sector amid the pandemic, according to
Jefferies.
UBS notes that given the importance of China to sales of
Burberry (Sell), Adidas (Buy), Nike (Buy) and H&M (Buy), the
boycott is "likely to result in lost revenue in the short term
and will be taken negatively by the market".
Burberry, which has become the first high-end brand to
suffer Chinese backlash over Xinjiang, has one of the widest
network of stores in all 25 key cities in Mainland China,
Jefferies says.
Overnight, China sanctioned British organisations and
individuals over what it called "lies and disinformation" about
Xinjiang, days after Britain imposed sanctions for human rights
abuses in the western Chinese region.
(Joice Alves)
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REFLATION SESSION ON THE WAY (0849 GMT)
Backed by last night's rally on Wall Street, the European
open is panning out into a classic risk-on reflation session
thanks to rising oil and commodities prices and higher bond
yields.
The STOXX 600 is up 0.8% at 426 points, less than 8 points
from its February 19 2020 record high.
As one would expect, miners and oil majors are leading the
show, with the basic materials index up 2.5% and oil and gas
rising 1.6%.
Banks and autos are also doing well, up about 1.1% each.
Concerns regarding the tension between China and western
capitals are not rocking the boat for now, nor are the rising
COVID-19 infections in Europe.
Among individual stocks, Denmark's Rockwool International is
leading the pack, up 3.7% after Nordea upped its rating to
'hold'.
There are very few big falls to mention: among the 20
biggest movers of the STOXX 600, 19 are in positive territory.
(Julien Ponthus)
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THAT 2020 FEELING COMING BACK (0809 GMT)
World stocks are trying to shrug off geopolitical tensions
and a Covid-19 resurgence to end the week on a high. U.S.
futures point to gains, Europe is playing catchup with Wall
Street's firmer Thursday close and Chinese shares have bounced
off three-month lows.
But the last full week of the first quarter has been hectic,
dominated by news of a massive Suez traffic jam that's costing
$400 million an hour. Besides that, Sino-U.S. tensions are back
and the global COVID-19 case count is rising toward mid-February
levels.
All that has sent investors scurrying back for safety --
Friday's BofA data shows they pumped $45.6 billion into cash
funds in the past week, the largest since April 2020 when
COVID-19 was spreading like wildfire.
The dollar too has almost clawed back its post-U.S. election
fall while Europe's sluggish vaccination pace has sent the euro
to the lowest since last November.
And the "value" stocks which were meant to be the big trade
of 2021 are facing setbacks -- the Russell 2000 index of smaller
U.S., shares has retreated 8% in the past week.
Some market reversals are down perhaps to month- and
quarter-end rebalancing, but some are for real.
The Suez Canal blockade could take weeks to clear and what
if the ship breaks? A prolonged shutdown of one of the world's
busiest waterways would be a huge threat to global trade.
Higher oil and shipping costs could boost inflation, fears
of which recently boosted U.S 10-year borrowing costs.
Some people remain optimistic though. A 2.1% rise in
February UK retail sales was apparently driven by consumers
buying outdoor furniture in the hope that easier coronavirus
restrictions will allow garden gatherings from next week.
Key developments that should provide more direction to markets
on Friday:
- German Ifo expectations for March
- Aviva has sold its Polish operations to Germany's Allianz for
2.5 billion euros ($2.94 billion) in cash,
- Coming up this afternoon: U.S. retail sales, inventories, core
CPI
(Thyagaraju Adinarayan)
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TAILWINDS FROM WALL STREET (0631 GMT)
The winds which lifted Wall Street to a late-day rally
yesterday are still blowing around this morning and providing
some tailwinds for the old continent's bourses.
European futures are up about 0.9% and the STOXX 600 is set
to end the session on some weekly gains should the trend hold.
That said, the rising tensions between the West and China
and the resurgent pandemic are making some disturbing noise in
the background.
Europe is struggling with the vaccination rollout and
failing to contain a rise in infections which will no doubt
delay the reopening of its economy.
On that front, the euro, which is at its lowest levels
against the dollar since November, is perhaps telling the market
a different story than this morning's buoyant futures.
(Julien Ponthus)
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