Last checked at 
* STOXX 600 up 0.7%
* Set for 3 session in the black
* Draghi boosts Milan bourse, banks
* Freenet surges on buyback plan
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COVID DISRUPTION TO BOOST TELCO STOCKS (1247 GMT)
After being overlooked for years, telcos are making a
comeback as the COVID-19 disruptions bring fixed broadband under
the spotlight.
The telecom STOXX index is leading gains today, up
2% to 218.0, still far from its 2015 high of 400, but recovering
from 164 touched in March.
Credit Suisse has an "aggressive forecasts" for fixed
broadband growth, seeing a double-digit increase of the
subscriber base, ex-China, to reach 1.0 billion customers by
2023.
The pandemic has made broadband access a necessity and
brought the ‘digital divide’ back to governments' agenda.
CS sees and return on invested capital (ROIC) from fixed
broadband access above the cost of capital in most markets and
says average revenue per user (ARPU) levels tend to be higher
for fixed broadband than for cellular.
Its top picks include Megacable in Mexico, PT
Telkom in Indonesia, Comcast in the U.S.,
and BT in the UK.
(Stefano Rebaudo)
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AMAZON: HOW IT STARTED, HOW IT'S GOING (1144 GMT)
With Bezos leaving the driver's seat at Amazon, it's now a
good time to look back at how it all started and how it's going
for the book seller's shares which got listed in 1997 and just
churned out over $100 billion of sales in a quarter.
A quick glance shows that actually, it's doing ok, with the
shares rising anywhere between 150,000 to 200,000%.
Over 20 years after Amazon's launch, it's also a good
opportunity to see what two decades did to the top of the S&P
500 when Bill Clinton was president.
OK, boomers, take a deep breath.
Some of the names might take you on a trip down memory lane
when banks and oil majors were stock markets darlings and Cisco
and Intel spearheaded the dot.com boom.
Microsoft on the other hand proved quite resilient dropping
from number one to number two on the podium while tripling its
value.
Walmart is also still there but it (only!) added a meagre
100 billion of market cap in two decades.
As Bezos, 57, told his employees, he's not retiring so we'll
probably hear from him and his space company Blue Origin which
reportedly aims to carry the first passengers on its New Shepard
space vehicle as early as April.
As far as his legacy is concerned, the jury is still out.
While Bezos has engaged in climate change philanthropy
and the value created by Amazon for its shareholders has been
astronomical, his company is regularly criticised for its tax
and employee treatment record, notably on the COVID-19 front.
Let's wait another 20 years and find out if the jury makes
up its mind.
(Julien Ponthus and Thyagaraju Adinarayan)
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WILL SUPER MARIO BRING ITALY'S SPREAD BELOW 100 BPS? (1123
GMT)
It was feared snap election would widen the spread between
Italian and German government bond yields to about 200 basis
points.
Now with Mario Draghi as a possible new prime minister, the
scenario has dramatically changed and investors expect the
spread to tighten below the 100-basis points threshold.
“With Draghi as a prime minister supported by a strong
majority the spread between Italian and German government bond
yields would tighten quickly below a 100 basis points threshold
towards 80 basis points,” Anna Guglielmetti, head of
institutional portfolio management Italy at Credit Suisse said.
“We expect more tightening to occur if Mr. Draghi is
confirmed as prime minister, with the 100bp mark easily within
reach. However, the outcome is still highly uncertain and BTP
strength should be treated with caution as it is ultimately
tightly linked to the political situation,” Unicredit says.
According to Citi, “BTPs are likely to cheer, with 10yr
BTP-Bund heading towards 100bp and long-end bull-flattening.”
The spread tightened 10 basis points at 103.1 bps.
(Stefano Rebaudo)
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EURO MISSES OUT ON THE DRAGHI PARTY (0940 GMT)
There's plenty of assets enjoying the prospect of super
Mario leading the next Italian government: government bonds,
banks, industrials, you name it.
One big miss though is the euro, which is completely missing
out on the party and has just hit a fresh two month low and is
on the verge of going under $1.20.
Seems quite odd.
As DB's Jim Reid recalled in his morning note, "the former
ECB chief is "credited with saving the single currency during
the sovereign debt crisis with his pledge to do 'whatever it
takes'.
But it seems investors in the bloc's currency are much more
focused on the growth gap growing with the U.S. than on Italian
politics.
"The recent political turmoil in Italy has not generated any
risk premia build-up on EUR/USD or EUR/CHF: thus, the upside
potential from the end of the government crisis may also be
somewhat contained", ING analysts wrote this morning.
For equity investors looking at the Italian market, it's a
different story.
For Luigi De Bellis at Equita, there could be a long term
boost.
"Draghi`s credibility from an international standpoint could
lead to a positive inflow of capital in Italy", he commented,
advising clients to "invest in liquid stocks which can take
advantage from the spread decrease, from the recovery fund
investments and from a reduction of the `Italy discount`.
His stock picks for this trade are Buzzi Unicem, Intesa,
Mediobanca, Mediolanum and Stellantis.
Here's the spread with Germany falling this morning:
(Julien Ponthus and Ritvik Carvalho)
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DRAGHI BOOSTS MILAN, BANKS AND EUROPE (0832 GMT)
Milan is clearly stealing the show at the open this morning
with the Italian blue chip index jumping 2.2%, about three times
more than the pan-European STOXX 600.
The possibility that former ECB chief Mario Draghi could
lead the next Italian government is clearly lifting the spirits
of investors.
The whatever-it-takes man is particularly celebrated in the
banking sector with all the Italian heavyweights jumping up.
Intesa +4.8%, Unicredit +4.6%, Banco BPM +3.5% and so on...
Logically, the European banking sector is the top performer
up 1.7%. It's a close race though with the media sector boosted
by the earnings of Publicis with the French group up 5%.
Another big mover this morning is Freenet, surging over 8%
with a big cheer from investors for its share buyback plan.
(Julien Ponthus)
*****
THE CONFIDENCE GAME (0759 GMT)
Global stocks are within kissing distance of a record high
set last month with U.S. stocks posting their biggest two-day
gain since the presidential election in November.
Markets seem to be looking beyond virus mutations, extended
lockdowns, and bumpy vaccine rollouts to focus on the recovery
that lies ahead. Wall Street got a further impetus as
expectations grew for more U.S. fiscal stimulus with stock
futures extending gains in early European trading.
President Joe Biden's proposed $1.9 trillion COVID-19 aid
bill inched closer to reality triggering the reflation trade
again with the U.S. yield curve steepening to its highest levels
in more than 3-1/2 years.
Stock market fear gauge, VIX, dipped to 25% while its
currency market counterpart is firmly pinned at a 6-month low.
Oil settled near one-year highs.
Asian stocks were a sea of green and a risk-friendly session
market meant the New Zealand dollar topped the FX charts thanks
to strong jobs data.
The only jarring note was the euro where the single currency
weakened for a third consecutive day and was in danger of
falling below the $1.20 level. The perception that the EU's
vaccine response has been slower than the U.S. or the UK, as the
coronavirus continues to spread across Europe has weighed on the
single currency this week.
In companies news, Amazon's Jeff Bezos said he will step
down as CEO. Ending on a high note? The business he began as an
internet bookseller 27 years ago is now an e-commerce giant and
one of the most valuable companies in the world.
And Italian bonds received a vote of confidence from
investors after President Sergio Mattarella looked set to ask
former European Central Bank chief Mario Draghi to form a
government of national unity.
Key developments that should provide more direction to
markets on Wednesday:
* Global final PMIs
* Central bank meetings in Poland, Iceland, Croatia,
Thailand
* US ADP unemployment figures
* Philadelphia Fed’s Harker, St Louis Fed’s Bullard, Chicago
Fed’s Evans, Cleveland’s Mester, Dallas Fed’s Kaplan,
* European earnings: GlaxoSK, Santander, Siemens, Volvo
* US earnings: Qualcomm, E-bay, Metlife
(Saikat Chatterjee)
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MORNING CALL: THREE SESSIONS IN A ROW? (0631 GMT)
European shares are set to open higher and seek to score
three positive sessions in a row.
There's favourable wind coming for Asia and Wall Street
where optimism linked to both the earnings session and the
global recovery lifted stock markets higher.
European futures are up about 0.5% with another big earnings
day ahead.
Among those already out, Siemens raised its 2021 guidance
after beating expectations due to a faster than anticipated
recovery from the COVID-19 downturn in China and Germany.
(Julien Ponthus)
*****
