* Europe tracks Wall Street's post Fed rally
* Miners, tech, oil outperform
* France's EDF plunges 12%
* Market awaits ECB, BoE
* Euro zone business growth slips
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SNB: IRON FIST, VELVET GLOVE (1041 GMT)
On the surface, there is nothing much to write about the
Swiss central bank's decision on Thursday.
Zurich is keeping its ultra-loose monetary policy in place
even as its bigger counterparts like the Fed are pressing ahead
with unwinding their pandemic-era stimulus policies.
But beneath the calm, the ground is shifting.
Chairman Thomas Jordan emphasised that policymakers are
closely watching the level of the franc and it will intervene in
the market if necessary.
Coming on the back of its biggest weekly intervention last
week in more than six months, his comments are a warning to FX
punters who are pushing the franc higher.
"There seems to be a clear desire to justify why the SNB is
allowing the franc to strengthen as much as it is now and to
reinforce its credibility that it will continue to act," said
Charlotte de Montpellier, an economist at ING.
"The comment about the risk of negative inflation if the
franc were to strengthen too much is for me a real signal about
its intentions to act in the coming months."
With the franc strengthening by a further 3% in nominal and
trade-weighted terms since September, investors would be keenly
watching whether the strengthening currency is taking the edge
off imported inflation or proving to be more of a deflationary
burden.
(Saikat Chatterjee)
*****
TOP 2022 CONTRARIAN BETS: SHORT LUXURY & TECH AND BUY CHINA
(0958 GMT)
Citi is out with its traditional pre-Christmas note looking
at how contrarians performed during the year and concludes that
following a "catastrophic" 2020, the trade paid off handsomely
this year.
In fact, 2021 was the best contrarian year since 2009,
according to strategists at the U.S. investment bank led by
Robert Buckland, who however remind investors that being
contrarian only delivered in 9 out of the last 26 years.
But what about the outlook for 2022?
"Contrarians will generally be bearish on the US which
produces 7 of the 10 shorts. Semi-conductor stocks are a
favourite sell, but our contrarian would also be calling against
this year’s rebound in Ford and ConocoPhilips. A rapid fall in
Covid concerns might help the negative call on Moderna. Another
big trade is to short European luxury goods, where returns have
been spectacular in 2021," they say.
In a separate note, Citi highlights that luxury shares have
risen over 40% in 2021, "the 6th consecutive year of significant
market outperformance for the sector despite unprecedented
headwinds and high level of uncertainty".
Going back to contrarian bets, Buckland's team believes that
EM contrarians "will buying anything China-related".
When it comes to asset allocation, "contrarians will be long
gold, short oil. They will be sellers of the US$. They will be
long EM, short DM equities".
Here below a screen of their top contrarian picks for next
year:
“Reprinted with permission of Citi Research. Not to be
reproduced.”
(Danilo Masoni)
*****
A TECH SURGE AND AN EDF MELTDOWN (0848 GMT)
All the FOMO (fear of missing out) that had been building up
in Europe since Wednesday's Wall Street rally has led to quite
an upbeat open, with tech stocks surging about 3%.
But while the good mood is keeping all equity sectors in
positive territory, France's EDF stands out for being deeply in
the red.
The energy giant is down 8% after cutting its 2021 core
profit guidance, following the discovery of faults in a safety
system at the Civaux nuclear power station.
On the macro front too, data just showed French business
activity expanding at a slower pace in December. Still that isnt
preventing the Paris bourse from cruising at the same speed as
the pan-European STOXX benchmark, up about 1.4%.
Across Europe, the main bourses are all up over 1%.
But while growth-focused tech stocks are benefiting from the
same tide which lifted the Nasdaq boat last night, some smaller
individual stocks are shining even more.
Notably Britain's Domino's Pizza Group is up over
20% after announcing a profit-sharing deal with franchisees,
ending more than two years of negotiations.
Cineworld too is up 9%, bouncing off Wednesday's big falls
triggered by a court ordering the chain to pay $957 million in
damages to rival Cineplex for abandoning a planned takeover.
(Julien Ponthus)
*****
CENTRAL BANKING THURSDAY (0812 GMT)
The Fed is out of the way, having announced faster stimulus
tapering, signalled three rate hikes for 2022 and upped
inflation forecasts. And of the ten central bank meetings
scheduled for Thursday, some will deliver rate hikes and most
others are likely to flag some form of policy tightening ahead.
Given a hawkish Fed was already pencilled in, the dollar and
U.S. yields rose modestly. But its message fired up stocks,
especially lifting the tech-heavy Nasdaq more than 2%, the
assumption being that long-term yields won't go too far.
That momentum has carried into Thursday, with world stocks
rising, S&P 500 and Nasdaq futures up as much as 0.7% and a
pan-European bourse Europe tipped to open almost 2% higher.
Japan's Nikkei enjoyed its biggest gain in almost seven
weeks, helped also by data showing exports up 20.5% from
year-ago levels (Full Story). PMIs though showed a slowdown; the
year's last set of PMI advance readings are due across the rest
of the developed world today.
But back on the central banking front, policymakers in
Europe may find it hard to ignore risks from the Omicron COVID
variant -- a 25 basis-point Norwegian rate hike for today has
gone from a dead-cert some days ago to a probably after the
expansion of COVID curbs.
The Bank of England is in a worse bind, with skyrocketing
Omicron cases on one hand and 5%-plus inflation on the other.
In any case, it will end its bond-buying scheme, and the
European Central Bank shortly afterwards is expected to flag its
pandemic-time programme will expire on schedule in March.
Emerging markets, way ahead of the pack in the rate-rise
race, will see Mexico raising rates for the fifth consecutive
time. Expect Russia to follow with a 100 bps move on Friday.
But there are exceptions, and Turkey is seen carrying on
with rate cuts, despite 20%-plus inflation and a fast-falling
currency. Anticipating a 100 bps cut on Thursday, the lira has
blown past 15 per dollar, having started 2022 around 7.4 TRY=D3.
Key developments that should provide more direction to markets
on Thursday:
-Philippines c.bank hold rates (Full Story); Taiwan, Egypt,
Indonesia decisions
- Shimao bonds benefit from news of possible support from
Shanghai regulators
-Markit Dec flash PMIs
-Swiss National Bank meeting (Full Story)
-Norges Bank meeting (Full Story)
-Bank of England (Full Story)
-ECB policy meeting (Full Story)
-Turkey, Mexico policy meetings (Full Story) (Full Story)
-U.S. initial jobless claims/Philly Fed index/industrial output
-US earnings: FedEx, Accenture, Adobe
(Sujata Rao)
*****
SET TO CATCH UP WITH THE FED RALLY (0716 GMT)
It's catch-up time!
European futures are rushing up this morning, trading well
over 1% after Wall Street rallied and Asia ticked up thanks for
to a well-received Fed policy statement last night.
Powell struck an upbeat tone about the U.S. economy and
seemed ready to raise interest rates to keep inflation in check.
The upbeat mood however in Europe will be subject to how
well both the BoE and ECB meetings go down today.
Juggling both inflation and the pandemic is a tricky
balancing act for policy makers.
(Julien Ponthus)
*****