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* Global risk-off storm
* STOXX 600 falls
* UK stocks under pressure on 'Freedom Day'
* Sumo's shares surge 40% after Tecent offer
Welcome to the home for real-time coverage of markets brought to
you by Reuters stocks reporters.
A BIG RISK-OFF BURST (1304 GMT)
European equity benchmarks are taking a big hit on the head
as we get into afternoon trading and for many of them, this
session looks like it could be the worst since last October.
Let's start by the pan-European STOXX 600 which is down
about 2.5%: one has to look back untill October 28 and its 2.95%
fall to see a similar setback.
Same goes in Paris for the CAC which also needs to look at
the Halloween season last year for a similar performance.
In Germany, the mighty DAX is off 2.7%, which would be its
worst session since December.
In terms of sectors, it's a dark day for oil and gas which
saw the worst hit since...September!
Volatility is way up with Europe's gauge at its highest
since May.
On the bright side though, at the time of writing as we wait
for Wall street to open, S&P futures are ticking up slightly and
are now off "only" 1.4%.
(Julien Ponthus)
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NOT WAITING FOR THE ECB! (1219 GMT)
If this were a regular Monday in Europe's summer season,
it's very likely that the ECB's meeting later this week would be
at the top of the news agenda.
But with COVID-19 worries sending the market deep into
risk-off, Thursday seems a long way to go with more pressing
matters at hand.
Anyhow, it's fair to say that with the new 2% inflation
target, a lot is expected from the wise owl and her crew and
there's no shortage of speculation doing the rounds given that
the ECB's forward guidance will now change.
"That is what often happens about strategy statements:
everyone reads into them what they would like to see", according
to Commerzbank strategists.
One very consensual expectation is that we haven't seen the
end of QE, through one form or another and the ECB will likely
wait till the end of the summer to answer the tough questions on
it monetary policy.
"The September forecasts could be a good moment for some
elaboration on this front", AXA IM chief economist Gilles Moëc
believes.
"The only realistic adjustment variable left to the ECB is
to prolong the current support, which implies delaying the rate
lift-off and maintaining a robust pace of quantitative easing
for longer", he adds.
Same take roughly from Konstantin Veit, portfolio manager at
PIMCO, who thinks "the ECB will likely use this week’s meeting
to guide markets towards a more comprehensive assessment of the
monetary policy stance in September".
Another similar view from Katharine Neiss, chief European
economist at PGIM Fixed Income:
"Perhaps as early as September, we expect a decision on the
scaling up of QE under the existing Asset Purchase Programme
(APP) beyond March 2022, which is when the current pandemic
emergency asset purchase programme (PEPP) is due to end".
Hungry for more?
Check out this story:
Strategy Review, tick, next? Five questions for the ECB
(Julien Ponthus)
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UK TRAVEL & LEISURE: A FULL CYCLE OF STRUGGLE (1028 GMT)
In the first day of 'freedom', the UK travel and leisure
index is right back where it was after PM Boris Johnson
announced seven months ago that several parts of the country
needed to be shut down.
On the Saturday ahead of Christmas, Johnson said that London
and southeast England needed more restrictions because of a
highly infectious variant of COVID-19, the move prompted travel
and leisure shares, considered a key indicator of the pandemic,
to sink on December 21.
Later, the whole country was put in a long winter lockdown
but amid the UK speedy vaccination programme, the space jumped
to pre-pandemic levels in March.
Fast forwarding to today, in the UK first "freedom day", as
most the remaining COVID-19 restrictions are lifted as of today,
the FTSE 350 travel and leisure index is down to
its lowest level since December, when the measures anticipating
the third national lockdown were put in place.
UK-listed shares of cruise operator Carnival Plc <CCL.L,
airlines easyJet are falling 7% and 5%, respectively,
while shares in Restaurant Group are down as much as
6.2% and Cineworld stocks slide 4%.
The moves reflect concerns around the growing number of
COVID cases, analysts say.
“Lots of people have been vaccinated and assumed they had
become invincible. Reality is now striking as many of these
individuals get a wake-up call by catching COVID or being pinged
and told to isolate," says Russ Mould, investment director at AJ
Bell.
Joshua Mahony, Senior Market Analyst at IG, argues that the
"UK stocks seem far from impressed by ‘Freedom Day’, with the
final removal of COVID restrictions doing more to raise fears of
a more pronounced outbreak that raise hopes around an economic
boost".
All in all, the FTSE 350 index is down 20% since March this
year.
(Joice Alves)
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KNOCKED-OUT SUMO? (0922 GMT)
Britain's video game company Sumo is the star of today's
session, surging 42% and just 4 pence away from the 513 pence
offered by Tencent.
Johnny-come-lately arbitrage traders will probably take a
hard look at this one because the gap between the offer price
and where the share is trading is a thin 0.7%.
While the market seems to be aggressively pricing the deal
going through, there doesn't appear to be much anticipation of a
rival bid at this stage.
"Tencent's proposed acquisition of Sumo at a 513p share
price looks like a 'knock-out bid', in our view", Citi analysts
write.
"While it is possible that there may be third party
interest, we think it unlikely", they add, noting "there is
unlikely to be any regulatory hurdles to a deal".
Same take from Jefferies analysts: "Chinese deals may imply
a higher regulatory risk, but we see no likely resistance or
counterbid".
So far then, taking a position on that deal seems to be a
low risk / low reward trade.
Here's Sumo's share price since the beginning of the year:
Also see:
Tencent snaps up British video game developer Sumo in $1.3
bln deal
(Julien Ponthus)
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EUROPE OPENS WITH TRAVEL STOCKS DOWN, AGAIN...(0645 GMT)
It didn't look good a few hours ago and it sure doesn't look
good at the open!
European stocks are down well over 1% at the open with
travel stocks weighing on the mood as the Delta variant forces
traders and tourists to reconsider their plans in the next weeks
and months.
This is so far the worst session since July 8, with the
STOXX 600 falling to its lowest point since early June.
The travel and leisure index is down about 3.2% with
companies at the front line of the summer season taking big hits
like Carnival, which is down around 8%, BA owner IAG off 5.8% or
easyJet falling 6.2%.
To make things simpler: all sectors are in the red and
almost all regional bourses too.
Among the happy few stocks thriving in this gloomy
environment, many are in the defensive healthcare sector such as
Galapagos up 1.7%.
Outside the pan-European benchmark, Britain's video game
company Sumo is surging a handsome 42% after Chinese
tech giant Tencent Holdings announced a 919 million
pounds deal.
(Julien Ponthus)
*****
FREEDOM DAY ON LOVE ISLAND (0607 GMT)
In a parallel universe, England would be celebrating its
European football crown with a public holiday and joyfully
lifting all COVID-19 restrictions for a much-anticipated Great
British Summer. In short, Freedom Day.
Instead, it's the Italians who are champions, Monday is a
regular day in the City of London and Boris Johnson's plan to
reopen the economy is seen at best as a high-risk gamble.
Scientists writing in the Lancet medical journal called it
"dangerous and premature".
With daily infections now north of 50,000, Britain's mood
could switch swiftly from 'Love Island' to 'I'm a
Celebrity...Get Me Out of Here'.
In fact, it's just the kind of painful reality check that's
been experienced by investors gambling hard on the reflation
trade.
As U.S. 10-year government bonds yields below 1.30% show,
the surge of the Delta variant of COVID-19 has eroded faith in
global economic recovery.
Sure, the reasons behind the recent bond rally are not fully
explained but an unnerving 'peak growth' and 'peak stimulus'
narrative has found its way into market commentary and research.
So European and U.S. stock futures are trading deep in the
red this morning while Asian shares slipped to a one-week low.
Perceived safe-haven assets, including the yen and gold, edged
higher, while oil prices are down.
Second-quarter earnings meanwhile have been buoyant for the
most part but they also seem to be shouting 'this is a good as
it get'. Few believe the stellar results will lift global stock
markets much higher than they are.
Key developments that should provide more direction to
markets on Monday:
- UK house prices rise again amid record monthly sales
- BOE's Jonathan Haskell speaks
- Italian luxury fashion group Ermenegildo Zegna to go
public by combining with a SPAC, giving the business an
enterprise value of $3.2 billion
- Auctions: U.S. 6-month and 3-month T-bills,
- Telecom Italia updates forecasts on revenues, Ebitda after
DAZN deal
- Tencent to buy British video game company Sumo in $1.3
billion deal
(Julien Ponthus)
*****
IT'S LOOKING VERY RED THIS MORNING! (0605 GMT)
Futures for European bourses are deep in the red this
morning and the mood is roughly the same for Wall Street.
Must be said the session in Asia wasn't that inspiring with
MSCI's broadest index of Asia-Pacific shares outside Japan
falling 1.3%.
Japan's Nikkei is also down 1.1% and with some very negative
news flow on the pandemic front, it's hard to see what could
cheer traders up.
Oil prices are also depressed with the OPEC + agreement over
the weekend to boost output.
We'll have a to wait a bit more to get the earnings season
really kicking in but a few developments are available already
this morning, such as Telecom Italia updating its guidance after
the DAZN deal.
For top news on European equities click here:
(Julien Ponthus)
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(Julien Ponthus)
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