Last checked at 
* STOXX 600 flat
* FTSE among worst losers
* Unibail shares jump on reopening
* Focus on Thursday's U.S. inflation data
June 9 - 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
PUSHING SUMMER HOLIDAYS BACK (1228 GMT)
As the summer kicked in and restrictions were eased,
airports and flights have started to get busier again but they
are still at a fraction of the pre-pandemic levels.
Barclays suggests people will get their summer holidays
later on, in September and October.
"With the recent news of Portugal having been taken off the
green list in the UK, we think short-term air travel prospects
remain uncertain but continue to expect more of a leisure-driven
recovery into the late summer period," Barclays says.
"But continue to expect more of a leisure-driven recovery
into the late summer period, with a possibly extended summer
season to late September/early October".
Amongst the airlines Barclays covers, capacity in short-haul
Europe increased by 10 ppts in June from May, but it is still
65% down versus 2019 levels, while long haul markets capacity is
at -68% from pre-pandemics levels (+4ppts vs May).
Air France-KLM (-50%), Wizz Air (-55%) are at the
highest levels of capacity, while Ryanair is still at
-80% of 2019 capacity, easyJet at -76%.
Leisure-exposed airports have seen the strongest pick-up in
capacity. AENA recovered to -52% from 2019 levels,
while Frankfurt (-63%), Zurich Airport (-71%) and
Paris (AdP)(-60%).
(Joice Alves)
******
WHEN YIELDS AFFECT STOCKS (1147 GMT)
The correlation between bond yields and equities is hard to
read and changing over time.
But Rabobank analysts highlighted a pattern that took place
yesterday between German bond yields and the Stoxx
600 index.
A rally in safe-haven bond prices(which move inversely with
yields) "that took place in the early part of Europe’s yesterday
afternoon and which, in turn, triggered a brief but ultimately
unsustainable rally in risky assets,” they say.
Yesterday Euro zone yields drop in the afternoon, tracking a
downward move in U.S. Treasuries.
“It is hard to discern a specific catalyst for this move,
but the accompanying price action on the part of U.S.
break-evens and Eurodollar futures point to a paring back of
inflation concern and an accompanying modest recalibration of
Fed expectations as informing the bullish tone,” they add.
(Stefano Rebaudo)
*****
CAPEX BOOST EVIDENCE (1050 GMT)
According to Barclays' research team, Europe Inc is getting
ready to spend big again.
Their analysis of corporate transcripts suggests capital
expenditure intentions are now back above pre-COVID 19 levels.
"Our economists forecast capex growth of 7.5% in ‘21 and
5.9% in ‘22, providing a positive contribution to EU real GDP
growth of 1.6 ppt and 1.3 ppt, respectively", the equity
strategy team writes in note published today.
Here's a non-exhaustive list on what's helping the trend:
- General economic bounce back
- Cash-rich balance sheets
- Earnings rebound
- Easy financial conditions
- EU stimulus financing green and IT investments
- strong consumer demand
- Supply shortages
- Energy transition
The sectors expected to accelerate spending are in the
telecom sector, utilities and tech notably.
On the other side of the trade, real estate is the only
space expected to show a sustained fall.
(Julien Ponthus)
*****
THE DIAGNOSIS FOR UK HEALTHCARE SMALL CAPS (1015 GMT)
Things could be about to change for the UK small cap
healthcare sector, which has performed well during Brexit and
the pandemic but could start to fell some aches amid the
rotation.
According to a new report from Liberum, the UK SMID
healthcare sector, which has outperformed the FTSE250 by
150% since the start of 2016, could face macro headwinds.
"We think there are macro headwinds growing via a rotation
out of SMID into large caps, while high and rising inflation
usually bodes poorly for healthcare share price performances,"
Liberum analysts say.
What to do?
Over the next six months, either go for those stocks in the
space with potential to deliver growth so fast that inflation
becomes irrelevant, or go for businesses with relatively scarce
value opportunity, they say.
"We think Medica fits the former and PureTech
the latter".
The reopening of health systems in Europe and the U.S. could
help companies like Uniphar, Medica, Clinigen
and SourceBio.
Liberum also expects much more M&A, with private equity
firms likely to continue to target the listed markets. "We have
already seen a ramp-up in acquisition among our coverage".
(Joice Alves)
******
WORRIES ABOUT U.S. PEAK GDP GROWTH (0939 GMT)
Inflation worries seem to be fading as most investors agree
with central banks when they say that a rise in consumer prices
will be temporary.
But what about the GDP growth?
Historically, it matters as equities have been rising when
growth is accelerating, which is not the case when we are close
to a peak, as it seems now in the U.S.
UBS analysts continue to see upside for stocks, but they say
“there are reasons to be cautious about basing investment
decisions on literal peaks in growth rates.”
But investors should "look at other offsetting tailwinds":
. Inflation should peak soon, with the U.S. consumer price
index for May close to 5%, but moderate for the rest of the
year, easing investors’ concerns
. U.S. GDP may peak in the second quarter, but job growth
will peak when schools reopen and unemployment benefits expire.
Besides vaccination rates, which widely affect economic growth,
“are still on the upswing in Japan and parts of emerging
markets”
. Record lose financial conditions in the U.S. will continue
to support the economy.
According to UBS analysts, investors' concerns that U.S. GDP
is close to a peak is one reason why S&P 500 index has traded
within range over the past two months.
(Stefano Rebaudo)
*****
OPENING SNAPSHOT: SUBDUED IT IS (0735 GMT)
There wasn't a lot of action expected at the open and it's
fair to say there isn't that much!
The STOXX 600 is about flat after about half an hour of cash
trading and there's really no visible big trend building on.
On the positive side, travel and leisure shares are leading
the pack as countries such as France are getting on with their
plans to reopen much of the economy again ahead of the holiday
season.
Miners on the other hand are the worst performers, losing
0.5% while insurers are down 0.4%.
In terms of bourses, London is clearly underperforming with
the FTSE 100 down 0.4%.
A few block sales and placement are causing some movement
among individual stocks: Salmar is losing over 4% while Verallia
is losing just under that.
(Julien Ponthus)
*****
THE INFLATION GENIE AND THE SLEEPING MARKET (0720 GMT)
For a big week in central banking and economic data, markets
have barely bothered to get out of bed.
In the prologue to Thursday's key U.S. inflation data,
Chinese producer price data for May showed the biggest jump in a
dozen years - signalling that factories are struggling to absorb
higher raw material costs and price pressures are flowing down
supply chains.
U.S. crude futures meanwhile closed above $70 per barrel for
the first time in more than 2-1/2 years, indicating no respite
in sight.
Investors have hardly blinked. World stocks are trading near
record highs while currency volatility remains firmly pinned at
February 2020 lows.
Indeed, U.S. stocks have not moved 1% in either direction
since May 20, the longest such period since a 69-session streak
between October 2019 and January 2020, notes Deutsche Bank's Jim
Reid.
Even bond markets, the first place where investors express
angst over inflation pressures, U.S. yields are trading at a
one-month low while the yield curve – the gap between the
longer-maturity and shorter-dated borrowing costs – is at its
narrowest since March.
Markets are increasingly buying policymakers’ mantra that
inflation pressures remain transitory with no perceived rate
hikes in sight. Thursday’s U.S. consumer price data is expected
to show the overall annual inflation rate rose to 4.7% and core
inflation increased to 3.4%, higher than Fed’s targets.
Of course there may be another reason for the bid to
safe-haven markets -- signs of renewed U.S./China tensions. The
U.S. Senate just approved a sweeping package of legislation to
boost the country's ability to compete with Chinese technology.
U.S. President Joe Biden departs for Britain on Wednesday on
his first trip abroad since taking office, an eight-day mission
to rebuild trans-Atlantic ties strained during the Trump era and
to reframe relations with Russia. (Full Story)
Elsewhere, the World Bank raised the forecasts for global
growth to 5.6% in 2021, marking the strongest recovery from a
recession since 1940 due to U.S. stimulus spending and faster
growth in China.
Key developments that should provide more direction to markets
on Wednesday:
- Central bank decisions: Canada, Poland.
- April German trade balance data
- Quarterly earnings at Spanish retail giant Inditex at a third
below pre-pandemic levels.
- Ferrari appoints Benedetto Vigna as new chief executive.
(Saikat Chatterjee)
*****
EUROPEAN BOURSES ON COURSE FOR A FLAT OPEN (0545 GMT)
After a 0.1% gain on Tuesday, European bourses seem set to
start Wednesday on roughly the same pace.
Futures for the STOXX 50 and Germany's DAX are rising 0.10%
and 0.03% at the moment while the derivative for the FTSE 100 is
losing 0.1%.
Investors wary of inflation won't like the news coming out
of China where factory gate prices rose at their fastest annual
pace in over 12 years in May, driven by surging commodity
prices.
With that in mind, Thursday's U.S. inflation data will be
heavily scrutinized even if at the moment the 10-year U.S. debt
yield is still at a cool 1.52%.
U.S. futures are also not showing any sign of particular
nervousness and trading pretty much unchanged.
(Julien Ponthus)
*****
