Last checked at 
* Choppy markets ahead of Powell
* STOXX 600 up 0.1%
* Autos, banks fall while real estate outperforms
* Bitcoin falls below $30,000
June 22 - 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
UK FULL REOPENING OPTIMISM (1249 GMT)
The fast-spreading Delta variant in the UK has forced the
government to postpone the full reopening of the economy till
July 19 but so far authorities seem quite confident there will
be no further delays.
While many took the optimism displayed this morning by
Health Minister Matt Hancock with a pinch of salt, he's not the
only one confident we're heading in the right direction.
"The risk that the re-opening could be reversed remains
low", writes Kallum Pickering, an economist at Berenberg, noting
the high level of vaccination in the country for which he
projects a GDP growth of 7% in 2021 and 5.4% in 2022.
While new reported daily infections have surged to over
10,000, Pickering says the pace is slower than the previous wave
and that the same goes for hospital admissions.
Better than that, despite infections and hospitalisations,
the number of deaths has remained low and stable.
"The UK is far away from the point at which medical
capacities could be stretched to such an extent that new
restrictions would be needed", he adds.
Here's a chart from his report where it shows how the rise
in hospital admissions is well below that of the previous wave:
UK health minister says data looking good on easing lockdown
(Julien Ponthus)
*****
BUY BANKS, SELL CYCLICALS (1131 GMT)
Equities are growing less worried about the Federal Reserve,
which is expected to be keen to avoid upsetting financial
markets while its tapering is set to start.
With this kind of assumption, the big deal for equities
seems to be inflation in addition to the widely expected strong
rebound of economy and company results.
Credit Suisse remains “structurally positive” on stocks as
valuations are “reasonable” and credit spreads are
“well-behaving” despite the recent 10 bps rise in TIPS (U.S.
Treasury Inflation-Protected Security).
At the same time, it highlights its overweight on banks and
underweight on non-financial cyclicals.
“Banks are the most sensitive sector to inflation. They were
the best performing U.S. sector over the taper tantrum and only
marginally underperformed when we had a bull flattening in the
yield curve in the last decade,” Credit Suisse analysts say.
“But this decade taxation, litigation and capital regulation
are all much less problematic,” they add.
Meanwhile, “the flattening yield curve is a warning for
non-financial cyclicals, especially given extreme valuations,
and they are discounting PMIs in the low-70s.”
(Stefano Rebaudo)
*****
UK LANDLORDS PARTY (1045 GMT)
There's a bit of a frenzy among Britain's commercial
property landlords shares, which are rising to the top of London
blue chips and mid cap indices this morning.
Land Securities, British Land, and
Hammerson are all gaining ground as it seems that there
is some conviction in the air that Britain is gearing towards a
full reopening of the economy in July.
"Commercial property landlords British Land and Land
Securities were also up strongly on recovery hopes as the former
confirmed plans to commence construction on a new tower block in
east London,” says AJ Bell's Russ Mould.
While Joshua Mahony at IG says that "despite doubts over
international travel, there is a great deal of confidence over
the ability to reopen the economy next month, with landlords
finally able to breathe a sigh of relief as a result".
J.P. Morgan raised Land Securities and British Land to
overweight from neutral saying it believes the sector is
"turning the corner" after its multi-year decline.
Here is how these stocks have mostly underperformed the UK
main benchmark since the pandemic hit the world in 2020.
(Joice Alves)
*****
TIME TO ADD TECH? (1027 GMT)
Even though markets still look undecided about how to
position after the Fed's hawkish shift, tech continues to
attract some positive noise.
Earlier this month BofA's June survey found out that the
tech is seen performing well in the coming years and that
investors had bought back into the sector after May's hit.
And a research from ETF provider GraniteShares today shows
that despite pressure on valuations, investors plan to increase
their sector exposure in the next 12 months.
Here the key findings of the study with hedge funds, wealth
managers, financial advisors, fund managers and institutional
investors:
* 42% say they will increase their own portfolios
concentration of
tech stocks over the next year with 12% planning to dramatically
increase their exposure
* 24% plan to cut their tech investments while 23% will
maintain
their holdings
* Professional investors are advising retail investors to
follow
their lead. 47% believe retail investors should increase tech
exposure, 30% believe they should reduce it and 23% maintain it
(Danilo Masoni)
*****
BITCOIN: "$30K WILL BE DEFENDED TO THE DEATH" (1008 GMT)
Bitcoin is ticking down again this morning after recouping
some of the losses sustained due to China's crackdown on
cryptocurrencies.
At about $31,400, many pundits are now looking closely to
the 30k bar which is seen as a critical level before some sort
of capitulation.
Commenting on Microstrategy CEO Michael Saylor doubling down
and buying more bitcoins, Neil Wilson at Markets.com expects
some drama going ahead if the market price action goes wrong.
"$30k will be defended to the death - if it goes expect a
bloodbath, and Saylor’s bet will look like a monumental
mistake", he said.
At Swissquote, Ipek Ozkardeskaya believes "the $30K support
is very solid and seems to be holding right now" but risks are
nonetheless building up.
"If the bulls can’t make it above the 200-day moving average
in the next couple of sessions, then the bears would come
seriously in charge", she reckons.
She added that "given the strength of the 30K support, we
shall see a steep selloff if the support is broken", putting the
next stop at $20K.
For Jeffrey Halley at OANDA, "failure of $30,000.00 will
open the trapdoor to a sub-$20,000.00 move".
Halley nevertheless doesn't believe "the digital day of
reckoning will be today" as the crypto king's technical
indicators are close to being oversold.
(Julien Ponthus)
*****
REDUCING EXPOSURE TO EM CYCLICALS (0931 GMT)
As some analysts put it, if there is something the last 16
months taught us is the power of buying-the-dip-strategy as
central banks continue pouring money into the financial system.
But while the consensus is inclined to see more upside for
equities, some views on emerging markets are changing.
“Some of the risks that we have been highlighting have
gathered steam, leading us to tactically reduce exposure to
cyclicals in Asia/EM,” BofA analysts say in a research note.
But “secular demand drivers such as de-carbonization
initiatives and capex for duplicated supply chains keep our
long-term bullish outlook for the sector intact,” they add.
“The Fed´s hawkish message lowers visibility for emerging
market assets through a possible increase in near-term
volatility in U.S. real rates and the U.S. dollar,” UBS analysts
say, but adding they don’t see the Fed removing accommodation
too quickly.
BofA analysts highlight “the decline in the China Credit
Impulse, a leading indicator for global growth/cyclicals,” while
authorities “look resolute in clamping down commodity prices to
rein in factory inflation.”
The U.S. dollar looks sets to reverse course on its weakness
that has been a pillar of support for cyclicals, they say.
BofA suggests shedding some of the cyclical overweight and
adding exposure to growth compounders instead.
(Stefano Rebaudo)
*****
OPENING SNAPSHOT: SECOND THOUGHTS ON THE REBOUND? (0734)
The mood has soured a tad and European stocks have opened
slightly in the red despite upbeat futures just about two hours
ago.
The STOXX 600 is down 0.1% with tech losing the
most with a 0.5% fall, followed by autos which had outperformed
yesterday.
The FTSE 100 in London is among the few benchmarks
making some gains with a 0.25% rise.
One has to note that Wall Street futures have also given up
most of their gains and are trading flat at the exception of the
Nasdaq's which is down 0.1% with the tech sector under pressure.
Here's how the STOXX 50 futures fell in the last hour:
(Julien Ponthus)
****
COUNTER-ATTACK: UNLEASH THE BULLS AND BACK TO REFLATION!
(0702 GMT)
It did take investors a few sessions to decide what to make
of the Fed's sudden hawkish turn last week but the overnight
rally on Wall Street sent a loud and clear signal:
counter-attack, unleash the bulls and back to reflation!
The Dow just completed its strongest session in over
three months with cash piling back in to energy and other
sectors expected to outperform as the economy rebounds from the
pandemic.
That was a stark reversal from last week, when the Fed's
tougher stance on inflation and projections for its first two
rate hikes into 2023 sparked a violent bout of profit taking
that wiped out value stocks and triggered the worst weekly
performance for the Dow and the S&P 500 in months.
The Fed's new stance also boosted the dollar and flattened
the Treasury yield curve but these moves have also partially
reversed.
The U.S. 10-year yield, which had fallen to a February low
of about 1.36% on Monday, bounced back just south of 1.50%.
It's fair to say though that with markets seemingly ready to
switch narratives in a heartbeat, all eyes and ears will be on
Federal Reserve speakers.
Investors are now waiting for Chairman Jerome Powell, due to
speak before Congress at 1800 GMT as well as several other key
Fed officials throughout the week.
History buffs will be closely watching his words as a
similar testimony by his predecessor Ben Bernanke in 2013
triggered the famous "taper tantrum" selloff in global markets.
At stake are the billions of dollars betting on the
reflation trade which has been the driving force of markets in
recent months.
Key developments that should provide more direction to markets
on Tuesday:
-UK government borrowing falls in May
-Dutch economic growth expected to recover faster
-Sweden, Finland May unemployment rates
-ECB speaker corner: Lane, Schnabel
-Euro zone consumer confidence data for June
-Italy industrial sales April
-U.S. housing data including existing homes sales for May
(Julien Ponthus)
*****
MORE UPSIDE LEFT (0527 GMT)
Yesterday's bounceback has legs it seems!
European futures are up about 0.3% and their peers on Wall
Street are also on the rise, showing no sign of a pullback after
the rally on Monday.
The risk-on turnaround has lifted stocks in Asia where
markets are ending the session in positive territory as
investors focus on economic growth rather than near-term rise in
U.S. interest rates.
The debate over when and how the Federal Reserve could begin
to reduce some of its massive stimulus for the economy was
nevertheless on full display yesterday, as two U.S. central bank
officials explained their support for an earlier withdrawal and
a third said any change was still quite a ways away.
(Julien Ponthus)
*****
