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* European shares up 0.6%
* Oil stocks lead gains up 3.5%
* Biden transition and vaccine hopes lift mood
* U.S. futures point to positive Wall St start
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HERD IMMUNITY IN DEVELOPED COUNTRIES IN Q4 2021? (1134 GMT)
Markets are betting once again on a V-shaped economic
recovery which is now in the cards after the news of effective
vaccines. Meanwhile analysts are trying to estimate when and
where this rebound will take place.
Citi expects vaccines to start lifting economies in
developed markets (DM) in the fourth quarter of 2021 and in most
of emerging markets (EM) in first half of 2022.
In the table below Citi estimates.
After the approval of vaccines expected in December 2020 or
January 2021, next year "supply would be prioritised to the DM
region, which has secured 85% of total bilateral pre-orders,
with pre-orders in several countries exceeding their
populations” a Citi research note says.
“In the region, some form of herd immunity by vaccination
could be achieved by 4Q 2021”, with the three front-runners in
the vaccine race likely to produce 0.5-3.0 billion doses per
year, it adds.
Mobility has already recovered in East Asia, including China
in mid-2020 where a normalization “has been driven by the
management of the pandemic with active health policies.”
However “major populous EM economies, having domestic
vaccine production capacity, may procure enough vaccines to meet
their needs by 1H22.”
But it may not be until the end of 2022 or even later that
sufficient vaccines are available to lower-income EM economies
with strained fiscal resources and limited capacity for domestic
production, according to Citi.
You can see in yesterday's blog below that DB strategists
believe herd immunity could come "over the summer" in the EU:
Why AstraZeneca's vaccine is a big deal for Europe?
(Stefano Rebaudo)
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HOW FAR CAN THE STOXX GO? (0942 GMT)
It's the time of the year when big banks publish their
yearly outlooks and the renewed vaccine optimism is making for a
rather upbeat period for risky assets, especially those which
have been hit hard by the pandemic risks.
European equities are one of them and price action today
suggests there is still fuel in tank for the recent rally to
continue into next year. But how far can they go?
UBS strategists led by Nick Nelson target 420 points for the
STOXX 600 by end 2021, an upside of around 8%, with EPS expected
to rise 35% and a fair value price target of 17 times profits.
But of course there are risks in both directions.
"Potential catalysts include: faster vaccine progress,
greater fiscal support, rotation out of fixed income into
equities and US investors returning to Europe with likely EPS
growth noticeably above the US for the first time in 17 years,"
they say.
"Downside risks: renewed lockdowns, a "no deal" Brexit and
any signs of slippage in EU policy response (such as the EU
Recovery Fund)," they add.
In the snapshot their scenarios for the pan-European
benchmark.
(Danilo Masoni)
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EUROPE IN THE BLACK SPURRED BY OIL STOCKS (0843 GMT)
European stocks are higher as investors expect a strong
economic recovery in 2021 due to vaccine progress, ignoring a
batch of results showing the damage of the coronavirus crisis.
Reports that Joe Biden’s pick for the Treasury Secretary is
former Fed Chair Janet Yellen is seen as a confirmation that the
top priority of the new administration will be on stimulus.
The STOXX 600 index is up 0.8% with oil and gas
stocks, today up 2.8%, leading gains for the second day
in a row as Brent crude prices hit their highest levels since
March on hopes of a quicker recovery in oil demand.
Shares in Novartis are outperforming their peers,
up 1.7%, after the company said it is initiating a previously
announced share buyback worth up to $2.5 billion.
British Airways owner IAG stocks continue to
outperform, today up 6%, on hopes of an easing in the
restrictive measures after news of effective vaccines.
Helping BA shares, England said it will introduce a new
system on Dec. 15, allowing the use of testing to shorten
quarantine for incoming passengers.
(Stefano Rebaudo)
*****
ON THE RADAR: VIRUS DAMAGES, CREDIT SUISSE, NOVARTIS (0744
GMT)
European stocks are set to open higher, still wary but
willing to look at the bright side after vaccine progress which
allows to hope in a strong economic recovery in 2021.
While the outlook is improving, several companies still
have to strengthen their balance sheets to repair damages from
the coronavirus crisis.
Greencore plans to raise cash by issuing new shares,
after it reported an 81% plunge in annual profit.
JD Sports is in exclusive talks with British
department store chain Debenhams over a potential rescue
takeover, The Times reported.
Compass Group reported a 75.5% slump in annual
pretax profit.
Deutz stocks are down 9.6% in pre-market trade
after the company postponed its medium-term targets of achieving
revenue of 2 billion euros and operating profit margin of 7%-8%
to 2023/24 from 2022.
Shares in Sixt are down 4.4% trade after the
company announced its new 2020 financial outlook.
It is a whole different story on the pharma front. Novartis
is initiating a previously announced share buyback
worth up to $2.5 billion, while it increased its target for a
technical operations productivity programme starting in 2021 to
$2 billion from $1.5 billion and said it was committed to
driving constant margin expansion.
Shares in Idorsia are up 3.6% in pre-market trade,
after the company announced positive results of two Japanese
registration studies with clazosentan.
Eyes also on Credit Suisse after the Swiss bank
said it expects to take a roughly $450 million impairment on its
stake in alternative investment firm York Capital Management.
Telcos are still busy with their network, with KPN
accelerating investment to 3.5 billion euros over the next three
years , while Italy told top utility Enel
it must bear in mind in any sale of its stake in broadband group
Open Fiber that plans to create a national ultra-fast network
are a matter of urgency and cannot be delayed.
Meanwhile Aryzta said that Elliott Capitol Advisors
had amended its potential takeover offer for an indicative price
of 0.80 Swiss francs per share.
(Stefano Rebaudo)
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EUROPE IN THE BLACK, LOOKS AT THE BRIGHT SIDE (0628 GMT)
European stocks are in positive territory as markets today
seem willing to look at the bright side on progress made on the
coronavirus vaccine while Joe Biden is about to start the
hand-over process with the White House.
Worries about the impact of lockdowns on the economy
continue to weigh in the continent after data showing business
activity contracted sharply in November, while in the U.S. IHS
Markit's indexes topped forecast staying comfortably above
water.
Rotation was under way as the Dow Jones outperformed the
tech-heavy Nasdaq.
Reports that Biden’s pick for the U.S. Treasury Secretary
role was former Fed Chair Janet Yellen was well-received as it
confirms fiscal stimulus will definitely be on the table of the
new administration.
(Stefano Rebaudo)
*****
