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* European shares hit 2-week high
* Omicron fears ebb, travel stocks fly
* U.S. stock futures rise
Dec 23 - Welcome to the home for real-time coverage of
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SANTA RALLY CARRIES TRAVEL STOCKS INTO BEST MONTH IN 10
(1118 GMT)
It looks like investors are getting even this year their
Santa rally, and that's especially true for European travel and
leisure stocks which despite the Omicron uncertainty are on
course for their best monthly performance since February.
Their index is up more than 12% in December, by far
the biggest sectoral gainer in Europe with a nine percentage
point outperformance versus the broader market.
That indicates optimism about a limited fallout of the new
variant as markets look past any short-term economic damage from
restrictions implemented to fight the virus, encouraged by
studies showing how Omicron is less lethal than Delta.
No surprise then that IAG, Wizz Air,
Lufthansa and Tui are all extending this
week's gains, up between 2 and 4% on the day to the top ranks of
the STOXX 600 regional equity benchmark.
Traders of course, do not rule out more turbulence ahead but
surely travel is one sector to keep a close eye on next year.
Following steep declines in November, the STOXX Travel and
Leisure Index has fallen back below prepandemic levels.
"It looks like either the market is quickly shelving Omicron
(worries) or it's a mega short squeeze. I think it is very early
to position on these businesses. But it is also true that they
have been avoided (be investors) for a couple of months at
least," said Giuseppe Sersale, strategist at Anthilia.
Meantime, the U.S. Global Jets ETF that tracks
airline companies is up 8% so far this month, while the S&P 500
has risen only 2.8%.
(Danilo Masoni)
*****
DRAGHI PRESIDENT? MAYBE JUST BUSINESS AS USUAL (1059 GMT)
What if the former ECB boss Mario Draghi becomes Italian
president and leaves his prime minister job?
Now it’s worth asking, as Draghi said on Wednesday, he would
be willing to become head of state when the position falls free
early next year.
Some analysts warned about a potential increase in Italian
risk premium as Draghi's arrival in February 2021 has boosted
confidence in the country's debt-ridden economy. But things
might be different.
Berenberg economist Guido Giorgio Bodrato draws three
scenarios.
He calls the first one “business as usual.” Draghi could
appoint a senior minister from his cabinet as his successor, and
“Italy could enjoy a relatively stable politics in 2022 upon the
start of Draghi’s seven-year reign as president.”
The most worrying scenario for investors in Italian assets
is the second one: snap elections. “With polls projecting a
substantial draw, parliamentary elections held in late spring
could open a new period of political uncertainty,” he says in a
research note.
“In a third unlikely scenario, Draghi could refuse to call
early elections, leaving the caretaker cabinet in charge,” if
the Parliament disagrees with his claim that the government can
continue without him personally heading the cabinet, he adds.
(Stefano Rebaudo)
*****
TRAVEL AND LEISURE STOCKS LEAD GAINS (0849 GMT)
The pandemic is stealing the stage once again, with some
positive vibes for risky assets driving European stocks higher
after a study suggested reduced risks of hospitalization and
severe disease with the Omicron variant.
The STOXX 600 is up 0.2%, with the travel and
leisure stock index -- which is the most sensitive to
the risk of pandemic restrictions -- leading gains, up 1.9%.
Autos stock index is up 0.8%, with Continental
stocks among the best performers after the CEO Nikolai
Setzer was quoted as saying the company could hit the upper end
of its profit margin outlook in 2021.
Analysts remain cautious about the medium-term impact of
Omicron as a potential reduction in hospitalisation needs to be
balanced against the larger risk of infection.
(Stefano Rebaudo)
*****
THE FAIRY TALE OF WALL STREET (0818 GMT)
Omicron spreads faster than Delta but is less likely to land
you in hospital. The UK now has more than 100,000 cases of
Omicron. China's Xian city has locked down 13 million residents.
But a third Astra Zeneca shot offers protection. And so on.
But... whatever. Markets seem to be reposing their trust in
companies, politicians, central bankers and doctors to ensure
Omicron doesn't get in the way of fat investment returns and
economic recovery. Wednesday's U.S. data painted a picture of a
highly resilient economy expanding at the fastest since 1984.
Even Japan upgraded growth projections for the next fiscal
year starting in April to 3.2% versus the previous 2.2%
forecast.
For U.S. equity investors at least the COVID years have been
a time of scintillating returns; the S&P 500 is is up 25%
in 2021 and 87% since end-2018. This year alone the biggest five
lockdown beneficiarines have added almost $4 trillion in market
capitalisation. Just to compare, the entire global equity
complex is up $10 trillion.
Markets seem to be winding down for the year however; stock
futures are flatlining, the dollar is near one-week lows.
Even the Turkish lira is staying calm for now and its
sovereign risk insurance costs have declined in the CDS market.
They remain however some 400 basis points above similarly rated
South Africa.
Key developments that should provide more direction to
markets on Thursday:
- Russsian president Vladimir Putin's annual news conference
-U.S. core PCE price index/durable goods/initial jobless
claims/new home sales
-U.S. 5-year TIPS auction
(Sujata Rao)
*****
EUROPE IN THE BLACK, EYES OMICRON (0818 GMT)
European stock futures are in positive territory after
hopeful developments about the Omicron variant in typically thin
holiday season trading.
Research by London's Imperial College said the risk of
hospitalisation for patients with the Omicron variant of
COVID-19 is 40% to 45% lower than for patients with the Delta
variant. However, the reductions in hospitalisation must be
balanced against the larger risk of infection
Also, a batch of U.S. economic data released Wednesday
suggested the economy would continue to expand in 2022.
All that is providing support to risk sentiment. One must
recall however that the unpredictable path of the pandemic and
its impact on the economy are bound to keep investors on edge
well into next year.
(Stefano Rebaudo)
*****
