Last checked at 
* STOXX 600 ticks up
* Luxury stocks lift equity market
* Germany's bund yield goes positive
* UK inflation surges
* Wall Street futures back in the black
Jan 19 - 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
Q1 EXPECTATIONS: STEADY AS THEY GO (1230 GMT)
There's been a pretty nice batch of Q4 earnings this morning
in Europe which stood in contrast with the doom and gloom
brought by Goldman Sachs' quarterly update on Wall Street
yesterday.
Richemont, Burberry and Pearson are shining and are
contributing to keep optimism flowing before Europe's earnings
season begins in earnest next week.
The latest data from Refinitiv seems to back the upbeat mood
with analysts' earnings growth estimates for Q4 stabilizing at
around 49% after a few weeks of decrease.
That's about twice the estimate for the S&P 500 for
currently stands at about 23%.
(Julien Ponthus)
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BETTING AGAINST THE NASDAQ 100 (1216 GMT)
With rate hike bets on the rise and the retail crowd showing
first signs of buy-the-dip fatigue, betting against the Nasdaq
100 is becoming a more popular strategy, it seems.
One way to gauge the heat is to look at inverse ETFs, and
turns out that the ProShares UltraPro Short QQQ, which
is built to get three times the inverse of the daily performance
of the Nasdaq 100, is seeing record trading turnover.
In the week to Jan. 14, SQQQ saw volume exceed 275 million
units for the first time on record, while five-day average daily
volumes have risen to twice as much the 90-day average.
More on betting against tech here: Antithesis of ARK
innovation ETF enjoy rally
(Danilo Masoni)
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THE THIN RED (MOVING AVERAGE) LINE (1110 GMT)
World stocks are now flirting with a dangerous thin red
line.
U.S. tech stocks broke below their 100 day moving
average last week and closed below the 200 day benchmark
yesterday.
Last session also saw the wider U.S. markets and
world stocks drop below the 100 day moving
average.
While these major indices have flirted briefly with that
level in the past year or so, they haven't conclusively stayed
below that line for longer periods.
The last time that happened was in the first quarter of 2020
when the pandemic slammed into markets. World stocks lost 30% of
their value in less than a month before rebounding later.
In that sense, a further drop below the 100-day moving
average globally could potentially mean more pain in store for
stock punters who have already got off to a rocky start this
year losing $2 trillion in market cap value.
(Saikat Chatterjee)
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DISCOUNTING A TOO HAWKISH FED? (1039 GMT)
With financial markets now wondering whether they went too
far in pricing the incoming tightening from the Federal Reserve,
what's to expect following next week’s meeting remains highly
uncertain.
The dollar was able to regain ground against the euro “as
hardly anyone is likely to have the guts to go into the FOMC
meeting with dollar shorts,” Commerzbank forex analysts say.
But expectations have already run a long way.
It is difficult for the market to gauge whether it will be
surprised they add, mentioning “thoughts making the rounds on
the market that the Fed might hike the key rate by 50bp in
March.”
Unicredit analysts point out to talk “that the Fed may prove
very aggressive on the rates front in March, and might even
consider an early kick-off of quantitative tightening” (QT).
“These expectations may prove exaggerated,” they say.
UBS analysts say that “the basic reason the FOMC does not
need to raise rates by 50 bps is that they can signal a higher
path, tighten financial conditions further and do so in a more
methodical and less disruptive way.”
UBS expects the QT to start in March.
The chart below shows Treasury yields rising to highs not
seen since January 2020.
(Stefano Rebaudo)
*****
LUXURY STOCKS TO THE RESCUE! (0840 GMT)
Things were looking quite ugly about an hour ago when
European futures were deep into the red following a rough
session on Wall Street where banking stocks, courtesy of Goldman
Sachs' earnings, and tech stocks got hammered.
But European equity markets have avoided a sell-off so far
thanks to luxury stocks which are to the old continent's
investors what FAANGS are, or were, for U.S. traders.
Shares in Switzerland's Richemont are leading the
STOXX 600 and up a whopping 7% after the world's second-largest
luxury group reported string demand for jewellery and watches.
That had a positive effect across the sector and France's
heavyweights, LVMH, Kering and Hermes are up and lifting the
Paris CAC 40 benchmark above the floatation mark.
The UK's Burberry is another strong performer, rising close
to 5% as the luxury brand said annual profit would beat market
expectations.
The retail sector was also on a roll, rising over
2% with Spain's Inditex leading the pack after Goldman Sachs
upgraded the stock due to resilient earnings and cashflow.
Marks & Spencer, Zalando and Kingfisher
were all rising over 2%.
The tech sector is also showing signs of resilience,
losing just 0.1%, a better fate than that of the Nasdaq last
night.
The start of the earnings season was also pretty positive
for Pearson shareholders who saw the stock jump 5%
after the education group raised its forecast.
(Julien Ponthus)
*****
GOLDMAN SACHS ADDS ANOTHER LAYER OF STRESS (0748 GMT)
For all the turmoil across financial markets yesterday, the
Nasdaq creeping dangerously near correction territory and
closing below a key 200-day moving average probably came as the
least surprising feature for investors.
After all, dumping expensive tech and growth stocks when
bond yields rise as the Federal Reserve embarks on an interest
hike cycle is seen as basic stock market trading 101.
Going overweight on banking stocks on tighter monetary
policy tightens is another common trade but that one backfired
spectacularly when Goldman Sachs missed quarterly profit
expectations and plunged 7% as rising expenses bit into its
fourth quarter earnings.
Traders are now waiting for Bofa and Morgan Stanley
to update the market today and see whether the key theme
of this new earnings season might just be rising costs,
including pay, denting profits across all industries.
With European and U.S. stock futures down over 0.5%, it's
fair to say there's palpable uncertainty on that front as other
structural forces of this tightening cycle are only gaining
strength in these early days of 2022.
The dollar is pumped up against rival currencies with
benchmark U.S. Treasury yields trading on two-year highs as the
Federal Reserve shows signs of being more aggressive in tackling
inflation while in Europe, Germany's 10-year bond yield rose
above 0% for the first time since May 2019.
Moreover, latest data showed British consumer price rose to
5.4% in December, its highest since March 1992, a level which
might encourage the Bank of England to speed up tightening.
Even the cautious Bank of Japan warned investors that
inflation may accelerate faster than expected if raw material
costs continue to spike.
This came as oil prices are up for a fourth day to levels
last seen in 2014 as an outage on a pipeline from Iraq to Turkey
increased concerns about an already tight supply outlook.
Key developments that should provide more direction to
markets on Wednesday:
-UK inflation rises to highest in nearly 30 years
-German harmonised inflation +5.7% y/y in December
US housing starts
US 20-year treasury auction
US earnings: Bofa, State Street Morgan Stanley, Proctor and
Gamble, Bancorp, Alcoa
Central Banks: BoE Governor Bailey and Deputy Governor Cunliffe
speak
Swiss National Bank Vice Chair Fritz Zurbrugg, speaks
(Julien Ponthus)
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