* European shares tick down
* Miners best performers, up 2.5%
* China helps Asian shares edge up
* U.S. bond markets shut for Columbus Day
Oct 11 - 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
EXPECTED: A CORRECTION BEFORE CHRISTMAS (1032 GMT)
There are loads of debates at the moment about the
stickiness of inflation or the impact of the energy price crisis
but there's one thing investors seems pretty confident about
and that's an imminent correction.
Deutsche Bank surveyed over 600 market professionals between
October 6 and 8 and found among a flurry of questions that 63%
believed a correction of between 5% and 10% would occur on the
S&P 500 before the end of the year.
"Even following a 5% correction in the S&P 500, respondents
overwhelmingly felt further declines were due", Deutsche Bank
analysts commented.
Among the top market risks identified were higher than
expected inflation and yields, a central bank policy error and
strong growth failing to materialise.
Here's a screenshot of the survey:
(Julien Ponthus)
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HOW TO SPEND THOSE 1 TRILLION EUROS (0951 GMT)
An interesting topic is whether and where people will spend
their excess savings in the next few weeks and months and its
impact on the economy and on equity prices.
UBS analysts tried to answer that question using their
‘Evidence Lab PulseCheck survey,’ while they estimate that now
excess savings across UK and euro zone are at 1 trillion euros.
They believe a recent rise in energy prices will have mixed
effects in Europe.
“Only c.50% of wholesale cost increases come through to
retail prices, and several EU governments have put in place caps
or protection for end consumers,” they argue.
The top 3 countries in terms of increased spending are still
Italy, the UK and Germany.
The categories that are likely to see the highest increase
in consumer spending are holiday/travel, fuel, car purchases and
housing improvements.
UBS analysts suggest investors should focus on names in the
top 5 categories for increased spending, such as British Airways
owner IAG, Volkswagen, Taylor Wimpey
and National Express and Stagecoach.
(Stefano Rebaudo)
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EUROPEAN BANKS RISE BACK TO PRE-PANDEMIC LEVELS (0841 GMT)
It took about 20 months to get there but here we are:
European banks are back to the levels they were trading at prior
to the global pandemic market crash.
The STOXX 600 banking index is at about 147 points
this morning and up a whopping 35% since the beginning of the
year.
Investors wondering who to thank for that 'remontada' need
only to look at their food and fuel bills.
"Banks are the clear answer" for investors looking to
protect themselves against inflation, argues Jerome Legras, head
of research at Axiom Alternative Investments.
Legras told us that banking shares are benefiting from the
structural change towards tightening taking place in monetary
policy across global markets.
Yields for German 10-year government bonds reached a high of
-0.12% this morning but were still at -0.5% just a month ago.
Slowly but surely, the financial environment is getting more
and more favourable to banking shares.
Banks are a bit like aircraft carriers, Legras said: they
take a lot of time to change course but once they do...
Among the other factors helping prop up their stock prices
is their new freedom from the BCE to launch share buybacks and
distribute dividends which is boosting their return yields.
Their valuation, be it price-to-earnings or price-to-book,
is still also fairly cheap, Legars added.
(Julien Ponthus and Danilo Masoni)
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ENERGY AND BANKS HELP STOXX LIMIT LOSSES (0719 GMT)
It clearly isn't risk-on at the European open but as crude
prices hit new multi-year peaks and rate hike talk persist,
energy and bank stocks are finding their way higher.
Their gains are enough to offset losses elsewhere and help
the STOXX 600 benchmark move around parity in early deals.
Here's your snapshot:
(Danilo Masoni)
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EARNINGS FACE THE INFLATION TEST (0655 GMT)
After weeks of debate about the supposedly transitory nature
of higher inflation and its potential monetary policy
implications, markets are about to find out how rising input
costs impacted companies during the third 2021 quarter.
As the reporting season kicks off in earnest from this week,
commodity price rises, labour shortages and supply bottlenecks
will be the main story, taking over from the absolute recovery
narrative of the previous two quarters. But with world stocks
down as much as 6% from last month's record
highs, it's anyone's guess whether the margin squeeze is already
priced in.
Asia started Monday on the upside but European and U.S.
equity futures suggest some caution, possibly as oil prices
extended their multi-week gains, pushing Brent crude to new
three-year highs.
Still, investors may be coming to terms with a more moderate
economic growth pace. Nineteen S&P 500 firms report earnings
this week starting with the big banks; Refinitiv IBES forecasts
profit growth at 30% this quarter, down from 96% in the previous
three-month period.
Companies may also find it harder in future to engage in tax
arbitrage -- a common practice in particular among tech and
pharma firms -- after 136 nations agreed on Friday to implement
a 15% minimum tax rate on big firms.
Meanwhile, hawkish central bank noise continues. Bank of
England policymaker Michael Saunders told households to get
ready for "significantly earlier" interest rate rises. He spoke
shortly after BoE Governor Andrew Bailey said above-target
inflation was concerning and had to be managed.
A Polish rate setter too said last week's surprise rate hike
was the beginning of normalising monetary policy.
Key developments that should provide more direction to
markets on Monday:
* Japan households expect inflation to pick up - BOJ survey
* Goldman cuts forecast for U.S. economic growth in 2021 and
2022
*Chinese developer Modern Land asks to delay bond repayment
- WSJ
* Yellen confident U.S. Congress will pass minimum global
corporate tax
* ECB Board Member Frank Elderson, Philip Lane
* World Bank/IMF meetings
* Fed speakers: Chicago Fed President Charles Evans
(Danilo Masoni)
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EUROPEAN STOCK FUTURES DIP (0637 GMT)
European shares look set to start the day on a cautious
footing as crude prices continue to rise to new highs and ahead
of the start of the earnings season in the U.S. later this week.
Futures on main regional benchmarks were last down around
0.5%, even as Asian shares edge up overnight, helped by a rally
in Chinese stocks and a weaker Japanese yen.
Wall Street was set for a weaker start too although trading
is likely to remain subdued due to the Columbus Day.
(Danilo Masoni)
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