Last checked at 
* STOXX 600 index slightly lower
* FTSE unfazed by new UK lockdown
* Retail and oil and gas stocks up lead
Jan 5 - 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
A DEMOCRATIC SWEEP WOULDN’T BE BAD AFTER ALL (1153 GMT)
Markets are a bit nervous about the runoffs in Georgia that
could give control of the U.S. Senate to the Democrats.
But according some analysts there are several reasons they
shouldn’t be, as equities will go on rising no matter what.
If Democrats win both the runoffs, they will take control of
the Senate via a tie-breaker vote from Vice President-elect
Kamala Harris and this result may ripple through a stock market
that closed 2020 at record highs.
According to Saxo Bank, it is just a matter of what stocks
to buy as “multiple highflyers/long duration stocks could feel
the pinch of reflation” while big tech could expect to be under
anti-trust scrutiny.
UBS says Biden’s agenda includes corporate tax hikes which
could reduce S&P 500 after-tax earnings by 5%, but also fiscal
stimulus that will support growth.
Among Democrats there are moderates who would not
necessarily vote for all of Biden's policy proposals so the
president “will have to fear that if they are too aggressive
forcing their agenda through Congress on a strictly partisan
basis, they could potentially lose their majority in both
houses” in midterm election in 2022.
Investors’ focus will still be on vaccine and virus
trajectories. With fiscal and monetary policy that will remain
highly supportive UBS continues to “expect a strong global
growth in 2021, despite recent virus headlines.”
(Stefano Rebaudo)
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SCOUTING THE STOXX 600 FOR M&A TARGET (1055 GMT)
There's been no shortage of M&A in 2020 and with the ECB's
ongoing massive stimulus, no reason to believe the deal pipe is
about to dry up.
That being said, short of a crystal ball, cherry picking the
stocks most likely to benefit from the trend is tricky business.
Oddo however has come up with a list of companies combining
a "buy" rating and an M&A conviction from the analyst following
them.
Among the stocks that stand out like ripe for some M&A
action are Getlink and ASMI.
The Channel tunnel operator isn't expected to remain
independent and could very well be snatched by a bigger group
focused on infrastructure assets such as France's Eiffage.
Another name is ASMI which has, according to Oddo, an
attracting valuation for an international player.
Other names mentioned in the report include Atos, Wallix,
Dialog, Subsea 7, Kaufman & Broad, easyJet and EDP.
What's also interesting is the fact that telcos, a sector
touted as prone for M&A, don't make it to the top of the list.
Interesting to note that there's a lot of if and buts
regarding banking names such as Commerzbank and SocGen.
(Julien Ponthus)
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INFLATION? NO WORRIES (1005 GMT)
Inflation is seen as a major concern for equities as it
could disrupt the lower for longer interest rates scenario which
is one of the factors propping up stock valuations.
But some analysts argue we should not worry about it.
According to Blackrock, “nominal yields will be less
responsive to rising inflation risk than in past episodes. This
suggests risk assets will perform better than in past
inflationary periods.”
Medium-term inflation risks “look underappreciated” as
production costs are seen to rise on a rewiring of global supply
chains, while central banks appear more willing to let economies
run hot with above-target inflation,” Blackrock says in a report
about its 2021 outlook.
Blackrock favours inflation-linked bonds and expects
equities to be supported by falling real interest rates.
Geographically speaking, the global investment manager
suggests being exposed to China and to the U.S., “the two poles
of global growth,” while tactically it likes Asia-ex Japan. It
is under-weight on Europe and Japan.
Sustainability is one of the main issues of the
post-Covid-19 era, but Blackrock takes a barbell approach,
“favouring quality stocks balanced with selected cyclical
exposures.”
(Stefano Rebaudo)
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OPENING SNAPSHOT: RETAILERS AND OIL AND GAS LEAD (0843 GMT)
Equities are little changed as bullish sentiment seems to be
undeterred, but investors paused the enthusiasm a tad ahead of
the results of the runoffs in Georgia that will decide which
party controls the U.S. Senate.
Democrats have to win the two seats in order to put the
balance at 50-50 with the tie breaker vice-president Kamala
Harris.
The STOXX 600 flattened after opening higher, with retailers
stocks leading gains up 1.3%, followed by oil and gas shares
while deadlocked talks between major oil producers about
potential changes in February output are set to continue later
in the day.
Among single stocks Next is the best STOXX 600
performer, up 7.7%, after its trading update.
Shares in UK airlines suffer a negative start after stricter
lockdown measures but they recover quickly and are now not far
from yesterday’s levels.
(Stefano Rebaudo)
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U.S POLITICS BACK IN THE SPOTLIGHT (0633 GMT)
European stock futures are in negative territory as
attention turns to runoff elections in Georgia, which will
decide the majority in the U.S. Senate with a significant impact
on president elect Joe Biden’s agenda.
The outcome of the vote is too close to call but the
uncertainty, which could drag on for days, might create a
fertile breeding ground from some pullbacks.
Slow counting of Georgia's mail ballots could unfold after
today's contests if the races are close. Public opinion polls
show Republican incumbents have about the same level of support
as their Democratic challengers.
(Stefano Rebaudo)
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