* STOXX 600 up 0.6%
* Bank sector leads gains after strong earnings
* Deutsche Bank posts best quarter since 2014
* Delivery Hero on track for best day since Dec. 2019
*
April 28 - 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
CASH FROM BONDS INTO EQUITIES (1103 GMT)
After months of very strong performance, one could think
that the European stock market is overstretched as the STOXX 600
trades near record highs.
Yet, especially if inflation and activity keep rising, there
is still scope for invertors to redirect their cash from bonds
into equities, Barclays strategists believes.
"In fact, equities still don’t look overly crowded to us
when compared to bonds," Barclays says. "There is still scope
for equities to receive inflows from bonds, especially if
activity data and inflation keep trending higher".
While investors have rotated back into equities over the
last six months, bonds have not seen outflows yet, with the
surge in money supply and central bank liquidity continuing to
boost flows to fixed income.
Additionally, money market funds saw significant redemptions
in the second half of 2020 and earlier this year, but now it
seems that things are changing.
"With equity positioning turning very bullish now, money
market fund redemptions have stopped and flows are slowly coming
back," says Barclays.
(Joice Alves)
*****
HOW TO BOOST EUROPEAN EQUITIES? BUYBACKS (1035 GMT)
There is a lively debate about whether to continue buying
stocks or to step aside at least temporarily, as analysts try to
assess the impact of the next earnings season after an almost
muted reaction to solid Q1 results.
But it’s not just a matter of earnings. Because, as Morgan
Stanley puts it, European buyback activity is expected to rise
sharply, providing a positive signal for the European market.
Morgan Stanley analysts see “a healthy bounceback in payouts
ahead,” with buybacks set to “account for a larger share of
total returns going forward.”
The reason is simple: “stocks were not being rewarded for
high dividend payments, while stocks in the top quintile of our
buyback yield factor saw very good performance trends in
Europe,” MS analysts say in a research note.
The impact might be more significant than expected as MS
sees such a move to “encourage U.S./global investors to
re-engage with Europe on the grounds of greater corporate focus
on perceived shareholder-friendly activity.”
Here are 10 overweight-rated stocks where "buybacks form a
part of our analysts' bullish narrative:" Akzo Nobel,
AP Moller-Maersk, ArcelorMittal, ASML
, Carrefour, Deutsche Telekom,
LVMH, Royal Dutch Shell, Swedish Match
and UniCredit.
(Stefano Rebaudo)
*****
A SWEET MORNING TASTE OF REVENGE FOR BANKS (0738 GMT)
Sometimes it can be hard to figure out what the big picture
is when there's a deluge of earnings at the open, but this
morning it's quite straightforward.
European banks are killing the earnings competition with
upbeat Q1 reports.
Both Deutsche Bank and Lloyds are firmly in control of the
top spots on the STOXX 600, with gains of 6% and 3.3%
respectively.
The German lender which has had an excruciating decade, is
set for its best quarter since 2014 and as a result, its shares
are set for their best daily gains since September.
Overall, the European banking sector, a major loser
in 2020, is up about 0.5% and rising 21.5% so far in 2021, neck
and neck with autos for the best sectoral performance of the
year.
Insurance is also in the spotlight, boosted by France's SCOR
, up 3.8% after its Q1 update.
Another bright spot in the market is Delivery Hero
, which is rising almost 4% after raising its guidance
for the year.
The broader market is flat but it would take only about
0.8% to take the STOXX 600 to a new record high.
(Julien Ponthus)
*****
OPTIMISM IN THE AIR (0719 GMT)
It's a packed day with U.S. President Joe Biden's first
speech to both houses of Congress, the Federal Reserve set to
conclude a two-day meeting and a slew of first-quarter earnings.
Biden's speech is in focus with his "Build Back Better"
agenda broadly popular with voters. He plans to outline another
crowd-friendly idea - putting $1.5 trillion toward childcare and
college education, and taxing wealthy Americans to pay for it,
on top of a $2 trillion jobs-and-infrastructure plan.
With more stimulus in the works, inflation expectations,
measured by the break-even inflation rate calculated from U.S.
inflation-linked bonds, rose above 2.40% on Tuesday, the highest
level since 2013.
Nominal ten-year U.S. Treasury yields also popped above
1.60%, a one-week high after tepid bond auction
results.
That's pushed the dollar broadly higher against rivals,
stalling the euro's rise above $1.21.
Fed Chairman Jerome Powell is expected to reaffirm that easy
monetary policy will remain in place for a prolonged period and
dismiss any suggestions of tapering bond purchases. Indeed,
money markets signal no meaningful change in U.S. interest rates
until the second half of 2022.
The combination of more stimulus hopes and easy policy is
spilling over to commodities with Brent crude prices approaching
$67 per barrel.
Optimism is also reflected in European markets thanks to
upbeat earnings and Germany lifting its GDP growth forecasts on
Tuesday. European stocks have opened higher and U.S. stock
futures are also edging up.
Deutsche Bank swung to better-than-expected net
profit in the first quarter of 2021, as strength at the
investment bank helped offset the headwinds of an ongoing
restructuring programme and the coronavirus pandemic.
Swedish bank SEB also reported a
better-than-expected net profit for the first quarter and Danske
Bank reported first-quarter profit above
expectations and kept its full-year forecasts.
Earnings at European companies in the first quarter of 2021
are expected to surge 71.3% from a year earlier, according to
Refinitiv IBES data.
Key developments that should provide more direction to
markets on Wednesday:
- U.S. Fed decision and Fed Chair Jerome Powell press conference
- U.S. earnings: Apple, Facebook, Qualcomm, Boeing
- U.S. wholesale inventories data
- Positive updates from Puma, Carlsberg
- Sainbury's suffers from extra lockdown costs
(Saikat Chatterjee)
*****
THE IRRESISTIBLE SURGE OF EUROPE'S Q1 EXPECTATIONS (0633
GMT)
Exuberant is probably a good adjective to describe how
upbeat analysts are getting about Europe's earnings season.
As you can see below, expectations for earnings growth at
STOXX 600 companies has surged to 71.3% year-on-year, against an
already impressive 61.2% last week.
But it gets even better going into Q2 as shown in their
table with an 87% jump:
(Julien Ponthus)
*****
EARNINGS GALORE: MARKETS IN A WELCOMING MOOD (0554 GMT)
European futures are trading up between 0.2% and 0.3% and
seem in a reasonably good mood to welcome a huge batch of Q1
results which, by the way, has analysts getting quite excited.
There's quite a lot of action on the wire already, notably
in the banking sector, with Deutsche Bank swinging to
better-than-expected profits, Spain's Santander reporting net
profits jumped almost five times and Sweden's SEB posting
better-than-expected earnings.
That said, results are coming from all over the place and
from a wide variety of sectors.
Among the publications investors are likely to focus on are
German online food takeaway Delivery Hero which saw Q1 revenues
more than double.
In France software company Dassault System raised its
full-year forecast while drugmaker Sanofi posted
stronger-than-expected Q1 results.
(Julien Ponthus)
*****
