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* STOXX 600, CAC 40 hit new records
* BNP Paribas jumps on U.S. unit report
* Philps tumbles on recall troubles
* Wall Street futures tick up
Nov 15 - 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
"REAL YIELDS WILL STAY NEGATIVE FOR THE REST OF MY CAREER" (1200 GMT)
Deutsche Bank strategist Jim Reid issued a note this morning in which he explains why he
believes negative real rates are here to stay.
"The reason I've felt that real yields will stay negative for the rest of my career is
because this has been the pattern whenever debt has spiked through history," he wrote.
This chart from his research piece shows how big jumps in debt, like during the U.S. Civil
War, WW1 and WW2, led inflation being higher than interest rates.
"The economic response to Covid has been more akin to a war time response, with debt and
spot real yields both spiking in opposite directions just like that seen around and after the
wars", Reid went on.
Moving forward, one scenario that could unfold is inflation getting back to 2% and 10 year
yields at 1%. That wouldn't be a game changer in terms of deleveraging but it would help to keep
the debt pile in check.
One big risk for markets however would be for real yields to turn positive.
"Given the global debt pile, that would strongly increase the probability of debt crises
across the world", Reid said adding that in which case, "the global financial crisis may look
like a dress rehearsal for a much bigger event".
(Julien Ponthus)
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DIP BOUGHT! STOXX AND CAC-40 HIT NEW RECORDS (0910 GMT)
Well, that didn't take long!
Investors were quite eager to buy the dip this morning and as a result, the STOXX 600 and
France's CAC 40 are sailing into uncharted high waters again.
Global stocks on the MSCI World are also up 0.1% and jut two points away
from 759.80, their all time high reached on November 9.
Wall Street futures are also on the rise which means we could get some new milestones later
in the day.
While fixed-income investors face a mountain of uncertainties with the global inflation
surge, equity markets seem to have little doubts about the direction of travel.
(Julien Ponthus)
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EUROPE STOCKS HOLD THE LINE (0835 GMT)
The STOXX 600 opened just slightly in the red but it seems ready to strike a new record high
at any time.
The pan-European benchmark is flat at 486.6 points, less than half a point away from its
November 12 all-time high.
Oil and gas and tech are up 0.4% while banks and miners are losing about 0.5% and 1%
respectively.
Among banking stocks, BBVA has dropped close to 7% as investors are taken back by its
decision to double down on Turkey, whose troubled currency has kept EM fund managers awake at
night of late.
The Spanish bank decided to launch a tender offer for the 50.15% stake it does not own in
its Turkish lender Garanti, for up to 2.25 billion euros.
Among other stocks that stand out, Koninklijke Philips shares are down 8.5% while worries
grow about its ventilator recall troubles in the U.S.
There's been a positive welcome to energy giant Shell saying it would do away with its dual
share system and keep a single line of shares to simplify its structure for investors.
Amsterdam listed shares of Royal Dutch Shell are up 1.7% while in London, the stock is up
1.8%. The company says it will move its tax residence to the United Kingdom from the
Netherlands.
Retail Ahold Delhaize has also been boosted by its plans to float online retailer
Bol.com and its shares are up a handsome 3.7%.
Airbus is also among Monday morning winners, up 2.6% after a massive new order for A321
jets.
(Julien Ponthus)
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I FOUGHT THE FED AND THE FED WON (0742 GMT)
'Don't fight the Fed', goes the old saying.
Investors tempted to challenge the U.S. Federal Reserve's narrative on transitory inflation
might want to read Russell Clark's final letter to investors while listening to the rock anthem
'I fought the law'.
After another monthly loss at the hedge fund which bears his name, Clark decided to wind up
his fund, deploring that global markets are increasingly driven by politics, notably China's,
for which he admits having no particular edge.
"U.S. markets are essentially a bet on the Fed unable to raise rates, and Congress unable to
regulate big tech or raise corporate tax rates", he wrote in his October newsletter.
Indeed, many hedge funds expected the Fed and other central banks to quickly turn hawkish
and have been forced to cover bets when caught on the wrong side of the trade.
The impact of the 6.2% year-on-year rise in U.S. inflation in October on the Fed's thinking
has proven tricky to call as President Joe Biden weighs whether to keep Jerome Powell as chair
for a second term or elevate Fed Governor Lael Brainard to the post.
Amid uncertainty on central banks' next move, gold prices slipped this morning from a
five-month peak.
Yields for 10-year U.S. Treasury notes are at about 1.55% while the euro zone's
benchmark, German 10-year yields is at -0.26%, highlighting how far behind the
European Central Bank is in the tightening cycle.
At 95, the dollar index is close to highs unseen since July 2020 while the euro, by
contrast, is trading at 16-month lows. The dollar's strength has also weighed on oil prices.
Meanwhile, global equity markets are trading at a whisker from their record
highs as Asian shares crept higher on Monday, boosted by positive Chinese economic data.
For their part, futures for European equities are just slightly in the red less than an hour
ahead of cash trading.
Key developments that should provide more direction to markets on Monday:
- China industrial output, retail sales accelerate but property clouds outlook
- Japan's economy shrinks more than expected as supply shortages hit
- India's Oct WPI inflation accelerates to five-month high of 12.54% y/y
- UK Rightmove house prices
(Julien Ponthus)
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