* European shares hover near 1-year high
* Oil stocks and miners provide support
* Bitcoin close to $50,000
* Wall Street seen rising after long weekend
Feb 16 - 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
BUBBLES BUT NO BUBBLE (1211 GMT)
The term 'bubble' is now widespread to describe the market
price action in a range of assets going from bitcoin to hydrogen
stocks.
A quick search on Google Trends for the U.S. in the finance
category shows there was indeed a surge for 'bubble' web
searches right in the week when the 'Gamestonk' retail mania
became front page news.
But there seems to be a paradox within the financial world
community.
Many are happy to call out bubbles on certain assets but are
otherwise very confident that equity markets will go North from
here despite pockets of irrational exuberance.
Deutsche Bank just released its monthly survey, which shows
that there's a pretty strong consensus that bubbles are indeed
among us.
Indeed, 90% of 460 market professionals polled worldwide on
February 10-12 agreed, strongly or slightly, that there are
many bubbles in the market at the moment.
Specifically, the bubble action is seen happening mostly in
the bitcoin and U.S. tech spaces.
But talking about the overall U.S. equity markets, BofA
found in its Global Fund Manager Survey that actually only 13%
of investors believe there's a bubble!
In a nutshell, it seems the consensus view is that specific
bubbles are only a sideshow of the main event, which is a bull
market doing its thing for the foreseeable future.
One has to note that there is indeed a real scarcity of
asset managers calling for investors to pull out from stocks
and hold on to cash.
Quite on the contrary, cash levels in investment portfolios
have hit the lowest since just before the so-called taper
tantrum of 2013, according to the BofA survey.
Kevin Gardiner and Victor Balfour, strategists at Rothschild
Wealth Management said in their February note to investors that
in their view, we're not in the danger zone, at least not yet.
"This does not look like a bubble to us", they wrote.
Valuations are high but not "outlandish", they argued,
adding that the prospective returns for equities "still exceed
both likely inflation and the likely returns on bonds and cash".
(Julien Ponthus)
*****
THE 2% YIELD BOGEYMAN (1037 GMT)
Debate about whether bond market dynamics will eventually
derail the bull run on the stock market continues and it seems
concern is spreading that at 2% Treasuries yields
could actually end the party.
"There is a palpable fear that a move of the US 10-year
towards 2% could destabilise the market," says Inigo
Fraser-Jenkins and his strategy team at Bernstein.
But is that level -- currently we're just above 1.2%
--something really to be scared about?
Of course that depends, and chiefly it's a function of
inflation and real rates, according to Bernstein.
"The shift in the 10-year has so far been almost entirely
due to shifts in inflation expectations. We think this is a sign
that the market accepts a narrative whereby despite inflation
expectations rising, real rates need to remain low" they note.
"If it persists, an environment of increasing inflation
expectations but with real rates pinned at negative or zero
levels is one that is benign for equities," they argue.
For more on this topic check out:
LIVE MARKETS-Can stocks tolerate rising yields?
(Danilo Masoni)
*****
MORE UPSIDE FOR MINERS (1013 GMT)
Investors have already been taking position on the mining
sector, with the European basic materials index
outperforming the Stoxx 600 recently.
The question now is: are they done or should they at least
slow down?
Not at all, according to Credit Suisse, which sticks to its
strongly overweight on the industry, with Anglo American
and Alcoa both rated outperform.
Here some reasons to be so bullish.
Generally speaking “mining should be driven by the rest of
the world opening up,” Credit Suisse says in a research note,
adding it sees developed world capex rising 6% in 2021.
Besides, fixed asset investment (FAI) growth in China is
expected to be at 14% in 2021.
“Investors have underestimated the sector’s, especially
copper’s, green credentials," according to CS analysts.
Valuation metrics, especially free cash flow, are attractive
on deleveraged balance sheets.
In the chart below Europe's basic materials index
outperforming the STOXX 600 month-to-date.
(Stefano Rebaudo)
*****
OIL AND GAS STOCKS PROP UP STOXX 600 (0833 GMT)
European stocks are slightly in positive territory boosted
by oil and gas stocks as crude prices are at 13-month highs
after Texas cold snap shuttered oil wells and refineries.
Stoxx 600 index is up 0.1%, with oil and gas stocks
leading gains up 0.8%. Banks and autos
are up around 0.4%.
Risk-sentiment remains upbeat on expectations of a strong
economic recovery led by a rollout of coronavirus vaccines, but
investors are waiting for Wall Street after it was shut
yesterday for a public holiday.
Among single stocks, Rotork shares are up 4.6% after
Jefferies upgrade, Glencore stocks are up 2.5% after
the company reinstated dividend as its debt dropped.
Paris listed shares in TechnipFMC are down 8% in
their first day of trading after the spinoff with Technip
Energies, whose stocks jump 30%.
(Stefano Rebaudo)
*****
REFLATION IT (0808 GMT)
The reflation song is resounding across world markets, with
equities marching to new record peaks, U.S. 10-year Treasury
yields touching 1.25% for the first time in almost a year and
the U.S. dollar continuing to slip.
Oil prices, helped along by a Texas cold snap that's
shuttered oil wells and refineries, are at 13-month highs. Even
Swiss government debt, the safe-haven asset par excellence, saw
30-year yields climb above 0% on Monday for the first time since
last April.
If investors are concerned about a Financial Times report
that China could limit rare earth mineral supplies to U.S.
defence contractors, there's no sign of it. Economic recovery
expectations sent copper to new eight-year peaks while
Australia's BHP has reported its best first-half profit in seven
years, thanks to China's iron ore appetite.
What to make then of economic data which has so far been
fairly lacklustre? Minutes from Australia's last central bank
meeting cited a need for "very significant" monetary policy
support for some time and final euro zone Q4 data is expected to
show a 0.7% quarter on quarter contraction.
Meanwhile, Britain's pound, the unexpected winner of the
coronavirus recovery trade, is homing in an April 2018 high of
$1.40.
Key developments that should provide more direction to markets
on Tuesday:
-German February ZEW
-Japan trade Jan
-UK Inflation
-San Francisco Fed's Mary Daly speaks
-RBA minutes
-TIC data on foreign Treasury purchases
U.S. corporate results: AIG, Occidental Petroleum, Yandex
(Saikat Chatterjee)
*****
EUROPE SLIGHTLY HIGHER, WAITING FOR WALL STREET (0625 GMT)
European stock futures are slightly higher after yesterday’s
rally, waiting for Wall Street to open as it was shut for public
holiday on Monday.
Risk-sentiment remains upbeat on expectations of a strong
economic recovery fuelled by a rollout of coronavirus vaccines.
The only concern is inflation and a possible rise of
interest rates, though the Fed said repeatedly it is too soon to
discuss scaling back the massive stimulus it provides.
In this situation a continue rise in U.S. Treasury yields
might be seen as an alarm bell and unsettle equities.
(Stefano Rebaudo)
*****