Last checked at 
* European shares hover near 1-year high
* Oil stocks and miners provide support
* Bitcoin crosses $50,000 for first time ever
* 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
WINNERS AND LAGGARDS IN THE ENERGY SPACE (1248 GMT)
Global energy is now the best performing asset of 2021, benefiting from a commodity boom and
reflation hopes.
But not everything is glamour in the space with many energy-related assets lagging during
the commodities rally last month.
"We found the EU energy sector to have lagged the most," writes Goldman Sachs analysts.
"Energy FX and US Energy Credit lagged as well but the underperformance was less extreme".
The last shall be first: following the poor performance of the European oil and gas sector
, investors have started to position for a catch up, with the index gaining some grounds
over the past few days.
GS says that the wide gap between Brent and energy sector could eventually be good news for
European energy stocks.
"Following the poor performance of energy stocks we think adding energy equity exposure is
attractive at this juncture", they say.
"Historically, we found that when the EU Energy sector lags Brent performance by 2SDs
(standard deviations), the EU energy equity sector tends to outperform its beta to oil price in
the subsequent month".
(Joice Alves)
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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)
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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)
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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)
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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)
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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)
*****
