* European shares struggle to reach new record high
* STOXX 600 down 0.3% after positive open
* Drugmakers hit as Biden backs vaccine IP waiver
* U.S. futures point to subdued start
* BOE keeps rates unchanged, slows bond-buying programme
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BOE AND FTSE UNCHANGED (1159 GMT)
It was an eventless Bank of England policy meeting. Not
surprisingly, both London blue chips and mid caps ground to a
halt after the central bank said it is keeping policy unchanged.
BOE held interest rates and the bond-buying programme
unchanged even as Britain's economy shows signs of recovery from
its coronavirus slump.
As highly expected and largely priced in, BOE raised its
2021 growth forecast, and now expects the economy to return to
its pre-pandemic size earlier, in the last quarter of 2021.
"Today’s MPC decision to keep policy unchanged comes as no
surprise as the economic recovery is still in its early days and
monetary policy has already been somewhat prescribed for the
coming months," says Ambrose Crofton, Global Market Strategist
at J.P. Morgan Asset Management.
But that could change soonish.
Paul Craig, portfolio manager at Quilter Investors, flags
that as things improve, "consumers and investors must be
prepared for the beginning of a tapering programme to reduce the
scale of quantitative easing."
“Given we are just over a month away from the government
declaring life ‘back to normal’ we should not be surprised to
see the BoE eventually have to act later in the year to
counteract any of the effects of this economic awakening," he
UK BRITISH FASHION: THE REAL LOCKDOWN WINNERS! (1101 GMT)
COVID has been brutal on Britain's fashion retailers, even
if strong online sales helped to partially offset weaker
in-store performance, things didn't look pretty.
Yet, while non-essential stores were closed in March, during
Britain's third national lockdown, clothing sales in
Sainsbury's clothing sales jumped by 201.2% and
Tesco's by 142.7% in the four weeks to April 4
according to Barclays.
Some may argue that the jump is mainly due to easy
comparisons with March 2020. Correct.
But comparing March 2021 clothing sales to two years ago,
that translates to 52.4% growth for Sainsbury and a 30% jump
If you are still not impressed, sales in the same period for
British fashion retailer Next -- which owns 500 stores
and has just raised its full-year profit guidance for the second
time in two months -- were up 41.9% from the depths of March
2020, but on a two-year view, that translates into a 21.1%
decline in sales, Barclays says.
Another example, JD Sports saw a 54.9% sales growth
year-on-year but on a two-year view, its sales declined by 14.5%
in the four weeks to April 4.
Shop owners are now hoping pent-up demand will make it up
for months of lockdown.
But after Next's strong results in the 13 weeks to May 1,
its CEO suggests it might be too soon to call for excitement for
a sector that has been struggling for years.
"We're not getting too excited about that because after each
of the last lockdowns we did see a spike in demand that petered
away after a few weeks," CEO Simon Wolfson told Reuters.
EZ BANK RESERVES AT ALL-TIME HIGHS (1036 GMT)
Vast amounts of cash available for banks means downward
pressure on money market rates, which could help the real
economy and financial markets.
That is why numbers of targeted longer-term refinancing
operations (TLTRO) -- favourable loans for banks that require
them to lend to households and businesses – are worth an
“The high net take-up at the March TLTRO III has led to a
further increase in banks reserves, which have reached all-time
highs in every jurisdiction,” Luca Cazzulani, co-head of
strategy research at Unicredit, says.
“Banks’ reserves in the various jurisdictions are now around
10/15% of total assets. This will keep downward pressure on
money market rates for the foreseeable future,” he adds.
Then what about TLTRO and bond purchases?
“Banks were net sellers of sovereign bonds" in March,
Furthermore, net purchases of sovereign bonds in June,
September, and December 2020 were generally negative, with most
purchases by banks occurring in March-May 2020, the early stage
of the pandemic.
BUYBACKS, NOT EARNINGS BEATS, ARE THE REAL MOVER (0955 GMT)
The fact that stellar profit beats are increasingly met with
a tepid reception is most likely a signal that much of the good
recovery news is already in the prices, especially as markets
flirt with record highs and lofty valuations.
That doesn't mean however that investors should look past
the current Q1 season on the view there won't be any positive
catalysts out of it. Barclays in fact has found out that share
buybacks are deliver upside surprises.
"Stock with buyback announcements, both in the U.S. and
Europe, were received well by the market in terms of their price
reaction," analysts at the UK bank house say.
"Payout announcements have picked up since Q4 and the
buyback theme has been outperforming the market ytd, which
should lead more companies to repurchase shares despite lofty
valuations," they add.
"Investors view buybacks as an additional sign of optimism
from corporates on top of earnings recovery and therefore are
rewarding them handsomely," they point out.
NEW RECORD IN SIGHT AS EARNINGS LIFT STOXX 600 (0734 GMT)
It's another busy earnings day and so far there are plenty
of beats which are lifting sentiment and bringing the STOXX 600
just inches to a new record high.
As analysts tend to stress these days, it takes quite a lot
of good news to take arguably stretched valuations higher, but
it seems to be happening nonetheless.
The pan-European index is up 0.3% at 442.6 points so it
wouldn't take much to rise over the 443.6 points reached on
Two sectors stand out this morning, banks, with Socgen up a
handsome 6% after its well received earnings and Unicredit
rising around 5%, also boosted by its update.
Beer giant AB Inbev is galvanizing the food and beverage
index, rising 3.8% on a good set of results.
Car makers are making a comeback with the index edging up
with Volkswagen gaining 1.6% in early trade after the company
raised its operating margin target for 2021.
Quick reminder, the best way to keep track on the earnings
action this morning in Europe is to click here:
BRITAIN'S ANTICLIMATIC SUPER THURSDAY (0708 GMT)
As Britons make their way to polling stations for local
elections, the focus is on Scotland where an outright majority
for the pro-independence Scottish National Party could trigger a
showdown with Boris Johnson's government, and hit the pound.
There's a couple of things, however, which explain
investors' relatively low anxiety levels: results due on the
weekend could show the SNP lost momentum, opinion polls have
indicated. And whatever the result, Downing Street is determined
not to permit an independence referendum.
A more pressing matter may be the Bank of England's policy
meeting where there is a chance it could talk of trimming
support for the recovering economy. It is also likely to say
Britain's economy is heading for a much stronger recovery this
year than it previously expected.
Any more hawkish than that and we are likely to see a market
As shown by the FTSE 100 index reclaiming the 7,000-point
bar on Wednesday and making its biggest jump since February,
sentiment is quite upbeat.
Also, with the Bank of Japan stressing the need for low
interest rates and U.S. Treasury Secretary Janet Yellen walking
back her comments on the possible need for rate hikes, the doves
clearly have the upper hand.
Norway's central bank may shed light on its intention to
tighten policy in the second 2021 half but will leave interest
rates unchanged today.
In the meantime, stock markets are at or close to record
levels; the Dow Jones hit a peak on Wednesday and the
pan-European STOXX 600 stands 0.4% off a new milestone,
galvanized by stellar ongoing Q1 earnings.
Other key developments that should provide more direction to
markets on Thursday
- German manufacturing March
- Euro zone retail sales
- Rebound in trading boosts SocGen earnings
- UniCredit Q1 profit tops forecasts
- ECB: today's speakers include Vice President Luis de
Guindos and ECB Board member Isabel Schnabel
- Fed: New York Fed President John Williams and Dallas Fed
President Robert Kaplan
-U.S. initial jobless
-U.S. earnings: Kellog, Expedia, NewsCorp, AIG
UNDECIDED EUROPEAN STOCKS EYE NEW RECORD HIGH (0529 GMT)
The pan-European STOXX 600 is just 0.4% from another record
high but given how flat futures are trading at the moment,
there's absolutely no guarantee a new milestone will be crossed
There's not that much momentum coming from the East where
MSCI's broadest index of Asia-Pacific shares outside Japan
There's plenty going on though in terms of earnings and
central bank action which could quickly swing sentiment either