Last checked at 
* European Stoxx index down 0.2%
* Tech stocks under pressure as yields jump
* Brent crude at $82.5 a barrel
* All eyes on U.S. job data
* Wall Street futures slightly higher
Oct 8 - 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
INFLATION: BRING ON THE Q3 EARNINGS SEASON! (1145 GMT)
We're less than an hour away from NFPs and traders are
waiting to see if the U.S. job data derails expectations that
the Fed will announce the start of tapering next month.
As it stands though, markets have probably accepted that a
print around 500k for September would allow the Fed to proceed.
Once that dataprint is out of the way, inflation should take
centre-stage. Besides next week's U.S. price data, strategists
will be looking for signs of inflation stickiness in the
incoming Q3 earnings season.
"What we also need is the peculiar wisdom of the crowd that
comes from the analysis of this earnings season", writes
Sebastien Galy, a strategist Nordea Investments.
"There we should get a sense of cost pressure and pricing
strategies as well as forward guidance", he says.
"From this information (...) we should be able to quickly
build a picture of the expected trajectory of inflation from a
corporate point of view born out of their experience and the
information they get from their investment banks".
Galy isn't the only one keeping a close eye on what the
earnings season will teach us on the thrust of inflation and its
impact on corporate balance sheets.
"While company CEOs are mentioning inflation a lot there has
never been greater expectations for revenues, profits and
margins", says Kleinwort Hambros CIO Fahad Kamal.
"How is that possible if there is so much inflationary
pressure?", he asks.
The answer to that will start trickling in next week in as
U.S. corporates begin to publish their quarterly results.
When it comes to Europe Inc, tighten your seatbelt for the
week of the 18th of October.
All the following (non-exhaustive list) blue chips will
publish then: EQT, Unilever, Deutsche Boerse, Tele2, Vivendi,
Reckitt Benckiser, ASML Holding, Akzo Nobel, Barclays, SAP,
Randstad, DNB Bank, Abb, Nordea, Volvo, Swedbank, Telia and
Pernod Ricard.
(Julien Ponthus and Sujata Rao)
*****
WHAT’S BETTER: SELLING TREASURIES OR BUYING DOLLARS? (1110
GMT)
It's true that selling Treasuries can be more or less the
same as buying dollars as a rise in U.S. yields – which move
inversely with bond prices – might trigger a strengthening of
the U.S. currency.
SocGen forex analysts argue that “sell the rally in
Treasuries is the equivalent of buying dollar dips, but the
forex trade is helped” by the relative trend in Eurozone vs U.S.
economic data overall.
“In the chart of euro zone-U.S. economic surprises, it's the
European weakness that's doing the hard work, more than the U.S.
strength,” they say in a research note.
The chart shows the rise of U.S. 10-year government bond
yield and U.S. dollar currency index in the
last few months.
(Stefano Rebaudo)
*****
HIGHER ENERGY PRICES ARE HERE TO STAY (0944 GMT)
As Deutsche Bank analysts put it, “financial markets have
been stirred but not completely shaken” this week as they
rebounded as soon as the surge in gas prices eased.
But the big unknown is what will happen to energy prices in
the medium term and their impact on the economy.
According to Generali Investments, several factors behind
the recent surge in oil prices “may not be resolved quickly,”
dampening the economic recovery and boosting inflation.
The green push “is shifting capital away from fossil fuels
toward greener sources. As building up capacity takes time,
greener energy sources may not be capable of compensating
short-term undersupply,” says in a research note Paolo Zangheri,
senior economist at Generali Investments.
Meanwhile, “temporary shifts to more polluting sources like
coal, are made more difficult by regulation, particularly by the
rising price of emission permits.”
On the oil front, “higher prices are not proving enough to
ramp up production, as years of underinvestment have limited
capacity and stretched balance sheets make most producers
reluctant to prioritise production over margins,” he adds.
Second-round effects could be more damaging, such as
accelerating production price inflation, while production being
scaled back “remains a tail risk for the moment.”
Here's a telling chart from the Generali Investments note:
(Stefano Rebaudo)
*****
EUROWAG: FROM TRAFFIC JAM TO TRAFFIC INCIDENT? (0904 GMT)
One interesting piece of news on the LSE yesterday was
something that didn't happen.
Czech trucking services firm Eurowag was supposed to make
its debut on the stock exchange but come the open, nothing
happened.
No trades, but also no immediate statement from the company
explaining why the delay, leaving investors wondering whether
the company which provides payment services and fleet management
systems for trucks had been caught in a nasty traffic jam.
The IPO eventually went ahead this morning (ticker is
) but the final offer price might give some clues as to
what may have triggered the delay.
The initial price bracket set at the end of September was
between 175 pence and 220 pence, then lowered to the bottom of
the range on Tuesday.
This morning, Eurowag went ahead with the listing at a final
offer price of 150 pence.
At 0959 London time, Eurowag is trading down about 9% at
about 136 pence per share after hitting a low of 134 pence.
Of course, if one looks at the market price action from the
initial valuation bracket, this is 20-36% lower than the company
had originally wanted to value the company.
Now, the big question for investors is whether this says
more about the company or the state of the IPO market in London
and Europe.
Deal cancellations and postponements have started to hit the
screens across the continent, with France's Icade Sante and
Switzerland's Chronext both pulling deals in the past week.
In addition, many companies that listed earlier in the year
are trading below their IPO price, with the FTSE Renaissance IPO
Index for the Europe, Middle East and Africa region down about
9% this year so far.
See also:
Eurowag aims for valuation of up to $1.98 bln in London IPO
Eurowag IPO Deal Expected To Price At GBP 175 Per Share
Eurowag IPO caught in traffic
Eurowag shares fall 10% after cut-price London debut
(Julien Ponthus, Iain Withers and Abhinav Ramnarayan)
*****
AUTOS AND OIL STOCKS UP, TECH DOWN (0748 GMT)
European stocks might still close the week in positive
territory, buoyed by the near-term solution on the U.S. debt
ceiling. The Stoxx 600 benchmark is still down 0.3%,
but autos and energy are bucking the trend with
gains of around 1.1%.
Tech stocks, which usually suffer as interest rates
rise, are the session's losers, down 1.2%.
U.S. government bond yields, meanwhile, are rising ahead of
today's job data, which might give more clues about when the Fed
will start reducing its bond purchases.
Eurowag stocks fell to 130 pence versus IPO price of
150 pence in their London debut.
Shares in Unite Group are among the worst performers
in the Stoxx 600 after company’s trading update, down 3.8%.
(Stefano Rebaudo)
*****
KICK THAT CAN (0733 GMT)
All's well. At least until December 3 when the U.S. Treasury
will again bump up against the newly raised debt ceiling,
allowing Congress to put markets through the 'will-they, won't
they' agony yet again.
And European gas prices are now around a third off peaks hit
earlier this week, though they still are up some 300% on the
year.
Still, it's enough to put markets in a better mood -- world
stocks enjoyed their biggest daily bounce on Thursday since May
while 10-year Treasury yields soared on Friday to 1.6%,
four-month highs. Chinese shares rose too as Caixin PMIs showed
an expansion in September services activity (after an August
dip).
The gains rippled into the commodity complex and commodity
currencies such as the Australian dollar too, though the
momentum is starting to fizzle now with Wall Street looking set
for a flat open and European futures a touch lower.
All eyes now turn to the 1230 GMT release of the U.S.
payrolls data, which a Reuters poll predicted will show 500,000
jobs added in September.
Remember what Fed boss Jerome Powell said last month -- that
he didn't need "a knockout great super-strong employment report"
to feel that conditions had been met to taper stimulus. Chances
are the data won't do much to knock the Fed off its tapering
course.
There are obviously other issues clouding the outlook. Gas
prices may be down but oil continues to climb with Brent now
almost $83 a barrel. At what point does it start to impact world
growth?
Then there's the Evergrande saga, which on Friday again hit
bonds and shares of Chinese property firms.
Key developments that should provide more direction to markets
on Friday:
- Eurowag sets listing price below range as it makes London
debut
- ECB board member Fabio Panetta speaks at BoE event.
- China Sept services activity returns to growth.
- India cenbank keeps rates on hold.
- Rising chip prices fuel Samsung's best quarterly profit in 3
years.
- Insurer Chubb to acquire Cigna's Asian, Turkish business for
$5.8 bln.
- Ireland agrees to global tax deal.
- German exports slip for first time in 15 months.
(Sujata Rao)
*****
EUROPE WITH NO DIRECTION, EYES ON U.S. DATA (0619 GMT)
European stock futures are from flat to slightly lower with
no clear direction yet as market focus shifts to today’s
September U.S. job data, which might affect the Fed’s decision
about when to start reducing its monetary stimulus.
Worries about Evergrande wrestling with more than $300
billion of debt continue to weigh, although China’s stocks rose
after a week-long national holiday on robust PMI data and easing
political tension with Washington.
The U.S. Senate approved legislation to avoid the risk of a
historic default this month but put off until early December a
decision on a longer-lasting remedy. That hasn't stopped U.S.
Treasury yields rising to their highest since June ahead of the
jobs data.
(Stefano Rebaudo)
*****
