China reopening still one to play for equities

STOXX 600 up 0.4%

*

Miners, autos top gainers

*

U.S. stock futures edge up

Welcome to the home for real-time coverage of markets brought to you by Reuters reporters. You can share your thoughts with us at .

CHINA REOPENING STILL ONE TO PLAY FOR EQUITIES (1201 GMT)

China remains in focus for investors this week amid recent developments in Taiwan.

Ongoing tensions between the U.S. and China are likely to continue as a risk factor for Chinese equities, write UBS investment strategists in a note. They point out recent drops in major Chinese indices, but despite all this, retain optimism.

"...we believe that the fundamental economic recovery should drive another leg up for the market."

In fact, the UBS strategists view Chinese equities as the most preferred in their global strategy.

"...recent management guidance from 4Q22 results briefings pointed to an overall recovery in consumption sentiment."

The country's internet sector in particular delivered positive surprises, they note, with most companies reporting higher-than-expected earnings after a boost following the country's post-pandemic reopening.

A strong and speedy recovery in the consumer services sector is also expected to be maintained over the next few quarters, write the UBS strategists, and consumer discretionary and staples companies also showed positive signs.

Lastly, property sales are showing an uptick.

So the UBS strategists continue to favour positioning for the China reopening, anticipating overall earnings growth of 14% this year. And buying Chinese stocks isn't the only way to do it.

"Other ways to position for China’s recovery include the Australian dollar, commodities, and select European stocks."

(Lucy Raitano)

REASONS FOR OPTIMISM ON EUROPEAN BANKS (1004 GMT)

With the STOXX 600 trading near a one-month high, fears of a wider crisis in banking stocks seem to have receded.

A European index of banks is trading at levels last seen in the first days of 2023, about 12% off a low hit on March 20.

According to Credit Suisse analysts, investors should remain overweight on European banks, citing "valuation, relative resilience and earnings momentum."

Their most preferred European bank stocks are ABN Amro , Barclays, Bank of Ireland Group, BNP Paribas and Banco Santander.

In a note, the CS analysts highlight three key themes as rationale for their optimism. First they highlight record returns and the fact that regulators continue to approve buybacks.

"We favour stocks with high recurring payout yields and high Basel 4 CET1 ratios, such as ABN and BNP Paribas," they write.

The second theme is "revaluation."

"EU banks already price in a recession at c0.8x TBV and recent events should have limited lasting impact on 12-13% ROTEs. Catalysed by earnings, we favour BARC and SAN on under 5x 2024 P/E."

Their third and final theme is interest rates which they say remain a tailwind to banks' net interest income.

The CS analysts' least preferred stocks among European banks are Deutsche Bank, KBC Groep, SEB and Svenska Handelsbanken

(Lucy Raitano)

CAN TECH KEEP RUNNING? (0912 GMT)

JP Morgan has taken a fresh look at tech following its strong start to the year, and even though it believes the space will do better in 2023 versus last year, the run is getting stretched.

"It is looking overbought, close to all-time highs, with RSIs that are nearing elevated territory. Valuations of the sector are up meaningfully from last October, with... Tech P/E relative is closing in on 20 year highs," says JPM.

The U.S. bank sees bond yields falling further from current levels, but says tech appears to have over-discounted that move and advises a defensive tilt to portfolios.

"We do not advocate to be short Tech... we believe that positioning in pure Defensive plays such as Telecoms, Utilities, Staples and Healthcare, could be the best place to be in over the next months."

(Danilo Masoni)

1-MONTH HIGH FOR THE STOXX (0804 GMT)

Shares in Europe kicked off the session on the good foot with gains spread across almost all sectors pushing the STOXX 600 to its highest in around a month.

The pan-European benchmark index was last up 0.6%. Top sectoral gainers were Basic Resources and Autos, both rising more than 2%, while Utilities >.SX6P> lagged after a recent rally, down 0.1%.

Most country indices were trading in the black. The CAC in France was just a handful of points below its previous record high, up 0.7%. Spain's IBEX bucked the positive trend, down 0.3%. Here's your opening snapshot:

(Danilo Masoni)

EUROPE SET FOR POSITIVE START (0645 GMT)

European shares were expected to rise on Tuesday as investors return to work following a long Easter break with positive readings across Asian markets and a late recovery on Wall Street on Monday supporting the mood.

EuroSTOXX50 and FTSE 100 futures were up around 0.7%, while U.S. derivatives pointed to mild gains later on Wall Street as traders eyed the start of the reporting season this week and the Wednesday's U.S. inflation report.

Corporate news was thin so far. Among the few highlights, utility Enel could find support after agreeing to sell its equity stakes in two Peruvian assets for $2.9 billion.

Eyes are also on Glencore after Reuters reported that CEO Gary Nagle plans to meet with some of Teck Resources' Canadian shareholders on Thursday to lobby them for support of its proposed takeover of the copper and zinc miner.

(Danilo Masoni)

ASIA STOCKS BOUNCE AS DOVISH CENTRAL BANKS LIFT THE MOOD (0550 GMT)

Asian stocks put in a strong showing on their return to full trading globally after the Easter break, with Australian investors coming back to a 1.3% rally in their equity benchmark.

In Japan, where it had been trading as usual over the holiday period, the Nikkei jumped 1.4% after new Bank of Japan Governor Kazuo Ueda signalled overnight he would stick to ultra-easy stimulus for now, knocking down the yen. The market got an additional boost after Warren Buffett said he plans to add to Japanese investments.

South Korea's Kospi leapt 1.5% after the Bank of Korea held rates steady for a second consecutive meeting, resisting any pressure from bets that the U.S. Federal Reserve would be hiking rates by a quarter point in May.

Sentiment may have also got a boost from a lower-than-expected reading on consumer price inflation from China, which gives the PBOC leeway for more supportive measures to help along the economic reopening. The local stock price reaction was muted though: Hong Kong's Hang Seng was up 0.9% while mainland benchmarks were flat.

The good mood belied a ramp up in China-U.S. tensions after the Asian superpower staged three days of military drills to yesterday that simulated strikes on Taiwan.

China's relationship with Australia seems to be thawing, however, with the trade partners resolving a dispute over barley, boosting the Aussie dollar.

Bitcoin, meanwhile, soared as high as $30,438 in Asia for the first time in 10 months, smashing out of recent ranges.

Europe returns to trading with very little on the economic calendar aside from euro zone retail sales for February and the Sentix business survey.

Key developments that could influence markets on Tuesday:

Sentix index

Euro zone retail sales

First Republic financial results