* Stoxx 600 index up 0.1%
* Tech stocks lead gains, up 0.9%
* Banks worst performers, down 0.6%
Aug 31 - Welcome to the home for real-time coverage of
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BOND YIELDS: MIND THE US-DE GAP (0848 GMT)
An uneventful/dovish testimony by Fed's Chair Jerome Powell
prevented government bond yields from rising above their recent
multi-week highs.
But, barring an unexpected shift of the Fed's attitude,
supply and demand will be one of the major issues driving rates.
"Given that we expect the ECB to confirm its current pace of
bond purchases at the upcoming meeting, the supply/demand
picture is favourable for the euro zone government bonds, hence
limiting any potential significant rise in their yields,"
according to Unicredit analysts.
"The situation is less rosy in the U.S. where, in the
remainder of the year, the Fed is likely to buy only $320
billion of U.S. Treasuries out $1 trillion of bonds expected to
be issued over this period," they say.
They reckon that "a 10Y UST-Bund spread of at least 200bp
would be more consistent with the supply/demand picture in the
remainder of the year."
The chart shows the spread between 10-year German and U.S.
yields, which had been well above 200 bps between February 2018
and January 2020.
(Stefano Rebaudo)
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M&A ACTIVITY BOOSTS TECH STOCKS (0749 GMT)
European stocks are slightly higher as they continue the
post-Jackson Hole price action.
The Stoxx 600 is in positive territory, up 0.1%,
propped up by tech stocks, up 0.9% after shares in
technology investor Prosus NV rise 2% as the company
agreed to buy Indian payments platform BillDesk.
Basic materials shares are up 0.6%, while positively
sensitive to higher interest rates bank stocks are the worst
performers, down 0.8%.
Worries about China's economy might spoil the party today
after weaker than expected August PMI data added to the recent
pressures caused by regulatory changes.
Hopes of more Chinese central bank support did help keep
China's stock losses in check overnight but the Shenzen-listed
tech shares are down nearly 2% and set for their worst
month since MArch 2020 - the peak of COVID angst.
Rolls Royce stocks are down 2% after FT reported that
Causeway Capital Management called on the British engine maker's
incoming chair to refresh the board.
(Stefano Rebaudo)
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WHO'S ROCKING THE BOAT NOW? (0711 GMT)
From Fed boss Jerome Powell on Friday to the Cleveland Fed's
Loretta Mester on Monday, the doves have been out in force,
sending the dollar to two-week lows, Treasury yields below 1.3%
and putting the S&P 500 on track for its longest monthly
winning streak since 2018.
But China is rocking the boat.
Its non-manufacturing PMI fell to a contractionary 47.5 in
August (53.3 in July) and the composite PMI recorded its first
sub-50 reading since February 2020.
The impact of new rules restricting under-18s from playing
video games for more than three hours a week is also weighing --
Shenzen-listed tech shares are down more than 2%.
And a Reuters report of a regulatory probe into the property
investments of Ping An Insurance sent its shares 7%
lower at one point.
Still, world shares scaled new record highs, while Wall
Street futures are almost half a percent higher. The main focus
in Europe is the euro zone "flash" inflation data following
Germany's 3.4% reading on Monday. Economists polled by Reuters
predict 2.7% -- that would be the highest reading since 2012.
Bond markets however, shrugged off Germany's outsized
reading and are likely to keep their eyes firmly trained on the
Fed and Friday's August U.S. jobs data.
On the corporate front, dealmaking never really took a break
over the summer but expect the pace to pick up in coming weeks.
Today's big news is the $4.7 billion purchase by tech
investor Prosus of Indian payments platform BillDesk. And the
familiar laments about supply chain disruptions continue -
business supplies distributor Bunzl is the latest.
Finally, watch travel stocks after EU removed the United
States and five other countries from its safe travel list. The
United States, on its part, has issued a "do not travel"
advisory for several European nations.
Developments that should provide more direction to markets on
Tuesday:
- Japan's industrial output shrank in July.
- Germany's centre-left SPD cement hold on first place ahead of
Sept 26 elections.
- Zoom Q2 revenues rose 54% to $1.02 billion, beating forecasts
of $991 million; BlackRock AUM at record $9.49
trillion in Q2 vs $7.32 trillion a year earlier
- Chinese Evergrande New Energy Vehicle shares down
after big H1 loss.
-Chile central bank meeting
-Chicago PMI due out
(Sujata Rao)
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EUROPE IN THE BLACK, CHINA DAMPENS RISK SENTIMENT (0619 GMT)
European stocks are poised to open higher following new
record closing highs on Wall Street.
They ended flat on Monday in thin volume as UK markets were
closed for a bank holiday.
Equities are still bolstered by confidence that the Fed is
in no rush to tighten monetary policy, which triggered
expectations that the reflation trade is about to take off
again.
But worries about China's economy are bound to dampen risk
appetite. In August, China's factory activity expanded slower
while the non-manufacturing PMI survey plunged to a
contractionary 47.5, data showed.
(Stefano Rebaudo)
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Rolls-Royce (RR.)
