* Subdued trading after Jackson Hole
* STOXX 600 flat
* Wall Street futures tick up
* UK on bank holiday
Aug 30 - Welcome to the home for real-time coverage of
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CHINA'S MOVE TO CUT GAMING TIMES RIPPLES TO EUROPE (1128
GMT)
Among the stocks under pressure today are a few European
gaming stocks such as Sweden's Evolution and France's Ubisoft,
down 2.5% and 1.7% respectively.
The pressure comes from China where regulators just slashed
the amount of time players under the age of 18 can spend on
online games in response to growing concern over gaming
addiction.
The market price action in Europe is however less
spectacular than in pre-market U.S. trading where shares of
Chinese gaming NetEase are down over 6% and Mobile game
publisher Bilibili is sliding 3%.
China's regulatory crackdown is definitely a major challenge
for investors as we move into September and here's a useful
recap of the sectors affected:
FACTBOX-From tech to education, China's season of regulatory
crackdown
(Julien Ponthus)
*****
CHINA’S TECH: BUY-THE-DIP OR… MAYBE NOT (1030 GMT)
Views on Chinese tech stocks are mixed, although recently,
some big investors have been more constructive, suggesting
finding companies aligned with the Chinese government's
strategic objectives.
Saxo Bank warns to stay away from China’s tech, while
arguing that a crackdown by the Chinese government on tech
companies might not be over yet.
“Investors should recognise that China’s next Party Congress
is set for October 2022, and the political sphere could continue
to cast a shadow over the Chinese equity market,” they say.
China’s government wants to “ensure that technology
companies do not become too powerful.”
Besides, “it will take time for foreign investors to come
back, and the ‘tail-risk that has happened in Chinese technology
stocks will not be easily forgotten by investors,” they add,
suggesting focusing on Chinese consumer stocks.
Tencent’s valuation premium on Facebook
recently shrunk, and Saxo doesn’t rule out that the Chinese
company could trade at a discount.
(Stefano Rebaudo)
*****
EURO: TIME TO LOOK AT GERMAN ELECTIONS? (0938 GMT)
A lot is at stake with the German elections in September,
from European integration to the fiscal policy of Germany and of
the euro zone.
But up to now, polls didn’t trigger much price action as the
outcome remains very uncertain and investors were busy focussing
on last Friday’s Fed Chair Jerome Powell's testimony.
“We warn against ignoring the issue completely,” with the
latest polls now indicating the possibility of a left-leaning
coalition, Commerzbank analysts say.
“Should a stronger trend emerge in the polls, there could
therefore possibly still be movement in the euro exchange
rates,” they add.
The equation is always the same. Greens and the SPD are more
in line with the idea of a fiscal union; “so the euro would
appreciate if those parties would form a significant part of the
new government.”
“The euro would tend to weaken” if the CDU/CSU, as well as
FDP, were to gain more significant influence.
Saxo analysts think the next government will be a
three-party coalition led by the centre-right CDU/CSU or the
centre-left SPD.
“We expect German fiscal policy to turn modestly more
expansionary after the election,” they say in a research note.
Commerzbank sees a euro-dollar exchange ratio at 1.18 in the
coming weeks, based on the macroeconomic backdrop.
(Stefano Rebaudo)
*****
THE REFLATION TRADE LIVES ON (0833 GMT)
It seems Powell's Jackson Hole speech extended the appeal of
one of the most popular trade of the year.
According to this morning's UBS House View, the investment
implication of the Fed chair's dovish speech support the
reflation trade.
"The resumption of the reflation trade that was evident all
week continued after the speech", the strategists argued.
"After a hawkish turn during the summer, the speech is more
reminiscent of Fed communication early in the year that
emphasized maximum employment and data dependency", they argued.
"That messaging was supportive of value and cyclical
equities back then, and we think that is the case once again".
Some reading on Jackson Hole:
ANALYSIS-Powell's wait-and-see speech reassures some
investors
Why Fed Chair Powell still thinks high inflation is
'temporary'
Fed's Powell holds fast to 'this year' timeline for
bond-buying taper
(Julien Ponthus)
*****
A SUBDUED OPEN FOR EUROPE (0726 GMT)
Maybe it's due to the bank holiday in London but this early
session in Europe sure feels quiet!
There's currently no stock across the STOXX 600 moving above
2%, which underlines just how little volatility there is at the
moment. To be fair the corporate newsflow is extremely thin and
doesn't warrant much market price action.
The pan-European benchmark is up about 0.1% and all sectors
are trading fairly quietly.
The best performance is in the automotive space, which is up
0.4%. Insurance, with a 0.25% dip, is the worst performer.
All in all though, European stocks are less than 1% away
from their August 13 record high of 476.16 points.
Not much action either for Wall Street futures which are
just very slightly trading in the black.
To be fair, most asset classes seem to be on hold at the
moment, be it in currencies with a perfectly flat dollar index
or bonds with Germany's 10-year Bund yield not moving much
either.
(Julien Ponthus)
*****
JUST A LITTLE BIT LONGER (0638 GMT)
A consensual takeaway from Federal Reserve Chairman Jerome
Powell's remarks at the Jackson Hole Symposium is that investors
will be able to dirty dance to the beat of the Fed's $120
billion monthly asset purchases for just a little bit longer.
Powell stuck to his dovish monetary policy message without
disclosing the timing of the central bank's tapering strategy,
allowing the S&P 500 and the Nasdaq to close at record highs on
Friday.
Like all things, the current bull market must come to an end
some day. But investors who feared that moment could have been
last Friday can sigh in relief even if September is typically
the trickiest month of the year for Wall Street.
There seems to have been no second thoughts or buyer's
remorse over the weekend with Asian bourses on the rise this
morning and the dollar index falling to a two-week low.
Wall Street futures are ticking up and European bourses are
set to open slightly in positive territory. Britain is closed
for a bank holiday.
There's still plenty of fears around that the rally is
running out of steam and that resurgent inflation might force
reluctant policy makers to pull the plug on quantitative easing
in a disorderly way.
In the meantime though, the yield on benchmark 10-year U.S.
Treasury note is at 1.3%, down from last week's
two-week high of 1.375%.
In the euro zone, where the economy is bouncing back amid
trillions of euros worth of monetary and fiscal stimulus, labour
shortages and production bottlenecks, German 10-year bonds yield
-0.42% .
Oil prices pared early gains on Monday, off more than
three-week highs reached earlier in the session as a powerful
hurricane ploughing through the Gulf of Mexico forced shutdowns
and evacuations of hundreds of offshore oil platforms.
Gold is steady, with the spot price at $1,816.2 per
ounce, down 0.1%, having touched its highest in three weeks
earlier in the session.
Key developments that should provide more direction to markets
on Monday:
-Japan's retail sales extend gains but COVID-19 challenges
persist
-Thai July factory output slows from virus curbs, outbreaks
-Eurozone business sentiment indexes consumer inflation
expectations
-Preliminary German CPI/HICP
-Emerging markets: Colombia central bank
-U.S. pending new home sales data
-U.S. 6-month and 3 mth bill auctions
(Julien Ponthus)
*****