LIVE MARKETS-STOXX 600: an underwhelming end to an extraordinary week

* Major U.S. stock indexes barely lower
* Consumer staples biggest gainer among S&P sectors; energy
down
most
* Biden edges closer to winning White House
* Dollar, crude down; gold up; U.S. 10-yr Treasury yield
~0.82%

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

STOXX 600: AN UNDERWHELMING END TO AN EXTRAORDINARY WEEK
(1210 EST/1710 GMT)
European shares have ended the session down 0.2%, quite an
anti-climax considering the STOXX 600 was on the verge of
scoring its best week since 2011.
Sure, with weekly gains just south of 7%, this week is still
the third best in 2020 and the fourth best in a decade.
It's ironic though that the STOXX 600's great run was
achieved during U.S election peak uncertainty and fizzled out
just as Biden seems to be nearing victory and better than
expected U.S job data boosted sentiment and yields.
Anyhow, five straight days of gains (quite a rare
occurrence) have changed the landscape with four sectors making
their way out of year-to-date losses.
So far in 2020, tech is up 3.6%, chemicals 3.4%, retail 1.4%
and utilities 0.9%. That compares with a 11.9% fall for the
STOXX 600.
Here's the STOXX 600 versus these four sectors:
(Julien Ponthus)
*****

TECH STOCKS NOT HAUNTED BY "SPECTRE OF REGULATION" (1110
EST/1610 GMT)
The idea that tech regulation would hurt tech stocks is
widespread. Many analysts have cited the lack of Democrat clean
sweep as a reason for the recent tech stocks rally, suggesting
that a split Congress means a clampdown on big tech is now less
likely.
Since Wednesday, when U.S. election results first started to
challenge the market expectation for a Democratic clean sweep,
the tech-heavy Nasdaq has risen about 6.4%, with tech
giants Facebook, Amazon, Alphabet, Apple and Microsoft among
those leading the gains.
But regulation isn't necessarily a bad thing for big tech
companies. In fact, some investors would welcome it.
"I think the regulation that we would have been looking at
would've been really healthy. I think the tech sector needs
regulation," said Dan Scott, CIO for wealth management at
Vontobel, in Zurich.
Scott, who invests in the tech sector, cited social media
companies' lack of liability for the third-party content
(Section 230) and the use of algorithms with racial biases as
reasons why he would welcome new regulation.

"I think shareholders would even potentially benefit in some
cases from breaking up some of these companies," he said.
"Some people talk about the break-up of tech too, and how
that might be something, and how you should be scared. Honestly,
if you took a company like Amazon, if you split out Amazon Web
Services from Amazon, I think you would crystallise value. I
think for shareholders it would be a beneficial thing," he said.
Brian Jacobsen, a senior strategist at Wells Fargo Asset
Management, based in Wisconsin, said that regulating tech is an
issue with bipartisan support, rather than being particularly
Democrat-specific.
"This rally isn't due to the spectre of regulation being
lifted. It's more due to the dominance of those companies in
their industries and their proven ability to generate decent
visible growth,” Jacobsen said.
Jacobsen said breaking up large companies isn't necessarily
bad for shareholders, in theory at least.
"Often with mergers and acquisitions, the justification is
that the whole is worth more than the sum of the parts – but, at
a certain size, the opposite becomes true," he said.
The race for control of the Senate, which investors will be
watching closely for hints about the legislative agenda, is
still on.

(Elizabeth Howcroft)
*****

EMPLOYMENT REPORT DEEP-DIVE: EVERY THORN HAS ITS ROSE (1020
EST/1520 GMT)
The Labor Department issued its always-anticipated jobs
report on Friday, which included several welcome surprises to
the upside. But it ain't all rainbows and lollipops.
The U.S. economy added 638,000 jobs in October,
38,000 more than expected, and the unemployment rate
dipped well below consensus to 6.9% from 7.9%.
The payroll adds were boosted by an impressive gain of
906,000 in the private sector, but capped by a
268,000 reduction in government workers.
Yes, the report was solid from many angles, but it still
illustrates a slowdown in labor market recovery - and the lowest
number of job gains in five months - as dwindling hopes for
additional fiscal stimulus, spiking cases of the coronavirus and
uncertainties surrounding the potential of a contested election
threaten the pace of an economic rebound from the deepest
recession since the Great Depression.
"With policy gridlock likely in the wake of the US election,
our focus has shifted back to economic fundamentals," writes
Gregory Daco, chief U.S. economist at Oxford Economics.
"Real-time data is quite sobering in that regard, with demand
being restrained by rising Covid-19 infections and slower
employment gains proving insufficient to offset lapsing fiscal
aid."

While the labor market participation rate
ticked higher to 61.7%, it still remains well below pre-pandemic
levels and has contributed to the drop in the unemployment rate
as shutdowns forced many Americans out of the work force.
"The participation rate is really the reason for the sharp
drop in the unemployment rate," said Peter Cardillo, chief
market economist at Spartan Capital Securities.
And although workers are putting in more hours,
average wage growth remains elevated - at 4.5%
year-on-year - which suggests that lower earners, who bore the
brunt of pandemic job cuts, are being rehired at a sluggish
pace.


True, the so-called "real" unemployment rate -
which adds marginally attached and part-time workers to the mix
- slid to 12.1%, the number of Americans working part-time for
economic reasons edged higher, to 6.6 million.

Despite the report's better-than-expected headline numbers,
investors were in a profit-taking mood in morning trading, with
all three major U.S. stock indexes setting a course to snap an
impressive four-day winning streak.

(Stephen Culp)
*****

INVESTORS BACK TO FOCUSING ON COVID-19 DEVELOPMENTS (0915
EST/1415 GMT)
Investors saw a refreshing rally this week as focus turned
to the prospect of a divided Congress in the U.S. and less risk
of major policy changes after Tuesday's election.
Yet, as investors are taking some profit off the table, some
fund managers are already taking the view that the U.S.
election-induced rally is history as "we are once again back to
watching virus developments," writes LGIM's Christopher
Teschmacher.
"With a contest still a possibility and equities having
bumped higher, we have taken profits on our short-term
positions, but we are allowing our medium-term positive view to
run on," he says.
His positive view will only materialize if a vaccine is made
available, but he sees the damage caused by the "European
lockdowns as temporary and partially countered by fiscal
easing".
Jeremy Leung at UBS AM also told us he is closely watching
vaccine developments as "you have to continue to monitor" and
"see how the coronavirus develops".
"Any kind of news around vaccine will cause rotation in the
market," he says.

(Joice Alves)
*****

S&P 500 INDEX FUTURES TRIM DECLINES AFTER PAYROLLS (0909
EST/1409 GMT)
S&P 500 e-mini futures were down slightly before the bell on
Friday, but pared declines after U.S. payrolls data.
The report showed U.S. employers hired the fewest workers in
five months in October, but the number beat economists'
expectations. The unemployment rate fell to 6.9% from 7.9% in
September.
Peter Cardillo, chief market economist at Spartan Capital
Securities in New York, said the report "beat expectations in a
big way.
"Futures have come back. Will they go to the plus side?
We've had four straight days of gains and we could be looking at
a contested election, which adds to the uncertainties."
Indexes on Thursday posted their biggest four-day percentage
gain in nearly seven months. Stocks have rallied this week as
investors were upbeat over the prospect of a divided Congress
and less risk of major policy changes in the wake of Tuesday's
election.
Democrat Joe Biden edged closer to winning the White House
early on Friday, widening his lead against Republican President
Donald Trump.




(Caroline Valetkevitch, Stephen Culp)
*****


BITCOIN'S MANY TAIL WINDS (1249 GMT)
There's been quite some speculation over whether bitcoin
would cross the $16,000 bar this week and it sure was
close!
$15,976 was today's high, which also marks the highest level
the crypto currency reached since 2018. Today's number is a 400%
comeback from the lows of that same year.
PayPal's decision to open its network to bitcoin
was hailed by virtual coin enthusiasts as a watershed
moment for cryptocurrencies but there's more than this to
explain the recent market price action.
There's quite a flurry indeed of tail winds and narratives
pushing bitcoin higher at the moment. One of those is the
colourful U.S. presidential election, which could reinforce the
view of those who believe bitcoin provides a safe haven when
political strikes.
"What we do know is that delays, legal challenges and a
potentially explosive constitutional crisis in the world’s
largest economy is likely to give bitcoin a meaningful price
boost", argued Nigel Green, chief executive of deVere Group on a
note published on November 4.
And indeed, as noted by Neil Wilson at Markets.com today,
"increasingly millennial investors are favouring bitcoin within
their portfolios as a diversification holding similar to people
own gold".
Wilson adds that this trend, beyond the short-term demand
that may have been triggered by the election, might be a
structural tailwind for the crypto currency.
"Given the scale of the gold market only a modest rotation
out of gold would imply a significant increase in prices for
bitcoin from here.
At eToro, cryptoasset analyst Simon Peters said another
structural trend might also be playing.
"The number of bitcoin being held with brokers or on
exchanges, as opposed to investors’ own wallets, is continuing
to fall", he said in a note, adding that "this reduction of
bitcoin in circulation and an increase in demand for the crypto
could be a reason for the continued price rise".
Then of course, investing in bitcoin can be seen as a
possible way to hedge the massive monetary and fiscal stimulus
deployed worldwide.
"People who think current Fed policy is incompatible with
the dollar maintaining its status as the unquestioned dominant
currency, are increasingly going to be drawn to bitcoin", SocGen
analyst Kit Juckes wrote at the end of October.
"I'm going to end up thinking much more about bitcoin in the
future, but for now, it's worth noting that its spike is a
direct consequence of the last 8 months' central bank policy
moves", he added.
Last but not least, momentum. Many have resisted the bitcoin
trade for fear it was just a fad but might reconsider in the
light of its recent rise.
"We might even see the bitcoin naysayers eat their words and
join the FOMO crew in the near future", eToro's Simon Peters
speculated.
Here's bitcoin since 2015:

(Julien Ponthus)
*****


MORE WORRIES ABOUT THE U.S. SENATE (1126 GMT)
Financial markets were quick to cheer the divided U.S.
administration scenario, but something can go wrong as delays
about the Senate might leave investors guessing for weeks.
Runoffs in Georgia "might dampen directional momentum for
several weeks," a Unicredit research note says.
The U.S. Senate race between Republican Senator David Perdue
and Democrat Jon Ossoff in Georgia appeared to be heading for a
January runoff, potentially making a pair of delayed elections
that could determine control of that chamber.
As of now, analysts expect Joe Biden president and a
Republican controlled Senate, which would mean less fiscal
stimulus and probably no tax increase, in a scenario that was
seen boosting risk-appetite.
The Senate race is of "utmost importance for U.S. bond
markets because political gridlock may stand in the way of a
powerful fiscal stimulus,” Unicredit adds.
Analysts at Credit Suisse expect a $2 trillion rescue
package under a Democratic controlled Senate, while just $500
billion if the GOP has the majority of the votes.

(Stefano Rebaudo)
*****



A NEW "WIN-WIN" MARKET NARRATIVE (1033 GMT)
Analysts at Barclays admit they had not anticipated the
European stocks' rally after early vote counts showed the blue
wave, anticipated by polls, was out of the picture.
Equities "have been surprisingly prompt to cheer the new
post election paradigm that could see Biden facing a split
Congress," Barclays say.
Why is that?
"The new market narrative seems to be that gridlock reduces
the chances of a large scale stimulus, but may force the Fed to
step up QE, while also lowering the risk of market-unfriendly
progressive policies (e.g. tax hike, tighter regulation) being
implemented".
Anyhow, uncertainty is markets' number one enemy, so it
won't come as a surprise that what most stock investors really
want right now is a clear win for the U.S. election, regardless
who takes the job.
A "decisive win from either of the two candidates is more
important for markets in the near term, than who that winner
is," Barclays analysts added.


(Joice Alves)
*****


EUROPE’S STOCKS EDGE LOWER AFTER A STRONG WEEK (0838 GMT)
European stocks are slightly lower after a weak start of the
day as Italy and France registered record numbers of COVID-19
cases. Pandemic worries were, however, partly offset by a batch
of stronger than expected results.
The STOXX 600 is now down 0.4% and set to post its best week
since June as of now, with insurers outperforming up 0.6% after
Allianz reported an unexpected rise in Q3 profit.
Travel and leisure stock and tech stock
indexes are the worst performers respectively down 1% and 0.9%.
In terms of single stocks, Richemont shares are up
10% after the company said it sees a marked improvement in the
second quarter thanks to online retail sales and China.

(Stefano Rebaudo)
*****



ON THE RADAR: ALLIANZ, RICHEMONT, RSA (0740 GMT)
European stocks are poised to open lower after a 5-day rally
as focus is back on the economic impact of the virus, while
investors are waiting for final results of the U.S. elections.
Yet, a batch of stronger than expected corporate results is
providing some support to European equities.
Allianz stocks are up 2.1% in premarket trade
after the company posted an unexpected 6% rise in net profit in
the third quarter, at 1.947 billion euros, higher than 1.626
billion euro consensus forecast.
Shares in Richemont are indicated up 4% as the
company sees a marked improvement in the second quarter thanks
to online retail sales and China. The Cartier jewellery maker's
net profit fell 82% in the six months to Sept. 30.
On the back of Richemont, Swatch shares are up 2.75%
in premarket trade.
Freenet, Rheinmetall and Deutsche
Telekom shares are up respectively 1.6%, 1.8% and
1.9% after results.
Bullish news also on the M&A front, with RSA Insurance Group
in talks with a consortium of Canadian insurer Intact
Financial and Danish insurer Tryg about a
possible break-up deal that values the British firm at about 7.2
billion pounds ($9.46 billion).
Shares in Bilfinger are up 9.8% in premarket trade
on a press report that the company decided to explore a sale
after receiving takeover interest.
British industrial software provider Aveva Group
intends to raise 2.84 billion pounds through a rights issue to
partly fund the acquisition of SoftBank-backed peer OSIsoft.

In the vaccine front, AstraZeneca plans to start
early and mid-stage clinical trials of its COVID-19 vaccine
candidate in China this year as it prepares a global rollout.

Novartis's canakinumab failed to help COVID-19
patients survive without invasive ventilation compared with
standard therapy, dashing hopes the arthritis drug could be
repurposed during the pandemic.
Seven municipalities in northern Denmark imposed a hard
lockdown, while Britain said it is removing Denmark
from the government's travel corridor list. Paris
will be placed under more restrictions, Greece
ordered a nationwide lockdown for three weeks.
As a result, British airline easyJet said it will
fly no more than 20% of capacity for the rest of the year.


(Stefano Rebaudo and Joice Alves)
*****


EUROPE IN THE RED AFTER 5-DAY WINNING STREAK (0633 GMT)
European stock futures are in the red along with their U.S.
peers after a 5-day rally, but an expected political gridlock in
the U.S. props up risk sentiment.
Investors have been betting on a Republican controlled
Senate that would block any moves to tighten regulation and
raise taxes.
But their focus is now back on the economic impact of new
lockdowns in Europe to contain the pandemic and a U.S. fiscal
stimulus which could be way smaller than expected.
In the battleground states of Georgia and Pensylvania there
is not a clear winner of the presidential elections yet.


(Stefano Rebaudo)
*****