* European shares rise 0.5%
* France reopens border with UK
* Tests seen confirming vaccines effectiveness
* Trump threatens to not sign COVID-19 bill
* US futures edge up, volatility down
Dec 23 - 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
"THE ULTIMATE VALUE PLAY" (1154 GMT)
With the pound and UK midcaps gaining some ground this
morning, it's probably fair to say that the market is pricing
that Brussels and London will eventually strike some kind of a
deal and that a crash out of the EU can be avoided on January 1.
One reason perhaps that investors are in no selling mood
when it comes to UK equities, is that they are already trading
at a big discount and they offer potentially quite a nice
upside.
With a PE of 17 for the FTSE 100 and 16.3 against for the
FTSE 250, British equities are cheap versus the pan European
STOXX 600 which can boast a PE of 21.5.
"UK equities are the ultimate value play", reckons Nadège
Dufossé, head of cross-asset strategy at Candriam.
In a note dedicated to Brexit asset allocation where the
central scenario is a last minute deal, she explains why she is
overweight on UK domestic equities.
"They should fully benefit from a relief if we find a Brexit
agreement and from the recovery once we come out of the health
crisis", she says, adding however that caution was in order when
it came to overall asset allocation.
"We have also added protections on the European equity
market in order to cope with a potential hard Brexit or vaccine
failure".
Anyhow, at the time of writing, uncertainty rules over the
Brexit talks. The latest we got from the Brussels bureau and on
our wire was that the EU's von der Leyen and Johnson were
expected to hold another call on Wednesday or Thursday.
(Julien Ponthus)
*****
BUYING THAT DIP AGAIN! (1041 GMT)
European equities are up for a second day in a row after
Monday's brutal sell-off which really had the traits of panic
selling at one point.
But today, a mix of hope and optimism is gaining the upper
hand again, drawing investors into dip buying mode.
Price action on Wall Street has also been telling.
The S&P 500 has fallen for three straight sessions but has
nevertheless recovered from the 1-week intraday low it reached
on Monday when (perhaps) misplaced fears about a new virus
variant put investors into a state of angst.
"The fact is that the market momentum is so strong, as it is
the 'dip buying' culture, given it has worked so well over the
past ten months," said Giuseppe Sersale, fund manager and
strategist at Anthilia in Milan.
The S&P 500 has gained as much as 70% from its March lows
whereas Europe's STOXX 600 has risen nearly 50%.
Meantime, Jeroen Blokland, portfolio manager head of multi
asset at Robeco in Rotterdam, asked his twitter followers
whether this week's pullback could represent an opportunity to
jump back into the market at more convenient prices.
To the question "Buy the dip?", more 61% of the 2,000
respondents to the poll said "YES".
"Not that global vaccination is without hurdles, such as for
example mutant strains, production capacity, transport issues
and a widespread unwillingness to have the jab, but so far
developments have surprised on the upside," he wrote today.
"Growing belief that there is light at the end of the tunnel
will likely bolster market sentiment and, more importantly,
overall well-being," he added.
And in London, Matthias Scheiber, Global Head of Portfolio
Management, Multi-Asset at Wells Fargo, also sounded upbeat.
"This winter will remain tough in terms of COVID-19 cases,
but the equity market is likely to look through the shorter-term
uncertainties and focus on the longer-term prospects on earnings
growth," he wrote in a note published .
(Danilo Masoni and Julien Ponthus)
*****
WHAT ABOUT THE CHINA FACTOR? (1020 GMT)
Analysts are rightly focused on virus trajectories and
lockdowns but they might have played down one of the factors
which recently boosted asset prices recently, namely the Chinese
economy.
A Citi research note says the strong rebound of China’s
economy has been supporting commodity prices as well as emerging
market shares, while propping up optimism in the manufacturing
sector in Europe.
But this is not just the effect of a pandemic under control
as that surge “is to a significant extent propelled by strong
credit growth,” a Citi research note says.
The China credit impulse is close to a post-Global financial
crisis high, it adds.
It might however end soon as the People's Bank of China
(PBOC) hinted recently that the time to end the pandemic
monetary policy response is approaching, Citi recalls.
For Europe, the strong Chinese credit numbers suggest an
acceleration in manufacturing in the first half of 2021, but a
weakening in liquidity over the coming months it could
potentially weaken Eurozone manufacturing in H2.
However as of today optimism prevails, with China shares
rising on expectations that policymakers would likely avoid
sudden credit policy tightening in 2021.
(Stefano Rebaudo)
*****
REBOUND CONTINUES (0833 GMT)
European shares are off to a positive start, extending their
rebound from Monday's sell-off as investors shrugged off Trump's
threat to not sign a relief bill, while taking comfort from news
that France has reopened its border with the UK and expectations
vaccines will be effective against the virus variant.
The STOXX 600, up 0.5% on the day, was just 1.5 percentage
points below the February high it last week.
Hopes of an eleventh hour Brexit trade deal also came into
play, lifting the pound and weighing on the FTSE, which was the
only major European index trading in the red in early deals.
Biggest gainer on the STOXX was BA owner IAG while stay at
home darling Hellofresh was down 2.5%, reflecting optimism about
the effectiveness of the vaccines.
Here's your snapshot.
(Danilo Masoni)
*****
MARKETS RIDE OVER TRUMP BUMP (0811 GMT)
U.S. President Donald Trump has thrown a small spanner in
the works for markets riding, once again, near record highs.
His threat late on Tuesday to not sign an $892 billion
coronavirus relief bill because he wants bigger stimulus checks
could disrupt the passing of a hard-fought package markets had
already priced in.
That, together with the clock ticking down on an elusive
Brexit trade deal between the European Union and Britain and a
new jump in COVID-19 cases globally has ruffled investors,
although not by much.
The signs on Wednesday in holiday-thinned markets were that
most traders are taking the news in their stride, with European
stock futures mixed.
World stocks rose 0.2%, powered by gains in Asia, and sit
just 1% off record highs.
Wall Street initially dropped sharply after news of Trump's
unease with the stimulus scheme, but futures now point to a
small rise at the open -- a sign again of stocks resilience as
investor optimism looks beyond short-term bumps in the road.
The dollar, which is headed for a 6% drop in 2020, slipped
as the euro rose back towards $1.22.
The dollar was also pulled lower by a rise in the pound on
the possibility of Britain and the European Union striking a
trade deal on Wednesday.
In corporate news, there was more electric vehicle mania
overnight. LG Electronics shares surged 30% after the South
Korean group and automotive supplier Magna announced the launch
of a $1 billion joint venture that will make key components for
electric cars.
Apple had gained on Tuesday after Reuters reported that it
plans to launch its own electric car by 2024 -- that had sent
the Nasdaq to another record high.
Key developments that should provide more direction to
markets on Wednesday:
-US monthly private consumption data for November
-Preliminary US core capex data for November
-Bank of Thailand monetary policy committee meeting
(Tommy Wilkes)
*****
MORNING CALL: EUROPE SEEN WEAKER (0639 GMT)
European shares are expected to open a touch weaker today
after a volatile start of the week that saw a big sell-off on
Monday followed by a recovery on Tuesday as investors gauged the
impact of a fast spreading virus variant discovered in the UK.
The new strain triggered tough restrictive measures in
Europe, which in turn clouded the outlook for the economic
recovery, although current vaccines should be protective even
against the new strain.
Drugmakers expect vaccines will be effective and their tests
should provide confirmation in a few weeks.
Meantime, in another positive sign, France will reopen its
borders to passengers from England on Wednesday, ending a
blockade intended to stop the spread of a new variant.
Souring again the mood again however was Trump who late on
Tuesday threatened to not sign the $892 billion coronavirus
relief bill, saying it should be amended to increase the amount
in the stimulus check.
At the time of writing, futures for the Euro STOXX 50, DAX
and FTSE 100 were down between 0.2% and 0.3%, while U.S. futures
also eased just slightly after a mixed close on Tuesday that saw
the Nasdaq reach yet another record high.
(Danilo Masoni)
*****
International Airlines (IAG)
