LIVE MARKETS-The unknown beyond 2%

* European shares down 0.5%

* German lockdown extension sours mood

* Auto stocks fall 2.8% after strong run

* U.S. futures weaken

March 23 - Welcome to the home for real-time coverage of
markets brought to you by Reuters reporters. You can share your
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THE UNKNOWN BEYOND 2% (1059 GMT)

Yields on U.S. treasuries and German bonds have been falling
this morning, dragged down by the Turkish lira crisis, the ever
resurgent pandemic and new Western sanctions on China.

At its current 1.63%, the yield on the U.S. 10 year doesn't
look that threatening for equity investors who have had by now
plenty of time to digest and adjust to its recent jump.

Looking forward though, there's no clear consensus of where
the breaking point stands should borrowing costs continue to
creep up further along with a robust U.S. recovery.

For Vincent Manuel, CIO at Indosuez Wealth Management,
things could potentially get ugly beyond 2%.

"Excessive interest rate steepening with the 10Y trending
above 2% which could be harmful for equities", he writes in the
asset manager's monthly letter which points out to potential
volatility ahead.

Indosuez has a target of 1.8% to 2% for H2 2021 "with
potential for overshooting".

In the meantime, fine-tuning the rotation of portfolios
between tech/growth stocks and cyclical/value shares remains the
names of the game.

The good news for European investors is that the current
trajectory towards growth acceleration (if a new wave of
infections doesn't stop it) will favour the old continent's
stock markets which are cyclical and value heavy.

Here's a chart from the Indosuez report showing how the rise
in U.S. 10 year yields has boosted value stocks in comparison
with growth and quality shares:

(Julien Ponthus)

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THE YEAR OF THE STOCKPICKER? (1018 GMT)

Stockpicking is showing signs of a comeback and after years
of neglect, active managed funds are starting to see inflows.

Year-to-date active equity funds globally have attracted net
inflows every month, amounting to $80bn in total, Citi reports,
based on data from EPFR.

"Last time that happened was way back in 2013," it adds

"The biggest beneficiaries of active equity inflows have
been Global, EM and ESG funds," they add.

Zooming out to the last twelve months the picture looks
different with global active equity funds suffering $110 billion
outflows, against the $296 billion of inflows for passive funds.

(Danilo Masoni)

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SOME GOOD REGIONAL EQUITY BETS (1001 GMT)

First the big picture then the regional equity strategy...
and the winners are: UK, Japan and Italy.

A negative cocktail of rising interest rates, a modest
dollar appreciation and China’s slowing economy will keep
emerging markets equities under selling pressure, according to
Credit Suisse which downgrades the stock markets of that area.

Meanwhile UK sector-adjusted P/E is trading close to a
record discount relative to global markets and it is the most
attractive region, Credit Suisse analysts say.

China stocks look expensive against global equities,
relative earnings revision is now negative and excess liquidity
has turned to a liquidity shortage, they add.

A rise of the U.S. dollar is expected in Q2.

“Putting it very simply, the fiscal stimulus in the U.S. and
the desire of the BoJ and ECB to cap bond yields leads to a
stronger dollar.”

Japan is overweight in both local and dollar terms as it has
been the best performing region when the dollar and U.S. yields
are on the rise, while showing clear signs of corporate change
which will reduce their valuation discount.

Continental Europe is benchmark as lack of fiscal stimulus
and poor vaccine roll-out weigh on its valuation. But Italy
becomes overweight -- joining Germany, Sweden and Spain -- as it
“benefits disproportionately” from the ECB quantitative easing
being stepped up, while P/E ratios are close to lows and
earnings momentum is very strong.

CS remains overweight on Korea, the most cyclical region,
India as it sees a significant bounce-back in GDP, while rising
Mexico to overweight as the peso looks too cheap.

(Stefano Rebaudo)

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NEW VIRUS WAVE PUSHES EUROPE'S BOURSES DOWN (0902 GMT)

European bourses are well in the red as the region's largest
economy has extended its lockdown, raising fears of a
slower-than-hoped economic recovery from the pandemic.

The German index is down 0.5% after slipping to a
one-week low as Germany is extending its lockdown until April 18
to try to break a third wave of the COVID-19 pandemic.

The pan-European STOXX 600 is falling 0.4% with the
auto and auto parts index leading the losses, down 1.4%.

In terms of single stocks, Swiss drug retailer Zur Rose
is gaining the most, up around 9% after Morgan Stanley
started coverage of the stock with overweight rating.

Volvo shares, on the other hand, is down almost
7% after the company warned chip shortage will hit output.

Other European countries' struggles with COVID-19
resurgence:

Austria delays reopening restaurants as COVID-19 cases rise

French COVID-19 cases accelerate despite new lockdown

Here's your opening snapshot:

(Joice Alves)

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LOCKDOWNS, SANCTIONS AND MONA LISA-LIKE NFTS (0808 GMT)

A whole year after Europe sent workers home to stop the
spread of COVID-19, governments, from Germany to India, are
having to extend or re-impose lockdowns.

Then there are mounting tensions between China and the West;
sanctions on Chinese officials over human rights abuses have led
Beijing to slap measures against European lawmakers, diplomats,
institutes and families.

The 1% fall on Chinese equities -- taking the Shenzen blue
chips more than 15% off mid-February peaks -- rippled out across
Asia and are also sending European and U.S. equity futures lower
while Treasury and German debt prices are higher.

Investors are also watching for any contagion from the
Turkish lira's 8% plunge on the more fragile emerging markets or
European banks exposed to the country. The lira has steadied for
now as a new central bank governor takes the helm, entrusted
with cutting interest rates despite high inflation.

So policymakers today -- most prominently U.S. Treasury
Secretary Janet Yellen -- should highlight the need for more
stimulus spending. European Central Bank chief economist Philip
Lane is already on the wires, pledging the ECB "will do its
part" to keep borrowing costs ultra low.

He spoke after data showed the ECB finally upped its
emergency bond-buying, with last week's 21 billion-euros tally,
the second-highest daily pace since last June.

Two more things to watch for: the Treasury auctions $60
billion in two-year notes, an appetiser for the $120 billion
sales of five- and seven-year notes later this week. Second,
Gamestop, the video game retailer which shot to fame during the
Jan-Feb retail trader mania, reports Q4 earnings.

Finally, it may be a sign of the times that Twitter
co-founder Jack Dorsey's first tweet, sold for $2.9 million on
the non-fungible token market, was likened by the buyer to the
Mona Lisa whose worth will become known over time.

Key developments that should provide more direction to markets
on Tuesday:
-Britain's jobless rate unexpectedly fell to 5% in the three
months to January
-Credit Suisse is hit with additional EU antitrust charges
--Israelis began voting in a fourth election in two years,
-Fed speakers: St. Louis President James Bullard 1300 GMT, 2030
GMT; New York President John Williams 1845; Board Governor Lael
Brainard 1945 GMT
-Philadelphia Fed non-manufacturing business outlook survey for
March – 1230 GMT.
-NATO foreign ministers meet
-Israeli Knesset election
Emerging markets: Central bank meetings in Nigeria, Hungary,
Morocco; Philippines kept rates on hold
-U.S. new home sales, current account Feb
-U.S 2-year note auction; 12-mth bill auction
European corps: Porsche

(Sujata Rao)

*****

EUROPEAN BOURSES SEEN HIT BY NEW GERMAN LOCKDOWN, CHINESE
SELL-OFF (0636 GMT)

European bourses are seen opening lower this morning as
German extended lockdown and Chinese sell-off is spoiling
investors' mood.

Germany is extending its lockdown until April 18 to try to
break a third wave of the COVID-19 pandemic.

In Asia, Chinese blue chips fell 1.5% as investors
took profit on a recent rally in some mainland firms.

Overnight announcements of new sanctions also did not help
Chinese stocks. The U.S., EU, Britain and Canada imposed
sanctions on Chinese officials for human rights abuses in
Xinjiang, in the first coordinated Western action against
Beijing under Biden administration.

Financial spreadbetters at IG expect London's FTSE to open
29 points lower at 6,697, Frankfurt's DAX to open 42 points
lower at 14,615 and Paris' CAC to open 16 points lower at
5,953.

(Joice Alves)

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