* A look at the day ahead from EMEA Markets Editor Mike
Dolan. The
views expressed are his own
LONDON, Nov 25 (Reuters) - A relatively bright start to the
week for world markets underlines what is shaping up to be a
pretty benign year-end for investors, already on course for one
of the best year’s for global equity of the past decade as we
head into the Thanksgiving holiday stateside on Thursday. Trade
war ping-pong aside, the picture painted of the global economy,
earnings and monetary policy appears to have found an
equilibrium of sorts. The November flash business surveys from
around the world, released on Friday, continue to point to
sluggish growth – a bit better than forecast in the United
States and a bit below consensus in Europe – but supporting the
thesis that sentiment troughed as we entered the final quarter
and easing the worst fears of a 2020 recession. Citi’s economic
surprise indices also show that market consensus is more
accurately capturing the state of the world economy. The
aggregate surprise index for G10 major economies and for the
U.S. index itself are both close to zero, where they have
hovered for the past month at least. The euro zone is more
negative, but only half the depth of a month ago. The standout
deterioration has been in the UK index, which has slumped to its
weakest reading in three months as next month’s election
approaches.
Otherwise, the main central bank settings also appear to be
broadly on hold. European Central Bank chief Christine Lagarde
indicated as much in her first major policy speech on Friday,
with the now widely flagged emphasis on getting government
spending to take the pressure off monetary policy. U.S. Federal
Reserve chairman Jerome Powell speaks later on Monday, but few
see any further easing of Fed policy on the immediate horizon
after three interest rate cuts this year.
And so on a macro basis, the elephant in the room remains
the U.S.-China trade war. While hopes for an immediate ‘Phase
One’ deal have gone a bit cold amid negotiating snags and
concerns over Washington pressure surrounding the Hong Kong
protests, there are also reports that the looming Dec. 15 tariff
hikes may be postponed too to allow talks more space to progress
into early next year. On the other hand, the Global Times, a
tabloid run by the ruling Communist Party's People's Daily, said
a phase one trade deal was "very close". Shanghai stocks gains
almost 1 percent on Monday, with Tokyo’s Nikkei up by a similar
amount and Hong Kong and South Korea’s main indices advancing
more than 1 percent each.
European stock futures were up smartly too. Ten-year U.S.
Treasury yields nudged higher. China’s offshore yuan was firmer.
The dollar’s DXY index gave back some of Friday’s sharp gains,
allowing euro/dollar to cling on to $1.10 even as dollar/yen
pushed higher. Sterling steadied after the PMI-related retreat,
with few sparks from the election campaign to add any new
direction on that front. South Africa’s rand rallied in early
trade after S&P Global Ratings decided on Friday to downgrade
the country's credit outlook instead of lowering its sovereign
rating, as many had feared.
On the European corporate news front, luxury stocks will be
on the watch-list after LVMH reached a definitive agreement to
buy U.S. jewellery chain Tiffany in a $16.2 billion deal that is
the largest takeover ever the acquisitive French group. One
trader sees LVMH and the whole sector rising as much as 2% at
the open. Meanwhile, Novartis agreed to buy U.S. biotechnology
company The Medicines Co for about $9.7 billion, as it seeks to
expand its portfolio of medicines against cardiovascular
disease. Novartis shares were down 3.2% in premarket trade.
Elsewhere, debt-ridden telecoms company Altice said it would buy
French fibre wholesale operator Covage for around 1 billion
euros, while freshly privatised French lottery operator FDJ
agreed to buy software publisher Bimedia. Shares in Prysmian are
expected to get a boost fter its troubled Western Link high
voltage connection was taken over by clients. Eyes also on
Italian toll road operator SIAS after a bridge on one of its
highways collapsed on Sunday following a massive landslide. No
casualties were reported.
* Europe corp events: Uber's operating licence in London
expires
Monday
* Turkey Nov manufacturing confidence
* Germany Nov Ifo business confidence
* UK CBI’s Nov distributive trades survey
* European Central Bank chief economist Lane speaks in
London, ECB
board member Mersch speaks in Frankfrurt, Bank of Spain chief
and ECB policymaker Hernandez de Cos speaks in Madrid
* Belgium Nov leading indicator
* European Parliament to debate compensation for farmers hit
by
U.S. sanctions after WTO ruling on Airbus subsidies
* Israel, Kenya, Ghana central bank policy decisions
* Turkish President Erdogan visits Qatar
* Brazil Oct current account balance
* Mexico Q3 GDP
* Fed chair Powell speaks in Providence
* Bulgarian Prime Minister Boyko Borissov meets U.S.
President
Donald Trump in Washington
(Writing by Mike Dolan, @reutersMikeD
Editing by Alison Williams)