* Biden takes the lead in Georgia-CNN
* European shares end week rally
* STOXX 600 down 0.6%
* U.S futures fall
* Richemont shares surge after results
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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)
*****
