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Oct 4 - Welcome to the home for real-time coverage of
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HERE'S YOUR MONDAY DOSE OF VALUE BULLISHNESS (0936 GMT)
There's barely no day that goes by without another broker
piling in with yet one more upbeat view on value, as rising
yields suggest the space has catch-up potential.
Delivering the Monday dose of value bullishness is Goldman
Sachs.
"Value still looks exceptionally cheap vs. Growth and we
think this provides pockets of opportunities for investors. That
does not mean that the rotation into Value will be persistent or
long-lasting but we do think the current rotation will go
further," GS says in its European express note.
Goldman is overweight on energy and banks.
(Danilo Masoni)
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UTILITIES: WHY THEY UNDERPERFORM (0859 GMT)
Higher energy prices are usually good for utility stocks.
This is the general idea, but there are a couple of things we
should consider.
As BofA analysts put it, utilities might become victims of
their own success as they face two challenges.
“Firstly, they are mostly hedged (against volatility in
energy prices) for 2022 and partially for 2023, limiting their
ability to capture higher prices in the near term,” they say.
“Secondly, they are vulnerable to imposition of windfall
taxes by governments seeking to avoid higher wholesale costs
impacting voters' pockets,” they add.
So BofA looks at utility stocks, country by country.
In Germany, there is the lowest risk of adverse intervention
that could negatively impact E.On, RWE,
Uniper.
France might face a temporary freeze with companies being
asked to postpone tariff increases until after the presidential
elections in April 2022.
The UK government's silence on energy bills creates
uncertainty for UK-exposed utilities such as Centrica,
SSE, Orsted, EDF and RWE.
Italy and Spain will probably see measures to cut consumer
prices at utilities' expense.
The chart below shows the European utility stock index
underperforming the oil and gas index and the
Stoxx 600.
(Stefano Rebaudo)
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RED IT IS! (0750 GMT)
There seems to have been quite a while of soul searching
this morning but the direction of travel now seems pretty well
set: it's down!
The pan-European STOXX 600 is losing about 0.5% at the
moment and only two defensive sectors, healthcare and food and
beverages are making timid gains.
All other sectors are losing some ground, starting with
banks which are down about 1.5%.
Same goes for national bourses which are overwhelmingly in
the red, at the exception of Madrid's IBEX which is flat.
In terms of individual stocks, BT is a top faller after a
media report said pay-TV group Sky was set to back Virgin Media
O2's fibre rollout.
Another big mover in London was supermarket Morrison down
3.7% after CDR won the auction with a 7 billion pound bid.
Looking ahead, Wall Street futures are also in the red,
particularly for the Nasdaq, down 0.7%.
(Julien Ponthus)
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EMERGING BRITAIN (0655 GMT)
As the Northern hemisphere autumn gets going, there is but
one colour -- green.
The dollar is trading just below one-year highs against a
basket of currencies and is heading for its best year since
2015. Speculators are piling in -- latest data shows "long"
dollar positioning at the highest since March 2020.
A hawkish Federal Reserve, higher Treasury yields and
jitters over the U.S. debt ceiling battle are all combining to
drive the greenback higher.
A rising dollar is typically a sombre omen for markets and
perhaps unsurprisingly, its four-week streak of strength
coincided with world stocks snapping a seven-month run of gains
in September. Dollar strength also usually spells bad news for
emerging markets, which had a pretty poor September.
Speaking of which, some strategists are starting to wonder
if Britain's pound isn't behaving like one. (Full Story)
Why? In a nutshell, it's that feeling when you realise
rising interest rates may not lift your currency much and
investors flee bond markets rather than flock to it.
Markets have brought forward expectations for the Bank of
England to raise rates but that has so far failed to prop up
sterling which hit its lowest levels of the year last week.
Sterling is being hit by a storm of supply shortages,
surging energy prices and of course dollar strength.
Doubts about the government's economic strategy are running
high as Prime Minister Boris Johnson admits a "period of
adjustment" is needed. And some pundits are warning of
1970s-style "winter of discontent". (Full Story)
Currency traders now await Friday's September nonfarm
numbers, which could encourage the Fed to proceed with unwinding
stimulus. As for today, those fretting about crude prices at $80
a barrel will watch today's OPEC+ oil producers' meeting.
Asian bourses started the week slightly lower while shares
of debt-laden China Evergrande 3333.HK were suspended after it
missed another interest payment.
Stocks futures point to a weaker session in Europe and on
Wall Street.
Key developments that should provide more direction to markets
on Monday:
-- OPEC meets on output increase as oil prices rally (Full
Story)
--CD&R wins $10 bln auction for UK supermarket Morrisons (Full
Story)
-- Euro zone finance ministers to discuss EU recovery plans
-- Fed speakers: Boston interim President Kenneth Montgomery, St
Louis Fed’s James Bullard,
-- US durable goods, factory orders
(Julien Ponthus)
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UNCERTAIN FUTURES (0635 GMT)
Futures for European stocks have been wobbling between
negative and positive territory for the past hour and it's yet
uncertain if they will settle in the black.
The mood seems a tad darker on Wall Street with S&P 500
e-minis down 0.3% and Nasdaq 100 e-minis losing 0.5%.
The session wasn't exactly upbeat in Asia with MSCI's
broadest index of Asia-Pacific shares outside Japan
dipping 0.1%.
Adding to the gloom, trading of debt-laden China Evergrande
was suspended pending an announcement about a major transaction.
Chinese media said the distressed developer would sell a
half-stake in its property management unit to Hopson Development
for more than $5 billion.
Oil fell on Monday ahead of an OPEC+ meeting which may
determine whether the recent rally in prices will be sustained.
In terms of individual stocks, all eyes will be on the
British retail sectors after CD&R won the auction for Morrisons
with a 7 billion pound bid.
(Julien Ponthus)
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