LIVE MARKETS A huge lockdown-triggered risk-off move
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A HUGE LOCKDOWN-TRIGGERED RISK-OFF MOVE (1015 GMT)
What on earth just happened?
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In a matter of minutes the dollar surged, the euro fell and the yields on government bonds dropped.
Germany’s bund lost 5 basis points to -0.330% and European banks fell over 2% while European equity markets, which were broadly higher, turned sharply negative.
The culprit is once again COVID-19 which has forced Austria into a new lockdown.
“Its the German health minister,” said Mikael Jacoby head of continental European sales trading at Oddo in Paris, noting that Jens Spahn said Germany’s coronavirus situation was so grave that a lockdown couldn’t be ruled out.
Also shaking markets was Austria announcing it will become the first country in western Europe to reimpose a full coronavirus lockdown. read more
“There’s going to be some red today”, Jacoby warned, noting that it was also a bid day in terms of expiries.
A NEW ALL-TIME HIGH IN SIGHT (0848 GMT)
A rise in oil shares and miners sent European equities up and within striking distance of their all-time high.
The Stoxx 600 (.STOXX) is up 0.4%, only one point from another record, with the basic materials stock index (.SXPP) leading gains up 1.6%, and oil and gas stocks (.SXEP) up 0.8%.
The French CAC 40 benchmark reached another record at 7183 points.
A report that a smelter in China had stopped production after an explosion drove industrial metals higher read more .
Oil prices rose as investor bet that potential coordinated releases by major economies of their official crude reserves may have less of an impact on markets than expected.
However, risk sentiment is being kept in check as the stronger than expected earnings season is about to end.
“A number of risk factors were increasingly piling up on the horizon,” Deutsche Bank analysts said, mentioning also Covid resurging cases across Europe and “some negative chatter about President Biden’s build back better package.”
Kingfisher (KGF.L) stocks are among the worst performers in the Stoxx 600, down 4%, after company’s trading update.
Hermes (HRMS.PA) shares are up 3.7%, after jumping more than 6% the previous day on market talk shares in the French luxury group could potentially be included in Eurostoxx 50 index during a December review.
WARNING: RATE RISES AHEAD (0808 GMT)
Charles Evans and Raphael Bostic, Fed governors from Chicago and Atlanta respectively, are among the U.S. central bank’s doves. So, their remarks suggesting mid-2022 rate hikes could be “appropriate” shows that the transitory inflation narrative may be wearing a bit thin.
Their comments on Thursday came as data showed weekly jobless claims now just a whisker above levels seen in March 2020, just before the pandemic hit. Jobless benefits rolls also are at a 20-month low.
Still, all this failed to stop the equity juggernaut, which saw the S&P 500 and Nasdaq closing at record peaks, lead by tech and retail, both of which are sensitive to higher borrowing costs. Wall Street futures point north, as are European bourses, where French and German shares have notched record highs.
In Britain too, retail sales snapped a five-month streak of falls to rise 0.8% in October, a bit more than forecast. Coming the same week as robust inflation and employment figures, the data may cement expectations for a December Bank of England rate rise.
The equity gains bypassed much of Asia however. Tokyo rose 0.5% on the prospect of a fresh $490 billion stimulus package but Hong Kong (.HSI) was dragged down by a 10% loss in Chinese e-commerce giant Alibaba (9988.HK) whose quarterly earnings showed the impact of a regulatory crackdown.
Other notable movers? Bitcoin is headed for its worst week in six months — 20% below recent record highs. That despite crypto miners raising funds and eyeing public listings.
Finally, the Turkish lira is licking its wounds after Thursday’s 11% fall triggered by a 100 basis point rate cut. It has clawed back some 2% this morning but is down almost 50% so far this year .
Key developments that should provide more direction to markets on Friday:
-Japan to unveil record stimulus package, bucking global tapering trend read more
–Unilever bags $5 bln deal with CVC for tea business read more ; Ryanair drops London listing, citing costs
-UK Gfk consumer confidence/retail sales
-German PPI +3.8% m/m, +18.4% y/y in October
-Ghana central bank meets
IN THE BLACK AGAIN (0728 GMT)
European stock futures are well in positive territory along with their U.S. peers after the Stoxx 600 index took a pause yesterday, closing lower and breaking a six-day rally fuelled by solid earnings.
Wall Street provided support as both the S&P 500 and the Nasdaq hit closing highs overnight, even if they struggled to shrug off hawkish inflation comments from a Federal Reserve policymaker. read more Japan’s Nikkei rose on tech and energy stocks, while Asian equities outside Japan declined.
Some uncertainty has crept in among investors as a more robust than expected earnings season is about to end and worries about possible new pandemic-induced restrictions across Europe weigh on risk sentiment.
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