- European stocks drop their first gains
- Best-performing oil and gas stocks up 1.1%
- Miners and banks fall
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MARKETS SLOWLY TURN RED AS EUROPEAN BANKS DIVE (1105 GMT)
The downside buying that lifted European stocks at the open gradually faded into morning trading, with the STOXX 600 now flat and Wall Street futures falling into the red as well.
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Much of the drag appears to be due to European banks which have slowly but steadily made their way into negative territory and are now down around 0.8%.
Lagarde spoke to Reuters this morning and it looks like what the wise owl from the ECB had to say didn’t go over well with shareholders of banking stocks.
“I see an inflation profile that looks like a bump,” Lagarde said in an interview with Reuters Next. “And a bump ends up going down,” she added, stressing that a rate hike was highly unlikely to happen in 2022.
Either way, markets may be slightly nervous this morning, but most analysts are still fairly bullish on risk assets and stocks next year.
“With consensus on earnings looking reasonable and valuations supported by real yields at bottom, the recent correction could ultimately create opportunities to reload risky assets as Omicron fears fade away,” Generali Investments says in a research note.
(Julien Ponthus and Stefano Rebaudo)
SWEDEN STEALS THE SHOW AT THE OPEN (0820 GMT)
As expected, European stocks opened in positive territory this morning.
What was less obvious was that two Swedish stocks would steal the show.
First, Swedish drugmaker Orphan Biovitrum, also known as “Sobi,” plunged 22% after US private equity firm Advent International and the Singapore sovereign wealth fund withdrew their offer after receiving low levels of acceptance.
Sobi is the worst performing stock in the STOXX 600, but another company in Abba’s country is also the best performing.
The trend climbs by nearly 10% after the announcement of a takeover which seems to be music to the ears of investors.
Leaving individual stocks aside, the session started in a clear risk-focused mood with travel and leisure stocks leading the way up 2.3%.
Concerns about the pandemic and the Omicron variant are still there, but some investors have decided that a tactical downside buy is in order.
Oil, gas and insurers are also up around 1%, while classic defensive games such as healthcare and consumer staples are almost flat.
It should be noted that although it is still very early on Wall Street, the mood there seems to be a little more cautious with mixed futures ahead of today’s NFPs.
OMICRON AND PAYROLL (TGIF) (0804 GMT)
Today’s non-farm payrolls, a reliable monthly snapshot of the US employment situation, comes in almost like an anti-climax. A more timely indicator, the weekly unemployment benefit lists released on Thursday, showed a figure below 2 million for the first time since last March and layoffs at their lowest level in three decades.
Along with strong data on consumption and the manufacturing sector, this indicates that the Federal Reserve will likely step up the pace of the unwinding of bond purchases, as its boss Jerome Powell has suggested.
It is also already assessed by the bond markets; the spread between two- and ten-year Treasury bill yields narrowed the smallest since June of this week.
Payrolls have the ability to surprise; a number shockingly lower than the 550,000 estimated by a poll of Reuters economists, would likely cause unrest. Especially since the data will not reflect the disruptions of the latest Omicron variant of COVID.
Omicron remains a source of volatility almost everywhere; German 10-year yields fell on the open and are back to their affected three-month lows on Thursday after Europe’s largest economy extended COVID brakes. And China’s service sector, vulnerable to COVID outbreaks and containment measures, stumbled in November, according to PMIs.
Asia has its own concerns, especially over relations between the United States and China. Hong Kong tech stocks (.HSTECH) fell to their lowest level in two months after Chinese company Didi (DIDI.N) moved its listing from New York to Hong Kong, while the Asian rideshare app Grab fell 20% on his Nasdaq debut. Read more .
Finally, don’t forget about the Chinese real estate issues, with developer Kaisa facing imminent default. Read more
Either way, the mood may be on the rise. Thursday’s Wall Street rebound gave way to a weak Asian session, but European stocks opened more firmly.
Key developments that should provide more direction to the markets on Friday:
-US FTC sues to block Nvidia deal to buy Arm read more
– ECB speakers: President Lagarde, Chief Economist Philip Lane
-PMI end services everywhere
-Non-farm results in the United States
– Emerging markets: Turkey IPC
-Fitch to review Italy’s credit rating
EUROPE WILL EXPECT WEEKLY EARNINGS DESPITE OMICRON (07:36 GMT)
While European stocks have yet to fully recover from last Friday’s Omicron shock, the pan-European STOXX 600 is currently expected to post modest weekly gains despite a grim news feed.
In the grand scheme however, the European index currently sits at 465 points, around 3% below levels when the world was still unaware that a new variant of COVID-19 would trigger new travel restrictions.
With futures currently up around 0.6% this morning, falling buyers might be tempted to give it a try, but some might decide to wait to see more forecasted US employment data. late in the day.
While few analysts believe today’s NFPs could change the Fed’s new stance on inflation, some volatility after the data is likely.
Among the news that investors will be carefully weighing this morning is the decision by Chinese rideshare giant Didi Global to delist from New York City just five months after its debut and continue listing in Hong Kong.
US competition authorities are also seeking to block Nvidia’s $ 80 billion bid for UK chip technology provider Arm.
Speaking of mergers and acquisitions, Australian biopharmaceutical giant CSL is in exclusive talks to buy Swiss drug maker Vifor Pharma in a $ 7 billion deal, Australian media reported.
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