* European shares up slightly in late morning
* Healthcare, travel and leisure stocks lead sectoral gainers
* Deutsche Bank falls despite first profit since 2014
Welcome to the home for real-time coverage of markets brought to you by Reuters reporters. You can share your thoughts with us at markets.research@thomsonreuters.com
FROM TRUMP TO MUSK (1122 GMT)
Not so long ago, checking out Trump's Twitter account used to be a daily morning routine for many journalists who couldn't afford to miss a bombshell statement from the former U.S. President.
Nowadays, failing to check out Elon Musk's latest tweets means FOMO-fuelled investors missing out on the next speculative retail frenzy.
There's already a long list of assets being propped up by just by a mention of the Tesla chief like GameStop or bitcoin even when it's a misunderstanding, like for the shares U.S. healthcare firm Signal Advance mistaken for the unlisted texting app.
Today's surge was for the Dogecoin crypto which jumped 50% after the billionaire entrepreneur tweeted his support just two days after promising to take a break from the social media.
Quite tellingly, when Musk a few minutes later wrote "Sandstorm is a master piece", some Twitter users wondered if we was referring to a stock or a popular tune.
But beyond today's fad, Musk's ability to move markets seems to capture the financial zeitgeist of early 2021.
"It plays into the whole narrative we have tracked these last two weeks as social media is used by various characters to ramp individual assets", commented Neil Wilson at Markets.com.
"Anything Musk tweets about shoots higher because he has such a strong following both on social media and as a businessman. People will literally invest in him and his ideas and don’t care what the fundamentals are about what's involved", Wilson added.
Some reading on this:
Elon Musk, back on Twitter, turns his support to Dogecoin
Papa Musk' tweets raise cheer in wrong Clubhouse [nL8N2K84CD)
Elon Musk's Cyberpunk approval helps boost video games maker CD Projekt further
GameStop extends Reddit driven hyper-rally after Musk tweet
Bitcoin to online petwear: "Papa Musk"
(Julien Ponthus and Sujata Rao)
*****
GERMAN BOND REPRICING (1034 GMT)
Two questions have been keeping government bond markets on edge since the delays in vaccine rollouts: can we still expect a strong economic rebound this year and, if this happens, will the ECB allow yields to rise?
Goldman Sachs continues to forecast a strong cyclical recovery coupled with a rise in long-end euro zone yields.
The recent delays “should only delay rather than derail the eventual vaccine rollout in Europe,” it says in a research note.
A more substantial risk comes from new strains of COVID however recent news on vaccine efficacy suggests that “our base case for strong cyclical improvement in mid-2021 is intact.”
ECB wouldn’t be a problem as it will interpret yields rising as being consistent with favourable financing conditions when cyclical conditions improve.
German 30-year yields were conspicuously low relative to the type of cyclical improvement we are still likely to see and they have around 30 bps of room to reprice higher.
The investment bank forecast 10-year bund yields at -0.30% at end-2021.
In the chart below Germany’s 30-year bond yield briefly above zero level today for the first time since September.
(Stefano Rebaudo)
*****
DAS AUTO (0844 GMT)
European shares are up just slightly but nevertheless managing to extend their winning streak to four days, shrugging off weakness seen in Asia overnight.
Risk sentiment remains supported as investors look past the Reddit fuelled gyrations and focus instead on the upcoming economic recovery, giving reflation trades new impetus.
No surprise then to see auto sector, which will be key in driving Europe Inc out of its profit recession, taking the lead and helping lift the STOXX 600 up 0.4% in early deals.
Autos are among the best performers in Europe year to date and their index has its highest since September 2018.
Their gains have brought the auto-heavy German index DAX
at striking distance from the record high set last month, up 0.6% on the day and at the key 14,000 mark.
The DAX was up even as initial gains in Deutsche Bank
fizzled out. The lender eked out a small annual profit, its first since 2014, as its investment banking business boomed.
Oil stocks , another reflation trade, are also doing strongly, as crude prices rise. Shell rose after its results.
(Danilo Masoni)
*****
BACK IN THE COMFORT ZONE (0801 GMT)
With the Reddit tumult under control, markets have returned to their comfort zone. World shares are a tad lower but within striking distance of last month's record peak and on track for their strongest week in three months.
Positive soundings from the earning season, Italy tapping former ECB chief Draghi to solve its political crisis, hopes for big-time U.S. stimulus and bullish comments by Fed policymakers on economic growth are all lending a new impetus to reflation trades.
Ten-year U.S. Treasury yields set a new three-week high at 1.151% and Brent crude is at an 11-month peak. In Europe, despite a double-dip recession, German 10-year yields are approaching six-month high.
In a sign of confidence, Shell boosted its dividend even as Q4 profits dropped to the lowest in over two decades, boosting shares almost 1% pre-market. Deutsche Bank meanwhile posted its first annual net profit since 2014, sending shares nearly 4% higher before the bell.
On the radar is also the Bank of England. No policy changes are expected but it will likely set its sight on the prospects of an vaccine-driven economic recovery and release the findings of a consultation on what negative rates would mean for banks.
One dampener: speculation China may want to tighten its policy drove short-term rates higher. Also watch the dollar -- at its strongest in more than two months on signs U.S. economic recovery is outpacing the rest of the developed world.
Key developments that should provide more direction to markets on Thursday:
Unilever reported underlying sales growth for the fourth quarter that was in line with estimates
Roche got a fourth-quarter lift from its COVID-19 test business
Nokia reported better-than-expected fourth-quarter revenue and underlying profits, buoyed by a strategy revamp
Frankfurt-listed shares in retail trader darlings GameStop and AMC fell in early trade
Bank of England meeting
Egypt central bank meets
Japan auctions 30-yr bonds
U.S. corporate events: Cigna, Bristol Myers-Squib, Merck, New York Times, Ford, Motorola
(Danilo Masoni)
*****
MORNING CALL: TAKING A BREATHER (0638 GMT)
European shares look set to open little changed this morning, as investors take a break following three straight session of gains, driven by the GameStop trade unwinding, U.S. stimulus and (last but not least) former ECB chief Draghi taking on the task of bringing Italy out of its political crisis.
Futures on the DAX and FTSE 100 indexes were trading flat and up 0.2% respectively at the time of writing.
Over in Asia, shares dipped as tight liquidity conditions in China curbed buying for now, though improving corporate earnings, expectations of large U.S. stimulus and subsiding retail frenzy all supported risk sentiment.
Back to Europe where the earnings season in underway, Deutsche Bank is on the watch-list after the bank swung to a small annual profit in 2020, its first since 2014, on the back of strong gains at its investment banking division.
(Danilo Masoni)
*****
<^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^ GameStop DAX bund Musk
^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>
Comments