* European shares up 1%
* Cyclicals lead sectoral gainers
* Vivendi surges on UMG listing plans
* Wall Street, China closed for holiday
Feb 15 - 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
EUROPEAN VOL IN KISSING DISTANCE OF PANDEMIC LOWS (1215 GMT)
European volatility is getting very close to its lowest levels since the pandemic hit the old continent.
The EURO STOXX 50 Volatility index has briefly hit 19.6 this Monday, just in kissing distance of 19.4, which is the lowest it
managed to go down to since March 2020.
As you can see below, European volatility has only tested sub 20 levels a handful of times in the past 12 months.
It must be noted that the trend isn't that surprising given that Wall Street's own gauge of fear the VIX, has also cooled off and closed at its lowest level since February 2020:
(Julien Ponthus)
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EUROPEAN BUBBLES, WHERE ARE YOU? (1107 GMT)
There's been many bubble alarm bells ringing across a range of assets, from hydrogen to cannabis stocks and of course crypto currencies just to name a few.
And while there's been a bit of action in Europe, it was mainly in Frankfurt where Gamestock, Tilray and other U.S. stocks have a listing.
Europe, unlike Asia or Wall Street is still below record highs and in terms of bubbles, there seemingly isn't that much going on.
that note, Saxo has just updated its bubble stocks basket and out of the 40 stocks selected, there isn't one in Europe out of a pool that includes North America, Western Europe, Japan, Hong Kong, Singapore, and Australia.
Saxo took the top 40 markets caps which have a negative 12-month forward expected earnings per share and a 12-month forward EV/Sales above 8.
Talking about bubbles, interesting though from Berenberg's Stubbs: "for bubbles to burst, we need to find a pin; otherwise prices can rise further still in 2021".
Here's Saxo's list:
(Julien Ponthus)
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TOP OVER/UNDERWEIGHT STOCKS BY FUND MANAGERS (1035 GMT)
What are most overweight and underweight stocks by active fund managers across all regions?
UBS analysts crunched some numbers, namely the institutional ownership data provided by FactSet, and answered the question forming an “active trading portfolio” by aggregating positions across global active managers.
They basically sum up all the holdings across active managers and calculate “weights of stocks in this active trading portfolio,” they explain in a research note.
They then compared this weight with the relevant equity index benchmark to form the active weight.
Among the top overweight globally there are Prosus , Tencent . Among the top underweight Apple , Amazon.com , Tesla .
In the tables below the top overweight/underweight globally. The calculation is based on MSCI AC World index universe. Data as of 12 February 2021 close.
Below top overweight/underweight shares in Europe.
(Stefano Rebaudo)
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CAN STOCKS TOLERATE RISING YIELDS? (0916 GMT)
Stocks are once again moving in tandem with bond yields this morning, and that's making investors wonder whether this correlation is eventually going to break down if bonds continue on their downwards path.
Strategists at JPMorgan are upbeat and believe stocks can easily absorb a further rise in yields.
"We would not expect the benign stocks-bonds correlation to break down while US 10-year yields are sub 2%, especially if the central banks’ liquidity provision remains ample, and growth backdrop positive," strategists at the U.S. bank say.
"We believe that the drivers behind the bond yields' move matter more than their levels. If the bond yields are seen to be going up for the wrong reasons, the correlations could change sooner, but any tapering concerns will not be significant for a while yet, likely not this year," they add.
Earlier this month Goldman Sachs strategists also looked into the issue, asking themselves what's the level of 10-year yields at which income-oriented investors go back to bonds?
"Different frameworks yield a range of answers, centered around 3%," they said. "3% is the implied price return p.a. of the S&P 500 through 2031 based on its current price to normalized earnings ratio. An equivalent but risk-free yield on bonds would compare favorably," they noted.
In the chart you see how S&P 500 dividend and 10-year U.S. bond yields have been converging.
(Danilo Masoni)
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VIVENDI STEALS THE SHOW AT THE OPEN (0842 GMT)
It's an overwhelming positive start to the week with only two stocks in the red among the top 50 biggest moves!
That said, with a rise of over 20% to a 2002 high, France's Vivendi is clearly stealing the show after the media group announced it would list Universal Music in Amsterdam and distribute 60% of the capital to its shareholders.
Among its shareholders of course is the Bollore holding company, which is also logically surging, up 14% at the moment.
That has lifted Europe's media index up nearly 3%.
Buoyant commodities and oil prices are also sending miners and oil majors higher in what looks a good day to play the reflation trade.
Cyclicals are hot indeed with banks up 1.6% and enjoying the rise in the yield of European sovereign bonds with the Bund crossing the -0.4% line for the first time since September.
Overall the pan-European STOXX 600 is up about 0.6% and around 4% of its February 2020 record high.
Here you can see how the huge majority of top movers are in the black this morning.
(Julien Ponthus)
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TIME TO TAKE A BREAK? (0807 GMT)
Time for a break? With Wall Street closed for Presidents Day and Chinese markets shut for the Lunar New Year, a good chunk of global financial markets is indeed taking some time off.
Probably a good time to step back, given equity markets are cruising on record highs and there are signs of speculative bubbles spreading across asset classes. Analysts at Nomura warn in fact of some "technical position-trimming" causing some market weakness towards the end of this week.
But notwithstanding doubts about the durability of the 'reflation trades,' they seem to be in the driving seat this morning as vaccine campaigns and hopes of U.S. stimulus beef up commodity and equity prices. Copper is at new eight-year highs, platinum at six-year peaks and oil at its highest in over a year, the last helped up also by Middle East tensions.
Yields on Germany's 10-year bonds also rose above -0.4% for the first time since September, after 10-year Treasuries ended last week above 1.20%, back at March 2020 levels.
U.S. 10-year inflation expectations too touched their highest since 2014.
Finally futures for European stocks, enjoying a better than expected earnings season, are up well above 0.5%.
Jitters about speculative bubbles rocking the boat remain however, after the 'Gamestonk' retail mania hit some hedge funds hard and briefly raised the question of systemic risks.
There's also some unease with bitcoin testing the $50,000 bar and the frenzy surrounding SPAC shell companies.
Talking about which, French investment firm Tikehau Capital is forming one with former UniCredit Chief Executive Jean-Pierre Mustier to target European financial deals.
Key developments that should provide more direction to markets on Monday:
- Japan Q4 GDP expanded more than expected, thanks to a rebound in overseas demand
- UK house prices Right Move
- Euro zone finance ministers meet
- Flash Q4 German GDP
(Julien Ponthus)
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WAKING UP ON THE RIGHT SIDE OF THE BED (0630 GMT)
Futures are quite upbeat this morning in Europe, up between 0.6% and 0.9% with commodities sharply on the rise.
While China and Hong Kong markets are shut for the Lunar New Year holiday, Asian shares have yet again hit new record highs, with the vaccine rollouts and the U.S. stimulus propping up the mood.
On the face of it, this looks like a typical 'reflation trade' day during which cyclicals and value stocks would be expected to do well.
It's also a quiet day on the earnings and the macro fronts and the U.S. bank holiday should keep volumes subdued.
(Julien Ponthus)
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