SPY390.37+10.01 2.63%
DIA316.33+6.88 2.22%
IXIC13,586.15+393.80 2.99%

DJ Euro Could Fall to $1.10 on Faster US Recovery Vs Eurozone -- Market Talk

· 02/05/2021 05:01

1001 GMT - The euro could fall to a range of $1.10 to $1.15 in coming months, from $1.1982 currentl,y as the U.S. economy's recovery is expected to outpace the eurozone's, Nordea Asset Management says. The U.S. could relax coronavirus restrictions sooner than the eurozone due to a faster vaccine rollout, which combined with the prospect of large-scale fiscal stimulus, should support the U.S. economy, Nordea analyst Sebastien Galy says. "This should drive the U.S. Treasury curve to steepen and bring forward a tad expectations of rate hikes," he says. A steepening yield curve is when the gap between short-term and long-term government bond yields widen and typically indicates investors expect stronger economic growth and rising inflation. (renae.dyer@wsj.com)

1000 GMT - Vinci's 2020 results showed an exceptionally strong free cash flow that supported a dividend in line with the previous year, UBS says. The French construction and infrastructure company's FCF generation was nearly flat year-on-year at EUR4 billion, compared with UBS's expectations of EUR2.1 billion. This was partly driven by a working-capital inflow of EUR2.3 billion, which led to net debt at EUR18 billion at year-end--around EUR2 billion below UBS's estimates. "As a result of this strong cash generation, Vinci is keeping the dividend flat at EUR2.04 vs consensus of EUR1.30," the bank says. Shares trade 5.6% higher at EUR85.82. (giulia.petroni@wsj.com)

0949 GMT - Despite significant new supply, European high-yield markets were "remarkably resilient" in January, says UniCredit. This was down to "unbroken demand for riskier credit" as riskier issuers took advantage of the attractively low financing costs, it says. High yield-rated bond supply totaled EUR14.9 billion as of the end of January, representing a 7.5% increase relative to the same period the year before. UniCredit expects the supply momentum to continue in February, despite a likely slowdown in 2021 due to a reduction in investment flows and the significant front loading of funding by many issuers last year. (lorena.ruibal@wsj.com)

0924 GMT - Sterling rises, extending Thursday's gains, after the Bank of England dampened the prospect of negative interest rates in the near term. Alongside its decision to leave its benchmark rate at 0.1%, the BOE said it would make preparations for negative rates but that could take six months while it expects a strong recovery this year. Commerzbank's Esther Reichelt says the BOE is unlikely to lower rates below zero but the post-coronavirus recovery will be overshadowed by increased trade obstacles due to Brexit. "We therefore expect Sterling to retrace its gains over the course of the year." GBP/USD rises 0.3% to 1.3702 and EUR/GBP falls 0.1% to 0.8748, having earlier reached its lowest level since mid-May at 0.8738, according to FactSet. (renae.dyer@wsj.com)

0924 GMT - The coronavirus pandemic has catalyzed the already existent trend of a shift to online retail in the U.K. and some retailers might ultimately emerge as winners from the change, Shore Capital says. "For the offline survivors, with much capacity removed, brighter times may be ahead, while most retail and food and beverage businesses have structurally enhanced their online capabilities," the investment group says. The nature and extent of remote working and its effects on urban centers may also bode well for the food and beverages industry in the long term as the current adjustments work through, Shore says. (matteo.castia@dowjones.com)

0923 GMT - Nonfarm payrolls in the U.S. are expected to rise by 100,000 in January after a fall of 140,000 in December, UniCredit says. The bank's estimate is higher compared with the consensus of economists polled by The Wall Street Journal, who expect payrolls to increase by 50,000. UniCredit's forecast is skewed to the upside following the ADP Research Institute's estimate that private-sector payrolls rose by 174,000 in January and better-than-expected jobless claims numbers, the Italian bank says. "With new Covid-19 cases peaking on Jan. 8 and falling quite quickly, along with some states either easing or planning to ease restrictions soon, payroll gains will likely accelerate next month," UniCredit says. The U.S. January employment report will be released at 1330 GMT. (xavier.fontdegloria@wsj.com)

0905 GMT - UniCredit doesn't rule out M&A and a merger with Banca Monte dei Paschi di Siena will be evaluated, the Italian bank's Chairman-Designate Pier Carlo Padoan told Italian daily La Repubblica in an interview. "We interpret Mr Padoan's words as an opening to M&A, where we see MPS as the most likely option, although we believe that an integration with Banco BPM would make more industrial sense," Intesa Sanpaolo analyst Manuela Meroni says. UniCredit shares rise 2.5%, while Monte dei Paschi is up 5.2%.(pietro.lombardi@dowjones.com; @pietrolombard10)

0903 GMT - Capital Economics' forecast that the eurozone economy rebounds strongly hinges on Covid-19 restrictions being lifted by the middle of the year, but vaccine supply shortages, distribution problems and concerns about variants could force governments to keep restrictions in place for longer, Andrew Kenningham, chief Europe economist at Capital Economics, says. Were restrictions kept for longer, Mediterranean countries are at greatest risk given that international travel will be among the last areas to be liberalized, Kenningham says. Capital Economics expects eurozone economic activity to start recovering in the second quarter and gain pace in 3Q, but Kenningham warns the risks are to the downside. (maria.martinez@wsj.com)

0902 GMT - Three positive factors will coincide in the coming weeks that should help the U.K. turn the tide on Covid-19, economists from Berenberg say. First, continued lockdown progress in reducing the number of cases--based on the recent five-day average, recorded infections could be at summer 2020 levels within two weeks. Second, the advent of spring and warmer weather by mid-March should bring with it the normal remission of seasonal respiratory viruses, Berenberg says. Finally, the vaccination of all high-risk groups by mid-March will also help, it says. "With luck, the U.K. can start easing restrictions from March onwards with the confidence that, even if cases started to edge up again, vaccination of the most-at-risk cohorts should prevent a serious surge in hospitalizations and deaths," Berenberg says. (xavier.fontdegloria@wsj.com)

0859 GMT - Sanofi's guidance for high single-digit earnings-per-share growth in 2021 is good news, Bryan Garnier says. However, foreign exchange is poised to reduce EPS by 5%, and assuming 8% growth this would lead to EPS of EUR6.04, which is slightly below consensus, the investment bank says. Sanofi's plans for additional cost savings of EUR500 million by 2022 is also good news, though it doesn't entirely come as a surprise, Bryan Garnier says. The French pharmaceutical giant previously said the pandemic has helped identify new sources of savings, and Bryan Garnier says this gives it confidence that Sanofi can reach an operating margin target of 30% by 2022. Sanofi trades 2.5% higher at EUR80.76. (cecilia.butini@wsj.com)

0839 GMT - Company earning results and U.S. labor data due later Friday will be at the centre of attention for credit investors, with both events signaling European credit market may end the week in positive territory, says UniCredit. "With investors focusing on the results of the earnings season and the U.S. employment report due out today, credit markets could remain on track for weekly gains, particularly in riskier parts of the credit spectrum," the Italian bank says. Credit spreads have narrowed this week across all credit scores, with riskier, lower-rated corporate bonds outperforming, it says. Economists polled by WSJ expect 50,000 jobs to have added in January in the U.S. (lorena.ruibal@wsj.com)

0831 GMT - Upbeat momentum in risk assets fueled by optimism about a U.S. economic-stimulus package and a vaccination-driven economic recovery is set to expand Friday from equities to credit markets. "Amid risk-on sentiment in broader markets, equity futures are trending higher once more this morning. We think that a positive tone will likely prevail in European credit markets today," says UniCredit.The pan-continental Stoxx Europe 600 opens 0.2% higher. Futures tied to the S&P 500 advance 0.2%, pointing to gains after the opening bell, while those of technology-heavy Nasdaq add 0.4%.(lorena.ruibal@wsj.com)

(END) Dow Jones Newswires

February 05, 2021 05:01 ET (10:01 GMT)

Copyright (c) 2021 Dow Jones & Company, Inc.