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LIVE MARKETS-Another one staying bullish on European banks

· 03/17/2021 10:00
LIVE MARKETS-Another one staying bullish on European banks

Dow gains slightly, Nasdaq down nearly 1%

Markets await results of FOMC Meeting 1400 EDT/1800 GMT

Euro STOXX 600 down ~0.4%

Dollar ~flat; gold edges lower, crude down

U.S. 10-Year Treasury yield advances, now ~1.67%

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ANOTHER ONE STAYING BULLISH ON EUROPEAN BANKS (0953 EDT/1353 GMT)

With yields on the rise, it looks like more and more brokers are feeling the urge to reiterate their bullish stance on the European bank space.

After the recent upbeat views from Credit Suisse, Morgan Stanley, and BofA, this time it's JP Morgan to affirm its positive stance on the rate-sensitive sector. nL1N2LE0L0

"Despite 30% outperformance since turning positive in Oct-20. We see further 10% re-rating potential," they say, sticking to their overweight rating.

There is a novelty though, namely they start to shift their portfolio toward dividend plays.

"We shift our barbell portfolio of asset gathering and low P/BV stocks post the material re-rating, with a continued preference for asset gathering alongside an increased quality element and more importantly, increased dividend exposure"



(Danilo Masoni)

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S&P 500: THIN AIR AND SPUTTERING THRUST? (0900 EDT/1400 GMT)

Since bottoming in early March, the S&P 500 .SPX quickly climbed to fresh record highs. But ahead of today's results of the latest FOMC Meeting, CME e-mini S&P 500 futures EScv1 are suggesting the benchmark index is poised to dip at the open.

From early 2018 to early 2021, the S&P 500 has seen six instances of making new highs and then ultimately suffering a sell-off of more than 5%. On average, the index extended just 5.5% above its prior peak, over a 27 week period:



In the six declines of more than 5%, between late 2018 and early 2021, the average was 14.4% over about five weeks.

In the two weeks since the most recent low, the SPX has only managed to extend about 0.8% above its mid-February peak. Although minimal, that is slightly greater than the 0.5% extension into the May 2019 high.

Meanwhile, weekly momentum measures are diverging. As it stands, just since early January, the RSI is potentially forming a third lower peak. The current reading, as was the case in mid-February, is failing to muster enough strength to push above the 70.00 overbought threshold. This lack of thrust can put the SPX at risk for a reversal. nL1N2LE0ZC

In the event of another sharp decline, a weekly close below the support line from the late-2018 high, now around 3,745, or 5.9% below this week's high, can suggest potential for a much more severe sell off.

Since the SPX closed above it in early December of last year, this line has continually contained downside turns on a weekly closing basis.

(Terence Gabriel)

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FOR WEDNESDAY'S LIVE MARKETS' POSTS PRIOR TO 0900 EDT/1300 GMT - CLICK HERE: nL1N2LF116







(Terence Gabriel is a Reuters market analyst. The views expressed are his own)