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LIVE MARKETS-Switching gears at the open

05/12/2021 03:38
LIVE MARKETS-Switching gears at the open

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SWITCHING GEARS AT THE OPEN (0735 GMT)

European futures were pointing in the wrong direction for most of the pre-market fun but 20 minutes after the bell, most European benchmarks have made it to positive territory thanks to a good batch of earnings.

London's FTSE 100 .FTSE is leading the way, rising 0.6% with the help notably of Diageo which is visibly seducing investors with its decision to restart its capital return plan following a strong recovery led by North America.

The broader STOXX 600 .STOXX benchmark is gaining 0.4%.

In the banking sector, Commerzbank is enjoying a 6.9% jump as it beat expectations and raised its revenue outlook.

Less love, must be said, in the Netherlands for ABN Amro, falling over 6% after reporting a net loss due notably to a money laundering fine.

Another big loser was French video game editor Ubisoft which didn't convince with its trading update and lost 6%.

While this morning's news flow was positive enough to tilt the market upwards, the U.S. CPI will most likely determine the fate of this session.


(Julien Ponthus)

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INFLATION SHOWTIME (0707 GMT)

Global equity markets continue their retreat from the record highs reached at the beginning of the week.

With fiscal and monetary stimulus in full swing backing the economic recovery, there's no shortage of sell-side analysts pitching to buy the dip and ignore short-term inflation jitters.

But no matter how good today's batch of corporate results turns out to be, there's little chance investors will rush to drastically change the direction of travel before today's U.S. CPI.

The indicator is expected to show a 3.6% rise year-on-year and any sign inflation is getting out of the toothpaste tube faster than feared could knock equity risk premiums hard.

The yield on benchmark 10-year Treasuries US10YT=RR is currently at 1.62% but could test the 1.77% high seen at the end of March on strong data.

For many pundits, there's a fat risk that the "sell tech and growth" knee jerk reaction to inflation might morph into an ugly "sell everything" correction.

In the meantime there were no surprises from Germany's inflation data this morning (Full Story) and Britain's economy shone, growing a firm 2.1% in March from February. (Full Story) In China, vehicle sales rose 8.6% in April -- a 13th consecutive month of gains.

On the commodities front, oil prices edged up after a drop in U.S. crude inventories reinforced OPEC's robust demand outlook, while the market awaited fresh updates on the Colonial Pipeline outage.

In terms of corporate earnings, there's nothing to spoil the mood in the upbeat European banking scene with Germany's Commerzbank CBKG.DE swinging to a first quarter profit and Dutch bank ABN Amro

For emerging markets, Taiwan may take the spotlight. Its stock market slid more than 8%,set for their worst day in over 26 years as authorities mulled tighter restrictions to tackle a rise in domestic COVID-19 cases. (Full Story)


Key developments that should provide more direction to markets on Wednesday:

- Zurich Insurance posts a solid first quarter (Full Story)

- SoftBank reports a $37 bln profit at its Vision Fund unit (Full Story)

- U.S. 10-year Treasury auction

- Fed: Vice Chairman Richard Clarida, Philadelphia President Patrick Harker speak

- Bank of England Governor Andrew Bailey at ISDA event


(Julien Ponthus)

*****

FURTHER OFF RECORD HIGHS (0525 GMT)

No exceptions!

European bourses are set to open lower today after their U.S. and Asian peers sustained heavy losses overnight as inflation fears took their toll across trading floors.

All in all though, global equities are not far off record highs, particularly on the old continent where the pan-European STOXX 600 is just about 10 points behind the 446.2 points reached on May 10.

There's also plenty of corporate earnings and indicators to help shape the session in Europe while traders wait for the very much awaited U.S. CPI.

It's likely many investors will want to get a glance on that one before buying the dip.

(Julien Ponthus)

*****