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DECADES UNTIL STOXX 600 COMPANIES REACH GENDER PARITY
On 8th March every year the world comes together to celebrate women's achievements. But the road to gender equality in Europe's listed companies is still long.
Things are improving, but slowly.
Based on the pace of progress so far, it will take more than 40 years to have 50% of the STOXX 600 companies led by women executive directors, While to reach a 50/50 split for female and male managers it would take 25 years, Goldman Sachs estimates.
Investors demanding more socially responsible governance have encouraged companies to hire more women while the legislation in some countries -- like the Netherlands and Germany -- to improve women's representation at executive levels, has pushed for more gender balance.
Amongst the pan-European companies, 33% of board members are women, up from 9% in 2005, "but, it is fair to say that a lot of this increase has been in numbers of non-executive directors," Goldman Sachs says.
Only 16% of executive directions in listed companies across Europe are women. Women are frequently paid less to do the same job as men. UK companies with a headcount of at least 250 have to publish their pay gap which remains high especially in finance.
The requirement has been suspended for 6 months amid the pandemic.
COVID-19 has just made bad things worse, with the pandemic hitting harder women in terms of job losses and for those still employed making life more difficult as they are "taking on more care responsibilities at home," GS says.
(Joice Alves)
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SPAC RAGE: NO GAME CHANGER FOR EQUITY SUPPLY (1206 GMT)
SPAC is the word on the lips of every CEO with ambitions to take his (or her) company public. Allowing shares to be listed quicker, at lower fees and with greater access to eager retail investors, SPACs are to a large extent behind this year's bumper $150 billion in initial share listings.
JPMorgan's Nikolaos Panigirtzoglou who has for years tracked equity and debt supply trends, estimates the SPAC rage will allow global equity issuance to reach $400 billion this year.
After accounting for share withdrawals via buybacks and employee stock programmes, he sees overall net equity supply this year falling by $300 billion, versus his previous forecast of a $500 billion fall.
So for stock markets, already reeling from higher bond yields, "the rise of SPACs is creating a less favorable environment for this year from an equity supply point of view than the one we had envisaged last December," Panigirtzoglou writes.
(This picture is of course subject to change; setbacks caused by rising yields may jolt SPAC plans or SPAC-led listings; a SPAC index is down this month, as this chart shows:
Panigirtzoglou also crunches numbers on bond supply. As we know high-quality bonds are scarce, given how much central banks are buying but he raises bond supply estimates for 2021 by $500 billion.
According to him, the new demand-supply picture equates to yields on the Global Aggregate bond index rising around 45 basis points. But this is less alarming than it sounds; remember yields on the index are already up 30 bps YTD.
(Sujata Rao)
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RISING YIELDS: LOOKING FOR THE "DANGER ZONE" (1135 GMT)
Looking at how much the Nasdaq has suffered lately, it does seem that the level at which rising yields start biting into stock valuation has already been met.
Then again, all hell didn't break lose when the 10-year government bond yields earlier this year caught up with the S&P's dividend yield.
So looking beyond tech and growth stocks, there's a lot of time and work been spent within research teams at defining how much higher yields can go before they become a real threat for the broader market.
"I see the tipping point at 1.75%-1.8%", Stephane Ekolo global equity strategist at Tradition in London told us.
In his morning Briefing, John Velis FX and Macro Strategist, at BNY Mellon sets the bar just a tad higher at about 2% based on how it would affect Equity Risk Premiums.
"Should yields move above 2%, we would see ERPs below 2.5%, and unless earnings expectations increase significantly from there, the stock market would be in the danger zone", he writes.
Could a speedy U.S. recovery help smoothen the process
Not necessarily.
"While we acknowledge that the economy should resume rapid growth as early as Q2 this year, as vaccines and fiscal spending start to have an impact on the outlook, we think that analysts have probably already factored reopening into their estimates", Velis wrote.
With the U.S. 10-year yield at about 1.6% this morning, it sure feels we'll find out pretty soon where the danger zone really is anyway!
(Julien Ponthus)
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ECB: HOW MUCH PEPP DOES IT TAKE (1101 GMT)
Some analysts argue that the ECB should increase the PEPP pace in order not to lose credibility on yields control.
But the issue here is how much more government bond purchase would it actually take to reassure investors
Economists at TS Lombard say “the bar for the ECB to prove its real commitment is an acceleration in the pace of PEPP net purchases above €20bn/week.”
Unicredit, which advocates more purchase by the ECB, sees a 20-25bn range this week.
“Weekly PEPP flows will then stabilize above EUR 20bn for some time, and at least until the market gets the message right,” it says.
“Clients expecting faster weekly purchases (20bn+) at a minimum to reduce rates for a region still seeing rises in COVID cases,” UBS says.
Nomura which expects the ECB to step up the pace of its PEPP purchases, recalls that this number “have been averaging less than €16bn per week since the start of 2021, almost half of the weekly pace at the height of the pandemic in spring 2020.”
But “prolonged effort however could renew the discussion about the adequate size of the envelope,” ING economists argue (see chart below).
Few analysts believe the ECB will look for something bigger in its arsenal to fight the rise in yields.
"The nuclear option would be to increase again the PEPP’s envelope", wrote Gilles Moëc, chief economist at AXA Investment Managers.
"We don’t think there is a pressing need to do so", he says.
Today the ECB will release data of its QE programme, including its Pandemic Emergency Purchase Programme (PEPP).
(Stefano Rebaudo and Julien Ponthus)
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OPENING SNAPSHOT: ALL TOP EUROPEAN INDICES IN THE BLACK (0900 GMT)
European shares kick off the week in positive territory after the U.S. Senate passage of a $1.9 trillion stimulus bill and a jump in oil prices that helped major European energy companies.
The stimulus passage fuelled hopes for a global economic recovery pushing the pan-European index up 0.7% with big COVID-19 laggards like cruise operator Carnival CCL.L leading the pack, up around 6%.
The European banking sector hit fresh one-year high, up 2.5%.
Brent crude futures rose above $70 a barrel for the first time since the COVID-19 pandemic began helping the oil sector .SXTP to gain almost 1%.
Here is your morning snapshot with all top bourses across Europe trading in the black:
(Joice Alves)
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MORNING BID: ON STOCK MARKETS, $3.5 TRILLION AND COUNTING (0805 GMT)
Ten-year U.S. Treasury yields have risen for six weeks straight, their longest rising streak in eight years. But the Fed, clearly seeing higher borrowing costs as commensurate with economic recovery, has essentially declined any action. So with President Joe Biden's $1.9 trillion spending package getting the nod from Congress, Treasury yields are on the rise again and Wall Street is gearing up for another hit.
The yield-sensitive grouping of FAANG plus Tesla and Microsoft has lost $760 billion in value since mid-February and futures for the tech-heavy Nasdaq index are already down 1.5% on Monday. Asian stocks ended on a weak note though Europe's tech-lite bourses might prove more resilient.
But rising yields are tightening euro zone financial conditions too. Much of it stems from exogenous factors though there are signs of domestic improvement too; Germany's Ifo institute said on Monday manufacturing sector sentiment improved for the third month in a row.
So the ECB's Thursday meeting has taken on more urgency; indeed some officials such as Fabio Panetta have effectively called for yield curve control to be adopted. We also find out later on Monday whether the ECB stepped up bond-buying last week under its PEPP emergency stimulus scheme to slow the yield rise.
European policymakers may be relieved however by the dollar's recovery against the euro; the greenback is at three-month highs, as rising real yields and economic recovery.
But signs of economic recovery -- and possibly inflation -- are everywhere; after Friday's forecast-beating U.S. payrolls figure, even Japan reported a sharp rise in its so-called economy watchers' index. Oil prices have vaulted above $70 (partly driven by Yemeni rebels' drone attack on Saudi production facilities)
Yields may have nowhere to go but up if data stays robust and central banks stay shtum.
Key developments that should provide more direction to markets on Monday - U.S. crowd-safety company Evolv Technology is combining with NewHold Investment SPAC to go public in a deal valuing it at $1.7 billion. -UBS begins appeal against 4.5 billion-euro penalty levied by a French court for allegedly helping clients stash undeclared assets offshore. -Norwegian holding company Aker is establishing a unit to invest in bitcoin and blockchain -BOE Governor Andrew Bailey speaks 1000 GMT
(Sujata Rao)
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BREAKFAST MIX: U.S. STIMULUS, CHINA, OIL SURGES (0633 GMT)
European shares are seen on the rise as traders expect global growth to accelerate after the U.S. Senate passage of a $1.9 trillion stimulus bill.
Upbeat economic data came also from China, which reported February exports in dollar terms skyrocketed 154.9% in February compared with a year earlier.
Capping the optimism, analysts also expect a sharp acceleration in inflation, stoked in part by the latest spike in oil prices, which is pushing up bond yields.
Brent crude futures surged above $70 a barrel for the first time since the COVID-19 pandemic began, while U.S. crude touched its highest in more than two years, following reports of attacks on Saudi Arabian facilities.
Financial spreadbetters at IG expect London's FTSE to open 46 points higher at 6,676, Frankfurt's DAX to open 66 points higher at 13,987 and Paris' CAC to open 39 points higher at 5,821.
(Joice Alves)
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