Travel and leisure stocks' record high trick

Unsurprisingly, airlines, tour operators, hotels and restaurants stocks are lagging behind

  

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TRAVEL AND LEISURE STOCKS' RECORD HIGH TRICK (1116 GMT)

Optimism is flying high across Europe with the travel and leisure index touching fresh record highs even if Europe faces a third wave of Covid cases and much of the Continent is under a lockdown. 

What

The record valuations has clearly more to do with the leisure part of the index, rather than the travel bit.

Stay-at-home winners such as internet casino company Evolution Gaming and British gambling group Entain, whose shares are up a whopping 400-450% since March 2020, are leading the index' gains.

Unsurprisingly, airlines, tour operators, hotels and restaurants stocks are lagging behind, still below pre-pandemic levels and very far from their records.

(Joice Alves)

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GERMAN-ITALIAN SPREADS STAND THE PRESSURE... FOR NOW (1040 GMT)

The Italian-German bond yield spread -- a critical gauge of the eurozone instability risk -- has been under some light widening pressure recently on worries about Italy's domestic debt and the EU recovery fund.

But, according to analysts, it shouldn't go far from the 100 basis points area in the short term, as long as ECB’s dovish measures remain in place.

"We are still optimistic about Italian government bonds as political risk has decreased significantly following Mario Draghi's appointment as prime minister," Mauro Valle, head of fixed income at Generali Investment, tells us.

"At the same time, the ECB support remains well oriented towards BTPs," he adds.

Valle expects the spread to stay in a tight range of around 100 basis points and sees a further tightening to about 80 basis points if the "eurozone economy recovers significantly and if the market starts pricing in the positive impact of the EU recovery fund, while the ECB support continues."

ING analysts right after the Court ruling, at the end of March, said they saw a floor for Italian German yield spread at 90 bps as long as uncertainty lingers.

And in today's research note they said should the EU recovery fund’s ratification process face a longer delay, periphery spreads will be "in limbo and more vulnerable," while German yields will be "converging to 0% later this year".

On March 26, Germany's constitutional court said the president may not sign off on legislation ratifying the European Union's Recovery Fund as long as it looked into an emergency appeal against the debt-financed investment plan. 

The chart below shows Germany’s 10-year Bund yield and the German-Italian bond yield spread.

(Stefano Rebaudo)

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AUTOS: THE "LOUIS VUITTON" MOMENT (0949 GMT)

Inflation is going to be hot topic this earnings season and the auto sector seems to be fairly well positioned to weather the temporary flame up in prices.

And for UBS analysts, auto manufacturers face what they call a "Louis Vuitton" moment.

"In an industry notorious for lack of pricing discipline, Q1/21 results will have a totally different playbook," they say.

"Driven by strong demand (mainly in the US and China and globally in premium), low inventories and production bottlenecks due to the chip shortage, OEMs will likely capitalize on their newly gained pricing power," they add.

All in all the Swiss bank expects strong pricing will more than offset lost volumes for most automakers with a potential for double-digit consensus upgrades for 2021 earnings.

European autos .SXAP are trading just below three year highs and have seen 34 straight weeks of positive earnings revisions.

(Danilo Masoni)

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EUROPEAN STOCKS BOOSTED BY MINERS, REAL ESTATE (0738 GMT)

It's risk-on trades across the board with the Stoxx 600 index hitting a fresh record high, despite worries about an uncertain economic rebound and U.S. stocks failing to provide support.

A rally in commodity prices lifted miners. The travel and leisure stock index hit a fresh record high, while real estate shares are on the rise after the German constitutional court ruled Berlin rent cap is invalid.

The Stoxx 600 index is up 0.3%, with real estate, miners, and travel and leisure stock indexes up around 1%.

Shares in ABB rise 2.4% after the company posted a Q1 beat and raised its 2021 guidance. Publicis jumps 4.5% as the company returned to organic growth for the first time before the pandemic.

Deliveroo shares down 1.2% after its first trading update since its IPO. 

(Stefano Rebaudo)

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U.S. RETAIL SALES, BANK EARNINGS AND SOME ROUBLE TROUBLE (0700 GMT)

It's down to a slew of U.S. economic data, including retail sales, and earnings from the likes of Bank of America, Citigroup and BlackRock to shake world stock markets out of the funk that appears to have set in the last 24 hours.

Global stocks are in a defensive mood, edging down from recent record highs. That follows a mixed close on Wall Street where newly-listed Coinbase finished up 52%, down quite a bit from its intraday highs of $429.54 on Nasdaq.

Trade in stock futures suggest a soft open in Europe, U.S. stock futures are trading mixed.

After U.S. banks' stellar results on Wednesday -- the first day of earnings season -- focus turns to the next batch of earnings.

March retail sales data could also be a potential market move, testing the recent calm in U.S. bond markets. Economists polled by Reuters forecast a 5.9% rise, month-on-month.

Industrial production data and the Empire State manufacturing survey are also on the calendar. So are weekly jobless claims numbers, which have risen in recent weeks, counter to signs of a recovery in labour markets.

And with currency investors increasingly convinced by the Federal Reserve's argument that interest rates will stay low for some time, any further signs of economic rebound could help shore up the dollar.

The greenback is languishing at new four-week lows against a basket of other major currencies .

Staying with currencies, Russia's rouble sank more than 1% to 76.65 per dollar on reports the U.S. will announce sanctions on Russia as soon as Thursday for alleged election interference and malicious cyber activity.

Elsewhere, South Korea's central bank kept interest rates at record lows of 0.5%. 

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

- US corp earnings: Blackrock, Pepsi, Bancorp, Bank of America, Delta Air, Citi, Charles Schwab, Alcoa.

- Riksbank governor Ingves speaks.

- BOJ governor Kuroda says Japan's economy picking up but any recovery likely to be modest due to coronavirus pandemic.

- German harmonised inflation +2.0% y/y in March.

- China's Tencent  plans to raise up to $4 billion in a bond launched Thursday - sources. 

- Central bank of Turkey meets.

(Dhara Ranasinghe)

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EUROPE SLIGHTLY IN THE RED (0528 GMT)

European stock futures are in negative territory amid weak signals from equities outside the Continent and worries about a slow vaccination campaign's economic impact.

Wall Street indexes closed mixed despite upbeat results from big banks, with the tech sector the biggest underperformer after Coinbase was sold off on its debut.

China stocks lost ground on concerns about possible further policy tightening.

Meanwhile, today's release of U.S. weekly jobless claims and retail sales data might put U.S. Treasury yields to the test.

(Stefano Rebaudo)

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