March 29 - Welcome to the home for real-time coverage of markets brought to you by Reuters reporters. You can share your thoughts with us at markets.research@thomsonreuters.com
STILL SOME OPPORTUNITY IN EUROPEAN EQUITIES (1135 GMT)
Being the second comer in term of post-pandemic economic recovery might paradoxically make Europe a sweet spot for equities, or at least sweeter than the U.S or EM.
Morgan Stanley continues “to favour a relative overweight in European equities and expect recent outperformance to persist.”
Though opportunity in the region "has narrowed considerably in recent months and see few remaining sources of double-digit upside from here."
Here are the main reasons to favour Europe’s equities, according to MS:
. Europe should see an improvement in its relative economic momentum over the coming months as global data peaks and European newsflow picks up from recent lows;
. relative valuation looks attractive with MSCI Europe trading close to an 8-year low versus MSCI it looks cheap even if you exclude U.S. peers;
. Europe should be less vulnerable to any broader sentiment reversal given lower levels of 'froth' - eg while we have seen very strong inflows into U.S. and EM equity markets recently Europe has actually seen small outflows.
(Stefano Rebaudo)
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ARCHEGOS FALLOUT: "IT'S CLEARLY NOT NORMAL" (1110 GMT)
Like Nomura did earlier, Credit Suisse is paying the price for the Archegos fallout and is now down about 15%.
How much did the Swiss lender lose It's unclear, estimates ranges from at least $1 to 4 billion which in any case is big blow and begs the question of what went so wrong.
"If the figures one can read about Credit Suisse are accurate, there is clearly a big risk management problem", Jérôme Legras, head of research at Axiom Alternative Investments just told us.
"The size (of the losses) is surprising, it's clearly not normal, liquidation of funds happen, it happened in the past and it will happen again but a liquidation with such huge and clearly uncovered positions on which banks end up with such a position is clearly unusual", he added.
How did the collateral fail to cover so much of the losses Also unclear but it seems Nomura and Credit Suisse got stung extra by acting later than Goldman Sachs and Morgan Stanley.
"One also has the feeling that the banks didn’t all act at the same time and that the first which acted made their way out while the others were left to pick up the pieces", Legras added.
The fire sale also echoes the market price action triggered during Gamestonk when short seller had to quickly sell long positions in U.S. IT and tech shares to cover their losses.
"In general one has the feeling that there has been a few recent episodes of abnormal market behaviour linked to fire sales", Legras also commented.
(Julien Ponthus)
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INSURER STOCKS: NOT JUST RISING YIELDS (1011 GMT)
Today financial stocks are not in a very good shape after the warnings by Credit Suisse and Nomura, but reflation trade seems to be very much alive along with expectations of rising yields.
This would be good news for insurers which, according to Berenberg, might also benefit from more M&A activity.
Berenberg sees lots of opportunities for increased M&A activity in the insurance space as “companies are looking to put capital to work and take advantage of undervalued or distressed assets,” it said in a previous report.
Even if we have actually seen relatively few transactions so far, “a rise in interest rates, if it increases deal valuations, could potentially lead to more deals, and this would boost the ROE and the capital flexibility of sellers,” Berenberg analysts argue.
Looking at the bigger picture, Berenberg sees U.S. yields US10YT=RR rising to 2% by mid-year and to 2.5% by end 2021, with 10-year Bund yield at -0.1% by mid-2021 and at 0.1% at the end of this year.
This scenario will send solvency across European and UK insurers covered by Berenberg to 210%, up 11.4 ppt.
Higher yields will also benefit reinvestment rates, with the greatest beneficiaries the London market names and reinsurers.
Today the European insurer stock index .SXIP is up 0.7%, outperforming the STOXX 600, while the bank stock index SX7P cuts some earlier losses and is now down 0.5%.
(Stefano Rebaudo)
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CREDIT SUISSE DROP WEIGHS ON FINANCIALS AT THE OPEN (0737 GMT)
Credit Suisse is down around 13% after warning it might take a significant hit from a default on margin calls by a U.S.-based fund named by sources as Archegos Capital.
That comes after Nomura closed 16% down for what is likely to be the same reason.
The financial services index, of which Credit Suisse is a constituent, is the worst performer and losing 1.5%.
European banks are also feeling the heat and are down 1%.
Among the top fallers, Deutsche Bank is losing 5.2% and UBS 4.2%.
The damage seen contained though and the overall market is doing quite all right: Frankfurt's DAX is on a new record high and the STOXX 600, up 0.1% is in striking distance of its February 2020 433.90 points all time high.
It's still looking less rosy on Wall Street where futures are down around 0.5%.
(Julien Ponthus)
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NOMURA, CREDIT SUISSE WOES VS SUEZ CANAL TRADE RELIEF (0717 GMT)
Nomura Holdings and Credit Suisse flagging major losses this morning no doubt trumps relief felt by the partial re-floating of a massive container ship blocking the Suez Canal.
Nomura and Credit Suisse warned they were facing significant losses after a U.S. hedge fund, named by sources as Archegos Capital, defaulted on margin calls. (Full Story)
A fire sale of stocks on Friday caused big drops in the share prices of a number of companies linked to Archegos, according to a source familiar with the matter.
The messy unwinding of large blocks held by Archegos is proving to be a real time stress test for Wall Street.
U.S. futures are 0.5% and 1% in the red with many investors fearing they haven't heard the last of the ripples. Euro zone banking stocks are down 0.7% at the open, Credit Suisse shares fell over 7% and Nomura lost a whopping 16%.
Friday's market price action was spectacular with shares in Viacom CBS, Discovery losing a quarter of their value.
Overall though, the Archegos sensation hasn't rocked the session in the East with MSCI's broadest index of Asia-Pacific shares outside Japan currently flat.
European stocks meanwhile have opened 0.2% higher, not far off the February 2020 record high of 433.90 points.
The prospects of the Suez Canal soon being open for business has brought some relief, with oil prices easing and energy markets cautious ahead of an OPEC meeting this week.
Closely-watched yields on U.S. 10-year notes also ticked down to just below 1.64%, holding below a recent 13-month high at around 1.75%.
Investors wary of U.S. inflation will be on the lookout for details from President Joe Biden on his infrastructure spending plans this week, which could supercharge an already accelerating U.S. recovery.
Key developments that should provide more direction to markets on Monday: - Credit Suisse warns of 'significant' losses from exiting hedge fund positions - Nomura flags $2 bln loss, cancels bond issue; shares plummet - Deliveroo sees investors demand exceeding the full deal size - Euro Zone Business Climate for March due
(Julien Ponthus)
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NO FIREWORKS FOR SUEZ CANAL BREAKTHROUGH (0533 GMT)
It's fair to say that the news the ship blocking the Suez Canal was being re-floated didn't trigger the kind of relief one could have expected on global financial markets.
Actually, European bourses are set to open slightly in the red judging by the look of futures on the old continent and Wall Street at the moment.
MSCI's broadest index of Asia-Pacific shares outside Japan ticked down 0.1% while oil prices lost about 2%.
Yields on U.S. 10-year notes also eased a tad to 1.64%.
It wouldn't take much however to lift the STOXX 600 to a new record high though.
The pan-European index closed at 426.93 points, just 7 points from its February 2020 all time high.
(Julien Ponthus)
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