LIVE MARKETS How to navigate the uncertain months ahead

  • European stocks rebound after massive selloff
  • Cyclicals leading the sector winners
  • Optimism about vaccines supports mood
  • Rise in US stock index futures

December 21 – Welcome home for real-time market coverage presented by reporters at Reuters. You can share your thoughts with us at market.research@thomsonreuters.com

HOW TO NAVIGATE THROUGH THE UNCERTAIN MONTHS (1041 GMT)

2021 started off with great optimism about the recovery and is hopeful that vaccinations could end the COVID-19 pandemic soon.

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But as the year draws to a close, uncertainty is the buzzword as risks ranging from Omicron to inflation and less accommodating central banks cloud the market outlook.

This has created volatility and the turbulence for next year is expected to persist. So how should investors navigate what promises to be a tough few months ahead?

For Alessandro Fugnoli, strategist at Kairos, Omicron’s impact on the recovery is unlikely to extend over the whole year and expects policy normalization to remain cautious.

“It does not seem that it is already time to lighten the weight of equities in the portfolios. Rather, it is a question of increasing the weight of defensive sectors in the coming weeks … Growth sectors and more cyclicals will become more attractive later when growth resumes from the second quarter, “he said.

And Filippo Garbarino, who manages the Global Equity Opportunities fund at Lemanik, expects the uncertainty to lead to sector rotations and volatility.

“However, the underlying situation is expected to remain moderately bullish, supported by continued earnings growth of listed companies and major global economies,” he said.

“At the sector level, our portfolio does not include banking and energy, sectors considered too risky. Instead, the portfolio is overweight consumer discretionary, healthcare and industrials. Technology is neutral.” , he added.

(Danilo Masoni)

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QUERY THE FED (10:28 a.m. GMT)

The ups and downs in risk sentiment these days before Christmas are major financial markets, including the US dollar and Treasury yields.

But there is more to just range trading, as some investors appear to be questioning the Fed’s commitment to hike rates in 2022.

“Market participants are not yet convinced that the Fed will be able to implement its rate hike plans three times next year and raise the key rate above 2% in subsequent years. MUFG analysts say.

They mention the blow to Democratic spending plans and the rapid spread of the Omicron COVID-19 variant.

Such expectations have “kept the US dollar from strengthening further following the Fed’s hawkish policy update last week,” they add.

But there are also a few more reasons keeping the greenback under pressure, including investors taking profits on their long dollar bets before the end of the year.

Overall, the MUFG believes that “there is a significant obstacle for the Fed to slow down its tightening plans and expects the US dollar to strengthen further by early next year.” .

The chart shows that the US dollar index has lost momentum recently, despite hawkish statements from Fed officials.

dollar

(Stefano Rebaudo)

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LEAD GAINS IN MINORS AND OIL STOCKS (0828 GMT)

European stocks are rising as risk appetite appears to be back after yesterday’s fall over fears that the pandemic and a blow to Democratic spending plans in the United States could threaten the recovery of the global economy.

The Stoxx 600 (.STOXX) is up 0.8% with the basic materials index (.SXPP) and the oil and gas index (.SXEP) leading the gains, respectively up 2.2% and 1.5%.

Oil prices are showing a rebound after a few tough days, but concerns about the impact of the Omicron variant on the economy and on fuel demand are still present.

Equity investors are unwilling to start any directional trading until the holiday season, with uncertainty still surrounding Omicron’s impact on the economy.

Among individual stocks, Zur Rose Group (ROSEG.S), operating in online pharmacy and pharmaceutical wholesale, fell around 6% after Germany postponed the introduction of electronic prescriptions.

Shares of Bolloré (BOLL.PA) rose 10% after receiving an offer of 5.7 billion euros for its African logistics assets.

instantaneous

(Stefano Rebaudo)

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FATHER NOL’S RALLY AGAINST THE GRINCH (0733)

If last week was all about central bank rallies, then this week is all about how the rapidly spreading Omicron Covid variant could rob markets of any festive cheer.

New Zealand delayed the planned reopening of its international border on Tuesday because of Omicron, as several other countries reimposed social distancing measures.

Many countries are on high alert days before Christmas and New Year celebrations, as the latest health crisis renews uncertainty in global markets and deals another blow to the global economic recovery.

The number of shoppers on UK shopping streets, for example, fell 2.6% over the weekend, market research firm Springboard said on Monday. Eurozone consumer confidence data will likely be watched closely.

Stocks, which fell on Monday, appear to be on more solid ground for now. Asian stocks bolstered Chinese efforts to shore up a struggling real estate sector, rallying over 1% (.MIAPJ0000PUS), ending a two-day losing streak.

The Japanese Nikkei rose 2%, European and US equity futures are firm.

And note that even when stocks fell on Monday, investors did not flock to traditional safe havens like bonds and gold. This may be because many investors liquidated positions for the year. Another explanation, others say, is that assets like sovereign bonds are expensive.

Elsewhere, the battered Turkish lira rose 7%, after a historic 25% recovery from record lows, as President Tayyip Erdogan unveiled a plan he said would guarantee local currency deposits against fluctuations of the market. Read more

Key developments that should give more direction to the markets on Tuesday:

– China Mobile to raise up to $ 8.8 billion in Shanghai listing read more

– British government borrowing totaled £ 17.4 billion in November read more

– UK businesses are feeling pressure from Omicron – Lloyds poll read more

– Japan improves its economic outlook for the first time in 17 months in a December report read more

– Australian central bank optimistic about outlook ahead of quantitative easing decision read more

– German consumer morale darkens read more

– Flash of consumer confidence in the euro zone in December

– Philadelphia Federal Reserve issues non-manufacturing issues – – Business Outlook Survey for December 1330 GMT

– US current account Q3

COVID and CESI

(Dhara Ranasinghe)

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BUY THE DIP AGAIN (0719 GMT)

European equity futures are well in positive territory after short hedging of US index futures brightened the mood in Asian trading.

Analysts expect range trading and non-directional market trends to dominate in the coming days as the Omicron variant remains a threat to the global economy as liquidity becomes increasingly scarce ahead of trading season. holidays.

Chinese stocks supported risk sentiment amid signs of increased political support from Beijing to ease the pain of the ailing real estate sector.

(Stefano Rebaudo)

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