STOXX up, travel stocks shine

נקודות מפתח:
  • STOXX 600 up 0.3%
  • China reopening hopes lift travel stocks
  • Caution before Fed's Powell speech
  • Eyes on euro zone inflation
  • U.S. stock futures inch higher


European equities got off to a positive start this morning with hopes that China could reopen its economy after a relaxation of COVID-19 restrictions in Guangzhou driving the travel sector to a near seven-month peak.

The STOXX Travel & Leisure (.SXTP) index was the biggest sectoral gainer in early trading, up 1.3% to its highest since early May, followed by autos (.SXAP) and tech (.SX8P) stocks.

Most other sectors also traded in positive territory, helping the broader STOXX 600 SXXP to rise 0.5% even as caution dominated ahead of Federal Reserve Chairman Jerome Powell's speech after the market close in Europe.

Here's your opening snapshot:

(Danilo Masoni)



European shares look set to rise slightly at the open, even after China PMI data disappointed and as caution reigns ahead of Jerome Powell's speech in which the Fed Chair is expected to stick to a hawkish playbook.

Euro STOXX 50, DAX and FTSE 100 futures were last up 0.6%, mirroring gains in Asia. China stocks also bounced back as hopes over a loosing in COVID-19 restrictions more than offset the disappointing macro data.

U.S. futures also pointed to marginal gains later on Wall Street, following losses on the S&P 500 on Tuesday, weighed down by declines in Apple and other tech stocks.

The European corporate news front looks rather quiet.

H&M though could get some attention though after the Swedish fashion retailer said it would cut some 1,500 jobs as part of its cost-cutting drive.

Still in Sweden, airline SAS reported a deeper Q4 loss than expected, but said underlying demand remained good although with a slight slowdown in October.

Home REIT said there were no overdue arrears related to amounts billed to Aug. 31, dismissing allegations about its finances raised by activist investor Viceroy Research.

(Danilo Masoni)



A look at the day ahead in European and global markets from Wayne Cole.

So Tuesday's bout of post-pandemic euphoria in Chinese markets has cooled today, perhaps a recognition of just how long it will likely take to materially raise vaccination rates there.

Even when restrictions ease, it will mean more infections and illness which could hamper growth over the first half of next year. Disappointing Chinese PMI surveys for November just underline the damage already done.

But neither have markets given back yesterday's gains, so there's clearly an expectation Beijing is now set on opening up which has to be positive for the global economy and supply chains over time.

Which leaves investors waiting on Powell, again. The analyst view is that he will have to play Grinch to stop U.S. markets from further easing financial conditions. Since the Fed hiked by 75 basis points on Nov. 2, 10-year yields have fallen 38 basis points and undone much of that good work.

So the message will likely be: "Hold your horses on rate cuts people." The labour market is drum tight and inflation of 7.7% is not 2%. The terminal rate will have to be higher than first thought to be sufficiently restrictive and stay there for longer.

Whether he can be hawkish enough is another matter given the signs of a turning point in inflation are mounting. Here in Australia today, a new monthly measure of inflation rose just 0.2% in October when some analysts had looked for a jump of 1.0%. The annual pace slowed to 6.9%, from 7.3%, and suggests a peak is nearby.

That echoes the inflation data from Germany and Spain which both surprised on the downside and saw markets take 10bps off pricing for ECB rates at the December policy meeting. That suggests today's EU-wide inflation figure will undershoot the forecast of 10.4%, even if the core measures prove stickier.

Key developments that could influence markets on Wednesday:

Federal Reserve Chair Jerome Powell speaks on the economic outlook and the labour market before a hybrid Brookings Institution event at 1830 GMT, including a Q&A.

A horde of U.S. data including JOLTS job openings, ADP employment, Chicago PMI and the second estimate of Q3 GDP and PCE prices.

(Wayne Cole)


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