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GOOD MORNING BROKEN CORRELATIONS! (0838 GMT)
European bourses have opened in the red in a session which is already loaded with contradictions, broken correlations and unusual patterns.
First and foremost, it’s worth noting that while the STOXX 600 is down about 0.2% in early trading, Wall Street futures are still trading in the black, 0.3% for the S&P and 0.5% for the Nasdaq. It’s worth noting that S&P 500 fell 0.5% ahead of close yesterday.
Second, while PMIs are one of the key indicators watched by equity strategists, it’s fair to say that yesterday’s good surprise had little positive effect.
Looking at oil prices, it’s another weird one with prices edging down despite the Suez Canal being blocked and disrupting part of the oil trade. Rising Covid cases might be weighing?
So quite counter intuitively, the oil and gas sector is the worst performing one, losing 1.3% at the moment.
Also while growth and tech stocks had been tracking U.S. Treasury yield, the correlation seems broken at the moment if you look at the Nasdaq which yesterday fell along borrowing costs.
There’s no spillover it seems from the overnight fall of Chinese tech shares due to concerns some may have to delist from U.S. markets.
Today in Europe, the tech sector is down 0.2%, which is just a tad lower than the broader market.
What seems to be the market focus today is how Europe deals with the third wave of the pandemic and whether a vaccine war with the UK can be averted.
COVID, MISSILES AND TANKER TAILBACKS (0816 GMT)
Plenty to chew over in what’s shaping up to be a busy session.
First to note is a sharp fall in dual-listed Chinese company shares after the U.S. securities regulator adopted measures that would kick foreign companies off American stock exchanges if they do not comply with U.S. auditing standards.
Another reason for markets to stay in risk-off mode perhaps was North Korea which launched two ballistic missiles into the sea near Japan. All that weighed on stocks earlier in Asia and now European stock futures are a tad softer.
But the session looks set to brighten up as U.S. equity futures point to a higher open for Wall Street.
They might seek some reassurance from the host of central bankers due to speak later in the day, including the ECB’s Christine Lagarde. The Swiss National Bank also meets and should keep interest rates at -0.75%, where it’s been for over six years. Central banks meet in South Africa and Mexico too.
Vaccine rollouts and supplies could be high on the agenda at an EU summit later on. The bloc on Wednesday tightened its oversight of coronavirus vaccine exports, giving it greater scope to block shipments to countries with higher inoculation rates such as Britain.
While German Chancellor Angela Merkel has made a U-turn over imposing a full 5-day lockdown over Easter, concerns about the euro area economy continue to pressure the euro, which is languishing near 4-month lows around $1.18.
Those worries also pulled crude prices more than 1% lower despite the oil tanker tailbacks caused by the stranded container ship in the Suez Canal. Key developments that should provide more direction to markets on Thursday: – ECB President Christine Lagarde, Bundesbank President Jens Weidmann, and Bank of England governor Andre Bailey, participate in a virtual central bank event hosted by BIS. – Sweden’s Ingves, Bank of Canada’s Macklem, ECB’s Weidman, ECB’s Villeroy de Galhau, New York Fed’s Williams also due to speak. – U.S. Treasury to auction 7-year bonds; 5-year bonds sold Wednesday with a sold bid (Full Story) – Italy to launch BTP short-term, a new government bond that will replace CTZ notes – Final iteration of US Q4 GDP
ALONE IN THE RED (0641 GMT)
European futures are currently trading in the red at the same pace as their Wall Street peers are cruising in the black: that’s about 0.2% give or take.
Tension is building up ahead of the virtual summit at which EU’ leaders will discuss new rules which would allow the bloc vaccine shipments to countries which are not sharing doses they produce.
The threat of a vaccine war adds up to concerns about Europe’s sluggish vaccination campaign and the new round of lockdowns implemented to keep the third wave of COVID-19 infection under control.
Among other factors weighing on the market today is the selloff in Chinese technology shares due to concerns they could be de-listed from U.S. bourses.
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