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LIVE MARKETS-DoorDash sets table for Airbnb in torrid IPO market

Wed 9th December, 2020 6:47pm
* Major U.S. stock indexes red; Nasdaq down ~1.7% * Stimulus talks drag on * Nearly all major S&P sectors fall: tech hit hardest * Energy very slightly green * Dollar up; crude, gold down, U.S. 10-Year yield ~0.93% Dec 9 - Welcome to the home for real-time coverage of markets brought to you by Reuters reporters. You can share your thoughts with us at DOORDASH SETS TABLE FOR AIRBNB IN TORRID IPO MARKET (1330 EST/1830 GMT) Food delivery firm DoorDash DASH.N blows past its IPO price on Wednesday, setting the table for Airbnb Inc's ABNB.O long-awaited public debut on Thursday. DASH opens at $182 after the IPO priced at $102, above an already upwardly revised target range.*:nL4N2IP3EY This as home rental startup Airbnb is reportedly poised to price its IPO above a targeted range of $56-$60 later today. Alongside DASH, AI software firm Inc's AI.N shares more than double in debut*:nL4N2IP2ED, and shares of advertising tech company Pubmatic PUBM.O are up 40%.*:nL4N2IP2FE IPOs have come at a blistering pace this year. Per Dealogic, 397 companies have brought IPOs to market in 2020, raising nearly $145 billion as of Dec. 7. This figure is nearly double the 200 new issues that collected $58.8 billion for the same period in 2019. And white-hot deal performance has clearly helped fuel new issuance. The Renaissance IPO ETF IPO.N , which owns shares of companies that recently went public, has surged about 110% this year vs the S&P 500 index's .SPX 14% advance. (Lance Tupper, Gertrude Chavez-Dreyfuss) ***** HYDROGEN: FLOATING AROUND IN GREEN ENERGY CIRCLES (1235 EST/1735 GMT) Nicholas Colas, Co-Founder of DataTrek Research, is out with some remarks on hydrogen, which has once again become a hot topic in green energy circles. Colas says that "as government policymakers start to consider what concrete steps their countries need to take to decarbonize, they seem to be coming to the conclusion that they must embrace an 'all of the above' set of solutions." Thus, besides solar, wind, and electric cars, there may be room for other ideas as well. As for hydrogen, Colas notes some building momentum. He says that Washington state is weighing giving hydrogen-powered vehicle purchasers the same sales tax breaks given to those who buy electric cars. He adds that Washington is also progressing on the necessary refueling infrastructure, with plans to open stations by 2022. Colas also says Hyundai is partnering with British chemical company Ineos to jointly develop hydrogen-powered vehicles. Meanwhile, he also notes that Porsche, Siemens and several of the world’s oil companies are working to develop and commercialize “e-Fuels,” which is basically climate-neutral gasoline, at a plant in the south of Chile. Colas says the idea here is to take wind power, which is apparently plentiful and reliable so near to Cape Horn, use it to make hydrogen, then combine it with carbon dioxide from the air to create a clean version of methanol. "From there it is a hop-skip-jump to gasoline." In conclusion, DataTrek states that going forward, they will be spending a lot more time considering clean energy alternatives. Solutions like green hydrogen remain a possible disruptor to electric vehicles. Those, he says, "are actually the incumbents in Green Energy 1.0." (Terence Gabriel) ***** EUROPE'S RISK APPETITE WAVERS AHEAD OF BREXIT DINNER (1148 EST/1648 GMT) European stocks markets, after a choppy session, ended the day in positive territory, but well off earlier highs . Risk appetite sure seems to have wavered ahead of a high-stake Brexit dinner in Brussels tonight. The pan-European STOXX 600 gained a meagre 0.4% while the pound maintained some gains, which seems to show investors are not ready to run for the hills just yet and are giving peace a chance. But while there's little expectation that a post-Brexit deal can be agreed on in full tonight, the possibility that UK PM Boris Johnson and the head of European Commission Ursula von der Leyen agree to disagree and call it night, so to speak, is very real. If the EU and the UK officially give up on finding some kind of trade agreement, tomorrow's session might prove to be a totally different one. On the bright side, it's an ECB Thursday which means Christine Lagarde will get the opportunity to seek to calm things down in the event of a stormy day across financial markets. At the moment, money is clearly on talks carrying for who knows how long. As Paul Donovan, chief economist at UBS GWM wrote this morning, "the interminably tedious US fiscal discussions continue to be tedious and interminable". (Julien Ponthus) ***** WEDNESDAY DATA: THE ANCIENT MONTH OF OCTOBER (1120 EST/1620 GMT) Data released on Wednesday focused mainly on a long-ago October, that fabled month when the presidential election still loomed, new vaccine developments weren't quite so promising, stimulus seemed like an impossible dream and the spike in new COVID infections had yet to reach the stratosphere. In October, the U.S. saw more job openings, more layoffs, and fewer hires according to the Labor Department's Job Openings and Labor Turnover Survey (JOLTS) USJOLT=ECI , a gauge of labor market churn. The quit rate, seen by economists as a barometer of consumer expectations - workers are less likely to walk away from a job in times of economic uncertainty - edged up slightly. According to Stan Shipley, economist/strategist at Evercore ISI, the report "was mixed on balance and is consistent with the disappointing November payroll release." "Though the absolute level of job openings is elevated, relative to the level of unemployment, they are low," Shipley adds. The increase in job openings and decrease in hires appears to echo the NFIB's small business survey released on Tuesday, in which survey respondents said finding qualified workers was their biggest challenge. In a separate report, the amount of wholesale goods stored in U.S. warehouses USWINV=ECI increased by 1.1% in October, according to the Commerce Department, a faster pace that previously reported and a decent acceleration from September's 0.7% growth pace. But compared with last year, wholesale inventories are down 2.2%. While an inventory rebound helped boost third-quarter GDP to a historic 33.1% annualized growth rate, inventories had been a drag on the economy for the previous five quarters, and according to recent indicators from ISM and NFIB, they remain at depressed levels. But more recent economic data could be found in the Mortgage Bankers Association (MBA) home loan data from last week. The average 30-year fixed contract rate USMG=ECI shed another 2 basis points to 2.90% last week, according to the MBA, setting a new historic low. But that failed to impress potential homebuyers. While applications to refinance existing loans USMGR=ECI edged higher, those gains were offset by a 5% drop in demand for loans to purchase homes USMGPI=ECI , resulting in a net 1.2% drop in mortgage demand. "Our forecast is for a slower pace of home sales in the months ahead over the balance of 2020 due to waning demand from urban dwellers, tight inventories and a sharp rise in home prices, but the risk may be for further upside surprises," says Nancy Vanden Houten, lead economist at Oxford Economics. Investors appear to be taking a breather in morning trading after Tuesday's record closing highs for the S&P and the Nasdaq. All three major U.S. stock indexes are modestly lower. But small caps .RUT and Dow transports .DJT are having a good day. (Stephen Culp) ***** WHAT'S NEXT FOR SMALL CAPS? (1005 EST/1505 GMT) Small caps are yet again the belle of the ball on Wednesday with the Russell 2000's .RUT almost 1% gain and the 1.2% advance for the S&P 600 .SPCY making the S&P's move look shabby. This was after the Russell on Tuesday far outstripped the broader market and boasted a record closing high, ending above 1900 for the first time. So far the index is up 6.3% for December after its record 18.3% monthly jump in November. BofA equity and quant strategist Jill Carey Hall notes that forward P/E expanded across sizes, with the Russell 2000 rising from 16.2x to 18.1x in its best month ever while the Russell Midcap expanded from 19.1x to 20.7x and the Russell 1000 climbed from 20.5x to 22.3x "underscoring the sharp rise in optimism." But even with valuations at the highest levels since the summer, Carey Hall says "the rally has failed to meaningfully close the valuation gap between small and large caps, which are at a 21% discount relative to where they've historically traded vs. large caps." But, Carey Hall sees COVID-19 as the biggest risk to her small cap vs large cap call. "A poor implementation of the vaccine rollout or lack of fiscal stimulus amid elevated optimism would disproportionally impact risky small caps stocks," Carey Hall writes. This is because they are more exposed to the domestic economy and credit conditions and have more exposure to secularly challenged sectors. Plus they do look expensive relative to large caps when non-earners and outliers are included. (Sinéad Carew) ***** "BOOM, GOLDILOCKS AGAIN, THIS TIME WITH A FISCAL TWIST" (0940 EST/1440 GMT) That's a nice summary of the state which a rare combination of monetary and fiscal stimulus globally has put markets in, as equity gauges across geographies scale new peaks in anticipation of a big macro bounce from the Coronavirus downturn. Credit for that goes to Giuseppe Ganci, chief investment officer at Swiss-based Compass Asset Management, who reflects in his latest note for clients about what lies ahead and how should investors position themselves in such a changing environment. Looking at the unusual duo of central banks and governments moving in tandem with support measures, he highlights how the nomination of Janet Yellen "just fits the bill". And in a sense tomorrow's European agenda with a EU summit on a stimulus package and an ECB meeting set to kick off more easing also exemplifies the new backdrop for markets. Back to the positioning question, Ganci says: "We got to run portfolios with higher risk than in the past. It is inevitable because 'There Is No Alternative' for us too." He's constructive on developed market credit because it's "closer to the action of central banks" and believes the new U.S. administration won't derail the positive trend for equities, even though it will likely change internal leadership. "With Trump we got to invest thinking 'America First' and America delivered first class results. With Biden I guess we can switch to an 'America Second' mindset," he argues "So, we overweight Asia and, after many years, we are more constructive even on Europe. Both areas offer better 'Value' than Large Cap US," he concludes. (Danilo Masoni) ***** DOW INDUSTRIALS: COMING TO A POINT (0900 EST/1400 GMT) Unlike the S&P 500 .SPX , and the Nasdaq .IXIC , since the Dow Industrials .DJI finally established a fresh record-high close on November 16, the blue-chip average has struggled to sustain strength. Since November 16, the Dow has yet to score 2 record-high closes in a row. Instead, after ending at a fresh record on November 24 and again on December 4, it immediately sputtered. It now coils in a contracting range, or rising wedge pattern, which can be easily seen on the hourly chart: The rising wedge pattern could be an ending-diagonal, which would suggest the Dow's rise is nearly exhausted. That said, if the Dow can thrust above the upper boundary of the pattern, which is around 30,290 today, it could clear the way for a spike higher. The next hurdles would be log-scale resistance lines from 2000 and early 2018, which now, on a monthly basis, come in around 30,425 and 30,865.*:nL1N2IB14U Conversely, an immediate decline, which breaks the lower boundary of the pattern, now around 29,865, could have greater bearish implications. Of note, with the recent narrowing price action, historical volatility has collapsed. In fact, daily Bollinger Band Width now stands at its tightest reading since February 5th. Five days later the Dow peaked and ultimately collapsed 38% into its March trough. Thus, with the Dow making its way toward the point of the pattern, momentum and volatility appear poised to pick up, one way or the other. This, as we near the winter solstice.*:nL1N2IO11S (Terence Gabriel) ***** FOR WEDNESDAY'S LIVE MARKETS' POSTS PRIOR TO 0900 EST/1400 GMT - CLICK HERE:*:nL1N2IP0XV <^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^ Dow12092020 MBA WSISC12092020 JOLTS job openings 2 JoltsLayoffsSC12092020 1 year performance of IPO ETF vs S&P 500 ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^> (Terence Gabriel is a Reuters market analyst. The views expressed are his own)
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