Live Markets: Baby Boomers like equities but can that sustain?

Activision Blizzard

22/08/2023 11:44

* 
      STOXX Europe 600 up 1.2%
    

        * 
      Tech rallies on Nvidia boost
    

        * 
      UbiSoft up after Activision deal
    

        * 
      US stock futures rise
    

  
Welcome to the home for real-time coverage of markets brought to
you by Reuters reporters. You can share your thoughts with us at
    
        BABY BOOMERS LIKE EQUITIES BUT CAN THAT LAST? (1040 GMT)
  
    Wells Fargo highlights data from Fidelity and Vanguard
showing that U.S. retirees are investing a significantly higher
portion of their savings in stocks compared to a decade ago:
    - Nearly half of 401(k) investors who actively manage their
money and are over the age of 55 hold more than 70% of their
portfolios in stocks, versus 38% in 2011.
    - Nearly four in 10 investors between the ages of 65 and 69
hold about two-thirds or more of their portfolio in stocks.
    Reason?
    Higher returns, equity market rebounds, monetary policy
support, greater willingness from 'baby boomers' to take risk
and increased life expectancy. 
    But this "will likely reinforce investor tendencies to
rebalance during bouts of market volatility - to purchase stocks
at more attractive prices, potentially shortening the rebound
phase," says Investment Strategist Douglas Beath at the Wells
Fargo Investment Institute. 
    The "buy on the dip" strategy faces risks from the growing
U.S. budget deficit impacting the Fed's easing policies, as well
as competition from higher bond yields, Beath says.  
    
    (Susan Mathew)
    *****        
    
    VALUE VS GROWTH IN EUROPE (1025 GMT)
    Morgan Stanley says that while value trade still dominates
Europe - mainly due to lagging tech weightage - a secular
transition towards a higher and more stable profit growth should
drive a re-rating over time.
    Lead analyst Giorgio Magagnotti believes better performance
from value stocks over the last couple of years represents a
pause in the evolution of the European equity market rather than
a reversal, and the re-rating should continue over the long run.
    "Although Financials and Energy (alongside Healthcare) have
seen the biggest increase in their market weight over the last
two years, they still show the biggest decrease in
representation since 2010," Magagnotti notes.
   "Longer term, the combination of today's low valuation and
the ongoing transition within the European equity market
suggests a rosier outlook."
    
    (Reshma Rockie George)
    *****
      
    THE POTENTIAL LONG-TERM WINNERS OF AI ADOPTION - GS (0931
GMT)
        Companies adopting AI will benefit long-term from
greater revenues, higher margins, or a combination of both,
Goldman Sachs says.
    Equity investors will price in the impact of AI to
productivity earlier than the actual earnings boost, analysts at
GS led by Ryan Hammond say. 
    They introduce a long-term AI beneficiaries basket which is
sector neutral to the Russell 1000  .RUI , to identify companies
with the largest potential long-term EPS boost from the impact
of AI adoption on labor productivity.
    "Our analysis suggests that, following widespread AI
adoption, EPS for the median stock in the basket could be 72%
higher than the baseline, compared with 19% for the median
Russell 1000 stock," Hammond says.
    Hammond identifies sectors with the largest potential
earnings gains from AI, such as software and services, consumer
staples distribution, and commercial and professional services
seeing at least 34% potential earnings gain in the long-term.
    Software companies will be some of the the biggest potential
gainers from automation, with firms like Guidewire Software
 GWRE.N  likely seeing five-folds earnings gain,  while Alteryx
 AYX.N , and  MongoDB Inc  MDB.O  seeing about three-fold gains
each. 
    
    (Roshan Abraham)
    *****
        
  
    STOXX GETS TECH SUPPORT (0800 GMT)
    European shares started the day on the front food on Tuesday
with a pre-earning rally in Nvidia shares boosting tech stocks
 .SX8P  and helping drive the STOXX Europe 600 up around 0.9% in
early deals. Most other sectors rose too, although energy
 .SXEP  lagged on softer crude prices.
    UbiSoft rose 6% to the top of the region-wide index as
investors cheered to a deal where the video game maker will buy
streaming rights for Call Of Duty and other Activision games.
    Here is your opening snapshot:    
    (Danilo Masoni)
    ***** 
    
    EUROPEAN FUTURES RISE (0638 GMT)
        European shares looked set to open higher on Tuesday,
underpinned by a tech-led rally on Wall Street on optimism ahead
of Nvidia results this week and following slight gains in Asia
where beaten-down Chinese stocks rebounded.
    EuroSTOXX50 and FTSE futures were up 0.7% and 0.2%
respectively, while U.S. contracts pointed to a broadly
unchanged start for Wall Street later on although rising
Treasury yields could temper sentiment.
    In European corporate news, eyes are on BHP after the mining
group said it saw solid growth from some sectors in China as it
logged its weakest annual profit since 2020.
    Leonardo is also on the watchlist. Sources told Reuters that
Italy's former minister Roberto Cingolani, who has been Leonardo
CEO since May, is being investigated for alleged abuse of office
in relation to an environmental authorisation to the Rosignano
Solvay plant on a Tuscan beach in 2022. The former minister and
Leonardo declined to comment.
    Chip stocks could get support from the pre-earnings surge in
Nvidia shares. 
    Finally, Ubisoft signed a deal for streaming Call Of Duty
and other Activision Blizzard games.   
    
    (Danilo Masoni)
    *****
    
    SKYROCKETING YIELDS IN THE SPOTLIGHT (0546 GMT)  
    Bond selling extended on Tuesday to drive 10-year Treasury
yields  US10YT=RR  to fresh 16-year highs in Asia trade and
leave already-nervous stock markets cautious.
    The move has no obvious trigger. But it isn't inflation, as
inflation expectations have hardly budged -- investors are
plainly demanding a higher return to keep on buying the stuff.
    Some analysts have drawn attention to the coincidence of
timing between the selloff and the Bank of Japan's signal that
it would allow 10-year Japanese yields as high as 1%.
    Perhaps traders are front-running a withdrawal of Japanese
capital. At the same time, the theme of the Federal Reserve's
forthcoming Jackson Hole symposium - "structural shifts in the
global economy" - has some speculating that bond markets better
shift, too, especially at the longer end.
    Either way, with inflation-insulated returns of 2% on offer
for 10 years  US10YTIP=RR  the implications for risk appetite
across the rest of the financial world are significant.
    Small beer on the data calendar on Tuesday will keep the
focus on yields and on Fed Chair Jerome Powell's Jackson Hole
speech on Friday.    
    For one, the move seems to be making Chinese policymakers
shy for fear of driving down the currency. Rate cuts on Monday
were disappointingly small, and were accompanied by state banks
hitting the offshore forwards market to prop up the yuan.
    Market jitters are palpable as stock indexes in Shanghai
 .SSEC  and Hong Kong  .HSI  struggled at holding early attempts
to snap losing streaks, and were loitering around flat or worse
by the afternoon.
    BHP Group on Tuesday reported its lowest annual profit in
three years and forecast commodity demand stabilising in China -
perhaps the best that can be hoped for in the circumstances.
    Elsewhere in Asia Thailand's fugitive former premier,
Thaksin Shinawatra returned to Bangkok from 17 years in exile -
coinciding with a bid by his political allies to form a
government with some of their biggest rivals.
    The yen  JPY=EBS  took a small boost on the risk of
intervention after Bank of Japan Governor Kazuo Ueda met with
Prime Minister Fumio Kishida.
    Ueda said he wished to refrain detailing what was discussed,
and said it did not include FX volatility, but the yen is just
below levels that drew official intervention last year. 
    Key developments that could influence markets on Tuesday:
    Data: UK public sector requirements, Euro zone current
account, U.S. existing home sales
    Earnings: Royal Unibrew  RBREW.CO , Better Collective
 BETCO.ST 
    
    (Tom Westbrook)
    *****

    <^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
UK and US real yields close to historical highs    https://tmsnrt.rs/3qAAvf0
EU open    https://tmsnrt.rs/3KORfpM
    ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>