Live Markets: Placing a bet on Chinese gaming and lodging
21/06/2021 18:34
* Major U.S. stock indexes sharply higher; small caps
outperform
* All S&P 500 sectors advance; energy leads
* Dollar dips; gold, crude gain; bitcoin plunges ~9%
* U.S. 10-Year Treasury yield hits 1.354%, now ~1.48%
June 21 - Welcome to the home for real-time coverage of
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PLACING A BET ON CHINESE GAMING AND LODGING (1320 EDT/1720
GMT)
Saira Malik, CIO, head of global equities at Nuveen, is out
with some further remarks on her expectation that non-U.S.
equities will outperform U.S. markets as global leadership in
reflation and recovery from the COVID-19 pandemic shifts to
non-U.S. countries and regions. With this, Malik turns her
attention from Europe to China.
According to Malik, China's recovery has been somewhat
messy, underscored by peaking earnings upgrades and a flattening
of leading economic data such as PMIs.
However, amid this confusion, she sees a fertile environment
for certain sectors of the Chinese equity market. Malik expects
roughly 40% of China's population to be vaccinated against
COVID-19 by the end of June and 70% by the end of the year.
"With nearly 20 million doses being administered per day, China
will likely experience a boom in travel, leisure and other
services spending thanks to strong pent-up demand (similar to
what we've seen in the U.S.)"
More specifically, Malik believes China's gaming and lodging
industries, such as those in Macau, should continue to garner
significant relief as economic and travel restrictions are
lifted.
Additionally, Nuveen believes these "lagging-but-recovering"
industries will continue outperforming China's tech sector,
which has "undergone a correction amid heightened regulatory
risks after delivering exceptional returns in 2020."
Separately, here is Refinitiv/Datastream chart of gross
revenue from total games in Macau through Q1 2021:
(Terence Gabriel)
*****
EUROPE CLOSES UP, ON A BIG COMEBACK (1159 EDT/1559 GMT)
Things were not looking that rosy in early morning trading
in Europe, but sentiment gradually improved and, at the end of
the day, the pan-European STOXX 600 was up about 0.7%.
Granted, 0.7% isn't that impressive but if you compare it to
the session's low, it's up 1.5%:
Better perhaps for the bulls is that the performance was
fueled by cyclical stocks, such as autos (+3%), chemicals (1.7%)
and miners (+1.3%), which typically suggests some confidence in
the economic rebound.
With the defensive healthcare sector being the worst
performer, the mood could be screaming 'risk on' but there's
some palpable sense of caution out there on what the U.S.
Federal Reserve's hawkish turn last week will mean moving
forward.
Asked to comment this morning on why European equity markets
had made it back to positive territory, Mikael Jacoby, a sales
trader at Oddo in Paris, said that putting aside a kneejerk
reaction to the Fed, there was no reason to sell at this point
in the cycle.
"In the short term, we're still in a recovery paradigm," he
said, noting that given the year-over-year EPS surge expected
for second-quarter reports and the massive liquidity around,
selling now was not a convincing trade.
(Julien Ponthus)
*****
COMMODITY PRICES, SHIPPING COSTS PUT THE HEAT ON U.S. GOODS
(1145 EDT/1545 GMT)
Recent remarks and forecasts from the U.S. Federal Reserve
suggesting that hotter-than-expected inflation could prompt the
central bank to begin tightening its monetary policy on a more
aggressive timetable than the markets were expecting added a
jolt of volatility into last week's otherwise muted and
range-bound trading.
While the Fed has repeatedly insisted the current wave of
price spikes won't metastasize into long-term inflation -
assurances supported by recent economic data - there are omens
in the tea leaves that suggest the wave might take longer to
crest and crash than investors were anticipating.
When efforts to contain the pandemic brought the global
economy to its knees, many materials producers shut down. And
now, more than a year later, consumers are freshly jabbed and
flush with cash and demand is roaring back.
But putting the supply chain back on track isn't
accomplished with the flip of a switch.
If it were a footrace, demand is rounding the second curve
while supply is lacing its shoes.
As Sara Johnson, executive director of global economics at
IHS Markit, puts it:
"Global supply chains are severely disrupted, and
rebalancing will take time," Johnson writes. "The IHS Markit
PMI™ global manufacturing survey found that supplier delivery
times lengthened in May to the greatest extent in survey
history, contributing to the steepest rise in input costs in
over a decade and record inflation in selling prices."
Disrupted global supply chain is being reflected by rising
world shipping prices, as expressed by the Baltic Dry index
.BADI .
Together, the cost of materials and the cost of shipping
them are forcing factories to pass prices along, an inflationary
equation that could be with us for some time.
"Downstream price pressures remain intense," Johnson adds.
The graphic below shows commodity prices against the BADI,
along with U.S. input/output price indexes from Markit's U.S.
PMI data:
(Stephen Culp)
*****
DOW, S&P 500 JUMP MORE THAN 1% AFTER RECENT LOSSES (1113
EDT/1413 GMT)
The Dow .DJI and S&P 500 .SPX are up more than 1% in
late morning trading on Monday with the Nasdaq .IXIC also
higher as indexes bounce after recent losses.
All 11 S&P 500 sectors are higher, with the energy index
.SPNY up more than 2% and leading percentages gains among the
sectors.
Last week, the Dow and the S&P 500 registered their worst
weekly declines in months after the Federal Reserve suggested
interest rates increases could come sooner than investors
anticipated.
Here is the late morning market snapshot:
(Caroline Valetkevitch)
*****
IF LGBT WERE AN ECONOMY, IT WOULD BE THE WORLD'S NO.3 (0930
EDT/1330 GMT)
LGBT+ inclusion doesn't only mean greater equality but it
also matters economically, and to illustrate this key point
Credit Suisse gives some eye-catching numbers.
First, according to the bank, the spending power of the LGB+
community makes up an estimated $2.7-5.6 trillion of G20, a
number, which put into perspective, means that if it were an
economy, LGBT+ would be the third or fourth largest globally.
But drilling down to corporate performance, Credit Suisse
has also found out that LGBT-inclusive firms have been
outperforming global stocks by a decent margin over the last
decade or so.
Its research shows that LGBT-inclusive companies have
outperformed the MSCI ACWI (excluding the LGBT-constituents) by
432 basis points per annum since 2010.
That said, Credit Suisse highlights 28 companies it believes
investors should look at if they want to gain exposure to the
theme. Of these, 4 are in Asia, 9 in Europe and 15 in the United
States.
Here's the full list:
(Danilo Masoni)
*****
GROWTH ON THE COMEBACK TRAIL VS VALUE (0900 EDT/1300 GMT)
Growth blazed its way higher vs value last week. The S&P 500
growth index .IGX /S&P 500 value index .IVX ratio enjoyed its
best week since January. This action has it on track for its
best month since March 2020.
As a result, the ratio has risen to a four-month high and
ended Friday back above its 200-day moving average:
That said, the ratio has yet to overwhelm the resistance
line from its September 2020 all-time high.
In any event, growth can thank its resurgence against value
to renewed strength in tech .SPLRCT , and FANGs .NYFANG . Tech
is the largest sector exposure of the S&P Growth ETF SPYG.P ,
at more than 40%. Since the ratio's mid-May trough, tech is up
nearly 7%, while the NYFANG has risen more than 10%.
Financials .SPSY , the largest exposure of the S&P 500
Value ETF SPYV.P at just over 20%, have been going the
opposite way. Since the ratio's mid-May low, SPSY is down nearly
6%.
The recent growth/value resurgence has coincided with a
continued decline in the U.S. 10-Year Treasury yield
US10YT=RR . urn:newsml:reuters.com:*:nL1N2MM268 In fact, the yield, after topping at
1.7760% on March 30, tumbled to as low as 1.3540% in overnight
trade Monday. However, it has since reversed, and is now back up
to the 1.48% area.
The daily 10-year yield candle pattern forming suggests
potential for a low of significance. This just as the
growth/value ratio nears the important resistance line.
(Terence Gabriel)
*****
FOR MONDAY'S LIVE MARKET'S POSTS PRIOR TO 0900 EDT/1300 GMT
- CLICK HERE: urn:newsml:reuters.com:*:nL2N2O30ZS
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GVV06212021 https://tmsnrt.rs/2Ui4JTr
LGBT https://tmsnrt.rs/3cUS13p
Early US market snapshot https://tmsnrt.rs/3gQ4Ygb
Commodities shipping and PMI https://tmsnrt.rs/35Cyv82
STOXX https://tmsnrt.rs/3gPzjgl
MacauQ12021 https://tmsnrt.rs/3qh3UGl
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(Terence Gabriel is a Reuters market analyst. The views
expressed are his own)