Live Markets: Fade the rebound in stocks and bonds - BCA Research

Hannover Rueck SE

12/08/2024 11:47

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      STOXX 600 up 0.1%
    

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      BT shares up on Drahi stake sale
    

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      Volatility ebbs
    

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      Wall St futures edge up
    

  
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    FADE THE REBOUND IN STOCKS AND BONDS - BCA RESEARCH
    The rebound in European stocks and bonds is only temporary, according to BCA Research, which
expects the carry-trade "blowup" to be the start before a more pronounced growth slowdown. 
    Europe's STOXX 600 index  .STOXX  is up over 4% from lows touched a week ago, when markets
were fretting about a possible U.S. recession and the yen-funded carry trade coming to an end as
Japan's currency strengthened.
    Germany's 10-year bond yield  DE10YT=RR , the euro area's benchmark, is up around 18 bps
from its Monday low. 
    "Investors should fade the rebound in European equities and bond yields," write BCA Research
analysts in a note published on Monday.
    "The underlying trend in global growth is weakening, and central banks are unlikely to alter
this downward momentum in time to prevent a recession," they say. 
    The firm says this will drag down earnings "significantly" and expects European earnings to
decline between 10%-18%, with a central tendency near 14%.
    Turning to bonds, BCA says the big move in yields off their lows was down to a decline in
risk sentiment, but with growth set to worsen, they see more rate cuts than priced by the market
next year. 
    "Such dovish surprises portend a rally in German bonds," BCA says. Bond prices move
inversely with yields. 
        
    (Samuel Indyk)
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    FOR MONDAY'S OTHER LIVE MARKETS POSTS:
    MARKETS SERENE BUT SENSITIVE AHEAD OF KEY US DATA CLICK HERE
    SUMMERTIME SADNESS CLICK HERE
    SMOOTH SAILING CLICK HERE
    FUTURES IN THE GREEN CLICK HERE
    MARKETS SHIFT TO HOLIDAY MOOD CLICK HERE

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European equities steadily higher    https://reut.rs/3yMqn6S
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