Live Markets: Short squeezes coming across European real estate?
18/04/2023 10:27
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STOXX 600 up 0.25%
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Financials biggest uplift
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Eyes on Goldman, BofA results
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U.S. stock futures unchanged
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SHORT SQUEEZES COMING ACROSS EUROPEAN REAL ESTATE? (0923 GMT)
Real estate has become quite unpopular, with today's Bofa survey showing investors are at
their most bearish on the space since July 2009 just as commercial real estate is viewed as the
most likely source of the next credit event.
Crowding data from UBS quant analysts that uses the bank's prime brokerage data and other
sources is pretty gloomy too and has some interesting findings.
One is that European real estate .SX86P is "the most crowded short of all sectors and
markets" with bearish bets almost doubling to 16.2% of market cap from 8.8% last month.
But a too crowded short also carries risk of short squeezes.
"European real estate remains a crowded short, pointing to potential short squeezes into the
companies’ Q1 23 earnings results, which started in recent days, in particular in Sweden," UBS
analysts including Charles Boissier write in a note.
The five most shorted stocks are SBB SBBb.ST , Aroundtown AT1.DE , Castellum CAST.ST ,
Klepierre LOIM.PA and URW URW.PA , according to UBS.
(Danilo Masoni)
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LOOK OUT FOR THE MOST ANTICIPATED RECESSION EVER - BNP (0912 GMT)
We are likely to see a moderate U.S. recession in the fourth quarter of 2023, and markets
are cautious, but this is also likely to be the most anticipated one ever, said Grace Tam, Chief
Investment Advisor with the CIO Asia at BNP Paribas Wealth Management.
"Time to lock in higher yields in quality bonds," Tam told the Reuters Global Markets Forum
(GMF).
"We are overweight equities with focus on non-U.S. equities. This is a bit contrarian, as
most investors are very cautious on equities, but we think sentiment is too bearish. A lot of
the bad news is already priced in."
Tam said bright spots in the current environment include European banks, as well as A-shares
and H-shares in China.
China's economy grew at a faster-than-expected clip in the first quarter, data showed on
Tuesday.
"China’s economy is recovering faster than market expectations - we expect to see stronger
data in coming months. A lot of foreign investors are still cautious on China, but this is a
positive as the market is still far from crowded."
Since consumption took the biggest hit during China's zero-COVID policy, there is
significant pent up demand and excessive savings, added Tam.
(Anisha Sircar)
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FINANCIALS KEEP STOXX AFLOAT (0754 GMT)
European shares rose slightly in early deals on Tuesday, aided by low equity volatility, and
with financials providing the biggest uplift to the STOXX 600 .STOXX on another big day for
Wall Street bank earnings releases.
The pan-European equity benchmark index was last up around 0.2%. Banks .SX7P rose 0.9%,
making them the biggest sectoral gainer in the region. Travel and leisure .SXTP was buoyed by
airline stocks after easyJet EZJ.L raised its profit guidance.
The euro STOXX volatility index .V2TX , a European equivalent of Wall Street's so-called
fear gauge VIX .VIX , was near the lowest levels since November 2021, and well below the peak
hit in the aftermath of last month's banking turmoil.
Here's your opening snapshot:
(Danilo Masoni)
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EUROPE EYES SLIGHTLY POSITIVE START (0640 GMT)
European shares were set to inch higher on Tuesday, supported by late gains on Wall Street
overnight and stronger-than-expected China GDP data with results from Goldman Sachs and Bank of
America due to take centre stage later in the day.
EuroSTOXX50 STXEc1 and FTSE FFIc1 futures rose around 0.1-0.2% ahead of the cash market
open and U.S. contracts pointed to a muted start on Wall Street. Asian shares fell slightly,
unimpressed by the upbeat Chinese data.
European bank stocks futures FESBM3 rose 0.6%, recovering partly from losses across the
sector on Monday that drove the region-wide STOXX 600 .STOXX equity benchmark into its first
daily decline in six sessions.
Swiss bank UBS UBSG.S , which lost almost 4% on Monday, said after the market close it
would use some of its treasury shares for the takeover of Credit Suisse CSGN.S rather than
cancelling them as originally planned.
Elsewhere, in earnings news, airline easyJet EZJ.L said it expects full-year profit to
beat market forecasts, while Sweden's Ericsson ERICb.ST reported first-quarter core earnings
that beat expectations. Revenues at military aircraft engine maker MTU Aero MTXGn.DE topped
expectations.
(Danilo Masoni)
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CHINA'S ECONOMY GATHERS PACE BUT MARKETS UNIMPRESSED (0549 GMT)
China's post-Covid recovery is firmly on track, according to a barrage of data on
Tuesday. The economy expanded 4.5% in the first quarter year-on-year, accelerating from the
previous 2.9% reading and handily outstripping forecasts for 4% growth. Retail sales surged more
than 10%, giving hope that hitherto flaccid domestic demand could also turn around.
But market reaction was fairly muted and the yuan was little changed. That's perhaps a sign
traders are worrying this could be a one-off and are bracing for more subdued data for the rest
of the year.
Tensions between Washington and Beijing continue to give investors pause.
U.S. law enforcement officials on Monday arrested two New York residents for allegedly
operating a Chinese "secret police station" in Manhattan's Chinatown, part of a crackdown on
Beijing's alleged targeting of U.S.-based dissidents.
Asia stocks were mostly weaker on Tuesday, with investors possibly fretting about the
implications of further Fed tightening after strong manufacturing data boosted bets for a hike
in May.
Investors are also unlikely to be buying aggressively ahead of upcoming bank earnings, keen
to see if any have been affected by turmoil in the sector. Goldman Sachs and Bank of America
report later in the day while Morgan Stanley is on Wednesday.
JPMorgan, Citigroup and Wells Fargo have all beaten Wall Street forecasts but State Street
tumbled more than 9% overnight after fee income fell.
Japan equities, though, were on track for an eighth straight day of gains, feeding off a
weakening yen and some buoyant domestic financial results.
The European stock open will be watched closely after the week started with a pullback from
one-year highs, ending a five-day winning run.
Bank Indonesia is widely expected to leave its key rate unchanged for a third consecutive
meeting in the coming hours, one of a growing number of central banks which are opting to watch
how policy tightening so far plays out in the economy.
For the Reserve Bank of Australia, the decision to pause last month after 10 consecutive
hikes was a close one, minutes of the meeting revealed, and a potential return to tightening is
very much alive.
Key developments that could influence markets on Tuesday:
UK labour data
German ZEW survey
Goldman Sachs, BofA earnings
(Kevin Buckland)
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eu open https://tmsnrt.rs/3GNqhN5
China GDP https://tmsnrt.rs/3A7fdqt
Real shorts https://tmsnrt.rs/41n5ZlZ
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