Live Markets: Too early to turn bullish on European real estate - DB
22/11/2023 12:08
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STOXX Europe 600 up 0.3%
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Nvidia results fail to excite
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Budget statement due in the UK
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Nasdaq futures positive
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TOO EARLY TO TURN BULLISH ON EUROPEAN REAL ESTATE - DB
(1208 GMT)
Although investors have already started to cheer about a
possible easing of central banks' monetary policy next year,
Deutsche Bank believes it is still too early to turn bullish on
European real estate.
The broker considers that 2024 will be another tough year
for the sector, specifically the first half as the impact from
interest rate hikes will become "more obvious".
"Further mark-downs on full-year appraiser values are likely
to spark defaults, triggering more distressed situations, while
large-scale breakups are likely to burden sentiment", Deutsche
Bank said in a note on Wednesday.
In an unfavourable environment, it continues to favour
defensive players with strong balance sheets such as Spain's
Merlin Properties MRL.MC and France's Gecina GFCP.PA and
Klepierre LOIM.PA (all "buy" rated), which should benefit from
distressed sales, expected to pick up next year.
DB sees the strongest fundamentals for Residential, followed
by Logistics, while it expects Office to further deteriorate and
Retail to stabilise.
It downgraded Austria's CA Immobilien CAIV.VI to "hold"
from "buy" as it sees the stock fairly priced and awaits lower
disposal activity ahead.
The European Real Estate index .SX86P has gained 1.5%
year-to-date, benefitting from an extensive climb in November,
as it has been rising 13% month-to-date.
(Matteo Allievi)
*****
ARE FALLING YIELDS ANY GOOD FOR AUTO STOCKS? (1050 GMT)
As markets get excited around possible rate cuts next year,
Morgan Stanley has looked into whether falling yields might be
any good for European auto stocks.
"History would suggest not. Lower rates may support
affordability for the consumer, but this is dangerous logic with
which to buy car stocks," cautions MS analyst Ross MacDonald.
"Used car inflation, not deflation, has been the source of
peak OEM profits. Valuations are sympathetic to cycle risks, but
cutting regimes tend to weigh on SXAP," he adds.
(Danilo Masoni)
*****
UBS: "CTAS HAVE FINALLY DECIDED TO JOIN THE PARTY" (0933
GMT)
After sitting on the sidelines for a while, Commodity
Trading Advisors have finally stepped into markets and UBS
expects them to keep covering short positions with $30 to 40
billion of equity purchases over the next two weeks.
"CTAs have finally decided to join the party," write
strategists at the Swiss bank in a bi-weekly update about
positioning and flows of CTAs, which trade market trends using
computer algorithms.
CTAs have bought back 60-70 billion of global stocks in the
past two weeks, reducing their shorts by 80%, says UBS.
"We do expect flows to continue but at a slower pace
($30/40bln over the next 2 weeks). If realized, CTAs will be
back net long equities by the end of this week," it adds.
The Swiss bank sees Brazil's Bovespa, the EuroSTOXX50,
Madrid's IBEX, India's NIFTY and the S&P in the U.S. as "Going
with the momentum" trades where CTAs could add positioning.
(Danilo Masoni)
*****
STOXX AT 2-MONTH HIGH, VOLATILITY CREEPS LOWER (0854
GMT)
European shares kicked off the session with broad-based
gains, driving the STOXX Europe 600 .STOXX to its highest
level in two months and bringing year-to-date gains to 7.6%.
The region-wide index was up 0.3%, while a gauge of euro
zone equity volatility .V2TX kept sliding, reaching its lowest
since July, just around one point above early 2020 levels.
All sub sectors were in the green. Real estate .SX86P led
the advance, up 0.9%, while basic resources .SXPP traded just
above parity. The FTSE 100 .FTSE edged 0.2% higher, quietly
awaiting finance minister Jeremy Hunt's autumn budget statement.
Here is your opening snapshot:
(Danilo Masoni)
*****
EUROPEAN FUTURES UP SLIGHTLY (0739 GMT)
European shares were expected to open up slightly on
Wednesday, taking a breather following the recent rally, as
traders prepared for more subdued market action ahead of
Thursday's U.S. Thanksgiving holiday.
EuroSTOXX50 and FTSE futures were last both up around 0.2%,
while contracts on the Nasdaq were off 0.3% as a better than
expected outlook from Nvidia NVDA.O was not enough to excite
investors following a 240% surge of the stock this year.
Nvidia shares fell 1.5% in early Frankfurt trading.
In Asia, shares backed away from 2-1/2-month highs and the
dollar found support as investors tempered some of their earlier
enthusiasm about the prospect of an end to U.S. rate hikes.
In European corporate news, Germany's ThyssenKrupp TKAG.DE
unveiled a 2.1-billion-euro impairment on its steel unit due to
a "gloomy" outlook, highlighting the challenge in efforts to win
Czech energy group EPH as a co-owner for the business.
Fresenius Medical Care raised its 2024 profit outlook as it
reached a favourable settlement deal with the US government.
In the UK, home improvement retailer Kingfisher KGF.L
downgraded its full-year profit outlook for the second time in
three months after third quarter underlying sales fell 3.9%,
with market trends in France weaker than expected.
Software company Sage SGE.L reported a 18% rise in
full-year underlying operating profit and said its margin would
continue to increase this year. It also announced a 350 million
pound share buyback programme.
Autocatalyst maker Johnson Matthey JMAT.L raised its
full-year outlook.
Eyes will also be on Milan-listed utility Enel ENEI.MI ,
which plans to invest 35.8 billion euros ($39.05 billion) in the
next three years.
Still in Italy, Monte dei Paschi's BMPS.MI saw its rating
upgraded by Moody's by one notch to reflect progress in the
bank's restructuring, stronger profit generation and lower risk.
(Danilo Masoni)
*****
NVIDIA SHARES TAKE BUMPY RIDE AFTER HOURS (0650 GMT)
The early focus was on Nvidia NVDA.O , which in AI tech
terms is the only company selling shovels during a gold rush.
Its Q3 earnings handily beat the Street, as did its forecasts
for Q4, although the bullish expectations built into this stock
are so immense its shares still eased a touch.
The company conceded that sales to China would be
significantly reduced by Washington's restrictions on tech
transfers, but balanced that by saying the drop would be more
than offset by strong growth in other regions.
This caused some wild swings in after-hours trading, its
stock sinking under $475.00 at one stage - quite a move given
that each dollar is worth $2.5 billion in market cap for the
$1.2 trillion company.
Volumes were so large and orders so backlogged that the
price was - unusually - still moving erratically hours into the
Asian day. The stock was last indicated at $490.75, down 1.7%
from the official close of $499.44.
The other big tech news was Binance chief Changpeng Zhao
pleading guilty to breaking U.S. anti-money laundering laws as
part of a whopping $4.3 billion settlement. Zhao stepped down
and will pay a $50 million fine, but could also face a prison
term.
Back in the old world, minutes of the Fed's last meeting
didn't really shift the dial on the policy outlook, at least for
markets. The FOMC is clearly on hold and it would take an
inflation shock to get them to consider another hike. Equally,
"all participants" agreed policy would have to stay tight for
some time to come.
There was a lot of talk about the September-October rout in
the bond market having tightened financial conditions, but since
that meeting 10-year yields have dropped more than 50 basis
points. That would normally add to the case for staying high for
longer.
But the market 0#FF: apparently doesn't see it exactly
that way, with a March rate cut priced at a 29% probability and
a May easing at 60%. Futures still imply around 93 bps of cuts
for 2024.
Treasury 10-year yields were up 1 basis point at 4.41%
US10YT=RR , but not far from the recent low of 4.397%. Major
currencies were also little changed, although China's central
bank did set another firm fix for its yuan, suggesting it is
serious this time about stopping the decline.
Later on Wednesday, Sweden's central bank will meet in what
is expected to be a very close call on whether to hike again. A
Reuters poll showed 10 of 19 economists looked for a rise, while
market pricing is leaning against a move. A steady decision
would likely be taken as the end of the cycle and put the crown
under pressure, which argues for a hike today.
Key developments that could influence markets on Wednesday:
- Euro Zone consumer confidence flash for Nov
- Riksbank holds monetary policy meeting
- British finance minister Hunt releases Autumn Statement
- Appearances by ECB's Centeno and board member Elderson
- Fed Bank of Cleveland President Mester speaks
- Speech by Bank of Canada Governor Macklem
(Wayne Cole)
*****
($1 = 0.9168 euros)
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