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STOXX 600 up 1.2%
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Bank jitters ease
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Trial success boosts Novartis
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S&P 500 futures up 0.5%
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TWO-THIRDS OF U.S., EUROPEAN JOBS COULD BE DONE BY AI (1224 GMT) Artificial intelligence could boost global labour productivity and eventually increase annual global economic growth by 7%, Goldman Sachs estimates.
About two-thirds of current jobs in U.S. and Europe could be automated by AI, while generative AI like ChatGPT could replace up to one-fourth of current work, GS economists led by Jan Hatzuis estimate, after looking at occupational tasks in both regions.
Globally, almost 300 million full-time jobs could be at risk from automation, GS says. The estimate comes as a weak macro economic background and outlook is already forcing companies to get leaner.
"Although the impact of AI will ultimately depend on its capability and adoption timeline, this estimate highlights the enormous economic potential of generative AI if it delivers on its promise," Hatzius said. More and more companies are ramping up AI usage to stay competitive: Microsoft last month said it is revamping its Bing search engine with artificial intelligence to rival Alphabet Inc's Google, while Baidu is set to release its ChatGPT-like "Ernie bot". Goldman predicts that ChatGPT and peers could lift annual U.S. labour productivity growth by little over 1% over a 10-year period, but that will depend on the pace of AI automation adoption. Earlier this month, Bank of America cited a PwC paper that estimated that AI could potentially contribute up to $15.7 trillion to the global economy by 2030.
(Aniruddha Ghosh)
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EUROPE'S REAL ESTATE FACES 50% POTENTIAL DOWNSIDE - CITI (1004 GMT) The highly leveraged real estate sector is one of the key areas of concern for investors as the spectre of a systemic credit event is now top of mind following bank failures in the United States and Europe. So what are the prospects for the sector in Europe?
Citi is downbeat and warns the potential downside for real estate stocks in the region could exceed 50%, should the market test 2009 trough price-to-earnings valuations. "Real estate values are expected to weaken through 2023 and 2024 between 20% and 40%, and with earnings growth slowing into rate and recessionary headwinds, credit markets are therefore set to tighten further," says Citi analyst Aaron Guy. "... if we test historic trough valuation, real estate stocks face over 50% downside," he adds.
"Reprinted with permission of Citi Research. Not to be
reproduced."
(Danilo Masoni)
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BANKS HELP LIFT STOXX 600 (0741 GMT) European stocks are on the rise with the banking sector leading the gains, bouncing from last week's declines, after a buyer emerged for large parts of Silicon Valley Bank's deposits and loans, which helped ease some of the anxiety across markets. The STOXX banks index rose 2.3% in early trading and was last 1.2% after sinking 3.8% on Friday. It is largely outperforming the broader stock market, with the pan European STOXX 600 index rising 0.8%. Deutsche Bank shares rose 4% after leading declines in the sector on Friday, when cost of insuring the German bank's debt against the risk of default jumped. Novartis shares are up around 6% to the top of the STOXX 600 after the Swiss drugmaker announced positive results for the phase III of its Kisqali breast cancer drug study.
(Joice Alves)
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EUROPEAN FUTURES RISE ON HOPES THAT BANKING TROUBLES EASE (0744 GMT)
European futures are sharply higher, pointing to a rebound for stocks as investors assessed moves made by authorities and regulators to rein in worries over the global banking system. Stocks tumbled on Friday, dragged down by turmoil in the European banking sector. But helping soothe some nerves on Monday were reports First Citizens BancShares Inc was in advanced talks to acquire Silicon Valley Bank (SVB) from the Federal Deposit Insurance Corp.
European Union leaders and the European Central Bank sought to calm market jitters by presenting a united front on the banking sector on Friday, saying EU lenders are well capitalised and liquid thanks to lessons drawn after the 2008 Lehman Brothers collapse. The U.S. Financial Stability Oversight Council said on Friday the U.S. banking system was "sound and resilient" despite stress on some institutions. Investors, though, remain wary. Global banking stocks have been battered through the month in the wake of the sudden collapse of U.S. lender SVB and the rescue of Switzerland's Credit Suisse . The STOXX 600 index fell 1.4% on Friday, with a rout in Deutsche Bank shares leading declines, as the cost of insuring its bonds against the risk of default jumped sharply.
(Joice Alves)
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BANKS ARE LEAKING MONEY (0615 GMT)
It's been a quiet Monday so far with Asian share markets mixed but U.S. and European stock futures higher, perhaps because they got through a weekend without another bank collapsing. There is some relief that First Citizens BancShares Inc is in advanced talks to acquire Silicon Valley Bank . There was also some talk the Federal Reserve could expand its new lending programme for banks as another step to reassuring depositors. Money is clearly flowing out of smaller banks toward their bigger siblings and to money market funds, which have seen an inflow of more than $300 billion in the past month to a record $5.1 trillion. BofA notes the prior two events like this in 2008 and 2020 were followed by Fed rate cuts. Fund futures now show an 88% chance the Fed stands pat in May, while a July cut is priced at better than 90%. Deposits at small banks fell by $120 billion in the week to March 15, while borrowing jumped $253 billion and presumably much of that was from the Fed. Capital Economics points out that deposits across all the banks have fallen by $663 billion in the past year as customers search for higher yield.
"Unless banks are willing to jack up their deposit rates to prevent that flight, they will eventually have to rein in the size of their loan portfolios, with the resulting squeeze on economic activity another reason to expect a recession is coming soon," they warn. European banks face similar strains, with the added speculative stress on Deutsche Bank and a general jump in the cost of credit default swaps. Deutsche Bank's five-year CDS hit 222 bps on Friday, the highest since late 2018, while UBS CDS shot up to 139 bps.
Credit Suisse had to tap the Swiss National Bank for "a large multi-billion amount" to secure its liquidity. Not only were customers withdrawing money but counterparties were demanding guarantees to keep doing business, hardly an encouraging sign when interbank lending relies so much on trust.
Key developments that could influence markets on Monday: - German IFO survey for March is seen around 91.0 - Bank of Spain´s Governor Pablo Hernandez de Cos delivers speech on economy. ECB Board members Frank Elderson and Isabel Schnabel speak, as does Andrew Bailey Governor of the Bank of England - Federal Reserve Board Governor Philip Jefferson speaks on "Implementation and Transmission of Monetary Policy"
(Wayne Cole)
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