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STOXX 600 up 0.2%
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German industrial output slumps
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London shut for coronation holiday
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U.S. stock futures steady
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CLEAN ENERGY: MIND THE GAP (0903 GMT) Clean energy stocks globally have been a disappointment since the pandemic. They have underperformed the market and have been hit by money outflows and a significant de-rating. That has opened up a gap with long duration stocks which have recovered recently as bond yields stabilised, and also with ESG funds which have witnessed inflows since late last year. And Bernstein sees an opportunity. "From a fundamental perspective this negative sentiment towards the 'Clean Energy' sector makes little sense to us, given some landmark changes in the policy environment for clean energy in 2022 and 2023 which have provided significantly higher visibility for the prospects of the sector," they write. Bernstein says Europe's RePowerEU plan has resulted in a greater urgency for the deployment of clean energy. It highlights how the U.S. Inflation Reduction Act (IRA) could drive $4.1 trillion in energy investment over the next decade. "Despite rising rates and higher renewable equipment costs, renewables remain as competitive as ever compared to fossil fuels and wholesale power prices in Europe while the IRA improves their competitiveness significantly in the US," Bernstein also says in a note published earlier this month. Their high conviction picks are Orsted, Vestas, CATL, Samsung SDI and LG Chem.
(Danilo Masoni)
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STOXX: RANGEBOUND TRADING (0809 GMT) There was nothing really new in price action across European stock markets in early deals on Monday with main country benchmarks and sectors fluctuating within recent trading ranges. The region-wide STOXX Europe 600 was up 0.2%, stuck around prices seen over the last couple of weeks after recovering as much as 10% from the bank turmoil lows of March. Energy stocks were bid, up 0.8% on the back of higher crude oil prices, and so were banks and healthcare , even though no new ground was made. Insurers were a weak spot, down 0.4% but that was due mostly to Munich Re going ex dividend.
London was shut for the coronation holiday, while
the DAX in Frankfurt added 0.1%. Data earlier showed
German industrial production fell more than expected in March,
spurring again recession fears in Europe's largest economy.
(Danilo Masoni)
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EUROPE SIGNALS QUIET START (0635 GMT) European shares looked set to open broadly unchanged on Monday, in a quiet start to the week also due to a holiday closure of UK markets, just as debt ceiling talks in the U.S. remain at a stalemate. EuroSTOXX50 and DAX futures were both trading around parity. U.S. contracts pointed to a muted start on Wall Street, following Friday's gains that saw the S&P 500 gain 1.9%, as U.S. regional banks rallied and Apple soared following strong results.
U.S. Treasury Secretary Janet Yellen warned on Sunday that a failure by Congress to act on the debt ceiling could trigger a "constitutional crisis" and call into question the federal government's creditworthiness.
Among data to watch is the U.S. CPI on Wednesday. Any big
surprise to the upside could put in question bets the Fed could
even start cutting rates as soon as July. Eyes also on the Fed's
bank lending survey for Q1 due after the European market close.
On the European corporate news front it was rather quiet too. Postal group PostNL and pharmaceutical firm Almirall could move after both beat quarterly profit expectations.
(Danilo Masoni)
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MARKETS AWAIT US BANKS' TAKE ON CREDIT SQUEEZE (0553 GMT)
It's been a quiet start to the week in Asia, which is no
surprise given U.S. consumer prices loom this week as a major
test of the market's sanguine view that the Fed is done hiking.
Futures are 90% priced for steady rates in June and 38% for
a cut as soon as July, leaving the market vulnerable to an
upside surprise on the CPI. Median forecasts are for a rise of
0.4%, but the range is 0.2% to 0.6% and either of those would
have an outsized effect.
In the meantime, everyone is waiting for the Federal
Reserve's Senior Loan Officer Opinion Survey, or 'SLOOS', to see
just how much lending has tightened given the strife in U.S.
regional banks.
This is not a release that usually attracts much attention
and there is no poll forecast for it. The main indicator is the
share of respondents, which include up to 80 large domestic
banks and 24 U.S. branches and agencies of foreign banks, who
say lending standards have tightened somewhat or considerably in
the quarter.
The last survey out in January showed a combined 44.8% of
respondents saw a tightening of standards for large and
middle-market firms. Goldman Sachs sees that rising to 60.2%, "a
level tighter than the dot-com crisis but less extreme than
during the financial crisis or the height of the pandemic."
It would also be consistent with levels reached before or
during the last four recessions - 1990-91, 2001, 2007-09 and
early 2020.
The survey was conducted between the last week of March and
first week of April, so would have missed the latest turmoil
around First Republic and PacWest.
Fed chair Jerome Powell last week offered a heads up on the survey, saying they would not now have to raise rates quite as high because of the tightening in standards. "If you put the credit tightening on top of that and the QT that's ongoing, I think you feel like we may not be far off (a neutral rate)," he said in his Q&A. "Possibly even at that level." The Bank of England isn't quite at neutral yet but will likely get closer to it later this week as the market implies a better-than-80% chance it will hike rates a quarter point to 4.5%.
Futures are also priced for a further move to 4.75% given inflation is still in double figures, though there is a chance the BOE could take a dovish turn given the board split 7-2 last time, with two voting to hold steady. This week also sees Chinese data on inflation and trade, while G7 finance ministers meet in Niigata, Japan, from Thursday through Saturday.
Key developments that could influence markets on Monday:
- ECB board member Philip Lane speaks in Berlin - Fed Bank of Chicago President Goolsbee and Bank of Minneapolis President Kashkari are speaking
(Wayne Cole)
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