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STOXX 600 up 0.4%
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Turkey vote weighs on BBVA
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Eyes on US debt ceiling talks
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Wall Street futures rise
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WHAT DOES BETTER WHEN CREDIT TIGHTENS (1002 GMT)
Credit conditions are tightening. And sings of that are pretty much everywhere: financing costs for corporates and consumers keep going up, bank lending standards are becoming more restrictive, demand for credit is falling and default rates are rising. Against this backdrop what should equity investors be aware of? JPMorgan has looked into it to conclude that investors should be better off with a defensive positioning. "When lending standards are tightening, and/or when demand for credit is falling, Defensive sectors such as Healthcare, Staples and Utilities are outperforming, in contrast to Cyclicals and to Banks, that are lagging," say JPM strategists led by Mislav Matejka. "With respect to moves in credit spreads, when they widen, as is JPM base case, Defensives work, at the expense of Autos and Banks. When all-in HY yield is moving up, Staples and Healthcare were typically by far the best performers, Financials and Real Estate the worst," they add.
(Danilo Masoni)
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STOXX FIRM DESPITE POLITICAL, DEBT CEILING JITTERS (0751 GMT) Europe's STOXX 600 is up 0.2%, near the 14-month highs hit late last month despite jitters around the U.S. debt ceiling and political uncertainty as Turkey hashes out its presidential election. Personal and household goods are rising 0.7%, the best performing sector, while oil and gas proves a drag, down 0.4%, in line with a soft crude market, where nagging worries about the health of the economy are denting Brent . Europe's second largest insurance company AXA reported first quarter results, with first quarter sales up 2% from the same period a year earlier. European insurers are getting a 0.5% uplift. At the bottom of the FTSE 350 is Wood Group , which fell as much as 40.7% shortly after the open after U.S. private equity firm Apollo Global Management said it would not proceed with a takeover offer for the British oilfield services and engineering firm. Shares in Wood Group were last down were last down 34.8% and on track for their biggest daily drop ever. In other news, Cellforce and Siemens aim to enter a strategic partnership, with Cellforce choosing Siemens' platform to produce premium-segment EV batteries.
A FTSE 350 index of precious metals was up 1.2% this morning. In one of the world's largest buyouts so far this year, Australian gold miner Newcrest Mining Ltd said on Monday it would back Newmont Corp's A$26.2 billion ($17.8 billion) takeover offer.
(Lucy Raitano)
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DEBT IMPASSE DOMINATES IN BIG DAY FOR POLITICS (0647 GMT) Politics has the spotlight at the start of a new week, falling chiefly - still - on the U.S. debt ceiling standoff. Talks between President Joe Biden and lawmakers look likely to resume on Tuesday, after getting postponed on Friday. Despite that setback, and deep partisan rifts, both Biden and analysts say there are signs of progress. Biden is confident enough that he's still planning on boarding a Wednesday flight to Hiroshima for the G7 summit. Investors, though, clearly want to see ink on paper. Equity markets weakened around most of Asia on Monday - with the notable exception of Japan - after the U.S. budget office backed the idea that Treasury funds will run out at the start of next month.
Currency markets though were paying more attention to stunning regional election results in Thailand and Turkey. Turkish president Tayyip Erdogan defied pollsters and kept alive his hope of extending a two-decade rule by forcing a runoff after leading Sunday's vote. The lira dipped to the lowest since March, when it was reeling in the aftermath of devastating earthquakes. Meanwhile, the baht soared after Thai opposition parties crushed military-backed parties on the weekend, signalling wide and strong discontent with the ruling junta.
However, the liberal Move Forward party and the populist Pheu Thai Party will not only need to broker a deal with each other, but also somehow win the backing of the junta-appointed senate to form a government.
The yuan touched a fresh two-month low amid worrying signs in data last week that the best part of China's COVID recovery is already behind. Retail sales on Tuesday will be the next test of flaccid consumer demand, following shocking results from import and inflation numbers. The People's Bank of China is holding fire for now, opting to leave rates unchanged on Monday. China may have its economic troubles, but it's still flexing its geopolitical muscle, sending its top envoy on a tour of Ukraine, Russia and elsewhere in Europe from today to discuss a "political settlement" to the Ukraine crisis.
Key developments that could influence markets on Monday:
Eurogroup meeting in Brussels
Euro zone industrial production data for March
NY Fed Manufacturing survey for May
Fed speakers including Raphael Bostic at Atlanta Fed conference
(Kevin Buckland)
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EUROPEAN FUTURES BRUSH OFF TURKEY ELECTION, U.S DEBT CEILING UNCERTAINTY(0634 GMT) European futures are signalling modest rises at the open, as a run-off election unfolds in Turkey while U.S. President Joe Biden said he remains optimistic about agreeing a deal to raise the U.S.'s debt ceiling. Eurostoxx futures are up 0.4% as are FTSE futures , while Germany's DAX futures are rising 0.3%. U.S CME e-mini S&P 500 futures are 0.2% higher. U.S. President Joe Biden said on Sunday he expects to meet with congressional leaders on Tuesday for talks on a plan to raise the nation's debt limit and avoid a catastrophic default. Meanwhile, Turkey headed for a runoff vote in Sunday's election potentially spelling weeks of uncertainty that could rattle markets, with analysts expecting gyrations in the local currency and stock market. Data on Monday showed Germany's wholesale price index fell slightly in April compared to the same month last year, the first year-on-year drop since December 2020.
ECB policymaker Peter Kazimir said on Sunday that The European Central Bank may need to
raise interest rates longer than previously thought to help tame inflationary pressures.
Looking ahead to the week, traders will be listening carefully as several Federal Reserve
officials are due to speak, with comments from Chair Jerome Powell due on Friday.
(Lucy Raitano)
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