LIVE MARKETS A tech surge and an EDF meltdown – Reuters

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A TECH SURGE AND AN EDF MELTDOWN (0848 GMT)

All the FOMO (fear of missing out) that had been building up in Europe since Wednesday’s Wall Street rally has led to quite an upbeat open, with tech stocks surging about 3%.

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But while the good mood is keeping all equity sectors in positive territory, France’s EDF stands out for being deeply in the red.

The energy giant is down 8% after cutting its 2021 core profit guidance, following the discovery of faults in a safety system at the Civaux nuclear power station.

On the macro front too, data just showed French business activity expanding at a slower pace in December. Still that isnt preventing the Paris bourse from cruising at the same speed as the pan-European STOXX benchmark, up about 1.4%.

Across Europe, the main bourses are all up over 1%.

But while growth-focused tech stocks are benefiting from the same tide which lifted the Nasdaq boat last night, some smaller individual stocks are shining even more.

Notably Britain’s Domino’s Pizza Group (DOM.L) is up over 20% after announcing a profit-sharing deal with franchisees, ending more than two years of negotiations.

Cineworld too is up 9%, bouncing off Wednesday’s big falls triggered by a court ordering the chain to pay $957 million in damages to rival Cineplex for abandoning a planned takeover.

(Julien Ponthus)

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CENTRAL BANKING THURSDAY (0812 GMT)

The Fed is out of the way, having announced faster stimulus tapering, signalled three rate hikes for 2022 and upped inflation forecasts. And of the ten central bank meetings scheduled for Thursday, some will deliver rate hikes and most others are likely to flag some form of policy tightening ahead.

Given a hawkish Fed was already pencilled in, the dollar and U.S. yields rose modestly. But its message fired up stocks, especially lifting the tech-heavy Nasdaq more than 2%, the assumption being that long-term yields won’t go too far.

That momentum has carried into Thursday, with world stocks rising, S&P 500 and Nasdaq futures up as much as 0.7% and a pan-European bourse Europe tipped to open almost 2% higher.

Japan’s Nikkei enjoyed its biggest gain in almost seven weeks, helped also by data showing exports up 20.5% from year-ago levels (Full Story). PMIs though showed a slowdown; the year’s last set of PMI advance readings are due across the rest of the developed world today.

But back on the central banking front, policymakers in Europe may find it hard to ignore risks from the Omicron COVID variant — a 25 basis-point Norwegian rate hike for today has gone from a dead-cert some days ago to a probably after the expansion of COVID curbs.

The Bank of England is in a worse bind, with skyrocketing Omicron cases on one hand and 5%-plus inflation on the other.

In any case, it will end its bond-buying scheme, and the European Central Bank shortly afterwards is expected to flag its pandemic-time programme will expire on schedule in March.

Emerging markets, way ahead of the pack in the rate-rise race, will see Mexico raising rates for the fifth consecutive time. Expect Russia to follow with a 100 bps move on Friday.

But there are exceptions, and Turkey is seen carrying on with rate cuts, despite 20%-plus inflation and a fast-falling currency. Anticipating a 100 bps cut on Thursday, the lira has blown past 15 per dollar, having started 2022 around 7.4 TRY=D3.

Reuters Graphics
Reuters Graphics

Key developments that should provide more direction to markets on Thursday:

-Philippines c.bank hold rates (Full Story); Taiwan, Egypt, Indonesia decisions

– Shimao bonds benefit from news of possible support from Shanghai regulators

-Markit Dec flash PMIs

-Swiss National Bank meeting (Full Story)

-Norges Bank meeting (Full Story)

-Bank of England (Full Story)

-ECB policy meeting (Full Story)

-Turkey, Mexico policy meetings (Full Story) (Full Story)

-U.S. initial jobless claims/Philly Fed index/industrial output

-US earnings: FedEx, Accenture, Adobe

(Sujata Rao)

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SET TO CATCH UP WITH THE FED RALLY (0716 GMT)

It’s catch-up time!

European futures are rushing up this morning, trading well over 1% after Wall Street rallied and Asia ticked up thanks for to a well-received Fed policy statement last night.

Powell struck an upbeat tone about the U.S. economy and seemed ready to raise interest rates to keep inflation in check.

The upbeat mood however in Europe will be subject to how well both the BoE and ECB meetings go down today.

Juggling both inflation and the pandemic is a tricky balancing act for policy makers.

(Julien Ponthus)

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