(In para 11, changes the day of the week to Monday from Friday) A look at the day ahead from Julien Ponthus.
Time for a break? With Wall Street closed for Presidents Day and Chinese markets shut for the Lunar New Year, a good chunk of global financial markets is indeed taking some time off.
Probably a good time to step back, given equity markets are cruising on record highs and there are signs of speculative bubbles spreading across asset classes. Analysts at Nomura warn in fact of some “technical position-trimming” causing some market weakness towards the end of this week.
But notwithstanding doubts about the durability of the ‘reflation trades,’ they seem to be in the driving seat this morning as vaccine campaigns and hopes of U.S. stimulus beef up commodity and equity prices. Copper is at new eight-year highs, platinum at six-year peaks and oil at its highest in over a year, the last helped up also by Middle East tensions.
Yields on Germany’s 10-year bonds also rose above -0.4% for the first time since September, after 10-year Treasuries ended last week above 1.20%, back at March 2020 levels.
U.S. 10-year inflation expectations too touched their highest since 2014.
Finally futures for European stocks, enjoying a better than expected earnings season, are up well above 0.5%.
Jitters about speculative bubbles rocking the boat remain however, after the ‘Gamestonk’ retail mania hit some hedge funds hard and briefly raised the question of systemic risks.
There’s also some unease with bitcoin testing the $50,000 bar and the frenzy surrounding SPAC shell companies.
Talking about which, French investment firm Tikehau Capital is forming one with former UniCredit Chief Executive Jean-Pierre Mustier to target European financial deals.
Key developments that should provide more direction to markets on Monday:
- Japan Q4 GDP expanded more than expected, thanks to a rebound in overseas demand
- UK house prices Right Move
- Euro zone finance ministers meet
-Flash Q4 German GDP
Reporting by Julien Ponthus