World stocks in third day of gains as Omicron fears ease

LONDON - A rebound in market sentiment continued in early European trading on Wednesday, with world shares set for their biggest two-day jump since November last year as investors became less concerned about the Omicron variant.

World shares plunged at the end of last month when the discovery of a new COVID-19 variant spooked investors. But sentiment has rebounded sharply this week in the absence of indications that the variant would derail the economic recovery.

The STOXX 600 had its biggest daily jump since November 2020 on Tuesday and, despite European stock index futures initially being in the red on Wednesday, at 0901 GMT the STOXX 600 was up 0.4 percent, set for its third consecutive day of gains.

The MSCI world equity index, which tracks shares in 50 countries, was up 0.2 percent - its highest since Nov. 26, when Omicron fears first hit markets.

"To be honest, it was more the absence of bad news rather than any concrete good news helping to drive sentiment," wrote Deutsche Bank strategist Jim Reid in a note to clients.

"Every day that passes without a wave of severe cases driven by Omicron is offering more hope that this won't be the curveball to throw the recovery off course."

British drugmaker GSK said on Tuesday its antibody-based COVID-19 therapy with US partner Vir Biotechnology was effective against all mutations of Omicron.

But a study in South Africa suggested that the Pfizer vaccine may only partly protect against Omicron.

"Clearly in the very short term uncertainty has risen over the Omicron virus... but overall at this stage we do not believe it will derail the macro picture in the medium-term," said Jeremy Gatto, multi-asset portfolio manager at Unigestion.

OUTLOOK FOR RATES

Oil prices eased as investors waited for more information about the extent to which the variant would impact demand. At 0911 GMT, Brent crude futures were down 0.4 percent and US West Texas Intermediate crude was down 0.5 percent on the day.

The dollar index was steady around 96.233, while the euro was up 0.1 percent at $1.1283.

The euro-dollar pair has struggled to recover from the 2021 lows it reached in November, hurt by expectations that the US Federal Reserve will tighten monetary policy more quickly than the dovish European Central Bank.

Last week, Fed Chair Jerome Powell said it might be time to stop seeing inflation as transitory, suggesting the central bank could speed up tapering.

"The market is pricing between two to three hikes next year now. We think that that pricing is too optimistic. We believe that the Fed will actually be slower to deliver on these rate hikes," said Unigestion's Gatto, adding that this would be supportive for equities.

The US 10-year Treasury yield, which had its biggest weekly drop since June 2020 last week due to a combination of Powell's hawkish comments and fears over Omicron, was a touch lower on Wednesday at 1.4597 percent.

US inflation data is due on Friday.

Meanwhile, shares in China's Evergrande Group hit a record low, after a missed debt payment deadline put the developer at risk of becoming the country's biggest defaulter - but the news had limited global market impact because it is already "well-priced" by the market, Unigestion's Gatto said.

In virtual talks, President Joe Biden warned Russian President Vladimir Putin that the West would impose "strong economic and other measures" on Russia if it invaded Ukraine, while Putin demanded guarantees that NATO would not expand farther eastward.

(Reporting by Elizabeth Howcroft; Editing by Alex Richardson)

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European shares dip as concern over U.S. politics, Ubisoft weighs

LONDON - European shares fell on Wednesday amid a global pullback in stock markets as worries about political turmoil in the United States led investors to seek safety after a strong run sent regional benchmarks to record highs.

The pan-European STOXX 600 fell 0.3 percent, as major regional benchmarks tracked a global dip in stocks and the dollar as concerns over U.S. President Trump multiplied.

Euro zone blue chips and the bloc's broader index of stocks both dropped 0.6 percent.

Britain's FTSE 100 on the other hand hovered close to its record high hit on Tuesday, outperforming European peers as gains among miners supported it.

Despite their falls on Wednesday, European benchmarks remain near recent highs, having risen sharply as investors pile in to the region on the back of an economic recovery, robust company earnings and voters' rejection of populist parties in elections.

"Markets broke upwards with the disappearance of concerns around the French election. Quite a lot of fast money came in and markets are just pausing now to digest that," said Stephen Macklow-Smith, head of European equities at JP Morgan Asset Management.

Ubisoft Entertainment, the third-biggest global entertainment company, fell 6 percent after it cut its mid-term sales forecast, reporting results near the bottom end of its target range after the close on Tuesday.

Raiffeisen Bank was a bright spot on a negative banking sector, up 3.5 percent after its first-quarter profit jumped more than expected as write-downs shrank.

Lloyds Bank gained 1.9 percent after the British government sold its last remaining shares in the bank, marking the end of an era after one of the largest financial crisis bailouts.

But the Netherlands' largest domestic lender ABN Amro fell 3.2 percent after its results, with traders citing a lower net interest margin and capital ratio, though the headline net income beat expectations at 615 million euros.

Thyssenkrupp was the top European gainer, up 4 percent after Tata Steel agreed the terms of a deal to cut benefits for its British pension scheme, removing a major obstacle to the potential merger of its steel assets with the German steel maker.

Thyssenkrupp's labour boss said the pensions deal does not lessen workers' opposition to a possible merger, however.

Gold miner Fresnillo rose 2.8 percent as the price of the safe-haven asset rose to a two week high.

Tullow Oil gained 2 percent after JP Morgan reiterated its 'overweight' rating on the stock, saying the oil company had improved its funding position, and valuation had returned to more compelling territory.

Norwegian fertilizer maker Yara got a boost from broker Liberum raising it to 'buy' from 'sell', saying prices of urea, a key ingredient in fertilizers, are close to a trough with fewer capacity additions ahead. Trading in Oslo was closed for the day, however, and the market will reopen on Thursday.

European earnings continued to paint a bright picture for the region's equities, with earnings growth for the quarter seen at 19 percent, according to Thomson Reuters data.

(Reporting by Helen Reid, Vikram Subhedar; Editing by Hugh Lawson)

source: news.abs-cbn.com