A look at the day ahead from Danilo Masoni. The passage of a $1.9 trillion U.S. stimulus package and the possibility of more to come is steadily lifting Treasury bond yields while the dollar is up 3% in less than two weeks, confounding predictions of a multi-month downtrend.
There are winners and losers from the moves -- European stocks, weighted towards energy, banks and exporters, are in a sweet spot for instance, delivering a rare outperformance versus tech-heavy U.S. indices.
Earnings are predicted to rise 44% in Q1, double that for the S&P 500.
So on Monday, Germany’s exporter-heavy DAX bubbled to record highs even as the U.S. Nasdaq fell 2% to enter what’s known as “correction” territory. Tuesday may bring consolidation, with European markets opening flat and Nasdaq futures lifted by people buying the dip.
Meanwhile, the greenback surge is causing ripples worldwide -- - commodities such as copper which are priced in dollars along with emerging markets and commodity currencies are feeling the heat. Oil prices too are back below $70 dollar.
The stimulus package may also have helped bring back the Reddit frenzy; GameStop shares, the focus of the January “stonks” jumped over 40% on bets amateur investors will plough their stimulus checks into the equity market. A Deutsche Bank survey estimated up to $150 billion could pour into U.S. stocks. Key developments that should provide more direction to markets on Tuesday:
* UK consumers cut back heavily on spending as they spent a second month in lockdown in February but confidence in the economy hit a 12-month high, Barclaycard said
* The U.S. House of Representatives will take up by Wednesday the Senate version of the $1.9 trln relief package
* Greensill Capital filed for insolvency on Monday after losing insurance coverage for its debt repackaging business
* Vodafone Group will seek to raise up to 2.8 billion euros from the listing of its towers unit
* Tesla shares fell for a fifth consecutive session on Monday,
* German exports unexpectedly rose in January, buoyed by robust trade with China
* Dallas Fed President Robert Kaplan at 2300 GMT
* RBA Governor Philip Lowe speaks at 2200 GMT
* Treasury 3-year note auction/6mth bill sale
* UK 20-yr gilt auction
* U.S.corporate news: Oracle
Reporting by Danilo Masoni
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