© Reuters. The German share price index DAX graph is pictured at the stock exchange in Frankfurt, Germany, November 30, 2021. REUTERS/Staff
By Anisha Sircar and Susan Mathew
(Reuters) -European shares posted their best session in almost six months on Wednesday, as investors picked up beaten down stocks that were hammered in the past few sessions by fears of the spread of a new and highly infectious strain of the coronavirus.
The pan-European rose 1.7%, recovering from a sharp sell-off in the previous session that had sent it to a seven-week low. The index ended November with a 2.6% drop and is 4% away from the record high it hit in the middle of last month. [MKTS/GLOB]
“Europe was already imposing lockdowns before Omicron. Since valuations are still elevated, earnings need to do the heavy lifting from here; that task has now become harder in the EU …. relative to the U.S.,” TS Lombard research head Andrea Cicione said.
A recent Reuters poll of strategists and brokers suggests that European stocks may hit record highs in 2022, boosted by a recovery in corporate profits.
The poll also says that and 40 indexes would hit uncharted peaks by mid-2022, while the STOXX 600 would gain 7% and reach 500 points by July.
“In the short term, uncertainty and therefore market volatility will continue until we get greater clarity on the resistance to vaccines and the lethality and transmissibility of Omicron,” TS Lombard’s Cicione said.
Industrial stocks were the biggest boost to the STOXX 600 on Wednesday. Among sectors, autos as well as travel and leisure rose 3.8% and 3.1%, respectively.
Miners gained 2.3% after prices rebounded on easing concerns about the Omicron coronavirus variant, while oil stocks jumped 2.1% as crude prices rose as OPEC meets. [MET/L] [O/R]
The European Union could greenlight COVID-19 vaccines tailored to target the new variant in three to four months, the region’s drug regulator chief Emer Cooke said on Tuesday, adding that existing shots would continue to provide protection.
A survey showed manufacturing growth in the euro zone accelerated slightly last month, but supply chain bottlenecks worsened.
Among individual stocks, Husqvarna, the world’s biggest maker of power gardening tools, jumped 5.4% after raising its overall financial targets and growth ambitions for robotic lawn mowers and other battery-powered products.
Italy’s Banca Monte dei Paschi di Siena surged 16.7% after saying it had begun a dialogue with the Ministry of Economy and Finance to restart discussions on its plans to raise capital.
Battered German property group Adler’s shares surged 34.5%, pulling up from all-time lows, after announcing divestitures.
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Morgan Stanley: bear market rally to continue
One of Wall Street’s best-known bears, Michael Wilson, thinks the S&P 500 will rise another 7% before turning down, so the bear market rally will continue for now, writes Market Watch.
After the Dow Jones, S&P 500 and Nasdaq Composite joined their strongest weekly gains since at least May last Friday, Wilson, who is chief strategist and head of U.S. equity markets at Morgan Stanley (NYSE:MS), told clients that there could be another 5% to 7% before the downward trajectory of U.S. stocks resumes during the latest bear market recovery.
Wilson has held a bearish view of the stock market for about 2 years and correctly predicted a sell-off this year.
Wilson explained in a research note sent out to clients on Monday that a pullback in the 38-50% drop in the stock market this year “would not seem like something unnatural, not consistent with the previous bear market rally.”
While growth concerns have triggered a sell-off in commodities and lowered inflation expectations, the fact that the U.S. economy is already slowing and heading toward recession means that any market rally is likely to be short-lived, and U.S. stocks are likely to eventually fall.
Wilson mentioned in the note that the bear market is not over yet, although it may appear otherwise in the next few weeks as the market takes the rate cut as a sign that the Fed can still manage a “soft landing” and prevent a meaningful revision to earnings forecasts.
U.S. stocks rose last week as investors now hope the slowing economy and falling commodity prices may inspire the Fed to raise interest rates less sharply. Federal funds futures, a derivative used by investors to bet on the pace of the Fed’s monetary policy changes, estimate with a high probability that the Fed will be forced to start cutting interest rates again as soon as next summer.
They also consider the lower peak in the federal funds rate: it will peak around 3.5% at the end of 2022 instead of 3.75% just a couple of weeks ago. Wilson also pointed out the drop in Treasury yields: the 10-year Treasury bond yield went from 3.230% to a low of 3.07% on Friday before rebonding again on Monday.
Wilson expects the S&P 500 index to fall to around 3,400 points if the U.S. Federal Reserve manages to get a “soft landing” for the economy — which Fed Chairman Jerome Powell said last week would be “a very difficult thing to do.”
Wilson expects that if the U.S. economy plunges into recession, the S&P 500 index will fall to around 3,000 points. In any case, Wilson believes that U.S. stocks are still highly valued because the risk premium — that is, the measure of compensation that investors receive for the extra risk of owning stocks instead of bonds — remains about 300 basis points higher than the 10-year Treasury bond yield, which is considered a “risk-free rate.”
Easing chip shortages to help Volkswagen in H2 – CEO
© Reuters. FILE PHOTO: Volkswagen logo is pictured at the 2022 New York International Auto Show, in Manhattan, New York City, U.S., April 13, 2022. REUTERS/Brendan McDermid/File Photo
BERLIN (Reuters) – Volkswagen (ETR:VOWG_p) sees a strong second half of 2022 and expects progress in catching up with rival Tesla (NASDAQ:TSLA) as easing chip shortages start to offset supply chain bottlenecks and rising costs, the carmaker’s CEO said on Tuesday.
“We are earning more than ever,” Chief Executive Herbert Diess said at a works meeting, adding Volkswagen is ramping up electric vehicle volumes in its biggest markets in Germany and China thanks to easing semiconductor shortages.
This should allow the carmaker to narrow the Volkswagen-Tesla gap this year and meet its goal of becoming market leader by 2025 if it seizes the moment while the U.S. electric car maker burns cash on large investments, the CEO said.
“Elon (Musk) has to ramp up two highly complex factories in Austin and Gruenheide at the same time – as well as expand production in Shanghai. That’s going to take strength out of him,” Diess said.
Reliance Chairman Mukesh Ambani steps down as director of telecom arm
© Reuters. FILE PHOTO: Mukesh Ambani, Chairman and Managing Director of Reliance Industries, arrives to address the company’s annual general meeting in Mumbai, India July 5, 2018. REUTERS/Francis Mascarenhas
BENGALURU (Reuters) – Reliance Industries Chairman Mukesh Ambani has stepped down as director of Reliance Jio Infocomm Ltd, the conglomerate’s telecom arm said on Tuesday.
Reliance Jio said https://refini.tv/3Nrs773 it has appointed Mukesh’s son and non-executive director Akash Ambani as the chairman of its board. Akash has been involved with the telecom unit since its launch in late 2016, where he started as a director.
India’s telecoms sector had been upended after the entry of Jio, which triggered a price war that forced some rivals out of the market and turned profits into losses.
Jio, which started out offering mobile teleservices, has been aggressively investing in services like internet broadband and forging ties with handset makers to launch low-cost smartphones and providing 5G services.
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