* European shares up 0.2%
* Utilities leads sectoral gainers
* Wall Street shut for Thanksgiving
Nov 25 - Welcome to the home for real-time coverage of markets brought to you by Reuters reporters. You can share your thoughts with us at markets.research@thomsonreuters.com
EM CURRENCIES VS THE DOLLAR: IT'S DIFFERENT THIS TIME?(1259 GMT)
The dollar is close to its highest since July 2020 against the euro after the U.S. Federal Reserve meeting minutes, and its run is probably not over yet.
But this doesn’t seem to be the case for emerging market currencies, even if they usually are considered more vulnerable in times of U.S. monetary policy normalization.
They apparently learned their lessons from the 2013 ‘taper tantrum’, when traders dumped Treasuries ahead of the Fed, reducing bond purchases, triggering a jump in U.S. yields.
In 2013 it was feared that “rising U.S. interest rates would plunge many emerging markets into a deep crisis due to a flight of capital, causing the respective currencies to plummet,” according to Commerzbank analysts.
“The central banks of the currencies that came under particularly heavy pressure in 2013 also seem to have learned from the episode,” they say.
Most of them reacted very early to the current inflation risks and have already raised their interest rates, in some cases substantially, they add.
“The early start of a normalization of monetary policy in the emerging markets is currently a great support for the currencies.”
It’s different for the Turkish lira, which is admittedly a particular case.
FOMC meeting minutes reinforced expectations that the Federal Reserve will raise rates sooner than other major central banks.
The chart below shows the emerging market currency index
.MIEM00000CUS holding not far from its end-June highs, while the euro/dollar EUR=EBS falls.
(Stefano Rebaudo)
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SHOW ME THE MONEY (1141 GMT)
Stocks of miners enjoyed a long rally up to mid-2021 and suffered only a mild correction since then. But now companies might need to take further steps to lure investors as the outlook about commodity prices becomes increasingly uncertain.
“We argue that mining companies could strengthen the credentials of their investment cases and lock in shareholder returns by stepping up special dividends and buybacks during the upcoming results season,” Morgan Stanley analysts say.
Obviously, some are better placed than others, given superior cash generation prospects.
Morgan Stanley analysts say Glencore GLEN.L remains their top pick among diversified miners, given its capital returns prospects. Anglo American AAL.L appears to be the least cash generative during H2 but this may be due to transitory factors.
Glencore's strategy will be under the scanner during the company’s investor day on December 2.
(Stefano Rebaudo)
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TURKISH BANKS: CAP RAISES ON THE HORIZON?
The Turkish lira is licking its wounds following this week's historic drop to records lows but despite the apparent calm, local banks will face difficulties.
Credit Suisse has taken a fresh look at the sector and even though it says all banks under its coverage "appear comfortable" on the liquidity front, it expects some banks to need capital injections or forbearance measures for capital ratios.
"The regulator is likely to redefine the solvency related forbearances in a more favourable way, in case the depreciation pressure on TL continues. We no longer expect the regulator to allow dividend distribution from 2021 earnings," writes Ates Buldur, analyst at the Swiss investment bank.
"For state banks, another round of capital injection may be considered as well. We do not rule out the possibility of well-capitalized private banks carrying out rights issues to maintain sizeable buffers," he adds in a note.
Every 10% depreciation in the lira has a negative impact on the banks' capital ranging for 25 to 80 basis points, according to Credit Suisse calculations based on management guidance.
In the snapshot you can see how Turkish banking stocks have underperformed the MSCI World Bank index.
(Danilo Masoni)
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THE BULL MARKET IS NOT YET OVER (0949 GMT)
Despite European stocks .STOXX are on track for their second-best annual returns since the 2008 financial crisis after year-to-date gains of more than 20%, analysts are not calling time out yet on the rally.
Joining fellow European market bulls from Morgan Stanley and BNP Paribas, strategists from Societe Generale are also optimistic on the European markets outlook for next year.
They predict a 9% upside to European stocks from current levels by end-2022, mainly driven by solid earnings growth in the backdrop of a supportive macro environment with cost inflation likely to peak soon.
Their top calls: Long European Green Deal basket, Long banks, Long European Capex, Long European buy backs index.
(Saikat Chatterjee)
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TECH, FOOD, LUXURY AND BIG PHARMA TO THE RESCUE (0850 GMT)
A bounce in tech and heavyweight food, healthcare and luxury stocks is helping the STOXX 600 .STOXX bounce with somewhat more conviction today after yesterday's volatile session.
Investors pondering risks associated with a resurgence of COVID cases in Europe and policy tightening in the U.S. are opting this morning for a defensive tilt, while the cyclical banks and oil stocks are seeing pressure to the downside.
The pan-European equity benchmark was last up 0.5% with shares such as chip firm ASML, drugmakers Roche and Astrazeneca, LVMH, and food giant Nestle all ranking among the top positive weights to the index, as you see in the snapshot.
Well-received results from cognac maker Remy Cointreau and radiation therapy equipment maker Elekta also provided support, being their shares up 10% and 7% respectively.
(Danilo Masoni)
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AMERICANS CAN GIVE THANKS (0812 GMT)
It's Thanksgiving and the United States indeed has cause to celebrate. Data released on the eve of the holiday showed robust consumer spending, jobless claims at the lowest levels since 1969 and a 4.1% monthly rise in the core PCE inflation index.
The figures reinforced the picture of an economy speeding away from the rest of the world still struggling with COVID-19 fallout. So much so that anxiety about rising inflation has taken root at the U.S. Fed, minutes from its last meeting showed also on Wednesday .
It's a piquant contrast with Europe, where data just showed inflation and surging coronavirus infections hitting German consumer morale which is back at June lows . Japan's economy meanwhile contracted 3% in the third quarter -- a contrast with the U.S. 2%-plus third quarter expansion
L1N2S60MU
Stock markets in Asia and Europe are firmer riding on the coat-tails of Wall Street which ended higher on Wednesday. But one result of the U.S. data beats is a dollar in "beast mode" in the words of the Pepperstone brokerage in Australia. This morning it's just off 17-month highs versus the euro and five-year highs to the yen EUR=EBS JPY=D3 .
It's bad news for emerging markets where many countries are seeing eye-popping inflation figures, potentially forcing more interest rate rises. South Korea on Thursday raised interest rates for the second time this year and further upped inflation forecasts.
Turkey of course is the outlier. President Erdogan's steadfast refusal to countenance higher interest rates has tipped his country into crisis. With the lira down 26% this month versus the dollar TRY=D3 , expect the usual references to Thanksgiving turkeys in news headlines and bank research notes
.
Key developments that should provide more direction to markets on Thursday:
-German coalition eyes return to debt limits from 2023, open to EU reforms
-Swedish PM resigns on first day in job, hopes for swift return
-Sweden Riksbank rate decision
-ECB speakers: ECB President Christine Lagarde; ECB board members Frank Elderson, Philip Lane, Edouard Fernandez-Bollo
-Emerging markets: South Korea raises rates; Sri Lanka on hold
-Remy Cointreau raises annual outlook after H1 profit beat
; Italy to discuss KKR's move on TIM after binding bid
(Sujata Rao)
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EUROPE: STEADYING ABOVE THREE WEEK LOWS (0745 GMT)
After edging up just slightly yesterday following a volatile session, European shares look set for a second day of marginal gains that should help the STOXX .STOXX regional benchmark to steady above three-week lows.
Investors are trying to set aside concerns over new restrictions in Europe, even as Germany had record COVID cases, and look past Fed minutes showing more officials are open to speeding up bond-buying taper and move faster to raise rates.
Wall Street will be shut for Thanksgiving, likely curbing activity across the board, but its positive close overnight and gains in Asian tech stocks bode well for risk sentiment here in Europe today.
European stock futures were last up between 0.1% and 0.3%.
(Danilo Masoni)
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