Diversified miners offering superior risk-reward
STOXX 600 up 1%
Real estate rebounds
Surprise profit boosts H&M
U.S. futures gain
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DIVERSIFIED MINERS OFFERING SUPERIOR RISK-REWARD (1025 GMT)
Since hitting a seven-month peak in January, Europe's miners .SXPP have slipped almost 20%, but the recent pullback has enhanced their risk-reward profile, according to analysts at Morgan Stanley, who say this is a "tale of two markets".
"Recent banking developments and rising policy uncertainty have revived recession fears in developed markets," MS says.
"In contrast, the outlook for China's industrial activity remains positive, with demand indicators pointing to continued (albeit seasonal) improvement."
With peak seasonal activity in China still upon us, MS's commodities team sees upside to industrial commodities next quarter before a potential pullback in the second half, while precious metals are at the top of their preference list.
Against that backdrop, MS says that the valuation multiples of diversified miners offer a "superior risk-reward".
Amongst those companies, Glencore has the greatest upside to price target, MS says, while the investment case for Rio Tinto is "improving". Anglo American gets an upgrade to 'equal-weight' but "operating risks remain", MS says.
"In aggregate, the industry is well placed to navigate a potential return of funding concerns given its low financial leverage," MS writes.
(Samuel Indyk)
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REAL ESTATE AND BANKS RISE IN TANDEM, HELPING STOXX (0823 GMT)
The standout mover in Thursday's opening deals in Europe was the real estate sector .SX86P which bounced for a second day following heavy losses this month and was last up 2.9%.
Gains in the sector came along another positive day for banks .SX7P, up 1.5%, although traders remained watchful for any new sign of stress as credit conditions tighten.
Strong rally for H&MHMb.ST shares, following a surprise profit at the world's second biggest fashion retailer. Bearish positioning in the stock was also helpful.
Power generator Drax DRX.L fell 10% after the British government turned down its carbon-capture project.
The broader STOXX 600 .STOXX index gained 0.8%, supported by a strong Wall Street close overnight and lower than expected inflation data from Spain. Here's your opening snapshot:
(Danilo Masoni)
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WALL STREET GAINS SET EUROPE SET FOR POSITIVE START (0631 GMT)
The good vibe from a positive close on Wall Street that pushed the Nasdaq 100 into a technical bull run from its December lows and saw the S&P 500 return above 4,000 points looked set to spill over to Europe on Thursday, as a wild month for investors draws to an end.
Euro STOXX 50 and FTSE futures rose 0.6-0.7%, while Asian shares held on to recent gains as Alibaba's 9988.HK spin-off plans continued to lift sentiment and banking fears eased. U.S. contracts pointed to another positive session ahead.
The pan-regional STOXX 600 .STOXX benchmark index however was set to end March with a decline of around 2%, although it was firmly on track for a second positive quarter in a row.
H&M HMb.ST should offer some cheer too. The world's No.2 fashion retailer reported a surprise operating profit for the December-February period.
Eyes will also be on health technology company Philips PHG.AS, which expects to reach settlements this year relating to its global recall of respiratory devices.
(Danilo Masoni)
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AS BANKING WORRIES SLOWLY SLIP INTO REAR VIEW, MARKETS FRET ON FED (0551 GMT)
With sentiment still fragile in the aftermath of the banking crisis, a risk-on rally proved short-lived, leaving the MSCI ex-Japan index swinging between gains and losses on Thursday. The dollar firmed up, continuing its rebound, while gold eased.
But as we are at the 'no news = good news' stage of the recovery from the banking worries, investors are preparing to try again as Europe wakes up with futures indicating a higher open.
Much of the market exuberance of the past couple of days came after Alibaba Group unveiled plans to split up, a move investors cheered in the hope that the worst for the Chinese tech sector is over. In a call to discuss the plan to split into six units, Group CEO Daniel Zhang said on Thursday the company's breakup plan will allow its units to become more agile and eventually list on their own.
Investors hope the plan will help unlock value for the internet behemoth. Alibaba's US shares currently trade at 11 times its forward earnings, according to Refinitiv data, below its 5-year average of 20 times as well as those of its rival JD.com and peer Amazon.com.
With fears of a widespread banking crisis easing, investor attention has switched to Fed vs inflation. Traders will get a glimpse of which way inflation is headed before the week ends, with data on Personal Consumption Expenditures, the Fed's favourite gauge of inflation, due on Friday.
In corporate news, UBS Group rehired Sergio Ermotti as CEO to steer its massive takeover of neighbouring Swiss bank Credit Suisse in a surprise move that pleased investors.
Meanwhile, the U.S. banking system's top cop said the scope of blame for Silicon Valley Bank's failure stretches across bank executives, Federal Reserve supervisors and other regulators.
Key developments that could influence markets on Thursday:
Economic events: Eurozone sentiment indicators, Germany preliminary CPI, U.S. Q4 GDP
Speakers: BoE's Catherine Mann, ECB's Isabel Schnabel
(Ankur Banerjee)
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Alibaba trades at discount to peershttps://tmsnrt.rs/42MlWTZ
eu openhttps://tmsnrt.rs/42Qqngm
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