Travel and leisure outlook brightens

<html xmlns=""><head><title>LIVE MARKETS-Travel and leisure outlook brightens</title></head><body>

STOXX 600 down 0.6%

ECB, BoE, Fed meetings this week in focus

UniCredit rallies after record profit

IMF cuts UK growth forecast

U.S. stock futures inch lower

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Europe's travel and leisure index .SXTP is trading near a one year high despite a cost of living crisis across the region, surging inflation squeezing incomes and widespread strikes as workers demand higher pay.

Analysts at HSBC said share prices reflect robust demand for travel, gaming and caterer services across Europe.

"Demand for 'experiences' continues to take precedent over demand for goods, which is supportive of leisure," they said.

"Unemployment should remain low by historical standards, and household balance sheets are in good order, even if the impact of higher mortgage rates is yet to feed through".

HSBC equity analysts expect travel to outperform. "We are bullish on travel going into 2023, with all aspects of travel, from tour operators to cruise lines, benefiting from strong booking demand".

They see gaming and caterers also performing well, versus hospitality.

(Joice Alves)



Historically, U.S. firms tended to use buybacks more than European companies as a means to return capital to shareholders.

But share buybacks in Europe are now as significant as in the U.S., with banks and energy sectors driving the surge, Bernstein says.

European domiciled companies have announced stock buybacks equivalent to 2.4% of their total outstanding market capitalisation over the last 12 months, the brokerage estimates.

While current buyback yields in the U.S. are around average historical levels, the European buyback yields have been strengthening since mid-2021 and are at record levels.

"One potential reason why European buyback activity has increased relative to the U.S. could be linked to relative valuations," Bernstein says.

European banks and energy sectors have been the key drivers of the surge in buyback activity on cheaper valuations and Bernstein expects the trend to be sustainable over the medium term.

"This change in buyback activity for Europe supports our view to overweight the region versus the U.S. and provides an additional catalyst outside of valuation and higher rates".

(Roshan Abraham)



Rate-hike angst seems to be a weight across the board this morning, but not so much for banks, which have surged to a fresh 11-month high.

Record profit at Italy's UniCredit CRDI.MI is another reminder of how the industry could benefit further as policymakers crack on with rate hikes, turning the page on years of ultra-loose policy that hit bank margins heavily.

To be clear, the sector has benefited already from last year's tightening measures but prospects of more rate hikes along with the economy's improving outlook are adding optimism.

"We started the year Market Weight on European Banks, but see much better prospects for the sector in 2023," Barclays strategists led by Emmanuel Cau said in a note this week.

"Arguably, markets are moving fast these days and it feels like 'easy gains' are behind us after such a fast rally ytd. A breather is always possible, yet we think it makes sense to be Overweight the sector at this juncture," they added.

Their upbeat case for banks is based on six pillars.

1) EU deep recession risk is receding

2) ECB and BOE rates to stay higher for longer

3) Healthy balance sheets can manage some credit risk

4) EPS momentum is strongly positive

5) Valuations remain depressed

6) Positioning is more positive now, but not crowded

(Danilo Masoni)



A surprise plunge in German retail sales and angst over another round of likely rate hikes this week combined to push the STOXX 600 .STOXX below parity in early trading today, offsetting good news from France where the economy managed to escape negative growth in the last quarter of last year.

The pan-European index was last down 0.5%. Healthcare and materials were the biggest drags and almost all sectors traded in the red. Banks .SX7P, whose margins tend to benefit from higher rates, were an exception, with record numbers from Italy's UniCredit CRDI.MI pushing the sector index to a new 11-month high.

Here's your opening snapshot:

(Danilo Masoni)



European shares were set to open lower on Tuesday ahead of preliminary GDP readings, which investors will be watching closely to assess how the region's economy is going just as the European Central Bank prepares to raise rates again this week.

EuroSTOXX50 STXEc1 futures fell 0.3% following losses in Asia, where angst over upcoming central bank decisions, including also from the Federal Reserve, weighed after a strong start of the year. U.S. futures were broadly unchanged.

It's also a big week for earnings. Swiss bank UBS UBSG.S beat estimates in its latest quarter, but predicted an "uncertain" year ahead, plagued by accelerating inflation and higher rates. Its shares were seen rising slightly.

In Asia, Samsung Electronics 005930.KS indicated it did not plan to cut investment in chips, even after the South Korean group posted its smallest quarterly profit in eight years.

Later on in the U.S., Exxon Mobil XOM.N is the first of the oil majors to report, while drugmaker Pfizer PFE.N and automotive group GM GM.N also release quarterly numbers.

(Danilo Masoni)



An impressive 6% rally in global stocks .MIWD00000PUS this month, the first gain in January after three years, has got investors all excited after a dismal 2022.

Fundamentally, prospects for the world economy are not as bad as feared just a few months ago, prompting the International Monetary Fund to raise its 2023 global growth outlook slightly.

The IMF cited "surprisingly resilient" demand in the United States and Europe, easing of energy costs and the reopening of China's economy.

Still, it would be wise for investors to be mindful of a gap between expectations and reality.

On Monday, hotter-than-expected inflation data from Spain and an unexpected decline in the German economy in the fourth quarter created uneasiness for stock bulls, dragging down European shares.

Asian equities fell 1% on Tuesday and the dollar was eyeing a fourth monthly loss as investors reckon a peak in U.S. interest rates could swing into view as soon as this week's Federal Reserve meeting.

Flash GDP numbers are due from the euro zone, along with growth data for France and Italy. The numbers are likely to be keenly watched for signs on how weary economies are faring.

The ECB is all but certain to raise rates by half a percentage point on Thursday but fresh inflation data is still crucial for the central bank's policy guidance for subsequent meetings.

The Bank of England is set to raise rates by 50 bps to 4.0%, respectively. Headline inflation moderated in December to 10.5%, but it's still over five times its official target.

Money market bets show that the U.S. Federal Reserve is set to raise its policy rate by 25 basis points to 4.50%-4.75% on Wednesday.

Adding to pressure on British finance minister Jeremy Hunt to come up with a growth plan, the country became the only Group of Seven nation to suffer a cut to its 2023 economic growth outlook in IMF forecasts published on Tuesday.

Britain's flagging economy now appears set to shrink by 0.6% this year, a sharp downgrade from previously expected growth of 0.3% in the IMF's last forecast in October.

Meanwhile, a U.S. federal appeals court ruled on Monday that drug manufacturers can limit healthcare providers' use of outside pharmacies for dispensing drugs under a federal drug discount programme, marking a victory for Sanofi SASY.PA, Novo Nordisk NOVOb.CO and AstraZeneca AZN.L.

Finally, there's good news for tech staff. With thousands of layoffs taking place in Silicon Valley, some German companies, faced with a tight labour market and a shortage of workers with key software engineering skills, are seizing on the West Coast's woes as an opportunity to recruit top talent.

Key developments that could influence markets on Tuesday:

Economic data: Euro zone Q4 flash GDP; France Q4 GDP, Jan CPI flash; Germany Dec import prices, retail sales, flash CPI; Italy preliminary Q4 GDP

Speakers: Swedish central bank governor Erik Thedeen participates in an open hearing on financial stability in the Swedish economy in Stockholm

European results: UBS, Swedbank

U.S. economic data: Q4 employment wages, Q4 Nov house prices

U.S. Federal Reserve begins two-day meeting

U.S. results: Exxon Mobil, Caterpillar, General Motors, Pfizer, McDonald's, UPS

(Anshuman Daga)



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