February 10 – Welcome home to real-time market coverage from Reuters reporters. You can share your thoughts with us at [email protected]

OPTIONS MARKET SKEPTIC AHEAD OF CPI DATA (1205 GMT)

The US options market is not reflecting the same level of complacency that the stock market did before the US inflation report, warned Michael Oyster, chief investment officer of Chicago-based Options Solutions.

The S&P 500 (.SPX) is about 4.5% off its all-time closing high, but the CBOE Volatility Index (.VIX), Wall Street’s fear gauge, is at its long-term average. term of 20 points.

This, Oyster noted, indicates that “the options market is showing a healthier dose of skepticism than the stock market.”

“The CPI reading topping consensus estimates is a concern that the options market is currently integrating as investors are still paying for sell protections and that’s why you see the high prices in the VIX,” Oyster said.

Consensus sees consumer prices in the United States rising 7.3% year-on-year last month after posting the strongest reading in nearly four decades in December.

The surge in inflation could force the Federal Reserve to tighten monetary policy more aggressively than previously feared.

Markets have fully priced in the possibility of a rate hike in March, according to CME’s FedWatch tool, with 77% betting on a 25 basis point hike in borrowing rates and resting on a 50 basis point hike. based.

“The stock market seems immune to any sort of bad news like inflationary data or the reality that interest rates are rising…and you see that in the buying mentality,” Oyster also said.

“The options market is saying there’s an underlying risk that we don’t fully appreciate at this point. (so) put options are going to be expensive,” he concluded.

(Medha Singh)

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CPI KRYPTONITE? (11:42 GMT)

We are about three hours away from the US CPI release and there is a clear feeling that the data will likely decide the fate of this session and perhaps beyond.

For Deutsche Bank’s Jim Reid, rising inflation is currently to markets what Kryptonite is to Superman: a game changer.

“If we don’t start falling quickly in line with expectations, the market will factor 50 basis point Fed hikes into the equation for 2022,” he warned.

The result for stock markets is quite binary for stock markets, argued Ipek Ozkardeskaya at Swissquote.

“Either we will see a reasonable CPI and the rally in stocks may continue, or we will see an ugly number, and the bears will rush into the market and destroy recent gains.

Among the various markets bracing for impact, technology is clearly at the forefront.

“Today’s U.S. inflation report may well be the catalyst that determines whether the Nasdaq 100 returns above this key 200-day MA level in the coming hours,” wrote Michael Hewson of CMC Markets. .

As a reminder, the Reuters consensus sees the CPI for January at 7.3%, but a lot of speculation is circulating.

“There are also market rumors today of a CPI downside surprise – so only 7.1% y/y? Such non-inflationism!! – for the first time in a while “, reads Rabobank’s Global Daily note.

(Julien Ponthus)

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ECB REDUCTION SCENARIOS (1040 GMT)

The Pandemic Emergency Purchase Program (PEPP) will end in March, but analysts expect the central bank to increase its asset purchase program (APP) to avoid a cliff edge effect and implement a gradual tightening of its monetary policy.

ECB data showed net PEPP volume stood at 50.1 billion euros for January and is expected to remain at that level until the policy meeting on March 10, according to Citi analysts.

“This means that the starting point for tapering is slightly higher than we had previously assumed, making it more likely that the ECB will choose to stick to a Q2 APP pace of €40bn/ months to avoid a sharp decline,” they state in a research note. .

The APP has stood at 20 billion per month since 2019, but analysts expect the ECB to increase it when the PEPP ends.

“We are also changing our APP assumptions – to 40 billion euros and 20 billion euros in the second and third quarters, respectively, after which we expect net purchases to end,” the Citi analysts add.

“The ECB’s first active line of defense after net asset purchases end would be the flexible use of reinvestments, but there appears to be limited willingness to commit to anything beyond that. “, say ING analysts.

Peripheral spreads remain exposed “to further widening amid expectations of accelerated policy tightening,” they add.

UBS expects the ECB to announce on March 10 that the APP will end on August 31.

(Stefano Rebaudo)

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FLAT STOXX COVERS BIG MOVE ON PROFITS (0851 GMT)

The STOXX 600 (.STOXX) is flat as a pancake in early trading as traders avoid taking big directional bets ahead of US inflation data that could shape the path of Fed rate hikes this year. But beneath the surface, there are big moves for individual stocks reacting to earnings updates.

Delivery Hero loses 18% on disappointing outlook, headset maker MIPS is down 17% after the results, while a $2.7 billion write-down sent IT consultancy Atos down 7% .

On the positive side, Siemens rebounded 6% after a boom in quarterly orders and packaging maker Huhtamaki was also up 6% after earnings beat expectations.

(Danilo Masoni)

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A BREATH FOR THE BREATH (0812 GMT)

The markets are enjoying a sort of respite. With 10-year Treasury yields down five basis points from recent highs, the Nasdaq managed to rebound about 10% from late-January lows. Europe’s STOXX 600 opens higher after bumper earnings propelled the index to its best day in two months.

Meanwhile, the Walt Disney Co. has allayed fears, raised after Netflix’s lackluster earnings report, that the entertainment streaming industry will face a settling of scores when the pandemic ends. Disney shares rose 8% after hours on the back of a 34% rise in revenue and expectations of stronger subscriber growth.

Wall Street futures are signaling a weaker open, however, as January’s US inflation data release comes into play. The CPI is expected to hit a four-decade high of 7.3%, but many hope the figure will show the economy is starting to work its way through supply issues and labor shortages.

More than five quarter-point Fed interest rate hikes are currently expected by the end of the year, but the data could tip those bets one way or the other.

Bond market signals have been reassuring for tech investors. Thursday 10-year Treasury auction saw the strongest demand since May 2020, a sign that buyers will be rushing to grab higher yields, which could limit their upside. Let’s see what happens at a 30-year-old auction later today.

Similarly, Spain on Wednesday received 60 billion euros in bids for a 7 billion euro project. 30 year show (Spanish 10-year yields are up about 35 basis points this month).

Key developments that should further guide markets on Thursday:

–Swiss credit ends a torrid year with a loss of $2.2 billion in the fourth quarter; SocGen quadruples its profits

-Unilever warns of high inflation and rules out big mergers and acquisitions; AstraZeneca sees growth in 2022 but COVID boost fades read more

-RICS UK housing survey

-The Swedish Central Bank announces its decision on interest rates at 08:30 GMT

– ECB board member Philip Lane speaks at 13:15 GMT

-Bank of England Governor Andrew Bailey on 2015 GMT

-US CPI/weekly unemployment figures

-U.S. 30-Year Bond Auction

– US Profits: Linde, Twitter, Coca-Cola, Moody, Philip Morris, Kellogg, Expedia, Western Union, Mohawk, First Energy

-Emerging market central banks: Indonesia, Mexico, Peru, Serbia

-South African President Ramaphose to deliver State of the Nation address

(Sujata Rao)

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EUROPE: BEWARE AHEAD OF THE US CPI (07:40 GMT)

European stocks are expected to rally this morning, but trade should remain cautious ahead of closely watched US inflation data for January, which could shape expectations of a Federal Reserve rate hike next month.

Headline CPI is expected to have risen more than 7% on an annualized basis, but Fed officials are hopeful the peak may be near. Read more

Euro STOXX index futures rose 0.4% and FTSE contracts were flat after a tech-fueled global equity cooldown, while Nasdaq derivatives fell 0, 2%.

In corporate news, it’s another busy day for earnings releases.

Credit Suisse is on the watch list after posting a $2.2 billion quarterly loss, hurt by provisions to settle legal fees for its investment bank and a slowdown in activity at its trading and trading divisions. wealth management. Read more

Here are some other income titles:

Unilever warns of high inflation and rules out big mergers and acquisitions read more

AstraZeneca sees growth in 2022 as dividend rises but COVID boost drops

French Crédit Agricole exceeds its profit target a year ahead of schedule read more

Siemens announces strong increase in orders as profit beats forecasts Read more

Steelmaker ArcelorMittal announces fourth quarter results above expectations read more

Total returns to profit in 2021 Read more

(Danilo Masoni)

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