LIVE MARKETS Capital markets and a good end of the year for banks

  • Major Wall St averages gain ground, S&P leads
  • All 11 S&P sectors up, energy leads
  • European stocks extend gains, STOXX 600 up 1.5%
  • Oil, gold, bitcoin on the rise; dollar slips
  • 10-year US Treasury yield ~1.49%

December 1 – Welcome home to real-time market coverage from Reuters reporters. You can share your thoughts with us at [email protected]

CAPITAL MARKETS AND SOLID YEAR END FOR BANKS (1040 EST/1540 GMT)

With capital markets activity accelerating, Credit Suisse banking analyst Susan Katzke expects a stronger-than-expected year-end for banks.

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Despite the month-end price decline, Katzke cited favorable asset prices for equities in particular as well as sequentially higher trading volumes for both equities and fixed income securities with increasing volatility and an improvement in the pace of investment banking revenue generation.

But Katzke noted a moderation in investors’ risk appetite and said macroeconomic confidence, market momentum and liquidity levels as well as investor conviction “will be critical to both quarterly progress and the longer-term sustainability of capital markets revenue growth”.

Still, the analyst presented promising numbers on investment banks for the fourth quarter execution rate compared to the fourth quarter of 2019 and observed that “activity in the capital markets – both the bank investing and trading – continues to trade well above 4Q19 levels.”

Total investment banking fees for the fourth quarter of 2021 are 52% higher than the fourth quarter of 2019 and 15% higher than the fourth quarter of 2020, although they are 4% lower so far compared to compared to the third quarter of 2021. These figures include a huge 109% increase in equity subscription and a 202% increase in IPO fees, according to Katzke who cites estimates from Dealogic and Credit Suisse.

While banking stocks seemed to start December in good spirits with the S&P Banking Index (.SPXBK) up over 2%, they have been quite volatile recently.

On Tuesday, the index closed 2.3% lower and at one point was as much as 8.3% below its October 25 intraday high. While Wednesday’s gain was so far on track to be the biggest since Sept. 23. Friday’s 3.9% drop was its biggest one-day drop since June 17.

On Wednesday, the index’s biggest percentage gainer was Fifth Third (FITB.O), up 3.6%, followed by SVB Financial (SIVB.O), up 3.5%.

(Sinead Carew)

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RETAIL TRADE: TOP FRENCH STOCKS TRADE (0949 ET/1449 GMT)

The French Financial Markets Regulatory Authority (AMF) has just released extensive data on the retail boom the country has experienced since the pandemic rocked financial markets in early 2020.

The main conclusion is that the trading appetite remains intact and comparable to what it was in March 2020.

Other findings include the fact that so-called “neo-brokers” have a younger clientele inclined to trade complex instruments and more volatile stocks.

A particularly interesting table is this one showing which stocks (for which the AMF is the competent authority) are the most traded:

MFA

As you can see, the usual blue chip suspects like luxury giant LVMH or aircraft maker Airbus are well represented, but neo-broker clients are more inclined to trade smaller, more volatile stocks like the French vaccine company Valneva.

Traditional banks are like BNP Paribas or SocGen, online banks include Saxo Bank and IG Markets while neo-brokers have companies like Activtrades and eToro in their ranks.

The AMF specifies that its investigation covers 218 million transactions executed between the third quarter of 2018 and the third quarter of 2021 by French and foreign retail investors in financial instruments for which it is the competent authority.

(Julien Ponthus)

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FOLLOW THE BOUNCING BALL (0832 ET/1332 GMT)

U.S. stock index futures point to a higher open after selling off sharply for the second time in four sessions, as a nearly 2% drop in the S&P 500 (.SPX) on Tuesday left the index reference to its lowest closing level since October 27.

Investors who were already jittery over concerns about the new COVID-19 Omicron variant that fueled Friday’s sharp pullback were further taken aback by comments from US Federal Reserve Chairman Jerome Powell that indicated the central bank could tighten its monetary policy more quickly than expected. Read more

Monday’s rebound was seen as somewhat lukewarm by analysts, who will be looking for a stronger follow-up to today’s rebound.

Futures added slightly to gains after the release of the ADP’s National Jobs Report, which showed private sector payrolls rose by 534,000 jobs last month, above 525,000 expectations. The data comes ahead of Friday’s key payrolls report.

Data due shortly after the opening bell includes the ISM manufacturing PMI for November as well as construction spending for October. The Fed’s Beige Book of economic conditions is expected later today.

Below is your pre-market snapshot:

Stocks are set to rebound at the open

(Chuck Mikolajczak)

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