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26.10.21 Market Review

PlusMarkets Analysis26/10/2021

The Market data was collected on 26 October 2021 at 10:15, and might have changed since then. Kindly refer to the listed sources for the most recent and updated information.

European Stock Futures Higher; UBS 3Q Profit Impresses

European stock markets are expected to edge higher Tuesday, helped by strong numbers from Swiss banking giant UBS.

At 2:05 AM ET (0605 GMT), the DAX futures contract in Germany traded 0.2% higher, CAC 40 futures in France climbed 0.2% and the FTSE 100 futures contract in the U.K. rose 0.1%.

UBS (SIX:UBSG) reported net profit of $2.3 billion in the third quarter, up from $2 billion in the previous quarter and a 9% increase from the same period a year before, as its wealth management division continued to boom.

These strong results may boost the heavily-weighted banking sector Tuesday, especially after Monday’s healthy numbers from U.K.-based rival HSBC (LON:HSBA) – even if neither is a particularly good proxy for the European sector as a whole, given their focus on Asia.

Earlier Tuesday, Asia markets pushed higher, helped by HSBC upgrading its call on Chinese stocks to overweight, saying investors had become too bearish on the market, while Wall Street closed Monday at new record levels.

Back in Europe, French car parts maker Faurecia (PA:EPED) reported a drop in third-quarter sales of over 10% from a year ago, as its customers cut production due to a global shortage in semiconductor chips.

RBNZ looking to reduce exposure to bonds with higher carbon footprint

New Zealand’s central bank said on Tuesday that it plans to reduce its exposure to bonds from countries like Australia that have a higher carbon footprint, as it outlined action to manage the economic risks associated with climate change.

The Reserve Bank of New Zealand’s (RBNZ) carbon footprint in its balance-sheet is above a simple benchmark of a G7 weighted bond holding because it holds more Australian and Canadian bonds, Governor Adrian Orr said in a news conference to launch its 2021 Climate Change report.

Orr said the bank gets higher yields from Canadian or Australian bonds than it does elsewhere.

“So yes, we would need to think hard around how we can achieve the same effectiveness in our balance with a lower footprint,” Orr said.

“That’s exactly the choice facing so many investors globally right now,” he said.

Orr pointed out that the Swedish central bank sold off bonds from the oil-rich Canadian province of Alberta and parts of Australia in 2019 because it felt that greenhouse gas emissions in both countries were too high.

Stocks rally in Asia, China property sector worries dampen sentiment

Asian stocks largely rallied on Tuesday, following Wall Street’s record highs overnight, though fresh worries about China’s property sector weighed on investors’ sentiments.

Europe and U.S. markets look set to keep the upward momentum as FTSE futures and E-mini futures for the S&P 500 index were up 0.06% and 0.24% respectively at 0531 GMT.

MSCI’s gauge of Asia Pacific stocks outside Japan rose 0.15% and briefly touched its highest in six weeks on Tuesday, after gaining throughout October.

The Asian regional benchmark however is down about 11% from its February high compared to the MSCI world equity index which is in sight of its record high hit six weeks ago.

“Equity prices are likely to be driven by technical positioning this week, as trade enters the final week of the month,” said Anderson Alves, an equities trader at global online trading platform ActivTrades.

Japan’s benchmark Nikkei average gained nearly 1.8%, while Australia’s S&P/ASX 200 closed 0.03% higher.

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Risk disclaimer: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 79.06% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.

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