MARKETS LIVE A green future: private financing and the involvement of retail investors

November 23 – Welcome home to real-time market coverage from Reuters reporters. You can share your thoughts with us at markets.research@thomsonreuters.com

A GREEN FUTURE: PRIVATE FINANCING AND RETAIL INVESTOR ENGAGEMENT (1118 EST/1618 GMT)

As the dust settles on COP26, much has been said about what it means for governments, businesses and investors, but the consensus was that billions of dollars in funding must be mobilized to have any meaningful hope of avoid the worst. of climate change and that the private sector is essential.

Of course, the Asian Infrastructure Investment Bank (AIIB) is looking to boost the amount of private capital it can help put to work on its projects.

Ludger Schuknecht, the AIIB’s vice chairman and general secretary, told the Reuters Global Markets Forum (GMF) that the AIIB’s securitization program was “well subscribed”, adding that around a third of the stake came from outside of Asia itself.

“If you look at the spreads, over six months responsible for the A class, the AAA rated one, in the range of 120 to 125 basis points… So a good return for investors who wanted high rated bonds and a good amount.”

Schuknecht said the bank was “even trying to create an environment for retail investors to also invest in the climate space,” which he added would be a first in Asia.

While climate finance was previously closely tied to debt markets and more specifically green bonds, COP26 appears to have cemented the belief among many investors across the capital structure that money needs to be allocated in a more respectful of the environment.

“The interest is across the whole range of solutions – discretionary portfolios, liquid and illiquid funds, structured products, direct deals,” Damian Payiatakis, head of sustainable and impact investing at Barclays Private Bank, told the GMF.

“For many investors, the entry points tend to be in investments where they are already active and familiar. If I step back, sustainability is the next stage of investing, not just the latest product or the latest trend,” Payiatakis added.

(Aaron Saldanha)

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A SMALLER PIECE OF PUMPKIN PIE: MARKIT SHOWS SLOWING EXPANSION (1054 EST/1554 GMT)

A single economic indicator released on Tuesday suggests that growth in U.S. business activity has lost momentum.

While the expansion of the manufacturing sector (USMPMP=ECI) picked up slightly, growth in services (USMPSP=ECI) – which accounts for a larger share of the total pie – unexpectedly slowed, according to the company. HIS Markit global information.

Markit’s preliminary “flash” Purchasing Managers’ Index (PMI) for November provided 59.1 readings for goods makers, an increase of 0.7 points from October. But services printing defied the consensus, falling 1.7 points to 57 points, two points lower than expected.

Taken together, the composite number lost 0.9 points to 56.9.

A PMI reading above 50 indicates monthly expansion.

While the U.S. economy has essentially reopened for business, with seesaw demand for goods versus services for customers approaching some semblance of serenity, the supply side of the equation remains in intensive care as Material and labor shortages continue to limit activity.

“The slowdown underscores how the economy is struggling to cope with persistent supply constraints,” wrote Chris Williamson, chief economist at Markit. “Input cost inflation rose sharply in November to a new survey high, adding to pressure on companies to pass on the recent cost spike to customers to protect margins.”

“Average prices charged for goods and services have continued to rise at an unprecedented rate,” adds Williamson.

Compared to its global rivals, the expansion of factory activity in the United States and Europe is essentially neck and neck, with commodity producers across the pond overtaking the United States in terms of production and workforce, but US producers benefiting from faster growth in new orders.

And since the end of the pandemic recession – the deepest and shortest economic contraction on record – China has clearly been lagging behind.

On Wednesday, investors will be treated to a veritable traffic jam of indicators as markets leave town to welcome the Thanksgiving holiday.

On tap for tomorrow are (deep breath), mortgage demand, corporate earnings, durable goods, GDP, consumer spending, PCE inflation, unemployment insurance claims, inventories, new home sales and consumer sentiment.

As for Wall Street, a lack of meaningful catalysts to move the market has exerted its gravitational pull on major equity indices, with the benchmark S&P 500 index on the road to its third straight day in the red.

Energy (.SPNY) is the outlier on the upside, with soaring crude prices pushing the sector up sharply.

(Stephen Culp)

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CAN WALL STREET MAKE ITS RETURN? (1015 EST/1515 GMT)

After opening like a mixed bag, Wall Street’s three major averages managed to turn positive early in Tuesday’s session after U.S. HIS Markit data showed U.S. business activity slowed moderately in November due to labor shortages and raw material delays, contributing to price spikes in the middle of the fourth quarter. Read more

However, the S&P 500 (.SPX) and Nasdaq (.IXIC) were less sure of themselves and soon fell back into the red.

At last glance, there were four sectors that were down slightly with technology (.SPLRCT) the most. Communication Services (.SPLRCL), Consumer Discretionary (.SPLRCD) and Healthcare (.SPXHC) are down.

The energy sector (.SPNY) is the biggest percentage gainer in the benchmark as oil gained ground to stabilize near $80 a barrel after the U.S. signaled plans to release up to 50 million barrels of oil from their reserves to cool the market.

Markets also continue to digest Monday’s news that Jerome Powell has been nominated for a second term as Fed Chairman and the fact that expectations were pushed back on Monday for an interest rate hike as early as June 2022 from previous expectations for July. Read more

(Sinead Carew)

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WILL READ IN CRISIS AGAIN, BUT NOT YET GLOBAL CONTAGION (0917 EST / 1417 GMT)

After an 11-day losing streak for the lira, the Turkish currency is once again firmly in crisis territory. The main concerns for investors now are where the selloff will end and what are the chances of the contagion spreading?

The Turkish lira fell almost 15% on Tuesday, while its benchmark (.XU100) rose 1.5% on suddenly cheap valuations. Turkish banks (.XBANK) have held up well so far, up 19% this month. The broader stock index rose 17% in November after hitting record highs.

Given its limited trade and financial ties with the rest of the world, alongside the improving external position of most emerging markets, economist Simon MacAdam of Capital Economics writes that any global spillover is unlikely. Turkish banks have $10 billion in foreign lending on their books, so domestic banking strains would not have a big impact on foreign lending.

“The uglier way it would get for the rest of the world is if President Erdogan kept his cool long enough and the lira fell far enough to endanger Turkish banks,” MacAdam writes.

Nevertheless, some Spanish and European banks like BBVA with Turkish exposure through its subsidiary Garanti could continue to underperform for the duration of the crisis as they did in 2018, adds the economist.

(Bansari Mayur Kamdar)

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DOW INDUSTRIALS: INSIDE THE LINES (0900 EST/1400 GMT)

For the past six months or so, the Dow Jones Industrial Average (.DJI) has been trapped between two log-scale trend lines:

On a weekly basis, the Dow Jones closed above a 90-plus-year resistance line in late March. With this action, the polarity of the line changed from resistance to support.

Since then, the Dow has rebounded several times, refusing to finish a week below. It now resides as support around 34,000.

On the upside, the blue chip average faces a resistance line from the start of 2018. This line topped out in mid-August and again at the start of this month. It now resides around 36,700.

Meanwhile, over the past six months or so, the weekly momentum has weakened. The MACD hit an over-year low in mid-October, and despite the Dow’s surge to new highs in early November, the momentum study managed only a tentative upside.

The Dow is now down 2.6% from its November 8 intraday high of 36,565.73. But with the MACD remaining weak, the risk remains for DJI to continue swinging lower to retest the support line. Read more

Ultimately, a weekly close outside the range defined by these two lines can signal potential for acceleration. Breaking back below the support line may suggest a failed break above a very long-term trendline, with the risk of a major reversal.

(Terence Gabriel)

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Terence Gabriel is a market analyst at Reuters. Opinions expressed are his own.

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