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December 09, 2020
Five Things - Europe
Bloomberg

Good morning. Stocks are higher as political risks are weighed, Airbnb's IPO is set to price and Softbank debates a new go-private strategy. Here's what's moving markets.

Stretched Stocks

European equity futures are higher after stocks rose in much of Asia and the U.S. S&P 500 closed at an all-time high. Goldman Sachs reckons U.S. equity positioning looks "extremely" stretched, increasing the risk of a modest pullback. In Washington, Treasury Secretary Steven Mnuchin presented a new $916 billion Covid-19 relief proposal to House Speaker Nancy Pelosi, in the first move by the Trump administration since the election to break a months-long standoff. Back in this region, U.K. Prime Minister Boris Johnson has dinner with Ursula von der Leyen on Wednesday as both sides seek to save Brexit trade negotiations. European leaders are lining up in support of the European Union Commission president.

Airbnb Valuation

We should find out how much Airbnb is worth later as the company that transformed the accommodation industry prices its initial public offering. The valuation could reach $42 billion, according to an earlier pricing range. The firm was initially struck hard by the pandemic, but has since seen a boom in customers seeking domestic rentals. Its valuation multiple may leave it at the top end of online travel peers like Booking.com and TripAdvisor, according to Bloomberg Intelligence. However, the group may face increased regulatory scrutiny, just like other gig-economy companies, BI warns. Trading begins in New York tomorrow.

Softbank Debate

Technology investment powerhouse SoftBank is debating a new strategy to go private by gradually buying back outstanding shares until founder Masayoshi Son has a big enough stake that he can squeeze out the remaining investors, according to people familiar with the matter. Shareholders in the Japanese firm are likely to support buybacks, since the company continues to trade at a discount to the total value of its holdings in companies like Alibaba and Uber Technologies. Son says he is now sitting on $80 billion in cash.

Virus Latest

France is mulling "many options" related to to the planned loosening of lockdown measures scheduled for Dec. 15 as the number of Covid-19 cases remains high. Possible plans include introducing a new curfew or sticking to the current lockdown longer to observe developments, according to Health Minister Olivier Veran. Switzerland's proposed new measures, meanwhile, include reducing opening hours for shops and restaurants. Elsewhere, Germany plans to vaccinate as many as 8 million people in the first quarter of 2021, after Britain's inoculation, including that of William Shakespeare, got underway on Tuesday. Finally, passengers on a Royal Caribbean cruise ship in Singapore are confined to their cabins after a positive case was identified.

Coming Up…

Italian Prime Minister Giuseppe Conte faces a big vote on European Union financial assistance amid opposition from part of his governing coalition. Meanwhile, German exports and South Africa inflation are the main data points, and British American Tobacco provides a trading update.

What We've Been Reading

This is what's caught our eye over the past 24 hours. 

And finally, here's what Cormac Mullen is interested in this morning

Greed is going parabolic and that has to be a warning sign for the risk asset rally. Here are three random examples from just this week that to me scream out for caution. The first is an easy one, overexuberance in the options market. Retail involvement in the derivatives market is at a record high and on Tuesday alone, the volume of bullish bets on stocks popular with Robinhood traders -- such as Tesla, Pfizer and Palantir -- each eclipsed total call volumes on the S&P 500 Index. The second is business-intelligence firm MicroStrategy's plan to offer $400 million of convertible bonds in order to buy....Bitcoin. I'll leave that for analysts who know the company better to decide whether such a strategy aligns with its business or is indeed intelligent, but shares did slump 14% on the news. And the final example is the milestone reached by newly-listed cloud-computing company Snowflake, whose market capitalization hit $120 billion and for a time exceeded that of IBM. While Snowflake is of course growing super fast, sales estimates this year of about $578 million do show some way to go before the firm catches up to Big Blue's projected $74 billion in revenue. The signs of froth in risk assets -- as was the case before the selloff in September -- are becoming impossible to ignore.

Cormac Mullen is a Cross-Asset reporter and editor for Bloomberg News in Tokyo. 

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