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5 things to start your day

January 25, 2021
Five Things - Europe
Bloomberg

Good morning. A reality check for what to expect in 2021, U.K. retail succession and some blue-chip earnings. Here's what's moving markets.

Tougher Start

The world economy is facing a tougher start to 2021 than expected as coronavirus infections surge and it takes time to roll out vaccinations. While global growth is still on course to rebound quickly from the recession of last year at some point, it may take longer to ignite and not be as healthy as previously forecast. The World Bank already this month trimmed its prediction to 4% in 2021 and the International Monetary Fund will this week update its own outlook. Double-dip recessions are now expected in Japan, the euro area and U.K. as restrictions to curb the virus's spread are enforced. Record cases in the U.S. are dragging on retail spending and hiring.

In With The New

Two British High Street fixtures are up for sale, and online upstarts are in the bidding to take over. Online fashion retailer Boohoo is set to acquire the Debenhams brand in a deal that will result in the closure of the group's remaining department stores, the Financial Times reported, citing two people with knowledge of the transaction. Meanwhile, Boohoo's peer Asos has emerged as the front-runner to buy the TopShop brand for more than 250 million pounds, Sky News reported, citing insiders. Online-only business Asos isn't in talks for any physical stores of Philip Green's insolvent retail chain, Sky says. In other European M&A news, Swiss stock exchange operator SIX Group wants to make more acquisitions, its chairman told a Swiss newspaper barely six months after completing the purchase of the bourse's Spanish counterpart.

Right Direction

Many European countries are noting a slowdown in coronavirus infections, but continue to tighten restrictions as new, more dangerous strains spread globally. The U.K. is considering tightening controls at its borders to prevent the import of new strains of coronavirus, which it fears may undermine the success of its vaccination program. France may go into another lockdown within days to halt the spread of the potentially deadlier strain that emerged in Britain last year. Oslo tightened restrictions because of that variant's spread, and Sweden banned travel from Norway. Encouragingly, Ireland reported the fewest new cases in almost a month, while France logged the lowest number in nearly a week. 

Mis-selling Probe

Deutsche Bank said Sunday it was conducting an internal investigation following a Financial Times report describing bank employees in a profit sharing scheme that sold people risky investments they didn't understand. According to the FT report, the inquiry originally focused on a desk in Spain that sells hedges, swaps and derivatives, but the probe ultimately stretched across Europe. "We initiated an investigation in relation to our engagement with a limited number of clients," a bank spokesman said in a statement. "We cannot comment on details until all aspects of the investigation are complete." He declined to confirm anything in the FT report or to answer additional questions from Bloomberg News. 

Coming Up…

European stock futures are pointing to a positive open, after the region's benchmark declined last week. Fourth-quarter earnings season is in full swing, and Philips is already out the gate, affirming its guidance for growth and margin improvement in 2021. British car parts supplier TI Fluid Systems is due later in the morning, and Portuguese paper mill operator Navigator Co.'s earnings are expected after markets close. The virtual stand-in for this year's World Economic Forum in Davos takes place this week; China's Xi Jinping speaks today and leaders including Emmanuel Macron and Angela Merkel are due to appear this week. Greece and Turkey are due to start exploratory talks to resolve a host of disputes over sovereignty and access to natural resources.

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

Despite the near-universal view that Treasury yields are only going to head one way this year -- up -- fast-money funds are giving the bonds a surprising vote of confidence. Speculators have turned net positive on Treasuries for the first time in more than three years, with leveraged fund positions in 10-year futures flipping net long, according to the latest data from Commodity Futures Trading Commission. The rise in yields on the global bond benchmark has stalled amid concerns about new coronavirus strains and as Federal Reserve Chairman Jerome Powell sought to stamp out talk of a premature reduction in the central bank's massive bond-buying campaign. The 10-year yield was at 1.09% Monday, down from its early January high of 1.19%. The move above the key psychological 1% level generated a mountain of commentary on what it would signal for global risk assets -- and they continued to push higher. It remains to be seen how a fall back below 1% would be welcomed, but it seems fast-money funds are beginning to bet on one.

Cormac Mullen is a cross-asset reporter and editor for Bloomberg News in Tokyo.

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