MORNING BID-Markets cheer stimulus money and M&A

Feb 8 – A look at the day ahead from Danilo Masoni.

Economists may be sparring over whether U.S. President Joe Biden’s $1.9 trillion fiscal stimulus is excessive or just enough, but for markets the reflation trade is alive and kicking.

Hopes the U.S. Congress will pass the $1.9 trillion support package in the coming weeks are injecting more impetus into assets that stand to gain from the economic recovery.

No surprise then to see world shares scaling a fresh record peak this morning, 10-year Treasury yields hitting a new 11-month high at 1.191% and oil prices advancing above the $60 per barrel mark for the first time in more than a year.

Positive news too from Italy where the two largest parties in parliament gave Mario Draghi’s conditional backing to form a government. Talks continue, but Italian 10-year borrowing costs inched down two basis points as Monday trading opened.

On the corporate front, chip stocks will be eyed after Japan’s Renesas Electronics said it was in talks to buy Dialog Semi in a deal that would value the UK-based Apple supplier at around $6 billion. Dialog shares are marked to open 10% higher.

M&A could also drive price action among European utilities. France’s Veolia is launching an offer for all of waste and water management company Suez, valuing it 11.3 billion euros after dropping efforts to win the backing of the Suez board.

Key developments that should provide more direction to markets on Monday:

German industrial output stagnated in December as lockdowns held back the export-oriented manufacturing sector

* Ethereum futures commence trading; the coin slips off record highs

* ECB President Lagarde speaks at the European Parliament – 1600 GMT

* Cleveland Fed President Mester speaks – 1700 GMT

* Bank of England Governor Andrew Bailey speaks to parliament committee on the London Capital and Finance fund’s 2019 failure.

* SoftBank Group Corp on Monday recorded an 844 billion yen ($8 billion) profit at its Vision Fund unit in the three months to Dec. 31

* Taiwan has banned Deutsche Bank from trading Taiwan dollar forwards and suspended it for two years from trading forex derivatives as part of a crackdown on speculation.

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