EUROPEAN EQUITIES ARE POSITIONED FOR GROWTH , STOXX DEEPER DOWN IN THE RED FOR 2022

30217 european equities are positioned for growth stoxx deeper down in the red for 2022

EUROPEAN EQUITIES ARE POSITIONED FOR GROWTH , STOXX DEEPER DOWN IN THE RED FOR 2022

According to a BofA survey, investors regard monetary tightening as the most important risk to markets, beating out COVID and inflation as the top anticipated concerns.

Nonetheless, according to BofA, investor optimism remained unaffected by central bank tightening intentions.

According to 374 respondents with $1.2 trillion in assets under management, 81 percent expect European shares to gain by at least 5-10% this year.

Banks, insurance, and industrials are the most overweight sectors, while technology fell out of the top three to become underweight for the first time in four years.

“The net share of investors indicating they are overweight banks reached a new high, with insurance reaching its highest level since 2014,” according to BofA.

At the open in Europe, selling pressure appears to be rather heavy across the board, bringing the STOXX 600 deeper into loss territory this year as rate hike concerns sour the mood.

The pan-European market benchmark fell roughly 1.3 percent in morning trade and was down around 2 percent year to date.

Tech (.SX8P) led falls, falling more than 2%, while energy was the sole positive sector, up 0.2 percent as oil prices reached 7-year highs.

ANTITHESIS OF ARK INNOVATION ETF ENJOY RALLY

ARK Innovation ETF  is down nearly 3% in premarket trading on Tuesday, in tandem with broad tech wreak caused by a spike in U.S. bond yields and fears of faster than anticipated U.S. rate hikes.

Investment products betting against the ETF, however, have raced ahead.

Three times short ARK Innovation ETF  is up 8% in London on Tuesday, bringing gains for the year to over 70%, while the underlying ETF down 15% YTD.

Tuttle Capital Short Innovation ETF , that tracks the inverse of the daily performance of the ARKK by entering via swap contracts, has gained over 50% since its launch on Nov. 9.

Popular investor Cathie Wood’s flagship ETF that consists of high-growth, high-valuation companies has halved from its all-time peak in Feb 2021. It was the top-performing U.S. equity fund tracked by Morningstar in 2020 before plummeting to among the worst performers of 2021.

So far this month, the ARK Innovation ETF has bled nearly $240 million in investment outflows, according to Lipper data. By contrast, SARK drew in $45 million in the week ended Jan 12, the largest weekly inflow since the ETF’s inception.

TECH TROUBLE

Nasdaq futures are down almost 1% on Tuesday, making it likely the tech-heavy index will add to its year-to-date losses of around 4.5%. Having risen for 12 of the past 13 years, it is under heavy pressure from the prospect of higher interest rates and bond yields, more so than the broader S&P 500 index or MSCI’s global equity benchmark.

The 4.5% loss masks deeper falls — 29 shares have lost 10% or more already this year, according to Capital Economics.

Nasdaq futures positioning has shifted dramatically short, Citi analysts point out, noting that $2 billion worth of remaining long positions are deep in the red.

Those investors will be looking nervously towards bond markets, where two-year U.S. Treasury borrowing costs have risen above 1% for the first time since Feb. 2020. In Europe, German 10-year yields are close to bursting above 0% for the first time since mid-2019.

Inflation is front and centre, as crude oil prices hit seven-year prices. That’s good news for some — the Bank of Japan signalled earlier the country was finally emerging sustainably out of deflation — but the bond selloff is setting the stage for a dismal stock market session; most Asian bourses fell and Europe looks set to open weaker.

Source: XglobalMarkets

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