MORNING BID-Hangover blues

·2 min read

Jan 26 - A look at the day ahead from Saikat Chatterjee.

After the party, comes the reality. Asian stocks are set to record their biggest daily fall in two months on Tuesday with potential roadblocks to U.S. stimulus and vaccine rollout delays being blamed as the culprits.

A flood of cash from global central banks, ultra-low or zero interest rates and COVID-19 vaccine rollouts have sparked a "buy everything" rally, helping world stocks add a whopping $33 trillion in value from their lows of last March.

But Tuesday’s early price action shows some investors are starting to have doubts on the longevity of the market gains.

The U.S. dollar has strengthened against virtually every major currency overnight, including the redoubtable Chinese yuan while U.S. Treasury yields are hugging a three-week low.

A widely watched stock market fear index is approaching two week highs while even the darling of retail punters, Bitcoin, is nursing its wounds, down a quarter from its peak in early January.

With more European countries mulling additional restrictions on movement, early predictors of economic activity are starting to flag casting doubt on an economic recovery this year.

Germany’s IFO business climate indicator undershot expectations on Monday and an economic surprise index in Europe is hovering near six-week lows.

Unsurprisingly, travel and the tourism sectors were the biggest hit in late European trading on Monday. The cracks widened more in emerging markets with the Brazilian real, Mexican peso and the South African rand swooning against the greenback over the past 48 hours.

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

* UBS posted on Tuesday a 137% rise in fourth-quarter net profit as high levels of client activity helped the world's largest wealth manager end 2020 on a strong note.

* Novartis's fourth-quarter sales and profit rose less than analysts expected, as the Swiss drugmaker said on Tuesday that the COVID-19 pandemic affected divisions including its eye and skin drugs as well as generics unit Sandoz.

* UK jobless rate rises to highest since 2016

* Upcoming earnings: Starbucks, Johnson & Johnson, General Electric, Texas Instruments