BUZZ-FTSE could lag Europe large-caps as c.bank paths diverge-BNP
The strong sterling could see export-heavy FTSE 100 constituents lag European large-caps as central bank policy in the two blocs diverges.
** Continued loose monetary policy in Europe given deflation fears could keep the euro's gains in check.
** That would keep profits for the Euro STOXX 50 relatively healthier than UK bluechips.
** BNP Paribas (Milan: BNP.MI - news) ' derivatives strategy team recommends playing this by buying out-of-the-money puts on the FTSE.
** Over the past decade the FTSE & GBP have been fairly well correlated. http://link.reuters.com/seg58v
** Relationship appears to be cracking as profits take a hit. http://link.reuters.com/veg58v
** Smiths Group (Other OTC: SMGKF - news) , Melrose and Compass Group (Other OTC: CMPGF - news) are among FTSE 100 constituents to have warned in recent weeks about adverse impact of GBP strength.
** Meanwhile ECB President Mario Draghi gave his strongest hint yet over the weekend that the ECB will act to head off any upside in the euro. (Stocks Buzz is a pilot project. Please send any feedback or suggestions to vikram.subhedar@thomsonreuters.com) (RM (LSE: RM.L - news) :sudip.kargupta.thomsonreuters.com@reuters.net; RM:vikram.subhedar.thomsonreuters.com@reuters.net)