* European shares slide 0.6%
* Infineon slumps 6.8% after announcing Cypress deal
* Chipmakers down 2-3%
* Oil & gas stocks slide
June 3 - Welcome to the home for real-time coverage of European equity markets brought to
you by Reuters stocks reporters and anchored today by Thyagaraju Adinarayan. Reach him on
Messenger to share your thoughts on market moves:
WHICH ASSETS HAVE YIELDS ABOVE 30-YEAR AVERAGES? (0847 GMT)
UBS have looked into this and they've found European equities are interesting when it comes
"They are one of the few large asset pools to have a yield above their 30-year average (4.0%
vs 3.4%)," strategists at the Swiss house led by Nick Nelson say.
But given recent high-profile dividend cuts such as Vodafone and Royal Mail,
it's also worth asking how sustainable they are.
Here's what Nelson and tem say, which looks somewhat reassuring:
1. Pay-out ratios are not extended (57% vs a long run average of 53%)
2. Free cash flow cover is also reasonable at 1.38x for 2019E
3. Balance sheets are under-geared with gross cash on the balance sheet set to reach c. €900
billion by end-2019
4. Dividends are far less volatile than earnings – the gap between EPS and DPS momentum
PMI where there are signs of stabilisation
As you can see in this chart, the gap between Europe's STOXX 600 dividend yield and yield on
the German bund has been rising to its highest in at least a decade.
WHO'S THE SECRET BUYER OF EUROPEAN STOCKS? (0813 GMT)
Although European stocks have taken a battering over the past month, they're still
substantially up this year despite data showing big outflows from equity funds.
The question on everybody's lips, as Goldman Sachs puts it, remains: "Markets are up and
buyers should in any case be matched with sellers - so who is purchasing European equities?"
Cumulative outflows from equity funds year-to-date are larger than in 2016, GS strategists
say, citing Morningstar data.
But looking at ECB data, which also includes flows into equity from multi-asset funds, mixed
or balanced funds, hedge funds, and quantitative funds, they find these other types of funds
have been buying equities so far this year.
Another purchaser is the corporate sector. With new issuance and rights issues diminishing
while buybacks have increased recently, companies have been a net buyer of equity.
"This does not represent the full picture... but it does give a more complete view than
focusing purely on equity fund flows," they write.
OPENING SNAPSHOT: INFINEON SLIDES, OIL STOCKS SKID (0726 GMT)
European shares are sliding 0.6% as lingering trade war worries keep investors away from
risky assets. Goldman Sachs economists say they now see a 60% chance that the U.S. will slap
tariffs on the final $300 billion of Chinese imports.
Infineon is down 5%, the top faller on the pan-European STOXX 600 index after it agreed to
buy Cypress Semiconductor for $10 billion.
Chipmakers in the region are falling 2-3%, despite expectations from traders that M&A in the
sector could be positive for these stocks. Clearly escalating rhetoric in a global trade war is
trumping that - so to speak.
Wirecard is a rare riser after its CEO tweeted that the company is steering towards an
"outstanding" first-half of 2019.
Oil & gas stocks are the worst-performing in Europe as Brent crude falls 1.1% amid stalling
demand and as trade wars fan fears of a global economic slowdown.
Confirming a risk-off trade, the defensive food & beverage, utilities and telecoms sectors
are down 0.1-0.4%, outperforming the market.
WHAT'S ON THE RADAR: CHIPS, AIRLINES, CASINO STOCKS (0647 GMT)
After the worst monthly performance since January 2016, European stocks are set to start
June on the back foot again. Futures point to another weak open with the trade-sensitive German
blue-chip index seen 0.6% lower.
In corporate news, chip sector M&A is making big headlines after Germany's Infineon agreed
to buy Cypress Semiconductor, which makes microchips used in cars and electronic devices, for
Infineon shares were last trading down 5.2% in pre-market but traders expect its regional
rivals AMS, Dialog Semi and BE Semiconductor to rise on the M&A
William Hill shares are seen 3% higher by one trader on reports in the Sunday Times
and the Telegraph that it had held merger talks with Las Vegas casino giant Caesars
Entertainment last year.
Traders expect shares of European airlines to come under pressure after IATA slashed profit
forecasts due to the ongoing trade war.
In the UK, construction company Kier is seen dropping 10-20% after a profit warning.
A few other headlines to watch out for:
Kier sees 2019 operating profit lower than expected
Dignity says welcomes proposals to regulate UK funeral plans
Danske Bank to sell Estonian private loans unit to LHV in $458 mln deal
NO SIGNS OF RESPITE (0554 GMT)
European shares are expected to be under pressure again today and there are no signs of a
respite as June begins.
"Risk assets are likely to remain highly sensitive to rhetoric around trade, until there are
signs of a more constructive approach by both China and the US," Peel Hunt's Ian Williams says.
The ongoing trade war is certainly hurting global airlines and IATA says the industry's
profits are expected to come down by more than a fifth.
In corporate news, M&A is making big headlines today: German chipmaker Infineon to buy
Cypress Semiconductors in 9 billion euros deal. One trader however says he struggles to see the
deal getting approval, pointing to Infineon's attempt to buy Wolfspeed from Cree, which was
blocked by CFIUS.
Fiat Chrysler is discussing a Renault special dividend and stronger job
guarantees in a bid to persuade the French government to back its proposed merger between the
carmakers, sources close to the discussions said.
Major corporate headlines:
Infineon to buy Cypress Semiconductors in 9 billion euros deal
Sephora to shut U.S. stores for day of diversity training after racial incident
EXCLUSIVE-FCA discusses improved Renault merger bid to win French backing
Aluflexpack aims to raise 140 million euros in latest Swiss IPO
Sunrise takeover of Liberty Global unit under review by competition authorities
Global airlines slash profit forecast on protectionism fears
EUROPE ON THE BACKFOOT AGAIN (0517 GMT)
European stocks are expected to open lower again this morning on worries of a prolonged
China-U.S. trade war and Washington's new tariff threats against Mexico. The pan-European STOXX
600 index dropped 5.7% in May, its worst monthly performance since January 2016.
"For most of this year the assumption had been that, for all the sound and fury around the
imposition of tariffs, they wouldn’t last that long and any damage could be easily mitigated.
Now it seems that tariffs are likely to last a lot longer and be more wide ranging than
originally thought," Michael Hewson at CMC Markets UK says.
Financial spreadbetters IG expect London's FTSE to open 31 points lower at 7,131,
Frankfurt's DAX to open 69 points lower at 11,658, and Paris' CAC to open 37 points lower at
In corporate news, German chipmaker Infineon Technologies agreed to buy
U.S.-based Cypress Semiconductor for $23.85 per share in cash (enterprise value of 9
(Reporting by Danilo Masoni, Helen Reid, Josephine Mason and Thyagaraju Adinarayan)