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LIVE MARKETS-Buybacks are sooooo 2018!

* Markets unfazed by PMI weak data

* STOXX up 6%, FTSE gains 5.7%

* Wall Street jumps Welcome to the home for real-time coverage of European equity markets brought to you by Reuters stocks reporters. You can share your thoughts with Thyagaraju Adinarayan (thyagaraju.adinarayan@thomsonreuters.com), Joice Alves (joice.alves@thomsonreuters.com) and Julien Ponthus (julien.ponthus@thomsonreuters.com) in London.



BUYBACKS ARE SOOOOO 2018! (1500 GMT)

S&P Dow Jones Indices just released its 2020 Outlook for buybacks, and - surprise, surprise! - it's logically pretty grim.

Using your balance sheet to buy your own shares ain't exactly a priority when one of history's worst recession comes your way.

S&P says that "pre-COVID-19 estimates predicted 2020 buybacks would come close to or exceed the $806 billion record set in 2018" but the virus epidemic has made these expectations irrelevant.

"Q2 ’20 is expected to be dismal", S&P writes, adding that "for 2020, buybacks may see a complete reversal of the 2018 buyback bonanza".

While some corporates might be tempted to consider buybacks once the worst of the crisis is gone, it might not be that easy to go back to the good old days (so to speak) of 2018.

S&P says there might be new restrictions on these programmes and that there might very well be an issue with the "public image of buybacks when the economy is still recovering".

Here's an S&P chart of quarterly buyback as a percentage of market value:



(Julien Ponthus)

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WILL THE VIRUS CRISIS TRIGGER M&A AMONG EU BANKS? (1359 GMT)

There's a lot of talk going around about how European banks could be part of the solution in the virus crisis, rather than being a big part of the problem during the GFC.

Having substantially deleveraged, beefed-up their equity and liquidity cushions since 2008, they're expected to cope (fingers crossed) with the inevitable losses and play a key role in distributing the government-backed loans announced to keep the economy afloat in the coming months.

While their balance sheet will suffer, rating agency Scope believes the pain will be manageable.

"Scope’s base case is that loan losses and RWA inflation will stop short of putting bank credit in jeopardy for most banks", it said in a statement.

There will be winners and losers however and the European banking landscape might not be the same post-crisis.

"Scope believes opportunistic as well as strategic M&A will likely re-emerge over time in fragmented EU banking markets", the rating agency writes.

"Battered bank equity prices offer banks with the strongest balance sheets an opportunity to pinpoint where they would like to increase market share. Regulators are also likely to see mergers as a way to facilitate weaker players out of the market".


(Julien Ponthus)

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DID YOU SOMEONE SAY 'FALLEN ANGELS'? (1220 GMT)

The coronavirus-induced market chaos has made stocks cheaper and there are a few out there available at a bargain, some argue.

As Europe's median stock valuations fell by a third in the last month, analysts at Morgan Stanley believe there is an opportunity to shop some good quality cyclical value stocks at a discount.

"From a markets perspective at least, we believe that we are probably at or very close to peak uncertainty... such that the longer-term risk-reward profile looks attractive," the bank says.

Here is a list of 14 'fallen angels', according to MS:

Alstom

BHP

Cellnex

ENEL

Eiffage

Ericsson

Essilor Luxottica

Kingspan

Neste

Partners Group

Schneider

Segro

Vivendi

Yara


(Joice Alves)

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CAN MARKETS BOTTOM WHEN THE RECESSION JUST BEGINS? (1215 GMT)

The PMIs this morning were brutal and showed European economies were set for an unprecedented shock. The worrying thing, of course, is that while we brace for the incoming recession, we don't know how massive it will be.

In this light, it seems tricky to call whether shares are priced for what's to come.

But with stock markets down a whopping 33% since the February highs, there's a lot of number crushing going to determine whether we have hit a bottom.

"Our indicators suggest ‘almost’," Jefferies analysts believe, adding that "only credit spreads have yet to fall in line".

They suggest looking into companies loaded with cash and strong credit rating as "the first place to look for ideas" and upgraded the S&P 500 to "bullish" within their global asset allocation.

Here's their valuation indicator:




See also:

Coronavirus smashes UK economy with unprecedented force

Euro zone business activity collapses in March as coronavirus spreads

Surveys show coronavirus pandemic savaging global economy


(Julien Ponthus)

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WHEN CUTTING THE DIVIDEND ISN'T ENOUGH (1121 GMT)

Every morning brings a fresh batch of dividend cuts or cancellations, and today is no exception with Dunelm or Redrow just to name a few.

While cutting the pay-out is necessary to face challenging times, it will not always be enough.

Here's a sobering comment from Richard Morawetz, a vice president and senior credit officer at Moody’s.

"Where the exposure is modest, a dividend cut may be sufficient to offset the impact but in the most affected sectors such as airlines or cruise lines where ratings are now typically on review for downgrade, a dividend cut alone is unlikely to be sufficient to mitigate the stress to the business’s profile".


(Julien Ponthus)

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WHERE'S YOUR ETF NOW? (1050 GMT)

The longest bull market in history was a nightmare for active managers struggling to stock pick their way to compete with ETFs' stellar returns and low fees.

Now that we're set in a bear market, portfolio managers will be quick to claim that they actually have a hedge.

"Quality active managers significantly beat the broad market in down months and especially in the worst four market crises over the past twenty-five years", StyleAnalytics wrote in the press release of a research note.

Here's their chart which shows that "the median manager underperforms the Russell 1000 46% of the time in up markets and outperforms the Russell 1000 51% of the time in up markets".


(Julien Ponthus)

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EUROPE'S FEAR INDEX: YOU WILL LOVE THAT CURVE (1001 GMT)

Europe's fear index (Euro STOXX 50 volatility) has gone down to where it was on March 11 and its curve, as you can see below, is somewhat reassuring considering the market turmoil of these last two weeks.

Same goes for the its American peer, the VIX, which is also back down to March 13 highs.

Here's the curve's lovely shape:


(Julien Ponthus)

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NO MARKET REACTION TO EURO ZONE PMI DATA (0935 GMT)

Markets were looking forward for today’s euro zone and UK PMI figures as those are the first indicators of the impact of COVID-19.

"Flash PMIs set to act as foretaste of economic tsunami to come," wrote earlier today Michael Hewson, chief market analyst at CMC Markets UK.

The new PMI figures confirmed that a market deterioration is widely expected given the progressive lockdowns that are being implemented around the world. Manufacturing numbers are bad but the data pointed to services taking a even bigger hit in the bloc.

Yet, we had no reaction from investors as it was highly expected. And the Stoxx index continues its upward path, up 4%.

"The PMI plummeted in March, of course it did. Only a foolish optimist would have expected otherwise during the current supply and demand shock that the economy is facing," writes ING.

(Joice Alves)

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RISK-ON TRADES FUEL RALLY, BLOC'S PMI DATA AWAITED (0834 GMT)

Risk-on trades across the board with mining, oil, tech and autos fuelling 3.5% to 5% gains in all European indices. CAC 40 is among the underperformers this morning as flash PMIs for France pointed to services taking a major hit.

Among single stocks, France's Biomérieux as expected is topping the charts after it won approval from the FDA for its product aimed at testing for coronavirus. Chipmaker Infineon takes second place rising the tech wave this morning.

London stocks ITV, Sainsbury's, WH Smith and Bellway are among the top fallers after PM Johnson ordered Britons to stay at home to halt the spread of coronavirus.


(Thyagaraju Adinarayan)

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FUTURES HOLD ONTO GAINS, FLASH PMIS IN FOCUS (0750 GMT)

Stock futures are still pointing to gains after Monday's rout, taking cues from Asia, which rallied as China's Hubei province where the coronavirus pandemic originated planned to lift travel restrictions.

Pointing to the ping-pong action in markets, Deutsche Bank's Jim Reid says "markets are continuing to bounce up on the latest policy announcements and then sliding back down as the economic reality of the situation re-emerges."

One of the economic reality the market faces today is in the form of flash PMIs which will later in the morning show us the first major reading into the economic damage from coronavirus.

In the corporate world, Pernod Ricard sees 20% hit to operating profit due to the slump in business caused by the global coronavirus crisis. Nordex meanwhile is seen rising after the German wind turbine maker forecast higher profits.

In the UK, the country's biggest building materials group Travis Perkins said it will be closing all its businesses as the country goes into a lockdown amid the coronavirus outbreak.

Among coronavirus gainers, France's Biomérieux is in spotlight after the healthcare company won approval from the FDA for its product aimed at testing for coronavirus.


(Thyagaraju Adinarayan)

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MORNING CALL: UP FOR NOW (0643 GMT)

European stocks are seen opening more than 5% higher this morning after yesterday's selloff in a typical bounce back as fresh wave of stimulus and monetary packages from across the world are stemming further losses.

"Everyone is still trying to figure out where equity market positioning is after the collapse in an attempt to formulate some short-term reversion strategy," said Stephen Innes Chief Global Markets Strategist at AxiCorp.

"As anything beyond 48 hours, in the absence of a medical cure, is an eternity in these risk markets, but ultimately, it's a massive challenge to unscramble this egg."

Things to watch out for: flash PMI for the euro-zone and the UK, the data for France will come in at 0815 GMT.


(Thyagaraju Adinarayan)

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(Reporting by Joice Alves, Julien Ponthus and Thyagaraju Adinarayan)