Advertisement
UK markets close in 6 hours 52 minutes
  • FTSE 100

    7,717.87
    -4.68 (-0.06%)
     
  • FTSE 250

    19,450.23
    -36.30 (-0.19%)
     
  • AIM

    736.04
    -0.59 (-0.08%)
     
  • GBP/EUR

    1.1689
    -0.0015 (-0.13%)
     
  • GBP/USD

    1.2679
    -0.0050 (-0.39%)
     
  • Bitcoin GBP

    50,338.39
    -3,409.43 (-6.34%)
     
  • CMC Crypto 200

    885.54
    0.00 (0.00%)
     
  • S&P 500

    5,149.42
    +32.33 (+0.63%)
     
  • DOW

    38,790.43
    +75.63 (+0.20%)
     
  • CRUDE OIL

    82.52
    -0.20 (-0.24%)
     
  • GOLD FUTURES

    2,154.60
    -9.70 (-0.45%)
     
  • NIKKEI 225

    40,003.60
    +263.20 (+0.66%)
     
  • HANG SENG

    16,529.48
    -207.62 (-1.24%)
     
  • DAX

    17,967.96
    +35.28 (+0.20%)
     
  • CAC 40

    8,159.88
    +11.74 (+0.14%)
     

LIVE MARKETS-Chasing the expensive LSE

* European stocks rise again: STOXX 600 +0.6% * Beaten-down sectors banks and cars lead charge higher * LSE rallies on Hong Kong merger proposal, up 7.5% * Apple iPhone launch boosts chipmakers * Casino buoyed by Carrefour takeover report Welcome to the home for real-time coverage of European equity markets brought to you by Reuters stocks reporters and anchored today by Josephine Mason. Reach her on Messenger to share your thoughts on market moves: rm://josephine.mason.thomsonreuters.com@reuters.net CHASING THE EXPENSIVE LSE (0958 GMT) Another twist in the LSE tale, first it was LSE-Deutsche Boerse deal (failed three times), then LSE-Refinitiv and now Hong Kong Exchange and Clearing (HKEX) has offered to buy LSE for $39 billion. The first deal was blocked by Brussels, then LSE knocked financial data firm Refinitiv's doors with a $27 billion offer, which potentially could be withdrawn given HKEX's precondition to scrap that deal to get bought by the Asian exchange. LSE however says it remains committed to the Refinitiv deal, while it weighs HKEX's offer. In this mix, LSE shares have benefited the most rising 84% so far this year and valuations have skyrocketed, making the FTSE 100 owner one of the most expensive exchange operator in the world even before the HKEX approached with the offer. (see chart below) (Thyagaraju Adinarayan) ***** HEDGE FUNDS: ON THE WRONG SIDE OF THE BRUTAL ROTATION? (0914 GMT) The rapid switch into value/cyclicals plays out of the momentum/defensive space is running into a new day, giving stock markets a positive spin, but positioning broadly tilted in favour of the latter means that many investors may have been caught off guard. Among those who could face pain from the brutal move that we've seen this week are hedge funds, unless they've been faster than the market in adjusting their portfolios. "Hedge funds will have been hit hard by this move...," writes Bernstein this week. Earlier in August, strategists at the U.S. investment firm noted that hedge funds had a larger exposure to Momentum than usual and that their positions looked vulnerable. Back then, according to Bernstein, hedge funds were more exposed to Momentum than they had been since mid-2017, and the exposure was at the top end of the 5-year range. In the chart you see the switch out of Momentum into Value which started at the end of last week. (Danilo Masoni) ***** EUROPE LOOKING TOPPY (0832 GMT) European stocks are storming higher this morning, hitting their highest in more than six weeks, but on the charts, they're looking a little toppy as a growing chorus of investors warn that markets are heading for a disappointment about the extent of dovish policy from global central banks ahead of the ECB's meeting tomorrow. The relative strength index (RSI) for the pan European STOXX and euro-zone benchmarks is above 65 this morning, their most overbought reading on a technical basis since July 4 and close to levels that would typically trigger a short-term sell-off. A reading of 70 and above would be considered overbought territory by chartists. Pictet has become the latest wealth manager to caution about unrealistic expectations being priced into the market about what the ECB and other central banks may do to shore up sluggish global economic growth over the coming month. "Although we expect central banks to ease monetary policy to arrest the economic slowdown, they aren't likely to deliver the volume of stimulus that the markets are hoping for, so we remain underweight equities," says Luca Paolini, chief strategist at Pictet Asset Management. Paolini cautions that U.S. stocks in particular look unattractive with the yield curve inverting and flashing a potential recession. Still the asset manager is overweight European equities because momentum in France and Spain are offsetting the damage from Germany's slowdown and a fresh round of ECB stimulus will help. But disappointment awaits. "Our analysis shows the gap between the current and market-implied volume of monetary stimulus – measured as a percentage of GDP – has never been wider, which means the market is set up for disappointment," he cautions. (Josephine Mason) ***** OPENING SNAPSHOT: BEATEN-DOWN STOCKS RISE AGAIN (0735 GMT) Miners, banks and cars are leading the march higher across European stock markets this morning, as investors continue to pile into this year's laggards. The pan European STOXX 600 was just shy of an Aug. 1 high in early deals. Defensives food & beverage and utilities are the only sectors in negative territory. In another sign that investors are shifting out of this year's best-performing stocks, Zara-owner Inditex's shares are down 2.8%, among the biggest fallers on the STOXX 600 even after delivering an in-line set of results. Dealers say the absence of a positive surprise triggered profit taking in the world's biggest fashion retailer after its shares hit one-year highs yesterday. They're up a whopping 32% this year. Infineon and STMicro are among the top gainers in Frankfurt and Paris after Apple's launch of its latest iPhone, while debt-laded French supermarket Casino is up 2.5% at March highs after a report rival Carrefour is weighing a takeover. Andritz and Maersk are being buoyed by positive broker recommendations. (Josephine Mason) ***** ON OUR RADAR: SUPERMARKET SWEEP AND IPHONES (0700 GMT) European stock futures are gaining again this morning, extending a winning streak into a sixth day, as investors pile into riskier assets ahead of the ECB's much-anticipated monetary policy meeting tomorrow with the central bank's chief Mario Draghi expected to lavish the market with stimulus measures to shore up the region's economy. Whether the market has set expectations for Draghi's generosity too high is yet to be seen. German stock futures are up 0.5% while Eurostoxx are up 0.3%. China has exempted 16 types of U.S. products from additional retaliatory tariffs in a conciliatory sign from Beijing and adding to the broadly optimistic mood even as signs of a global manufacturing slowdown abound. This morning, data shows China's auto sales fell for a 14th consecutive month in August and Schmolz & Bickenbach has cut its forecast for the full-year, blaming a weakening steel demand as its order backlog continued to decline in the third quarter. Its shares could fall as much as 20%, a dealer says. Apple's launch of its new iPhone 11 series may help lift the mood across chipmakers, Infineon, Dialog Semiconductor and STMicro, although the lower price tag and new features may not be enough to win customers in China, the world's largest smartphone market that is already crowded with cheaper and feature-packed rival handsets. The owner of clothing chain Zara, Inditex, has posted first-half profits and sales that were in line with expectations, buoyed by good summer weather in Europe and favourable foreign exchange effects. But dealers say the absence of a positive surprise from the world's top fashion retailer is likely to weigh on the stock. In luxury goods, French handbag maker Hermes has delivered strong sales growth within mainland China in July and August that helped offset the impact of anti-government protests in Hong Kong on its business within the Greater China region. Traders say its EBIT growth was better than expected, which is expected to lift shares by 2-3%. In dealmaking, a report that French retailer Carrefour is weighing a possible bid for Casino is seen pressuring Carrefour and giving a significant lift to its debt-laden rival. Casino would rise as much as 10%, dealers say. UK headlines (see earlier blog for other major news overnight): Galliford Try reports 27% drop in full-year profit Domino's Pizza brand in Turkey, Russia delivers 15.4% core profit rise in H1 UK outsourcer Mitie Group loses finance head to CPA Global Britsh hedge fund Man Group president Jonathan Sorrell steps down BRIEF-Competition watchdog to assess Unite Group takeover of Liberty Living Group BRIEF-Capital & Regional Says Growthpoint In Talks To Buy Majority Stake In Co BRIEF-Chemring Says Current FY Expectations Unchanged BRIEF- New Look Q1 loss narrows to 2.7 mln pounds BRIEF-Crest Nicholson Names Iain Ferguson Independent Non-Exec Chairman BRIEF-Unite Group Sees 3%-3.5% Rental Growth In 2019-20, 2020-21 (Josephine Mason) ***** EUROPEAN STOCK FUTURES ON A 6-DAY WINNING STREAK (0624 GMT) European stock futures are indicating a stronger open this morning, extending a winning streak into a sixth day as investors brace for the ECB to cut interest rates and announce a range of stimulus measures to shore up the bloc's economy tomorrow. Germany's DAX is leading the charge, up 0.5% while the Euro STOXX 50 is up 0.3%. Traders expect the rotation seen in recent days from growth/momentum stocks into under-owned battered value/cyclicals to continue, boosting cars and banks. But reminders that manufacturing in the region and across the globe is weakening abound: Schmolz & Bickenbach overnight cut its forecast for the full-year, blaming a weakening steel demand as its order backlog continued to decline in the third quarter. On the high street though, conditions appear to remain pretty resilient. The owner of clothing chain Zara and the world's biggest fashion retailer, Inditex, has posted first-half profits and sales that were in line with expectations, buoyed by good summer weather in Europe and favourable foreign exchange effects. There's a bit of M&A action: French retailer Carrefour is reported to be weighing a possible bid for its debt-laden rival Casino while ArcelorMittal is exploring a sale of its downstream construction business as it divests non-core operations, according to a report. Here are some early headlines: Merck KGaA Confirms 2019 Targets Bankers step up rate rant ahead of crunch ECB meeting Vivendi denies plan to take over Italy's Mediaset UK's Man Group President Jonathan Sorrell to leave firm -Sky News Sanofi to pay Lexicon $260 mln for terminated partnership Naspers takes Tencent stake out of Africa with Prosus listing ArcelorMittal to explore sale of construction business- Bloomberg Norsk Hydro to shutter some aluminium foil production in Germany, lay off workers GRAPHIC-FTSE 100's changing face: A trip down memory lane Spain's Telefonica looks to make money from mobile towers European Q3 profit outlook improves slightly, still in recession Carrefour weighing bid for French retail rival Casino -BFM Schmolz + Bickenbach Lowers 2019 Earnings Forecast (Josephine Mason) ***** ROTATION CONTINUES, EUROPE SEEN HIGHER (0519 GMT) European shares are expected to extend yesterday's gains, notched up late in the day as investors continue to shift into sectors that have underperformed this year banks like cars and banks, taking profits in defensive industries like healthcare. Trading may be in a tight range again though ahead of the ECB's monetary policy meeting tomorrow, with some strategists cautioning that investors are setting their expectations for the size of stimulus to be announced too high. Banks will continue to benefit from rising bond yields. "Investors are trimming long speculative positions in sovereign bonds, as dovish expectations have certainly gone well ahead of what central banks would deliver at this month’s meetings," says Ipek Ozkardeskaya, senior market analyst at London Capital Group. IG financial spreadbetters expect London's FTSE to open 25 points higher at 7,293, Frankfurt's DAX to open 70 points higher at 12,339, and Paris' CAC to open 12 points higher at 5,605. (Josephine Mason) ***** (Reporting by Danilo Masoni, Josephine Mason and Thyagaraju Adinarayan)