LIVE MARKETS-Closing snapshot: European shares close slightly higher
* European shares close marginally higher
* Fed chair Powell says more rates hikes likely appropriate
* No breakthrough in U.S.-China trade talks
LONDON, Aug 24 (Reuters) - Welcome to the home for real-time coverage of European equity
markets brought to you by Reuters stocks reporters and anchored today by Julien Ponthus. Reach
him on Messenger to share your thoughts on market moves:
julien.ponthus.thomsonreuters.com@reuters.net
CLOSING SNAPSHOT: EUROPEAN SHARES CLOSE SLIGHTLY HIGHER (1550 GMT)
Even (Taiwan OTC: 6436.TWO - news) though European shares eased slightly after Fed chair Powell said that more rate hikes
are likely if the economy stays strong, the STOXX has gained around 0.7 percent this week,
though trading has been on the thin side during the August lull.
Here's your provisional closing snapshot:
(Kit Rees)
*****
UK HOUSEBUILDERS - SIMPLY MISUNDERSTOOD? (1440 GMT)
In a more positive view of the UK housebuilding sector, analysts at Berenberg say they
believe share prices in the sector continue to diverge from their fundamentals.
Berenberg sees three signs that things might not be all that bad. They reckon that margin
growth isn't being factored into estimates, while balance sheets have vastly improved.
Finally, Berenberg reckons that working capital movements, such as housebuilders promptly
scaling back land-buying and build-out rates, are "underappreciated".
"We often hear that the sector moves as one, and stock selection does not matter. Since 2000
there has been significant divergence between the best- and worst-performing businesses," say
Berenberg's analysts, highlighting Barratt Developments (Frankfurt: 859551 - news) , Taylor Wimpey (LSE: TW.L - news) , Countryside and Bellway
as their top picks.
(Kit Rees)
*****
HOUSEBUILDERS HIT BY DROP IN UK MORTGAGES (1423 GMT)
Housebuilders are among the worst-performing on the FTSE 100 today after figures from UK
Finance showed British banks approved fewer mortgages in July, despite a boost from existing
home-owners seeking to lock in cheaper interest rates ahead of the Bank of England's rate rise
in August.
Berkeley Group, Persimmon (Frankfurt: 882058 - news) , Taylor Wimpey, and Barratt Developments are all down 0.7 to 1.6
percent.
Investors are pretty downbeat on housebuilders and real estate in the UK generally, with
real estate investment trusts (REITs) trading at sharp discounts to their book value due to
Brexit fears, inflation and rising rates causing house - and office - prices to roll over.
With (Other OTC: WWTH - news) prices falling (see below), prospective homebuyers are more likely to delay their
purchase - as today's mortgage figures seem to reflect.
Jefferies analysts didn't mince their words in a recent note, saying "Buying REIT shares is
like breaking into a bank that's already been robbed" and adding "We expect domestic demand to
remain subdued until the full implications of the UK EU Referendum are known."
But Henry Dixon, manager of the Undervalued Assets fund at Man Group (LSE: EMG.L - news) , owns Bellway (Frankfurt: 869646 - news) and
Barratt Development and sees the housebuilders as attractively valued, better-financed
alternatives to REITs in order to express a positive view on UK real estate.
While REITs like Capital & Counties - which runs London's Covent Garden shopping and leisure
district - are selling premium real estate, he reckons housebuilders are more likely to be in
the affordable market, which has been less hard hit.
(Helen Reid)
*****
HELLO OLD FRIEND! (THE BIG EU BANK MERGER RUMOUR IS BACK) (1245 GMT)
Hello old friend, it's been a while!
The rumour that a pan-European banking behemoth is in the making is back again this morning.
This time it's the UniCredit (EUREX: DE000A163206.EX - news) /SocGen (Paris: FR0000130809 - news) tie-up speculation that has been revived after Milano
Finanza reported that the Italian bank was working with a senior Rothschild banker to advise it
on a possible merger. (Reuters has no-comments from all parties on the report)
The senior Rothschild banker named in the report is no less than Daniel Bouton, former
chairman of...Societe Generale (Swiss: 519928.SW - news) .
One thing to remember is that the Unicredit/SocGen merger rumours got started when Jean
Pierre Mustier, another former top executive who spent over 20 years at Societe Generale, was
appointed Unicredit CEO in 2016.
Mustier, a high-flying banker once seen as a future head of SocGen, and Bouton, a once very
powerful figure of French capitalism, both resigned in 2009 in the aftermath of the Kerviel
rogue trading scandal.
Anyhow, it's now been a few years that schemes to create European banking champions (or
too-big-to-fail monsters?) trigger some market action.
Rumours regularly tie up BNP Paribas (LSE: 0HB5.L - news) or SocGen to either Deutsche Bank (IOB: 0H7D.IL - news) or Commerzbank (Xetra: CBK100 - news) .
There's a long list of arguments used to dismiss the possibility of such big deals and one
of the most convincing is that the extra capital required to sustain a new hugely systemic bank
would absorb all synergies and make a deal pointless from a shareholder's point of view.
While a number of French or German politicians openly dream of EU banking champions able to
compete with Wall Street, the tense relationship of Berlin and Paris with Italy's
anti-establishment government also makes a deal less likely now.
Anyhow the rumour isn't harming SocGen or UniCredit shares which are up 1.3 percent and 1.1
percent respectively, comfortably above the Euro zone banking index (0.5 pct).
A Jefferies note was likely to have helped lift UniCredit with the broker's analysts taking
the view that "the bottom-up investment case for UniCredit (Buy) remains intact" despite
"near-term hurdles".
(Julien Ponthus)
*****
MIDDAY SNAPSHOT: A STEADY CLIMB FOR EUROPEAN STOCKS (1148 GMT)
Ah, the calm march higher into the weekend. A rise across cyclical sectors is keeping the
STOXX 600 in positive territory midway through the session.
U.S. stocks futures are also trading higher, with a speech from U.S. Fed Chair Powell due at
1400 GMT.
Here's your snapshot:
(Kit Rees)
*****
TRADE WAR NO DEATH SENTENCE FOR EQUITIES (0924 GMT)
Markets have been caught lately in a tug-of-war between, on the one hand, strong company
earnings, and on the other building trade war risks. Today it looks like strong fundamentals are
winning, despite inconclusive U.S.-China trade talks.
UBS (LSE: 0QNR.L - news) chief investment officer Mark Haefele strikes an optimistic tone on the trade war,
looking to historical precedent.
"'Great power (Shenzhen: 300438.SZ - news) competition' does not necessarily have to hurt markets," he says, noting
strong U.S. equity market returns in the 50s and 80s despite the Cold War and the U.S.-Japan
trade conflict.
However, he did reduce the size of his overweight position in global equities, bringing
overall asset allocation stance to "broadly neutral" as he saw the market as not pricing in the
increased tariff risk.
So why still stay keen on equities overall?
"Earnings growth is a powerful force," argues Haefele. UBS expects 6 percent earnings growth
for U.S. stocks and 14 percent for Chinese stocks in 2019 even despite the tariffs impact.
Analysts are also still becoming more positive on Europe's earnings growth outlook:
(Helen Reid)
*****
OPENING SNAPSHOT: END-WEEK BOUNCE FOR EUROPE, RYANAIR WILTS (0720 GMT)
European benchmarks are rising across the board in early trading with bank stocks and miners
the biggest boosts. Basic resources (Frankfurt: W8Z.F - news) strength came as London copper prices recovered and was set
for its best week in four.
Antofagasta (Other OTC: ANFGF - news) is among top gainers, up 2.2 percent.
Irish construction supplies firm Kingspan is leading the STOXX 600 with a 7.5 percent gain
after strong results, while Swedish Match (LSE: 0GO4.L - news) is suffering from Jefferies starting coverage with an
"underperform" rating.
Ryanair shares are down 1.7 percent, among the biggest declines on the STOXX, giving back
yesterday's gains after a deal reached with an Irish pilots' union. The airline announced
yesterday it would now charge passengers to take a 10-kg piece of hand luggage on board.
And finally, shares in Swiss semiconductor maker U-Blox (Other OTC: BLXX - news) are sinking 15 percent after the
company's disappointing results. The company reported weaker than expected results and cut its
guidance for the year, with traders flagging its China business as particularly disappointing.
(Helen Reid)
******
MORNING HEADLINES ROUND-UP (0631 GMT)
There's not loads on the corporate results front - Computacenter (LSE: CCC.L - news) , Henry Boot (LSE: BHY.L - news) , Kingspan are
among those reporting - but a drug approval for Shire (Xetra: S7E.DE - news) , car recalls from Fiat Chrysler and
Volkswagen (IOB: 0P6N.IL - news) , and NAFTA talks on autos dragging on could all move stocks today.
FDA approves Shire drug for rare swelling disorder
Fiat Chrysler, Volkswagen issue recalls for cars in Mexico
UPDATE 5-U.S.-Mexico NAFTA talks seen running into next week, autos unresolved
Computacenter half-year profit up 24 pct on higher German demand
Britain's Electra Private Equity ends buyout talks
UK's Petrofac (Amsterdam: PF6.AS - news) to sell interest in Greater Stella Area for up to $292 mln
Henry Boot Confident Of Meeting 2018, 2019 Expectations
Kingspan H1 trading profit up 10 pct, sees strong H2
Equinor awards Alcatel Submarine a monitoring contract at Johan Castberg field
State spending, investments drive German Q2 growth
(Helen Reid)
*****
FUTURES: LONDON DOWN, CONTINENT UP (0615 GMT)
Futures are now trading and indicate that the FTSE is set to retreat slightly at the open
while bourses on the continent are on course for a modest rise. With moves on both sides between
-0.2 and +0.2 percent, modest may just be the right adjective to use this morning.
(Julien Ponthus)
*****
KEEP CALM AND CARRY ON: FTSE SET FOR CALMEST WEEK in 2018 (0558 GMT)
Of course this is August and one shouldn't draw too many conclusions but this week seems on
course to be the least volatile of the year for the FTSE.
As you can see below, the British blue chip index is on a weekly gain of only 0.06 percent
(against 0.6 for the pan-European STOXX), which is clearly close to nothing and the most
insignificant move of the year.
As always, political risk, be it in the form of Brexit but also from beyond, like the
Turkish currency crisis or the China/U.S. trade war, doesn't seem to be keeping British
investors awake at night.
"Keep calm and carry on", seems to be the way forward.
(Julien Ponthus)
*****
MORNING CALL: NO CLEAR TREND YET (0530 GMT)
After U.S.-China trade talks ended without progress, it seems markets aren't ready to commit
before Powell gets a chance to give hints on the Fed's next move at the Jackson Hole meeting
later today.
After the S&P 500 and the Dow Jones slid last night and as Asian shares end the session in
negative territory, financial spreadbetters expect London's FTSE to open 9 points lower,
Frankfurt's DAX 17 points higher and Paris' CAC to rise n 7 points.
(Julien Ponthus)
*****