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LIVE MARKETS-Closing snapshot: European stocks reverse losses, end higher
LONDON, March 7 - 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 STOCKS REVERSE LOSSES, END HIGHER (1742 GMT)
Well things got rather interesting there, didn't they? M&A news livened up a European
session which started in negative territory but ended higher, with a bounce across financials,
tech and autos leading the way, while U.S. shares are lower.
Below are your closing levels - have a good evening, and see you tomorrow for more market
action!
STOXX 600 +0.4% 372.71
FTSE 100 +0.2% 7,157.84
DAX +1.1% 12,245.36
CAC +0.3% 5,187.83
FTSE MIB +1.2% 22,473.47
(Kit Rees)
*****
RENAULT SHOOTS HIGHER AS NISSAN IN TALKS TO BUY FRENCH STAKE (1610 GMT)
Renault (LSE: 0NQF.L - news) shares surged to their highest since December 2017 after Reuters reported
Nissan is in talks to buy the bulk of the French state's 15 percent stake in the carmaker.
That's a lot of privatisation talk in one day, a trader points out. The French government is
gearing up to privatise ADP, utility Engie (LSE: 0LD0.L - news) is considering selling power
plant assets to Germany, and now the Renault news.
"Is the French state clearing the decks?" he muses.
"It's a massive positive for Renault if they get free of government," he adds, saying
government ownership prevents the company from doing the cost cutting it needs to do.
However, Renault's shares have pared gains slightly and are up around 4 percent after a
Bloomberg report said that Nissan denied being in talks to buy the Renault stake.
(Helen Reid)
*****
WILL THE "PEAK GROWTH" THEME GROW ON? (1534 GMT)
Has Europe touched its "peak growth" or is the loss of economic momentum just temporary? As seen
with this morning's Euro zone GDP figures, signs of loss of steam are appearing.
While most equity strategists remain overweight on the Euro zone, some like Deutsche Bank (IOB: 0H7D.IL - news) 's
Sebastian Raedler have warned that a likely slowdown in PMIs, even at a handsome rate, could
prompt stocks to retreat over the year.
In between both approaches, Credit Suisse Investment Committee Report said today it adjusted
its exposure to take into account a slowdown, even if it's not lasting.
"We reduced exposure to the most growth-sensitive equity segments in mid-February as we
expect a temporary peak in growth momentum," Credit Suisse (IOB: 0QP5.IL - news) wrote.
The bank also said that even if it doesn't expect a full-on trade war, "the uncertainty
regarding the future international trade environment adds a risk-off flavour to market
sentiment.
(Julien Ponthus)
*****
LOOKING FOR A TRADE WAR HEDGE? "BUY TECH" (1516 GMT)
Tech stocks have significantly outperformed the broader market since the open, showing good
resilience to worries that tariff plans by U.S. President Donald Trump could trigger a global
trade war. Is there a kind of trade war hedge here?
"Absolutely. That is the point. Sell autos, industrials. Buy tech," says Stefan de Schutter,
portfolio manager at Alpha Trading in Frankfurt.
After all, tech doesn't sell the kind of stuff that governments can block at a port.
In this one-month chart you can see how European tech stocks have clearly
outperformed the STOXX 600 becnhmark index, as well as the auto and industrial sectors:
The top three tech gainers are SAP (Amsterdam: AP6.AS - news) , AMS (IOB: 0QWC.IL - news) and ASML Holding (LSE: 0QB8.L - news) , all up
more than 1.7 percent.
(Danilo Masoni and Tom Pfeiffer)
*****
"NO WINNERS" FROM BREXIT (1324 GMT)
Unsurprisingly, Donald Tusk's remarks aren't particularly optimistic about the impact of
Brexit on trade. Brexit will make trade "more complicated and costly" for everyone, he said
earlier, with Luxembourg prime minister Xavier Bettel echoing: "there will be no winners after
Brexit".
Interestingly Tusk commented specifically on air travel, saying he is determined to avoid
disruption of flights between the UK and EU, one of the most feared potential consequences of
Brexit.
In response to Trump's tariff talk, Tusk also said trade wars are bad and "easy to lose",
and announced EU leaders would devote a session to the U.S. trade threat at their next summit on
March 22-23.
U.S. stock futures are down 0.6 to 1 percent as investors across the pond price in Cohn's
resignation and renewed trade fears.
(Helen Reid)
*****
WHEN INDUSTRIAL GROWTH GETS "QUITE EXCITING" (1301 GMT)
Philip Dicken, head of European equities at Columbia Threadneedle Investments, is hoping
this will feed through into capex.
"Capacity utilization has gone up a lot, and therefore companies are going to have to invest
in their capital stock, and one man's capex is another man's revenues," says Dicken.
"We've been quite stock-specific but we've been taking advantage of industrial growth and
GDP growth," Dicken adds.
He says they have quite a big position in Kingspan, an Irish building materials firm
which makes insulation products, and which he expects will benefit from European growth picking
up. They also have a sizeable position in French business services group Elis.
(Kit Rees)
*****
ADP SALE REPORT PUTS FRANCE'S 70 BLN PORTFOLIO UNDER SPOTLIGHT (1241 GMT)
Shares (Berlin: DI6.BE - news) in French airport operator ADP are showing no sign of fatigue this morning
and are now up 5.1 percent at the top of France's index of top 120 blue-chips.
That comes after a local press report said the government is looking to privatise ADP and
sell all of its 50.6 percent stake, which is worth about 8 billion euros.
Investment bankers and investors alike are expecting French President Macron to launch a new
wave of privatisations to finance an innovation fund and ADP seems a plausible way to start.
The government directly holds a portfolio of listed companies worth about 70 billion euros
(February 23 market value).
Many of these companies are regularly at the centre of M&A speculation like Orange (LSE: 0OQV.L - news)
, Renault, Engie or recently Thales (LSE: 0IW5.L - news) with the acquisition
of Gemalto (LSE: 0OGA.L - news) .
Here's a link to access the French Finance Ministry's portfolio of listed companies: http://bit.ly/2G6pAOJ
and a broader one with the 81 firms it has a stake in: http://bit.ly/2D77SXS .
Firms in the latter include the national lottery or local airports that could also be fully
or partially privatised.
Here's a screenshot of the portfolio of listed companies that you can access from the link
above:
(Julien Ponthus)
*****
WILL INVESTORS SWAP U.S. BANKS FOR EUROPEANS? (1221 GMT)
After meetings with 100 investors in Britain, Europe and the United States, JPMorgan (LSE: JPIU.L - news)
confirms its overweight U.S. over European banks and says that despite all the positive economic
green shoots in Europe, stock picking is not that easy.
"For European Banks to re-rate, we would need to see positive operational gearing driving
earnings upgrades. In our discussion with global investors, especially the US marginal investor
who spends a majority of their time on the US rather than Europe going through the issues, the
conclusion still remains that US banks will outperform Europe," analysts at the US bank say.
"We agree with that view for now," they add.
So where will investors put money in European banks?
"A slim picking," they note, although there are still some interesting takeaways:
* Less and less interest in the geographically diversified business model such as banks like
BNP Paribas (LSE: 0HB5.L - news) , Societe Generale (Swiss: 519928.SW - news) , Santander and BBVA (LSE: 931474.L - news)
* More and more a view in the U.S. that the domestic Spanish banks re-rating thematic has
come to a pause until next year when Euribor may start to move upwards
* Ongoing momentum and interest in the Italian banks, especially UniCredit (EUREX: DE000A163206.EX - news)
and Intesa Sanpaolo (Amsterdam: IO6.AS - news)
US banks have recovered almost all of the losses they made since the global
financial crisis in 2007 as the Federal Reserve has started to raise interest rates and Donald
Trump is cutting down regulation. European banks instead have been left behind, as you
see in the chart.
(Danilo Masoni)
*****
INCOMING (Other OTC: ICNN - news) : BREXIT HEADLINES! (1134 GMT)
The EU's Tusk is to present the bloc's draft guidelines for a future relationship with
Britain after Brexit at 1215 GMT but the key point has already leaked out: the bloc plans to
offer British-based financial services companies only limited access to the Single Market,
according to a draft document quoted by Bloomberg.
Britain's Hammond will get a chance to answer at 1430 GMT when he announces his Brexit plan
for banks and how he intends to protect the industry from a Brexit hit.
In the meantime, the British banking sector is down 0.1 percent. Notice that
the pound, which rarely trades in the same direction than the FTSE, is losing close to 0.3
percent against the euro. The British blue chip index is down 0.1 percent.
Here are the views of Andreas Koening, head of global FX at Amundi (Berlin: 350155.BE - news) , on sterling:
"I am short on sterling. They were too positive before Brexit negotiations a couple of weeks
ago. There are more frictions in the discussions. I think significant detereoration in Brexit
negotiations is not priced in. They still expect some kind of deal which is the most logical
outcome. But if something negative happens, then we go another 3-5 percent down from current
levels."
(Julien Ponthus and Saikat Chatterjee)
*****
#EUROBOOM LOSING SOME OF ITS SHINE (1113 GMT)
Figures from Eurostat confirm Eurozone GDP expanded by 0.6 percent in Q4 with both domestic
demand and trade boosting growth, but some signs of weakness emerged.
Consumption growth was the weakest in nearly four years, at 0.2 percent, Oxford Economics
lead economist Nicola Nobile writes.
"These latest numbers do take some of the gloss off the #Euroboom," Nobile says, adding the
pick-up in inflation could be the reason why consumers have been more reluctant.
Exports growth has remained strong, however, up by around 2 percent over the quarter.
"This confirms our view that Eurozone companies have taken stock of the acceleration in
world trade and dynamic domestic demand that have increased capacity pressures in industry, by
ramping up investment," he says.
(Helen Reid)
*****
EUROPE Q4 PROFIT GROWTH STILL SEEN BEATING U.S. (1022 GMT)
The reporting season in Europe is past its mid point and as numbers continue to roll in
earnings expectations confirm their solid momentum and still point to stronger fourth quarter
growth in Europe than in the United States.
Combined fourth-quarter profits of companies in the pan-European STOXX 600
benchmark index are seen rising 19.4 percent, against the 15.1 percent rise expected for the S&P
500, according to Thomson Reuters (Dusseldorf: TOC.DU - news) analyst David Aurelio.
Revenues in Europe are seen rising 2.5 percent, against 8.2 percent for the U.S., indicating
that cost cutting is a key driver for the outperformance.
At the country level, Austria (+117.7 percent) and Italy (+51.5 percent) are leading the
advance, while the UK (+15.4 percent) is below the rate expected for the STOXX.
Here's your Q4 forecast chart:
And here are forecasts for 2018 that show growth slowing to 1.8 percent in the first quarter
and climbing back to a peak of 17 percent in the third quarter:
(Danilo Masoni)
*****
RETURN OF TRADE WAR: HOW WOULD ESCALATING TARIFFS IMPACT EUROPE? (1018 GMT)
The latest episode in a developing trade spat between the U.S. and the rest of the world has
put a dampener on trading today.
"Markets viewed Cohn as a voice of reason on trade policy," says UBS Chief Economist Paul
Donovan. "The Trump Twitter feed has denied "chaos" in the administration, but senior staff
turnover has been unusually high. This undermines the policy continuity that markets crave."
Tariffs on steel alone would pose no great risk to the Eurozone, UBS (LSE: 0QNR.L - news) analysts argue: the
biggest exporters of steel to the U.S. are Canada, Brazil, South Korea, Mexico and Russia.
But should a fully-blown trade war develop and impact other areas, this would of course be
negative. To assess the potential impact, UBS has collated the biggest sectors exporting to the
U.S. - and therefore most at risk from protectionism (see table below).
"Apart from automobiles, pharmaceuticals and machinery equipment rank highly and would thus
be hit hard by U.S. import tariffs," analysts write.
(Helen Reid)
*****
AD AGENCIES WPP, PUBLICIS HIT BY P&G SPENDING CUT (0906 GMT)
It's the latest bit of bad news for advertising giants WPP (Frankfurt: A1J2BZ - news) and Publicis (Paris: FR0000130577 - news) ,
whose shares are among the notable fallers today.
Procter & Gamble (Swiss: PG-USD.SW - news) is reported to be cutting its spending on ad agencies by $1.25 billion over
the next three years, aiming, according to the Telegraph, to "take back control" (where have we
heard that before?) from the big agencies and invest instead in internal analytics.
Digital disruption of the advertising model has put ad agencies under increasing pressure in
recent years. Below you can see that 2017 was the first year in many that WPP's shares didn't
follow the market higher, as bigger corporate budgets stopped automatically translating into
more ad agency spending.
(Helen Reid)
*****
OPENING SNAPSHOT: TRADE WOES WEIGH, ROLLS ROYCE SHINES (0821 GMT)
Shares across Europe are falling and nearly all sectors are in the red this morning after
Gary Cohn's resignation reignited concerns over trade wars.
But on the corporate front there are some outstanding performers, particularly among UK
firms, which could be helping the FTSE 100 outperform European peers.
Rolls Royce (LSE: RR.L - news) shares are up 10.6 percent after the engine maker reported strong results
with profit beating expectations.
Smurfit Kappa (Frankfurt: SK3.F - news) is also a top gainer, up another 3.7 percent after having shot up 20
percent on Tuesday. Its suitor International Paper confirmed it had proposed 8 billion
euros for the company.
Meanwhile ad agencies' shares are falling, with traders pointing to an FT report that
Procter & Gamble is to cut ad agency spending by $1.25 billion over the next three years.
Publicis and WPP are both suffering, down 2.4 percent and 1.7 percent.
(Helen Reid)
*****
COMPANY NEWS MORNING HEADLINE ROUND-UP:
They’re back. Trade war fears made a comeback last night when Donald Trump made fresh
comments on tariffs and his economic adviser Gary Cohn, seen as a bulwark against protectionist
forces within the administration, resigned.
European futures are lower, in line with Asian indexes and U.S. futures which are also in
negative territory. Wall Street closed too early to digest the news.
So it’s mainly about politics today but there’s still some corporate news to animate the
session, including International Paper's confirmation of its proposed takeover of Smurfit Kappa:
Telecom Italia (Amsterdam: TI6.AS - news) promises higher investor returns under 3-yr digital push
Rolls-Royce 2017 profit beats, cautious on this year
Smurfit Kappa rejects International Paper's $10 bln bid
SAP execs see margin gains beyond 2020 as cloud costs subside
Deutsche Post DHL eyes further profit increase in 2018
RTL sees revenues growing 2.5-5 pct in 2018
Novartis (IOB: 0QLR.IL - news) , U.S. partner plan remote trials to boost participation
UK insurer esure's full-year pretax profit rises 35.6 pct
Italy's Carige says can't meet new investor's board seat request
RBS (LSE: RBS.L - news) reaches $500 mln settlement with New York over mortgage securities
YNAP in line with 5-year plan, core profit margins to rise in 2018 -CEO
(Julien Ponthus and Tom Pfeiffer)
****
EUROPEAN FUTURES OPEN LOWER AS TRADE WAR FEARS SPREAD (0710 GMT)
European futures have opened lower as fears that new U.S. tariffs could ignite a trade war
spread to Europe:
(Julien Ponthus)
*****
MORNING CALL: EUROPE SEEN OPENING LOWER AS TRADE FEARS RETURN (0617 GMT)
Fears of an imminent trade war had eased during the previous session, allowing shares to
recover but the resignation of White House economic adviser Gary Cohn, seen as a bulwark against
protectionist forces within the Trump administration, means we are back where we were.
Financial spreadbetters expect London's FTSE to open 18 points lower, Frankfurt's DAX down
36 points and the Paris CAC down 16 points at the open.
(Julien Ponthus)
****
(Reporting by Danilo Masoni, Helen Reid, Kit Rees and Julien Ponthus)
