UK Markets closed

LIVE MARKETS-Closing snapshot: IG Group soars, Brexit-sensitive stocks bruised

* European shares down 0.1%; FTSE up 0.1%

* Wall Street edges lower on fresh trade concerns

* Marks & Spencer top loser in Europe after results

* Brexit-sensitive stocks hit as political turmoil deepens

* U.S. could blacklist Chinese surveillance firm - NYT

May 22 - Welcome to the home for real-time coverage of European equity markets brought to

you by Reuters stocks reporters and anchored today by Danilo Masoni. Reach him on Messenger to

share your thoughts on market moves: rm://danilo.masoni.thomsonreuters.com@reuters.net

CLOSING SNAPSHOT: IG GROUP SOARS, BREXIT-SENSITIVE STOCKS BRUISED (1552 GMT)

It's been a volatile day both on the index and stock level with moves of as much as 13% from

IG Group after results, while the FTSE 250 is lagging the rest, down 0.6% as rumours that Prime

Minister May will resign swirl.

"Feels like a matter of time before she has to resign as she is fast running out of

options!" says one trader.

Marks & Spencer, which was already falling after its profit decline reported earlier today,

tumbled further as political turmoil deepended, and has ended down 9.4% in its worst day since

February. Housebuilders Berkeley, Barratt Development, Taylor Wimpey, and Persimmon fell 4.3 to

5.5% as fears Britain is heading towards a hard Brexit increased.

"Every day that moves on the probability of either no Brexit or no deal increases," Edward

Park, deputy chief investment officer at Brooks Macdonald, told us. "It's very difficult to

price the housebuilders, Brexit-sensitive stocks, or sterling - you know the current price is

wrong because it's either too cheap or too expensive!"

IG Group shares were a silver lining, surging 12.5% after it unveiled a plan to drive

growth.

Here's your closing snapshot:

(Helen Reid)

*****

EUROPE STOPS BLEEDING (1505 GMT)

Despite the fresh trade tensions, the upcoming EU vote that's fuelling debate about

political risk in the region, and Brexit uncertainty hitting new highs, signs are emerging that

the bleeding of funds out of Europe has stopped.

Just have look at what UBS strategists led by Nick Nelson have to say after a U.S. trip:

"U.S. investors are not yet buying European equities, but they have stopped selling for

the first time in around 15 months. Europe is clearly not the go-to investment, but there

is acknowledgement of the underlying value and more importantly, stabilisation in the macro

backdrop and earnings outlook."

Along similar lines were comments last week from Andrew Garthwaite, strategist at Credit

Suisse, who was also on his way back from a marketing trip in North America and parts of Europe.

Here's what he said: "There was a lot of interest in Europe for the first time in more than

18 months with clients still being clearly underweight the region".

In this chart you can see how weekly earnings revisions for the MSCI Europe index have

started to show signs of stabilisation in May following a string of downgrades that started in

September 2018. On top of that, the macro backdrop is improving with the Citi surprise index on

a recovery path since the start of the year.


(Danilo Masoni)

*****

HIKVISION HICCUPS (1251 GMT)

Just when markets breathed a sigh of relief as the U.S. eased trade restrictions on Huawei,

news broke that more Huawei-like sanctions could be slapped on Chinese video surveillance firm

Hikvision.

Shares in the $35 billion company dropped 5.5% in Shanghai. A similar drop was seen in rival

Zhejiang Dahua Tech, who is also seen as a potential company to be a target of the U.S. as per

media reports.

European markets are near the day's low as more and more Chinese companies are being

targeted with trade restrictions, raising a fear of a long and winding trade war.

Neil Campling, an analyst with Mirabaud Securities, says there are no major Hikvision

suppliers in Europe, but there are some in the U.S.

Ambarella, Xilinx, Intel and AMD are among U.S.

suppliers. Campling says the main image processing chip for Hikvision's products come from

Ambarella.

Shares in Ambarella, which gets 87% of its revenue from Asia, are tanking (-13%) in U.S.

pre-market trading.

It's not immediately clear how much revenue it gets from supplying components to Hikvision.

A big chunk of the company's revenues (c. 78%) come from China, Campling adds.

Who's Hikvision's rival? Do they benefit?

Campling says the main rival historically has been Honeywell who lost market share from

Hikvision's strategy of undercutting on prices. But Honeywell shares aren't rising this morning.

(Thyagaraju Adinarayan)

*****

EUROPEAN ELECTIONS: UK SET TO BOOST POPULIST SHARE OF THE VOTE (1143 GMT)

With voters heading to the polling booths from tomorrow to Sunday, the European elections

will be carefully watched by investors. These votes don't generally make big waves in markets

but any sign of populist parties gaining a stronger foothold won't be welcomed.

Britain's last-minute participation in the elections will boost support for Eurosceptic

groups in parliament by about 1.5 percentage points, according to Goldman Sachs estimates.

Overall, they see support for the populist parties rising to 20-25% from around 15%.

"We continue to expect a fragmented parliament with mainstream parties forming a coalition

and continuing to drive the agenda, albeit with more pronounced populist influences," write GS

economists.

"We do expect the challenges from populism to persist, which will complicate trade

agreements and the transfer of national sovereignty required to make progress on European

integration," they add.

Here's Reuters' cartogram of the votes across European countries:

(Helen Reid)

*****

A MEATY BUSINESS (1048 GMT)

How about an eggless egg or a meatless meat burger for lunch?

These foods are in fashion today and the choice is clearly visible in financial markets too

with vegan burger maker Beyond Meat's beefy (pun intended) stock market debut on May 2,

when it gained a whopping 160 percent!

Barclays says the market for alternative meat will slowly eat into the real meat market,

forecasting it to reach a 10% share of the $1.4 trillion global meat industry in the next ten

years.

Kellogg, Cargill , Tyson Foods, Kraft-Heinz, Nestle

and Kerry, among others have either invested in plant-based meat alternatives or have

developed their own, the bank says.

Drawing parallels to electric vehicle (EV) companies' disruption of the car industry,

Barclays believes the ultimate market opportunity for plant-based protein is potentially even

larger given the mainstream appeal of affordable food products relative to the high-end, niche

audience targeted by EV manufacturers.

"With that said, we believe taste and price will ultimately dictate whether or not

alternative meat gains widespread acceptance."

Taste does matter doesn't it? Now go get your burger!

(Thyagaraju Adinarayan)

*****

WILL EUROPE EVER OUTPERFORM THE U.S.? (0914 GMT)

Hopes for European equities to outperform the U.S. are fading fast despite encouraging signs

at the peak of U.S.-China trade escalation last week.

Some investors and brokers highlighted Europe's steep discount to the U.S., and with the

Trump administration delaying tariffs on European autos, the picture was improving slightly.

This helped European equities to outperform the U.S. after the trade war escalation this

month. But that fizzled out fast! Now the STOXX 600 trades inline with the S&P 500 since Trump's

tweet on May 3 triggered a ramp-up in trade tensions.

Will Europe ever outperform the U.S.? It's a steep mountain to climb!

Since the financial crisis, European equities have underperformed U.S. by a whopping 76%.

Goldman Sachs writes: "The main difference between the two equity markets is that margins

have increased sharply in the U.S."

That's clear with Europe's EPS still way off its 2008 peak, while the rest of the world has

gone past the pre-crisis highs.


So, where's Europe headed next?

GS says the faster euro area growth acceleration expected by its economists in the second

half of 2019 is unlikely to be strong enough for European equities to outperform meaningfully.

And the bank points to some key risks:

* political uncertainty will likely remain elevated and US-Sino trade tensions will likely

spill

over to Europe

* growth remains structurally lower in Europe

* part of the growth improvement has already been priced.

(Thyagaraju Adinarayan)

*****

HUAWEI RELIEF BOUNCE FIZZLES OUT (0720 GMT)

Relief over Washington's temporary relaxation of trade restrictions against China's Huawei

lasted one day and following yesterday's gains, European shares are back lower again with the

exception of the FTSE which is buoyed by a weaker sterling on continued Brexit uncertainty.

Tensions between Washington and Beijing are again rising after the New York Times reported

that after Huawei, the U.S. could blacklist another Chinese tech company: video surveillance

firm Hikvision. Willingness to talk however remains, with China's ambassador to the United

States saying Beijing is ready to resume negotiations.

The tech index is up 0.2%, seemingly shrugging off Hikvision news.

Among top movers we have M&S which is falling more than 4% on news that it plans a

£601.3 million rights issue to fund its joint venture with Ocado. That's overshadowing

in-line results.

UK energy supplier SSE is another heavy faller after it missed analysts'

expectations for annual profit and warned of another hit to results in 2019 as it battled stiff

competition and rising costs. Intermediate Capital is rallying 7% after well-received FY

numbers.

Royal Mail jumps 5%, off record lows it hit on Tuesday, after revenue better than

expected and traders say dividend cut was not as bad as expected.

(Danilo Masoni)

*****

ON OUR RADAR: M&S, ROYAL MAIL RESULTS, TECH (0656 GMT)

European shares are expected to open slightly lower this morning as worries over trade

tensions between the U.S. and China likely to sap appetite for risky assets following after

relief over Washington's temporary relaxation of trade restrictions against China's Huawei.

Euro zone futures are down around 0.1%, while FTSE futures are up 0.3%, helped by a

weakening pound as PM May continues to struggle to get backing for her Brexit compromise.

On the corporate front, Britain's Marks & Spencer will be in focus after it reported a 10%

fall in full-year profit, a third straight decline, along with falls in quarterly underlying

sales of both clothing and food, showing the pain of its latest attempt at a multi-year

turnaround. Its shares are up 1-2% in premarket trade.

Another disappointing dividend news after Vodafone earlier this month: Royal Mail slashed

its dividend by 40% and said it would invest a further 1.8 billion pounds in its UK postal

service in five years in hopes of turning the business around. Revenues however beat

expectations, sending its shares up 2% in premarket.

British energy supplier SSE missed analysts' expectations for annual profit and warned of

another hit to results in 2019 as it battled stiff competition and rising costs, while

engineering services group Babcock said it expected revenue and underlying operating profit to

fall in 2019/2020.

Eyes also on the aero sector for any readacross from news that parts maker FACC postponed

its 1 billion euro sales target by one year to 2020/21 as it expects demand for some new

aircraft to be flatter than initially thought. Meanwhile from Toulouse, Airbus has hinted at a

price battle and imminent aircraft revamp to counter a possible new Boeing mid-sized jet.

Elsewhere Dialog Semi is set to be hit by a downbeat broker research, as the tech sector

remain in focus trade tensions between Washington and Beijing take the form of direct action

against Chinese companies. The NYT reported that after Huawei, the U.S. could blacklist another

Chinese tech company: video surveillance firm Hikvision.

In M&A, the family which founded Swedish beauty products company Oriflame has announced 12.9

billion crowns offer for the company, sending its shares up 35% premarket. Italian insurer

Generali could be in focus after a report said the company is in talks to buy Metlife's Central

Europe Assets which may be worth more than 2 billion euros, while in the mining sector Barrick

Gold has proposed to acquire all of the shares it does not already own in Acacia Mining Plc via

a share-for-share offer.

Delivery Hero may suffer from a share placement at a discount to its current share price.

Other stock movers: Paragon profit jumps on mortgage, commercial lending; Global miner BHP

plans to expand nickel output amid battery boom; Superdry appoints Nick Gresham interim CFO; IG

Group predicts profit slump as markets, regulation bite; Swedish tool maker Sandvik sets new

long-term financial goals

(Danilo Masoni)

*****

FUTURES POINT TO SLIGHTLY WEAK OPEN IN EUROPE, FTSE INCHES UP (0622 GMT)

European stock futures are down slightly with lingering worries over trade tensions between

the US and China likely to sap appetite for risk following yesterday's relief over Washington's

temporary relaxation of trade restrictions against China's Huawei.

FTSE futures however were edging up slightly, likely benefiting from a further drop in the

pound this morning as no Brexit solution appears to be in sight and pressure to oust PM Theresa

May seems to be mounting.

Here's your futures snapshot:

(Danilo Masoni)

*****

HEADLINES ROUNDUP: SANDVIK SETS GOALS, BPH EYES NICKEL OUTPUT BOOST (0545 GMT)

While it seems that relief over the U.S.'s temporary relaxation of curbs against China's

Huawei is running out of steam, there doesn't look to be any corporate news so far that could

change calls for a sluggish start in Europe this morning.

"Traders are waiting for the next chapter in the unfolding trade drama. Sentiment remains

fragile as investors digest the changing face of the trade dispute from broad sweeping tariffs

to direct action against single Chinese companies," says Jasper Lawler, Head of Research at LCG.

We already mentioned the NYT report that the US could blacklist another Chinese tech

company: video surveillance firm Hikvision.

Back to European corporate news, we have Swedish tool maker Sandvik that could grab

attention after setting new long-term financial goals for revenue growth and operating margin in

a bid to improve performance across economic cycles. Miner BHP said it plans to expand its

nickel sulphide operations amid an expected boom in demand.

We'll keep an eye also on Commerzbank which is due to hold its annual shareholder meeting

amid questions its future after merger talks with Deutsche Bank collapsed. Livestream of

speeches: https://bit.ly/2LUBwJI

Here's your headlines roundup:

Global miner BHP plans to expand nickel output amid battery boom

Norsk Hydro to boost alumina output as Brazil lifts restrictions

VW truck brand to invest $344 mln in Brazil after Ford exit

Thyssenkrupp's supervisory board backs CEO's IPO strategy

Airbus prepares counter-punch to new Boeing mid-sized jet

Airbus seeks resolution to German arms export row -CEO

Benetton scions to get more power in family holding company- source

Embattled Metro Bank dodges major shareholder rebellions

Delivery Hero Sets Placement Price For New Shares At €40.35

Monte Paschi beat soured loan reduction targets in 2017-2018

Astaldi says Salini extends to July 15 bid deadline in rescue deal

Telecom Italia chief favours network control in any Open Fiber tie-up

Outside Europe, the major headlines overnight include:

U.S. could blacklist Chinese surveillance tech firm Hikvision -NYT

Air China asks Boeing for compensation over 737 MAX grounding

Walmart to make first direct pitch to big corporate ad buyers at NY event

Alos worth having a look at this explainer: Who pays Trump's tariffs, China or U.S.

customers and companies?

(Danilo Masoni)

*****

EUROPE SEEN STEADYING AFTER HUAWEI RELIEF BOUNCE (0521 GMT)

European shares are expected to open flat to slightly up today following gains seen in the

previous session when worries over trade frictions were soothed by relief over Washington's

temporary relaxation of curbs against China's Huawei.

Financial spreadbetters at IG expect London's FTSE to open 21 points higher at 7,350,

Frankfurt's DAX to open 18 points higher at 12,161, and Paris' CAC to open 5 points higher at

5,390. European shares rose yesterday with the STOXX 600 regional benchmark adding 0.5% and

Germany's DAX up 0.9%.

Over in Asia, stocks were also up slightly even though they struggled for traction as

worries about trade frictions between the world's two largest economies weighed.

Also weighing was a report in the New York Times that United States could blacklist another

Chinese tech company: video surveillance firm Hikvision.

(Danilo Masoni)

*****