UK Markets closed

LIVE MARKETS-Closing snapshot: S&P and STOXX walk into a bar

* European shares on fresh milestones * Wall Street reaches record highs * Well-received results boost Ryanair, Healthineers, Ferrari * UK plan to overhaul online casinos hits gambling stocks Welcome to the home for real-time coverage of European equity markets brought to you by Reuters stocks reporters and anchored today by Joice Alves. Reach her on Messenger to share your thoughts on market moves: joice.alves.thomsonreuters.com@reuters.net CLOSING SNAPSHOT: S&P AND STOXX ENTER A BAR (1647 GMT) Bartender says: "So, why the long face?" But seriously folks, there's something going on in terms of sentiment with Wall Street on record highs and European bourses hitting all kind of milestones. The pan-European STOXX 600 is roughly 12 points from its record high while, like it or not, we're in the middle of a corporate recession and still waiting for the macro doom and gloom to bottom out. Sure, optimism is back regarding the trade war but we all know how volatile that can be and the same goes for Brexit. It's not really the market conditions you would expect for such exuberance - but there you go. Funny to notice that it's getting increasingly hard for strategists to defend underweight ratings for equities and one of the frequent justification to gear up back on risk is simply fear of missing out. Anyhow, here's the hunky dory world of European equities at the close today: (Julien Ponthus) ***** IF GREED IS GOOD, IS EXTREME GREED, EXTREMELY GOOD? (1526 GMT) Just as Wall Street hits new records, CNN's Fear & Greed Index has shot up to a new 'Extreme greed' high of 85. A week ago, it was indicating simple "greed" at 67. Now, with fears of a melt-up emerging again, there may be case of taking Gordon Gekko's "Greed is good" with a few pinches of salt. Extreme greed may not always be extremely good, a cautious investor might be forgiven to thing. Other (sarcastic) voices, beg to differ: And here's the Fear & Greed index since 2017: (Julien Ponthus) ***** BEAR CAPITULATION (1448 GMT) The "melt-up" word has made its comeback and same so the phrase "bear capitulation", clearly indicating the shift in narrative -- which makes a perfect fit with equity markets across the globe climbing to new highs. Only a few minutes ago the STOXX 600 reached its highest since August 2015. Meanwhile in the U.S. the S&P 500 has opened at a new lifetime high and equity markets from Switzerland to Brazil and India are also trading at record levels. Not bad, eh, but is this the max stocks can reach? Probably not, especially "if there is bear capitulation", as strategists at JP Morgan indicate. "If some of the headwinds that were in force over the past 18 months, such as falling PMIs and increasing trade uncertainty, turn, as we expect, then markets would have further upside potential," they add. No surprise JPM stays bullish on equities, "looking for new highs before the next U.S. recession strikes". (Danilo Masoni) ***** Q3 EARNINGS: A MISS HURTS MORE THAN A BEAT HELPS (1357 GMT) As always, there have been spectacular misses and beats and price swings during this corporate earnings season with, for instance, and no later than today, Siemens Healthineers surging close to 10%. It's always tricky to get a sense of whether traders are punishing lower-than-expected profits harder than they are rewarding good surprises. The answer seems to be quite balanced actually as this Morgan Stanley research note on European earnings shows. On the day, companies which announced an EPS miss underperformed the market more than those who published beats outperformed. Over 5 days, however, it's the opposite, beats are better treated than misses are hit. (Julien Ponthus) ***** MELT-UP FEARS MAKE A COMEBACK (1244 GMT) That's the price of success: the S&P 500 is on all-time high and with Wall Street futures pointing out to another likely record this session, it's only natural to see people worry about a melt-up again. Talks about a possible melt-up were quite frequent at the beginning of 2018 but an inflation scare triggered a sharp sell-off during which analysts scrambled to reassess equity risk premia in a volatility spike that was a pretty messy business. The fixed-income situation at the end of 2019 is of course very different as the latest Fed cut showed, but benchmarks achieving new milestone while earnings growth remains sluggish at best can understandably leave a few traders scratching their heads. An influential voice, Ed Yardeni, president and chief investment strategist at Yardeni Research, told CNBC last Friday he wasn't comfortable with the pace of the latest rally. "I just don't want too much of a good thing here, I'd like this bull market to continue at a leisurely pace not in a melt-up fashion", he said. This morning, Saxo also raised the danger of seeing stocks rising to quickly. "We now have to contemplate a potential melt up scenario in US equities striking a similarity to the 1999-2000 rally", says Peter Garnry, Head of Equity Strategy. Garnry's note came with an unusual mea culpa: "we have been totally wrong on our general allocation decision of underweight equities and overweight bonds", he said, adding Saxo was now "officially positive on equities until the downward dynamics return". Anyhow, as you can see below, it seems the "melt-up" narrative is starting to buzz on Twitter: (Julien Ponthus) ***** BEATING LOWERED ESTIMATES (1042 GMT) Halfway through the Q3 season most companies have beaten estimates and, even though the bar has been lowered significantly, that's helping investors enjoy the rise of European equities to fresh highs. Here's an account of how Q3 is progressing, courtesy of UBS. * Reasonable beats: A net 10% of companies beat, roughly in line with the long run average of 11%. Going into the results, there has been a steady stream of downward revisions * Margin pressure coming through: Top-line beats at 24%. The gap with earnings beats is close to 10-year highs, suggesting that margin pressure is starting to come through * Sectors: Semis, Software and Pharma beating, Telcos and some Staples missing. Cyclical sectors are driving most of the beats after they bore the brunt of the downgrades YTD * Beats rewarded most in 8 quarters: Companies that beat are being rewarded more than usual. The average net beat is outperforming on the day of results the most in 8 quarters (Danilo Masoni) ***** OPENING SNAPSHOT: SPOTLIGHT ON RYANAIR AND HEALTHINEERS (0858 GMT) Earnings results are driving top movers this morning. Siemens Healthineers has hit an all-time high and is up more than 6% after it reported better-than-expected Q4 sales and said it expects strong growth to continue next year. Ryanair also got a nice boost from its results and hit its highest since September 2018 as investors preferred to focus on the positive results, rather than on the announcement of a two-month delay to the start of its Boeing MAX 737 deliveries. Ryanair said it may have none of the jets to fly next summer, which would freeze its growth. Results were not good news for everyone, Vopak shares were down more than 4% this morning as company reported earnings before interest and taxes (EBIT) slightly below consensus for Q3, saying its oil hub terminals in Europe and Singapore partially offset good performance from new assets. Here are a snapshot of the top movers this morning: (Joice Alves) ***** ON THE RADAR: CARS, PLANES AND OIL (0750 GMT) European shares are set to edge up as China- U.S. trade deal hopes are back on the table following some positive talks on Friday and following a surge in Asian shares today. European futures are all in positive territory this morning, up around 0.5-0.6%. Euro STOXX 50 futures hit their highest since end-Jan 2018, DAX futures hit their highest since mid-June 2018 while CAC 40 futures shot to their highest in almost 12 years. The optimism over trade talks is likely to lift car shares. In the automobile sector, there are also some M&A updates as Fiat Chrysler and Peugeot expect to sign a binding merger deal as soon as early December. Investors also have some new earnings updates to digest. Ryanair is seen opening higher this morning after its quarterly profit after tax beat expectations. The company also cut growth plans as it expects to take delivery of its first Boeing 737 MAX in March at the earliest, two months later than it last forecast, which means the Irish low-cost company now expects to fly fewer passengers than previously forecast. Among top movers, Igas Energy shares are seen opening down 15-20% after an UK moratorium on fracking. Shares in Siemens Healthineers were down 4.4% in early Frankfurt trade after results. Shares in Wirecard up 2.3% after it announced details of share buyback programme. The largest corporate news today is the long-awaited announcement of what is on track to become the world's largest listing. Aramco - the world's most profitable company - kick started yesterday its IPO announcing its plans to float on the domestic bourse. On the Brexit front, Nigel Farage said yesterday that he will campaign countrywide against Prime Minister Boris Johnson's Brexit deal. As the futures highs show, European bourses don't seem much interested in Farage and have barely had any reaction to his announcements, so far. Here is the main corporate headlines this morning: ​ BRIEF-IAG To Buy Air Europa For 1 Bln Euros Ryanair cuts growth plans as first MAX deliveries delayed to March Telefonica Deutschland adds subscribers in Q3, confirms outlook Healthineers says growth to continue after strong end to 2019 Traton 9M profit boosted 34% by new Scania truck sales PostNL Q3 operating income misses estimates Delta might pull out of Alitalia bid consortium -newspaper Oil storage firm Vopak signs China deal, will expand Belgium, Mexico sites French firm Axereal seals acquisition of Cargill's malt business Insurer Hiscox's premiums grow, keeps reserves for hurricane Dorian (Joice Alves) ***** CHINA-U.S. TRADE TALKS, NIGEL FARAGE AND ARAMCO (0647 GMT) European bourses are expected to open higher this morning after Asian shares surged today following some Friday's optimism over U.S. and China trade talks and upbeat U.S. job data. Back in Europe, investors will have more UK election news to digest this morning as the leader of Britain's Brexit Party, Nigel Farage said on Sunday he doesn't plan to stand in the December election, preferring to campaign countrywide against Prime Minister Boris Johnson's Brexit deal. On the corporate front, Aramco is taking the spotlight. The Saudi Arabia's giant finally kick-started its highly anticipated IPO on Sunday, announcing its intention to float on the domestic bourse in what could be the world's biggest listing. Cars are also in focus, as Fiat Chrysler and Peugeot owner PSA aim to sign a final merger agreement as early as the beginning of next month. Spreadbetters at IG expect London's FTSE to open 19 points higher at 7,321, Frankfurt's DAX to open 62 points higher at 12,961 and Paris' CAC to open 25 points higher at 5,787. (Joice Alves) ***** (Reporting by Danilo Masoni, Joice Alves, Julien Ponthus and Thyagaraju Adinarayan)