UK Markets closed

LIVE MARKETS-Closing snapshot: red

* European shares drop on economic growth concerns * STOXX 600 down 0.4%; DAX -0.4%; FTSE -0.8% * German economy narrowly escapes recession 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: rm:// CLOSING SNAPSHOT: RED (0503 GMT) Europe ended on the back foot as disappointing data from China added to fading trade talk hopes. German GDP numbers were better than expected but with a growth of just 0.1% in the third quarter there's nothing really to rejoice. As a result, European equities fell for a second straight session in a row, down around 0.4%, after hitting their highest since July 2015. Here's your closing snapshot: (Danilo Masoni) ***** TRADING ON UK ELECTION NIGHT, WHAT COULD GO WRONG? (1611 GMT) Well quite a lot actually! Nomura's Jordan Rochester just issued a note on the Dec 12 elections which contains an important warning for investors contemplating trading that night. The exit poll which is released after 10pm could get it wrong: it did so in 2015 and could very well get it wrong again. "We do worry that holding an election in December instead of in May may lead to a larger error than in recent years due to time-of-day sampling errors or the complications of Remain/Brexit alliances in individual constituencies may prove difficult to model", he writes. As Rochester shows below, once the exit poll is issued, the swings on sterling are brutal and dangerous for investors caught on the wrong end of a trade. See below how the pound reacts on election nights. (Julien Ponthus) **** ARMAGEDDON: WHEN MARKET GURUS GET IT WRONG (1524 GMT) In 2010, just two years after the brutal financial crisis, a host of market experts and money managers started coming out with predictions on the next blow-up, some forecasting wild scenarios, such as a 90% stock market drop. (see the second picture below) >>> Fast forward to 2019 (almost 2020) >>> * S&P 500 scaling new peaks * Global growth stable (slow albeit growing) * U.S. unemployment at record lows * World stock markets in their longest bull run ever "Something peculiar happened after the Global Financial Crisis: the rise of the Armageddonists, which refers to the market-watchers, forecasters and money managers whose apocalyptic comments spread like wildfire in print and online financial news," says Michael Cembalest, chairman of market and investment strategy at JPMorgan. Now it gets more interesting: JPMorgan ran a hypothetical situation in which investors buying the bearish commentary moved each time $1 from S&P 500 to bonds. This is how it looks: If you had shifted your money to bonds in 2014, you would've underperformed S&P 500 by 40%. "One day, of course, Armageddonists will be rewarded with a recession," Cembalest said. The "Armageddonists" and their comments: (Thyagaraju Adinarayan) ***** THE ITALIAN JOB: HOW BANKS GET THEIR "FREE LUNCH" (1401 GMT) Italian banks are widely believed to have engaged in a lucrative trade since the ECB implemented lighter rules to ease the pressure caused by negative borrowing costs. In a nutshell, the arbitrage consists of borrowing funds at negative interest rates and then parking it cost-free. "Italian banks can therefore passively make profits by borrowing money to other banks and placing it on their current account at the Bank of Italy", Eric Dor, head of economic research at the IESEG School of Management said in a note. Check out here a detailed story on how the ECB arbitrage trade works and another one there on the data which shows that tens of billions of euros in idle cash are being exchanged between euro zone banks. Dor's chart explains the ECB trade quite nicely: (Julien Ponthus) ***** GERMAN GDP: WOULD A BAD NUMBER BEEN BETTER? (1134 GMT) Europe's No. 1 economy is stagnating and while its feeble 0.1% growth rate in Q3 was better than expected, avoiding Germany a technical recession, markets aren't taking any joy from that. Uncertainty over a Sino-U.S. trade deal is playing a big role in keeping investors on edge, but it can also be argued that only slight deviations versus forecasts can do no good in convincing reluctant investors to join the "buy Europe" trade. Take Matthew Cady, investment strategist at Brooks Macdonald, who wonders "ironically" whether a weaker number would have actually been better for markets. "Against increasingly vocal calls from ECB presidents past (Draghi) and present (Lagarde), the German policy makers have resisted the idea of moving away from their 'black-zero' balanced budget rule, in order to fund a sizable fiscal expansion," he said. "That today’s number is better than slightly expected is potentially the worst of both worlds... not strong enough to assuage growth fears in the Eurozone and not weak enough to push Germany into a meaningful fiscal response," he adds. And it's this standoff between monetary and fiscal co-ordination that contributes to Brooks Macdonald's underweight stance in the region. (Danilo Masoni) ***** OPENING SNAPSHOT: QIAGEN STANDS OUT (0845 GMT) After 45 minutes of trading or so, European bourses seem to have chosen a downward path even if the directional trend doesn't seem to be written in stone. Most regional benchmarks are trading in the red while the STOXX 600 is down 0.1%. As expected, the spotlight is on the shares of genetic testing co which is up about 10% after a Bloomberg report saying instruments maker Thermo Fisher Scientific had made an approach. Second on the STOXX 600's top gainers is British luxury brand Burberry which managed to offset double-digit declines in Hong Kong thanks to the popularity of collections by designer Riccardo Tisci. Among other Q3 results, a few financial groups are having a good day: Dutch insurer NN Group is up 3% and Belgium's KBC 2.8%. The big loser in terms of sector are autos notably due to Daimler, down 2.7% after the German carmaker said tougher emissions rules would hit earnings in 2020 and 2021. (Julien Ponthus) ***** NO BIG THRILLS IN TODAY'S BATCH Q3 EARNINGS (0749 GMT) While Disney shares were the big sensation on Wall Street yesterday, there's nothing (YET?) that really stands out in one of the last busy days of the Q3 earnings season. In terms of headlines likely to move equities, Bloomberg reported a potential deal for Qiagen with U.S. rival Thermo Fisher which is already animating pre-market action. Qiagen shares are seen rising 10%-15%. Otherwise we have British luxury brand Burberry seeing big sales declines in Hong Kong, RWE upping its 2019 outlook. Among utilities, French state-controlled utility EDF cut its nuclear power generation target in France. Henkel sales fell and Merck raised its sales guidance. Zurich Insurance set new targets while miner BHP tapped Australia head Henry as new CEO. In the same industry, Germany’s K+S cut its full-year core earnings forecast. On the bright side, Germany avoided a recession in the third quarter with GDP up 0.1% but data from China and Japan overnight was less rosy. (Julien Ponthus) ***** MORNING CALL: THE JURY IS OUT FOR BREAKFAST (0636 GMT) According to IG, financial spreadbetters expect Frankfurt's DAX to open 3 points lower, Paris' CAC to shed 4 points and London's FTSE to lose 17 points at the open. That's not much of a trend or a clear sense of direction yet and where this session will lead us is still not clear at the moment. There's however enough corporate publications to keep busy before the open with notably Bouygues, Burberry, RWE and Vallourec. Economic indicators are also expected to animate morning trading with GDP, employment, inflation and retail data from across Europe. (Julien Ponthus) ***** (Reporting by Danilo Masoni, Joice Alves, Julien Ponthus and Thyagaraju Adinarayan)