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LIVE MARKETS-Closing snapshot: risk-off session on coronavirus fears

·7-min read

* Shares closed lower

* Bank of Ireland shares down 14.8%

* Italian banks are outperforming Welcome to the home for real-time coverage of European equity markets brought to you by Reuters stocks reporters. You can share your thoughts with Thyagaraju Adinarayan (thyagaraju.adinarayan@thomsonreuters.com), Joice Alves (joice.alves@thomsonreuters.com) and Julien Ponthus (julien.ponthus@thomsonreuters.com) in London and Stefano Rebaudo (stefano.rebaudo@thomsonreuters.com) in Milan.

CLOSING SNAPSHOT: RISK-OFF SESSION ON CORONAVIRUS FEARS

European stocks have come under further selling pressure on fears of a second wave of infections as the coronavirus pandemic continues to dominate headlines.

A tentative opening in the black ran out of the steam quickly as South Korean officials warned about a potential second wave of COVID-19 infections and Germany said the coronavirus reproduction rate has gone up, triggering expectations that the pandemic is not yet under control.

In a typical risk-off day, bank, travel and leisure industries are down about 2%, while the Stoxx 600 index lost 0.4%. Healthcare and retail sectors bucked the trend and were in positive territory.

Among the top losers ArcelorMittal was down 15% after it proposed an offer of shares and mandatory convertible notes worth 2 billion dollars.

The Italian stock market outperformed as the banking index stayed in the black the whole session after recently reporting unexpectedly solid results and ahead of possible payouts late this year.

(Stefano Rebaudo)

ITALIAN BANKS ARE OUTPERFORMING

The Italian banking sector is outperforming its peers across Europe on Monday as better-than-expected financial results and possible dividend payments lift sentiment.

Ratings agency Moody's, leaving the country's credit outlook at 'stable' and its rating at 'Baa3' one notch above junk territory, was a relief for lenders with big amounts of Treasury notes in their portfolios.

The Italian banking stock index is up 0.6%, compared to a 1.8% loss in the Euro Stoxx Banks index.

"It is mostly about Q1 results, which in many cases were stronger than expected and the possibility of dividend payments later this year," says Luca Rubini, managing director in Milan of Spanish investment firm Fidentiis.

Last week heavyweight Intesa Sanpaolo reported a surprise 10% rise in first-quarter net profit thanks to strong trading gains. While annual profit is set to fall sharply, it planned to pay out 75% of 2020 profit as dividends if regulators allow it.

Its rival Unicredit, which bowed to regulator pressure and froze the dividend payment, said last week it would assess its decision in Q4.

UBI Banca said it was ready to pay dividends on 2019 results if authorities allowed it.

(Stefano Rebaudo)

TECH AND DEFENSIVES IN THE SPOTLIGHT, FOR NOW (1200 GMT)

Inflation risk is not highly topical these days with the world facing a steep recession due to lockdowns, but the huge amount of stimulus which has been flooding into the economy and financial markets could raise some questions.

Could "extreme amounts of stimulus" result in overheating when we get back to something that resembles normality?

JP Morgan Cazenove says it is getting a number of queries along these lines.

The investment bank does not rule out a reflationary effect, triggering a rotation which would put an end to the strong performance of growth and quality stock, but not quite yet.

"The more durable reflation trade could happen from Q4, and in the meantime tech & defensives are likely to stay the winners," it says.

(Stefano Rebaudo)

*****

THAT SPRING OPTIMISM... WATCH OUT!

Stock markets are pricing in a V-shaped recovery, but it might be the case to avoid letting emotions carry you away.

The coronavirus crisis has created such levels of uncertainty, that investors might current be way "too optimistic" as they try to make sense of what is happening to the global economy, says NN IP in a note.

"When the market outlook is so volatile," NN IP says, "investors often fall prey to emotions and biases that result in suboptimal investment decisions".

One of the reasons for improved sentiment might be the way news and social media are analysed using natural language processing (NLP) to rapidly extract, aggregate and categorise large volumes news and social media feeds, NN IP says.

Equity investors are pricing in a V-shaped recovery, owing to improving medical data on COVID-19 and the cash central banks pumped into the economies.

"This represents a disconnect from the real economy in which people’s fears for their health, jobs and a second wave of coronavirus infections will persist for some time," the Dutch asset manager adds.

(Joice Alves)

*****

OPENING SNAPSHOT: EASYJET AND WIRECARD STEAL THE SHOW (0755 GMT)

European bourses are all nicely trading in the black this morning as investors are hopeful the easing of some lockdown measures will bring a revival in business activity across Europe.

France opens shops today after weeks of lockdown while the UK PM Johnson said on Sunday the lockdown will not end yet, but he announced some easing of restrictions encouraging people that can't work from home -especially in the manufacturing and construction sectors- to return to work.

Britain's blue chips and midcaps are also catching up with some Friday's gains as the London stock exchange was closed for a bank holiday on Friday when easing tensions between the world's two largest economies and better than expected U.S. unemployment data lifted markets in Europe.

The pan-Euroean index is up 0.5% with basic resource companies leading the gains.

In terms of single stocks, EasyJet shares tumbled 7.1% to the bottom of the FTSE 100 and the STOXX 600 as Johnson said the UK would soon need to quarantine people flying into the country to prevent a coronavirus infections from abroad.

At some point this morning, shares in Wirecard jumped 12%, it is now up 9% at the top of the STOXX 600 after a management reshuffle.

(Joice Alves)

*****

ON THE RADAR: AIRLINES, HENKEL AND LAFARGEHOLCIM (0650 GMT)

European futures are pointing to a higher open as more countries get ready to ease some of the coronavirus lockdown measures.

In the corporate front, there’re some positive results: Henkel, the maker of Persil detergent and Schwarzkopf shampoo, reported a big jump in Q1 sales of laundry detergents and household cleaners, which offset sales in coronavirus-hit adhesives and beauty care divisions.

Leg Immobilien has confirmed its 2020 earnings forecast after Q1 results.

Meantime, other corporates struggle to see some clarity, Nordex said it is not sure when it could issue a new 2020 outlook.

More pressure on airlines: easyJet urged the UK to keep any quarantine requirements on travellers arriving in the UK for only a short period, as airlines face a new threat to their survival after British PM said yesterday that a quarantine will soon be needed for people flying to the country to prevent infections from abroad.

In the M&A front, LafargeHolcim's deal to sell its $2.15 billion Philippines business to industrial group San Miguel Corporation fell through.

Thyssenkrupp said it has less time for its restructuring plan than expected as "the difficult economic situation at Thyssenkrupp is being significantly intensified by corona", its CEO said in a note to staff.

(Joice Alves)

*****

EYES ON EASING LOCKDOWNS (0540 GMT)

European futures are pointing to an open in the black as more European countries get ready to ease some of the coronavirus lockdown measures, even as Germany reported a pick up in new cases just days after its leaders loosened social restrictions.

In France, shops and hair salons can reopen today after eight weeks of lockdown. . In the UK, PM Boris Johnson said on Sunday the COVID-19 lockdown will not end yet but some 'careful' easing will begin.

Stocks are seen continuing on the positive vibe seen on Friday when easing tensions between the world's two largest economies and better than expected U.S. unemployment data lifted markets.

(Joice Alves)

***** (Reporting by Joice Alves, Julien Ponthus, Stefano Rebaudo and Thyagaraju Adinarayan)