LIVE MARKETS-Closing snapshot: seasonal optimism
* European shares rise, Italy up 1.8 pct
* Results lift Meggitt (Other OTC: MEGGF - news) , hurt Merlin
* Kion jumps on UBS (LSE: 0QNR.L - news) upgrade
* Wall Street rebounds as strong bank results help
Oct (Shenzhen: 000069.SZ - news) 16 (Reuters) - 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: danilo.masoni.thomsonreuters.com@reuters.net
CLOSING SNAPSHOT: SEASONAL OPTIMISM (1630 GMT)
Optimism for the Q3 earnings season is lifting investor morale across the pond and seems to
have overcome, at least temporarily, jitters from last week's market scare.
Here's your closing snapshot:
(Julien Ponthus)
*****
POUND UP + FTSE UP = GOOD WAGE DATA + BREXIT COMPLACENCY? (1501 GMT)
Sure, the rising pound is slowing down British blue chips and acting as an accounting drag
but still, it's quite rare to see sterling and the FTSE strive harmoniously in positive
territory, up 0.5 percent and 0.4 percent respectively.
Data showing the basic wages of workers in Britain rising at their fastest pace in nearly a
decade has acted as real booster for the currency.
"That’s because the pound (is) ignoring the ongoing Brexit uncertainty," reckons Spreadex
analyst Connor Campbell.
Indeed, possible market complacency about Brexit seems to be rising among analysts, a bit in
the same way that strategists saw Italian markets outperform despite rising political risk.
Deutsche Bank (IOB: 0H7D.IL - news) 's strategists "think that the market is underpricing the risk of a near-term
political crisis - either a leadership challenge from Brexiteers or a breakdown in the
DUP/Conservative political agreement," Jim Reid said in his morning newsletter.
UBS, in a note about the insurance sector, also took the view that "Brexit risks do not
appear fully priced in" while Rabobank sees the outlook for GBP "still littered by pitfalls" due
to political uncertainty.
Things could change quite quickly for the pound, Spreadex's Campbell warned.
"There are plenty more chances for the FTSE to get its revenge, however, not only with
Wednesday’s inflation and Thursday’s retail sales data, but the impending, hugely important
mid-week summit between EU leaders."
(Julien Ponthus)
*****
THE RESURGENCE OF UK VALUE (1437 GMT)
Despite their sensitivity to sterling and Brexit news, UK stocks are also reflecting trends
in the broader market, Berenberg analysts say, noting mid-cap growth stocks did worse in last
week's selloff while those considered "value" plays did well.
There's been a big reversal in some of the UK's best-performing growth stocks, with
"multi-year winners" such as Learning Technologies (LSE: LTG.L - news) , Keywords Studios (LSE: KWS.L - news) , RWS, Fevertree and Burford
down by an average of 21 percent, they find.
Growth stocks across the UK and European markets are beginning to lose their shine after
years of outperformance.
Meanwhile a (somewhat unlikely) combination of bakery company Greggs (Stuttgart: 41G1.SG - news) , Telecom Plus (LSE: TEP.L - news) , The AA,
pub operator Greene King (Frankfurt: A0F66P - news) , pet store Pets at Home (Frankfurt: A1XFE7 - news) , and Renewi would have returned 3 percent since
the start of this month, despite them being on average down 33 percent year-to-date. These
stocks have been out of favour with very low valuations, which may now lure investors in.
As you can see below, overall analysts have been downgrading their estimates for FTSE 250
earnings in recent weeks:
(Helen Reid)
*****
EUROPEAN INVESTORS GET OILY (1316 GMT)
Oil & gas stocks are the only sector in the red today on the back of a drop in crude prices,
but BAML's European fund manager survey today finds the percentage of European fund managers
overweight Energy is its highest in 6 years - with a net 34 percent overweight, a 21 percent
increase from last month.
This level of allocation to energy stocks triggers BAML's contrarian sell signal, they say,
although the level is far from the highs it reached in 2008 before the oil price shock (62
percent overweight in June 2008).
Autos and Travel stocks, on the other hand, saw net 25 percent drops in positioning.
Investors are the most bearish on Construction and Utilities stocks, while they're increasingly
overweight Healthcare (Shanghai: 603313.SS - news) , and Banks have seen a remarkable reversal from last month's survey, as
you can see below.
Another interesting observation from the survey is that "not a single sector that is
perceived to be overvalued by respondents is overweighted, suggesting momentum may shift in the
coming months into defensive value".
Overall, global investors are the most downbeat on the global economy they've been since Nov
2008, and have switched the U.S. for Japan as their most favoured equity region:
(Helen Reid)
*****
MIDDAY SNAPSHOT: DIP BUYERS' MOOD IMPROVING (1219 GMT)
Mood has clearly improved throughout the session and euro zone equities are now up
on a high, up 1 percent while U.S. futures are firmly in positive territory.
Seems like Goldman Sachs (NYSE: GS-PB - news) and Morgan Stanley (Xetra: 885836 - news) 's strong performance in equity trading has
something to do with higher spirits. See
Quite a shift from this morning's cautious mood.
"It doesn't look like investors are rushing in just yet," noted IG (Frankfurt: A0EARV - news) 's Chris Beauchamp a few
hours ago, cautioning that "a fresh selloff remains likely".
"An ‘After you, Claude’ approach seems to apply," he wrote using the catchphrase of RAF
pilots about to begin an attack.
Another colourful expression was Nicolas Cheron, from Binck.fr who told his clients "it was
urgent to wait".
Time (Frankfurt: A11312 - news) to jump back in?
(Julien Ponthus)
*****
OPENING SNAPSHOT: EUROPEAN SHARES BUILD ON RECOVERY (0751 GMT)
In early deals, European shares are climbing 0.4 percent with defensive sectors utilities,
telecoms and real estate, as well as autos, leading the way.
Merlin meanwhile is down 7.7 percent, set for its worst day in a year after warning about
rising costs from labour and regulation.
British American Tobacco (Kuala Lumpur: 4162.KL - news) shares are down just 1.2 percent but the heavyweight is weighing on
the FTSE, after it cut its forecast for revenues from non-cigarette products.
Broker notes are also moving some stocks.
Kion shares are up 10.2 percent, top of the STOXX after UBS upgraded it to "buy", saying a
recent pullback has taken the shares down too far. "While we were previously concerned that the
market could overrate the structural growth in warehouse automation and underrate the cyclical
challenges in trucks, we think it is now likely the opposite on both counts," they write.
Ocado is also up 4.5 percent with traders citing a double upgrade to "buy" from BAML.
Italy's FTSE MIB is up 1.4 percent, outperforming the rest as Italian bond yields fall on
encouraging comments from Tria.
(Helen Reid)
*****
ON OUR RADAR: UPDATES FROM BAT, MEGGITT, TOMTOM (Swiss: TMO.SW - news) (0651 GMT)
European shares are set to stabilise above 22-month lows hit in the previous session as the
focus turns from the upset caused by a steep surge in U.S. yields to the start of the reporting
season which is expected to deliver double-digit earnings growth for the third quarter.
Futures on main euro zone benchmarks were trading up 0.1 percent, while FTSE futures were
lagging a tad behind amid uncertainty surrounding Brexit talks.
In earning updates, British American Tobacco cut its full-year revenue target for
next-generation products, citing a flat market in Japan and a product recall in the United (Shenzhen: 000925.SZ - news)
States. On a more positive note, engineer Meggitt raised its estimate for 2018 organic revenue
growth thanks to higher demand for its wheels, brakes, fuel tanks and other aeroplane parts,
while TomTom (LSE: 0MKS.L - news) posted a stronger-than-expected rise in third-quarter core earnings.
About 6 percent of STOXX 600 companies are due to report this week. Overall, third quarter
earnings for the index are expected to have risen 14 percent on revenues up 7.4 percent,
according to Refinitiv I/B/E/S data, while euro zone earnings are seen up 12 percent. That
compares to the 21.6 percent growth seen for US companies.
Other stock movers: Profit up 14 pct at housebuilder Bellway (Frankfurt: 869646 - news) on higher prices, sales; Merlin
Entertainments to meet 2018 forecasts; Volvo warns some truck engines could be exceeding
emission limits; Ambea to buy Aleris' Nordic care business in SEK 3 bln deal; Drax to pay 702
million pounds for Scottish Power generation facilities
For more headlines, check out our previous post.
(Danilo Masoni)
*****
HEADLINES ROUNDUP: EARNINGS START TO FLOW IN (0559 GMT)
It looks there is no big corporate news that could shake markets this morning, although the
European earnings season is starting to see the first releases with results coming in from
TomTom and Talanx (IOB: 0QA8.IL - news) .
About 6 percent of STOXX 600 companies are due to report this week. Overall, third quarter
earnings are expected to have risen 14 percent on revenues up 7.4 percent, according to
Refinitiv I/B/E/S data.
Telecoms could also continue to draw attention after Deutsche Telekom (IOB: 0MPH.IL - news) said it was confident
it will secure EU antitrust approval to buy Tele2 (LSE: 0QE6.L - news) 's Dutch business.
Here is out early morning headline roundup.
TomTom reports better-than-expected Q3 core earnings
Sanofi (LSE: 0O59.L - news) , Regeneron say late-stage Dupixent trials show positive results
Total CEO sees lower demand, higher supply of crude in 2019
Talanx Q3 profit hit by industrial property insurance losses
Deutsche Telekom CEO optimistic about EU okay for Tele2 Dutch deal
Linde (IOB: 0H3X.IL - news) says FTC's Commissioners looking into merger
Swisscom (IOB: 0QKI.IL - news) evaluating tie-up for Italian unit Fastweb - Bloomberg
Dassault Aviation (LSE: 0IAX.L - news) will raise production rates on certain models -CEO
BHP doubles stake in promising Ecuador copper project
Rio Tinto Q3 iron ore production falls on planned maintenance and safety pauses
Anglo Asian's Azerbaijan gold output rises 47 pct in Q3
BP and Eni (LSE: 0N9S.L - news) to start drilling in Libya within months- The Telegraph
Burberry joins luxury sector's race to refresh products monthly
France's Safran (LSE: 0IU8.L - news) redesigned part of Silvercrest engine -executive
Italy's Piovan revises IPO range to low end, books to close early
Cepsa float fail could jeopardise other energy listings
Advent starts preparations for IPO, sale of Addiko bank -sources
Sweden's Fagerhult to buy Italian lighting group iGuzzini
Offshore drillers eye recovery by 2020
(Danilo Masoni)
*****
MORNING CALL: EUROPE SET TO STABILISE ABOVE 22-MONTH LOWS (0512 GMT)
European shares are expected to rise slightly at the open today, further stabilising
following a turbulent week that pushed them to 22-month lows, as investors reacted to a steep
rise in U.S. Treasury yields and fresh political worries.
Financial spreadbetters expect London's FTSE to open 1 point higher at 7,031, Frankfurt's
DAX to open 30 points higher at 11,644 and Paris' CAC to open 8 points higher at 5,103.
In Asia, stocks rose modestly, gaining a firmer footing after a week of heavy losses,
although increasing tensions between Saudi Arabia and the West fanned geopolitical concerns and
capped gains.
(Danilo Masoni)
*****