* STOXX 600 ends up 0.6 pct
* Hopes of U.S.-China truce lift stocks further
* IBEX lags as parliament votes down govt budget
Feb 13 - 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: email@example.com
CLOSING SNAPSHOT: THREE IN A ROW (0524 GMT)
Optimism about a possible trade deal between Washington and Beijing and a stabilisation in
earning downgrades helped European shares end higher for the third session in a row, bringing
the STOXX 600 regional benchmark close to mid-November levels, up 0.6 percent.
The FTSE 100, up 0.8 percent, got an extra lift by a lower-than-expected inflation
report and renewed optimism about a delay to Brexit, while the IBEX ended flat, lagging
its peers after Spain's parliament rejected a draft 2019 budget, pushing the country close to an
early national election.
Here's your closing snapshot:
ITALIAN PIRS: NO BUBBLE BURST BUT INFLOWS SHRINK (1609 GMT)
Remember Italy's so-called PIR (piani individuali di risparmio) scheme that introduced tax
breaks to investments into small- and mid-caps? Well, at its launch there were worries it could
lead to a price bubble with all its possible nasty consequences, but fast-forward a couple of
years there has been no burst.
What has happened instead is that inflows into PIR compliant funds have fallen sharply and
the outlook is not great either.
Milan-based Equita estimates inflows into PIR-compliant funds to have fallen to around $4
billion in 2018 from $10.9 billion in 2017, and expects 2019 to be a much tougher year as an
effect of uncertainty stemming from changes to the scheme introduced by the new budget law.
"The actual enforceability of the new regulation and the establishment of new compliant PIR
funds seem to be discouraged by regulatory uncertainty, limited investment opportunities in
compliance with the rules, as well as the difficulty in converting such investments into liquid
assets," they say.
"All these elements could slow down inflows regardless of the market performance," they add.
So what does Equita expect for 2019?
Based on the previous rules, they forecast inflows for 2.7 billion euros but warn that this
estimate should be significantly reduced if the new rules aren't changed.
After a stellar outperformance in 2017, Italian mid-caps have lost part of their edge versus
TAKING SPAIN'S VOTE IN ITS STRIDE (1407 GMT)
The markets are taking the Spanish Parliament's rejection of the 2019 budget proposal in
their stride this afternoon. So, the veto was expected, but still it raises the likelihood the
minority government will call an early snap general election.
After a brief drip into the red, the Madrid stock exchange is in positive territory and hit
its session high, up 0.4 percent, shortly after U.S. CPI data, a sign that investors are looking
elsewhere for their cues.
This reaction is in marked contrast to big gyrations we saw on the IBEX - and particularly
bank stocks - in late 2017 after Catalonia's independence referendum.
In bond markets, the closely-watched gap between 10-year Spanish and German government bond
yields widened to around 111 basis points in the immediate aftermath of the
results and is now back at 109, where it stood late on Tuesday.
The more volatile, smaller Lisbon market is getting dragged lower by the political
uncertainty in Madrid. It's the only European market in the red this afternoon.
The two most likely election dates are April 14 followed by April 28. Prime Minister Pedro
Sanchez knows that the last thing left-leaning voters want - including even those who favour
Catalan independence - is for the right to come back into power.
see a bit of noise in the near term, but for us that would be one to fade because you could get
a positive scenario and the tail risks are pretty low in terms of getting a party that's
negative for markets."
He adds that the Spanish economy is performing well, and if the bond yields rise further he
would see it as an opportunity to add to Spanish bonds.
(Josephine Mason and Helen Reid)
A LOVE LETTER TO RISKIER ASSETS (1219 GMT)
strategy, Alain Bokobza, and team are in the mood for love of riskier assets ... specifically
It's too early to be extremely bearish but also too late to be extremely bullish, so for the
time being, the team says it's best to keep a tactical positive bias for equities.
That's because of the paradigm shift with the Fed indicating it wouldn't raise interest
rates as quickly as expected. They're bearish the dollar for the same reason.
"As the dust settles, we are building the case for adding more protection for portfolios,
notably through gold but also China equities," they write.
The reason for giving Chinese equities some love? Equity valuations are extremely low, with
the market P/E back to October 2014 levels and expectations are for the trade war tensions to at
least not turn totally ugly, they say.
But will Beijing and Washington feel the romance as talks to hammer out a truce to end the
protracted trade spat continue tomorrow?
SANTANDER COCO POPS: "AN EARTHQUAKE OF THE SCALE OF 1" (1140 GMT)
definitely grabbing a lot of attention. (Our story here:)
Here are a few quotes from our conversation with Jerome Legras, head of research at Axiom
Alternative Investments who doesn't think it's such a big deal.
* "When you look at the bond price, for a shock wave, it's a very, very small shock, it's an
earthquake of 1 on the Richter scale"
* "A shock wave is when everyone expects something and the opposite turns out, when there's
a sudden realization that things are not the way one thought and there's a feeling of betrayal,
it's really not the case here".
* "I think that some people may be in need of sensationalistic news, it's really not a shock
wave, just a few days ago, most people we talked about it were saying there was 50/50 percent
chance they would call."
* "Some people may have been taken by surprise but then again, a lot of people were
* "There is a risk of extension, we're well paid to take it".
Anyhow, Santander share price is flat, another sign that this is not a big issue for the
BIG OIL: A CASH FLOW STORY (1044 GMT)
Oil stocks haven't grabbed many headlines recently but the sector is up a handsome 9.5
percent so far in 2019 and even though it may face more headwinds from falling crude oil prices,
solid balance sheets are a reason not to worry too much.
Their strength boils down to strong cash flows, a gift of their past restructuring efforts.
"Sector cash flow is back to levels last seen in 2014, when crude prices were above $100/b,"
say HSBC analysts Gordon Gray and Kim Fustier, highlighting how Q4 results from oil majors that
have already reported were solid.
Q1 however is set to be a tougher test, but HSBC remain confident, even if they expect a $9
drop in Brent prices from the previous quarter.
comfortably above our expectations for FY19 capex plus dividends. This illustrates the sector’s
robustness, with its FCF breakeven of $53/b in 2019e," they say.
At a $70 Brent price forecast, HSBC sees excess cash flow for US and European oil majors at
around $40 billion per year through 2020-2022.
AT THE OPEN: EUROPE IN JUBILANT MOOD (0838 GMT)
The European market's in jubilant mood again today, with Frankfurt once more leading the
gains as investors cling to hopes of progress in the U.S.-China talks this week.
Individual moves are being driven by earnings: ABN Amro was the standout loser, dropping 7.5
percent and set for its worst day since June 2016 after Q4 profits missed expectations.
billion. Its shares were down 1.5 percent.
Here's your snapshot:
WHAT WE'RE WATCHING AT THE OPEN: EARNINGS (DUH!) (0750 GMT)
Risk-on spirit this morning as trade war optimism lifts world markets and a fresh burst of
European earnings are – so far – not spoiling the show.
Better than that, overnight data from Refinitiv shows that earnings growth expectations are
no longer falling even if the big picture show a big fall since November (see post below).
A lot of earnings from the low countries with notably, ABM AMRO posting profits below
demand in Asia.
adverse market conditions in Q4 to undermine its 2020 profit targets.
Outside earnings a few significant corporate developments such as Airbus nearing a decision
to embrace constructive talks with Eliott Management and Thyssenkupp bowing to Cevian and
simplifying its structure.
In the UK, another sign that Brexit angst is starting to bite, real estate agent Countrywide
profits halved and British homewares retailer Dunelm became the latest company to start
stockpiling some of its best-selling products to beat potential supply disruptions.
Here's a list of top headlies:
Banco Santander opts to roll-over CoCo bond
Orpea FY Revenue Up At 3.42 Billion Euros
Temenos FY Non-IFRS Revenue Up 14 Pct
Heineken sees 2019 profit growth at similar pace to last year
Airbus to give update on A380 shutdown plans -sources
Clariant hits Q4 headwinds in plastics business
Akzo Nobel's fourth-quarter earnings top estimates
ABN Amro Q4 net profit dives 42 pct as loan impairments surge
Aurubis Q1 earnings fall almost half on plant shutdowns
Asset manager Amundi confirms profit target although adverse markets hit Q4
German minister backs tougher rules on telecoms suppliers
Banks seek government support to help firms at risk from no-deal Brexit
Pernod CEO pursues change and engages activist shareholder
MEDIA-Deutsche Bank Seeks to rebuild in Mideast
(Julien Ponthus and Josephine Mason)
FUTURES ARE UP (0715 GMT)
European futures are trading comfortably in the black as it seems that the content of the
earnings galore this morning isn't going to spoil the risk-on spirit lifting global markets due
to trade optimism.
U.S. futures are also rising by the way.
SPEAK OF THE EARNINGS...(0703 GMT)
Speak of the earnings and they shall appear. It's earnings galore this morning, so much so
that the list of companies reporting today couldn't fit on a single screenshot without
de-zooming from the Reuters Morning News Call !
Just to name a few of the blue chips reporting this morning (a lot of Dutch companies it has
to be said), we've got Heineken, Koninklijke Vopak NV, Clariant
, Amundi or Akzo Nobel.
EARNINGS: Q4 EXPECTATIONS NO LONGER FALLING (0640 GMT)
Good news! Q4 earnings forecast for STOXX 600 companies are no longer in free fall and have
actually edged up to 3 percent year-on-year , I/B/E/S Refinitiv data shows.
Data showed last week a 2.3 percent earnings growth expectation, which constituted a sharp
fall from earlier forecasts.
You can see the evolution of Q4 earnings growth expectations here:
EUROPEAN BOURSES READY TO GO WITH THE (GOOD) FLOW (0620 GMT)
European bourses seem ready to go with the (good) flow and follow their Asian and U.S. peers
higher as optimism that Washington and Beijing might be able to hammer out a trade deal lifts
Frankfurt's DAX up 53 points and Paris' CAC to rise 15 points.