UK markets close in 4 hours 59 minutes

LIVE MARKETS-Coronavirus: "At this stage we do not adjust forecasts"

* European shares' rebound continues after Monday's plunge

* Strong bank earnings provide support, Santander rallies

* Caution remains over spreading China virus

* Apple suppliers in demand as iPhone back to growth 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:


Interesting to note that the travel and leisure index has been rising in sync with the STOXX 600 this morning, as the market continues its recovery (or gets complacent -- you choose) after Monday's big coronavirus scare.

Those getting back into the sector just as BA suspends all its flights to China might take comfort in this HSBC sectoral research note in which the bank's analysts take the view that while the virus outbreak potentially threatens the sector, some of the risk is often already priced in.

"At this stage we do not adjust forecasts for the Coronavirus impact", they write.

They notably take comfort in how markets reacted during the SARS precedent.

"As we highlight earlier in this report, the impact from the Novel Coronavirus may impact travel demand, but historically air volumes were resilient in the UK and Europe during the SARS epidemic".

Here's their chart:

(Julien Ponthus)



With Santander's Q4 shining all over the banking sector, today's batch of earnings doesn't look particularly grim, even if KPN's have clearly dampened the mood for telcos .

What's really more concerning is the constant pace at which earnings expectations are sliding down to a point where the awaited end of Europe's corporate recession is becoming somewhat elusive.

This was supposed to be the quarter during which profits would finally rise again for the STOXX 600 after three sets of decline.

But looking at the chart below, things don't look that good, particularly at a moment when strategists are struggling to justify current valuations.

(Julien Ponthus)



Two days of gains have almost erased Monday's nervy coronavirus drop and even though many remain sceptical about the market's apparent resilience, the fact that investor positioning is still cautious would suggest that a big correction is unlikely.

"We acknowledge that the macro implications of the coronavirus outbreak are unknown at this stage and that the situation could get worse before it gets better", strategists at the UK bank led by Emmanuel Cau say.

"That said, while equities could be vulnerable to further profit-taking in the near term, we believe that the risks of a more material correction such as the ones of Q1 or Q4 2018 are low... even accounting for the recent inflows, LO equity positioning doesn’t look particularly stretched," they add.

Check out this Barclays chart below:

(Danilo Masoni)



Crises like coronavirus often provide good entry points and crucial to this is timing.

For now the prevailing idea is that things will get worse before they get better and it looks that stock pickers are waiting for a bigger sell-off before chasing any opportunity.

"History tells us that these crises resolve quickly (SARS, bird flu, swine, etc.) But we have not yet reached the peak of negativity: it usually happens when the WHO issues a global alert and for now we are only at the local level," says Angelo Meda, head of equities at Banor SIM in Milan.

"We are monitoring the daily evolution of the cases and we think there could be more bad news. In the sectors, luxury is at a strong premium on the market compared to the past, which reduces is upside; better (to look at) airlines, mining and oil!," he adds.

For more on the topic:

LIVE MARKETS-History lessons: crises can be buying opportunities

LIVE MARKETS-Buying the dip in mining?

LIVE MARKETS-Luxury upgrades in the time of Coronavirus

(Danilo Masoni)



Seems the market finally chose its side and tilted towards 'risk-on' as Q4 headlines piled in with Santander giving a much needed boost to Spain's IBEX and more critically the banking sector as a whole.

The Spanish bank is up over 4%, lifting the sector to a 1% rise, which is in turn helping the STOXX 600 cling on yesterday's rebound with a 0.4% rise.

Signs that the mood is upbeat, cyclicals are back in favours with miners and autos for instance in the leading pack.

Airlines are recovering despite BA suspending its flight to China. Clearly Wizz Air's results are helping and so is a positive Berenberg note on Lufthansa.

KPN is close to single-handedly bring the telecom sector in negative territory with an impressive 6.8% fall after disappointing Q4 results.

The Tech sector is also brought down by Avast which is down close to 10% on negative reports about an anti virus software. Meanwhile, Temenos is enjoying a 2.5% boost after the announcement of a partnership with Google.

Another big loser is SES, sliding 6% on a senate bill that limits payout to companies that vacate C-band airwaves. The SMARTER Act proposes satellite operators receive an incentive payment of just $1 billion, Exane says, adding that it's well below market expectations (Exane est. $9.4 billion)

Here's your opening snapshot:

(Julien Ponthus)



Among news which could spook the market and travel/leisure stocks is British Airways suspending all direct flights to and from mainland China.

On the upside, Wizz Air is expected to rise 2-3% after it upgraded its annual profit forecast.

Also the fact that sales growth at LVMH were impacted by protests in Hong Kong could send jitters through the luxury sector even though Italy’s Salvatore Ferragamo met its guidance with a slight increase in 2019 revenues. The French luxury group is expected to lose 2-3% at the open.

Apple’s results is likely to cheer up European suppliers such as Dialog Semiconductor, STMicro, ASML or AMS but investors could view it as a glass half empty due to possible supply disruptions from fast-spreading coronavirus.

In other tech news, Software is likely to be a big faller during the session after a poor set of results.

Europe’s Q4 season has begun in earnest and telecoms look in a good spot with Finland’s Elisa, The Netherlands’ Dutch Royal KPN, Norway's Telenor and Sweden’s Telia all reporting upbeat earnings. There’s also some M&A with Vodafone agreeing to sell its 55% stake in its Egyptian unit for $2.4 billion

Good news for banks also with Sweden’s SEB and Spain’s Santander unveiling with better than expected profits.

UK house prices rising at their fastest pace since Nov 2018 will no doubt continue to fuel speculation on the BoE's possible rate cut but could help house builders.

Novartis is also thought to be a winner after fourth-quarter core net income rose 13%.

From pre-mkt indications, Airbus’ billions of provision for corruption isn’t seen moving the stock and same seems to go for Renault and its new CEO.

(Julien Ponthus)



European stocks are expected to cling to the wagon of yesterday's market rebound with a little help from positive Q4 results from Europe Inc but also from Apple, which helped lift Wall Street higher and later reported better than expected sales and profits.

Things were left rosy in Asia where shares fell as a spike in new cases of the new Coronavirus added to worries about the economic impact of the outbreak.

At the time of writing, futures point to a limited rise in shares of 0.1% to 0.2% and financial spreadbetters expect London's FTSE to open 23 points higher, Frankfurt's DAX 27 points up and Paris' CAC to gain 5 points.

So far, the figures reported by Novartis, Telenor, Santander, KPN, SEB and Telia in this busy earnings season session seem encouraging.

That said, some investors might decide to stay cautious before the Fed meets later today.

(Julien Ponthus)


(Reporting by Danilo Masoni, Joice Alves, Julien Ponthus and Thyagaraju Adinarayan)