UK Markets closed

LIVE MARKETS-A correction coming?

* Stocks swing between negative and positive territory

* FTSE down 0.5%, CAC 40 up 0.2%, DAX flat

* BT falls after Labour nationalisation plan

* UK financial sector suffers 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: julien.ponthus.thomsonreuters.com@reuters.net


A CORRECTION COMING? (1219 GMT)

Global markets are in cruise mode but their complacency is likely to make equity markets vulnerable to correction in the short term, UniCredit says.

"There is now a high risk that equity market prices already take into account a successful partial trade deal."

With sliding earnings estimates for 2020 and valuation levels limiting further upside, UniCredit expects an increasing likelihood that profit-taking will occur.

But none of this is evident in positioning with the net short-positions in the CBOE VIX futures at record highs and call volumes easaily exceeding puts in the U.S.

"The interpretation is that a put/call ratio around its lower extremes signals exuberant bullishness, which argues for caution and for the increased likelihood of a stock-market decline", UniCredit strategists warn.

Thyagaraju Adinarayan)

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WHAT IF THE TRADE WAR DEAL IS A 'SELL'? (1057 GMT)

There's considerable frustration in morning notes today about how any comment on the trade war negotiations, be it relevant or not (and most often not), have been moving markets up and down all week.

"It's been RORO (risk-on risk-off) on back of the constant zig-zags in the US-Sino trade headlines for the past two weeks", said Stephen Innes chief Asia market strategist at AxiTrader.

At Oanda, Craig Erlam feels "both sides have felt the need to provide a constant flow of contradictory comments to keep us on our toes" while Michael Hewson, from CMC Markets, admits "the constant prevarication about whether we’ll see a phase one deal by year end is becoming tiresome".

As put by Ipek Ozkardeskaya at LCG, it's an "emotional roller-coaster" for traders.

With that in mind, wouldn't it be an irony of epic proportion if after all these weeks of trade war kremlinology, stock markets fell or fail to react significantly to a 'phase one' deal announcement?

David Holohan, senior equity investment strategist at Mediolanum AM believes most of a Sino/U.S. deal is priced in and that an announcement may only trigger a modest and quickly fading price move.

"It will likely move up on the morning of the announcement but we think that even by the afternoon and the following days, it will likely start to level off", he told us yesterday afternoon.

Funny how such a big chunk of 2019 trading could turn out to be a classic "buy the rumour-sell the news" moment.


(Julien Ponthus)

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OPENER: SEB AND NORDICS STEAL THE SHOW (0840 GMT)

As expected, European stock markets have opened in positive territory, up about 0.3% with trade war optimism doing its usual thing. What wasn't on the radar a few hours ago was that Nordic stocks would be the biggest movers on the STOXX 600 and steal the show.

Swedish bank SEB is down over 13% after it has been informed of an upcoming television report on suspected money laundering in the Baltics in an upcoming program in which the name of the bank is mentioned.

Other big losers in the region include Salmar, down 5.9% and Mowi ASA, down 3% after U.S. authorities open a probe on allegations of possible collusion between Norwegian producers of farmed salmon.

It's not all bad in the North of Europe with for instance Simcorp up 7.1 percent, the biggest gainer on the STOXX 600, thanks to a positive trading update.

Subsea 7 opened 8% higher after a report that Italy's Saipem was considering a deal with its rival.

Among smaller companies, Shares in Sweden-based property firm Hemfosa surged close to 17%, heading for their best day ever, after rival SBB launched a $2.42 billion cash and shares offer.

The other big sensation of this session is Britain's BT after Labour vowed to nationalise parts of its network to provide free full-fibre broadband for all by 2025. While Labour isn't expected at the moment to win the poll, BT shares are down 1.9% and the second biggest faller among London's blue-chip stocks index.

Here are the biggest movers on the STOXX 600:


(Julien Ponthus)

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ON THE RADAR: BT NATIONALISATION AND AN M&A PARTY (0755 GMT)

European stock markets are set to open higher this morning as trade war optimism, gains in Asia and a new record high on the S&P 500 encourage traders to switch on to risk-on mode.

In this context, market attention is likely to focus on Germany’s DAX, a typical gauge of trade war fear and greed and within the index constituents, proxies to play for the US/China feud such as car makers.

The big news in the UK market is Labour saying it would nationalise parts of telecoms provider BT's network if it won power in the Dec. 12 election to provide free full-fibre broadband for all. Labour is however at the moment not expected to win the election.

On the M&A front, price action is expected in Scandinavia where Nordic property firm SBB launched a $2.42 billion cash and shares bid for its rival Hemfosa. The price constitutes a premium of 22.7% to the closing price on Thursday and so all eyes will be on how investors arbitrage the price gap.

Another share under the spotlight will be Europcar after Reuters reported its main shareholder, France’s Eurazeo, hired JP Morgan for a possible sale of its 29.8% stake.

Altice is expected to rise at the open after it said its sale of its Portuguese fibre network was progressing well.

In the battlefield for food delivery supremacy, Germany’s Delivery Hero said it would continue to look at every single acquisition and that Europe would break even for the full year.

In Italy, Saipem is said to be considering a deal with its rival subsea 7.

(Julien Ponthus)

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MORNING CALL: IT'S RISK ON (0635 GMT)

Another closing record for the S&P 500 and gains across Asian shares are expected to lift European stock markets at the open.

There's a very clear "risk-on" sentiment out there with optimism and the trade war front after White House comments suggesting Washington and Beijing are close to striking a trade deal.

Financial spreadbetters expect London's FTSE to open 37 points higher, Frankfurt's DAX to rise 75 points and Paris' CAC to gain 29 points.

The pan-European STOXX 600 is only 11 points away of its record high of 415.18 points reached in April 2015.

(Julien Ponthus)

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