LIVE MARKETS-Don't cry wolf for a U.S. recession - whisper!
* European shares fall slightly
* Election worries pull Italian stocks down from 8-yr high
* Trump to announce decision on Iran nuclear deal
* Oil prices ease after hitting 3-1/2 year highs
LONDON, May 8 (Reuters) - 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
DON'T CRY WOLF FOR A U.S. RECESSION - WHISPER! (1155 GMT)
Rabobank just published a research piece in which it puts the probability of a U.S.
recession at 27 percent by September 2019 using treasury yield curve models.
"Not enough to change our baseline forecasts, but substantial enough to whisper wolf, wolf,
wolf", the bank said, adding it wasn't planning to change its base case forecasts but wanted to
highlight that "there are several indications that recessionary risks might be on the rise".
Here's their chart:
As a sign that investors are indeed concerned about how much fuel this cycle still has in
its engines, BofAML also issued research of its own which produced slightly more optimistic
findings.
"The yield curve may be flattening but our rates strategists do not expect it to invert in
2018. Given the average lag between inversion and recession is 27 months that would put a
recession at the earliest in 2021!," their global cross-asset strategy team wrote.
The bank cautioned, however, that "history is only a guide" and pointed to the risks posed
by possible trade wars and weakening survey data.
It also gave a reminder that "equity markets tend to peak six months before a US recession"
and that "the majority of investors think the peak in equity markets will be this year".
Anyhow, BofAML believes the cycle is far from over and says it is "happy" be long on
equities but has switched its European position into a FTSE one.
"The makeup of the FTSE, which is commodities and defensive heavy, is more late cycle
oriented. It also has one of the highest dividend yields of global equity markets," it said.
Talking of wolves, here's a link to a 2013 blog by Reuters Photographer Lisi Niesner called
"Among wolves" : https://reut.rs/2I4hSEL
Here's a photo from it:
(Julien Ponthus)
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MIDDAY UPDATE: ITALY LEADS LOSSES (1224 GMT)
At the session's halfway mark Italian stocks are still the worst performers in a broadly
negative European market.
Among sectors, financials are the biggest weight on the STOXX, mainly due to falls among
Italian lenders, whilst the energy sector is also on the backfoot as the price of oil slides in
ahead of Trump's decision on the Iran nuclear deal.
And it's looking to be a similar story in the U.S., with stocks futures trading around 0.3
percent lower.
Here's your midday snapshot:
(Kit Rees)
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UK CHALLENGER BANKS: DISRUPTION IN CONSOLIDATION (1038 GMT)
Is this the age of consolidation for UK challenger banks? CYBG (Frankfurt: 42YA.F - news) 's 1.6 billion pound all-share
offer for Virgin Money sure seems to be making that case. (see also)
"The deal structure (i.e. full share, no cash, small premium) raises a question whether new
financial upstarts, that sought to challenge the UK’s Big 4 banking titans, stand a chance to
steal any meaningful market share within the gruelling financial sector environment on their
own," commented Artjom Hatsaturjants, from Accendo Markets.
"South Africa’s FirstRand mixed cash/shares takeover of Aldermore in 2017, and the newest
CYBG/VM deal adds further fuel to the fire of the idea that the challenger banks will not be
able to survive on their own despite several years of exciting growth prospects," he added.
So what about the next move?
Artjom Hatsaturjants believes Metro Bank (Frankfurt: 6MB.F - news) or OneSavings Bank (Stuttgart: 2OS.SG - news) could be ripe for picking and
that they could even attract foreign bidders thanks to the weak pound.
Here's link to a 2010 story for those of you who remember or would like to be reminded of
how Virgin Money sought to conquer British retail banking: https://reut.rs/2rta6gN
(Julien Ponthus)
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"IT'S NOT A GOOD DAY FOR ITALIAN ASSETS" (0906 GMT)
Italian assets have been shrugging off political worries for months but today it's
different. Italian stocks have progressively lost ground this morning and are last down more
than 2 percent, while government bonds are also being sold off heavily as investors react to
strengthened prospects of an early election.
Here's the background:
President Sergio Mattarella called on Monday for Italy's bickering parties to rally behind a
"neutral government." Italy's two largest parties, the far-right League and anti-establishment
5-Star Movement, came out against the proposal. This raises the likelihood of an unprecedented
immediate return to the polls, even as early as July.
And here are some views from investors:
Carlo Franchini, head of institutional clients at Italy's Banca Ifigest: "It's not a good
day for Italian assets. Markets are starting to feel the pressure of elections. Volumes and
selling pressure on the BTP are growing... Markets were not expecting there could have been
elections so early. That could put at risk the approval of the budget law and recent data has
eroded confidence in the country's economic recovery."
Matteo Ramenghi, UBS Global Wealth Management, Chief Investment Officer for Italy: "The
events of the last few hours suggest that the scenarios of a temporary technocratic government
or repeat elections are more likely. A broad grand coalition supporting a technocratic
government would reassure markets since it could induce political stability and prolong current
economic policies, though its lifespan would be in question. Repeat elections may cause more
uncertainty and therefore may weigh on Italy assets."
Italy's FTSE MIB benchmark is set for its worst day in more than 2 months. Just in
the previous session the index hit its highest level since October 2009 and, despite today's
drop, it is still the best performer in Europe, up 12 percent so far this year.
(Danilo Masoni)
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OPENING SNAPSHOT: EUROPEAN SHARES WITHOUT DIRECTION (0712 GMT)
European shares have opened without a clear direction with the STOXX 600 moving in and out
positive territory in early deals, as caution dominated ahead of President Donald Trump's
decision on whether to withdraw the United States from the Iran nuclear deal.
Here is your snapshot with Europe's main country indexes and, as you can see, there is not
much conviction around: the FTSE is up 0.3 percent while the DAX is down 0.1 percent.
At the single stock level, top STOXX movers were hearing aids firm William Demant (LSE: 0RGT.L - news)
and German postal and logistics group Deutsche Post DHL Group, down 8.7 and 6.2
percent respectively following disappointing updates.
Ambu (LSE: 0R4L.L - news) shares rose sharply for a second day, hitting a fresh record high, following solid
results released on Monday, while Shire (Xetra: S7E.DE - news) advanced nearly 5 percent after Japan's Takeda
agreed to take over the UK company for 46 bln pounds.
(Danilo Masoni)
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DON'T FORGET POWELL! (0619 GMT)
Federal Reserve Chairman Jerome Powell is due to participate from 0715 GMT in a panel before
the Swiss National Bank (LSE: 0QKG.L - news) and International Monetary Fund.
His intervention will be closely watched as the rising dollar helped European shares close
at three-month highs yesterday as the dollar hovered around 4-months peak.
(Julien Ponthus)
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FUTURES RISE IN LONDON, DIP IN FRANKFURT (0608 GMT)
FTSE futures are currently trading in positive territory but it's not looking as good
elsewhere with the DAX set to open about 0.2 percent down.
Here's how futures are doing at 0606 GMT:
(Julien Ponthus)
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MORNING HEADLINES: IRAN DEAL AND COMCAST'S FIRE POWER DOMINATE (0558 GMT)
It should be announced after the end of trading in Europe today but Trump's decision on
whether he will withdraw from the Iran nuclear deal will be on every investor's mind, especially
those with an interest in energy stocks as oil prices close to their 3-1/2 year highs.
Here's our latest on that front:
Another twist in the Sky (Frankfurt: 893517 - news) saga: U.S. cable operator Comcast (Swiss: CMCSA.SW - news) is asking investment banks to
increase a bridge financing facility by as much as $60 billion so it can make an all-cash offer
for the media assets that Twenty-First Century Fox has agreed to sell to Walt Disney (Swiss: DIS-USD.SW - news) .
Also on the M&A front, Virgin Money said that it received an 1.6 billion pounds all-stock
takeover offer from rival CYBG and Shell (LSE: RDSB.L - news) is to sell stake in Canadian Natural for
about $3.3 bln
The earnings season is still on:
DSM's Q1 net profit doubles on high vitamin prices
Adecco Group (IOB: 0QNM.IL - news) sees revenue growing at 5-6 pct rate
Deutsche Post DHL confirms 2018 targets despite Q1 earnings miss
E.ON's Q1 profits beat estimates on energy retail boost
Axel Springer Q1 in line, confirms 2018 guidance
Munich Re Q1 net profit up 48 pct amid low payouts for major losses
Uniper (Swiss: UNIPE.SW - news) posts profit drop at Global Commodities segment
(Julien Ponthus)
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MORNING CALL: EUROPEAN SHARES SEEN BROADLY FLAT AT THE OPEN (0521 GMT)
European shares are seen opening broadly flat at the beginning of the session. Financial
spreadbetters expect London's FTSE to open 13 points higher at 7,580 points, Germany's DAX to
lose 6 points at 12,942 points and Paris' CAC to open flat at 5,531 points.
Investors will be bracing themselves for Trump's decision on whether to withdraw the United (Shenzhen: 000925.SZ - news)
States from the Iran nuclear deal as such a move could disrupt global oil supply.
Oil prices have just eased slightly this morning after hitting 3-1/2 year highs.
Asian stocks ended the session slightly up thanks notably to gains in technology stocks.
Wall Street ended in positive territory, boosted by Apple (NasdaqGS: AAPL - news) 's sixth straight day of gains.
(Julien Ponthus)
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