UK markets open in 1 hour 52 minutes

LIVE MARKETS-ECB: Is Ross stealing the show from Draghi?

* STOXX 600, DAX climb

* Tech jumps after STMicro results

* ECB keeps policy unchanged

Jan 24 - Welcome to the home for real-time coverage of European equity markets brought to

you by Reuters stocks reporters and anchored today by Helen Reid. Reach her on Messenger to

share your thoughts on market moves:


There was a "disturbance of the force" (as Obi-Wan Kenobi would say) shortly after 1330 GMT

on European and U.S. equity markets and while we first thought that was attributable to Draghi

saying risks had moved on the downside for Europe, that's probably not the case.

According to two traders, it's much more likely it was U.S. Commerce Secretary Wilbur Ross

saying a resolution on trade with China is still "miles and miles" away which triggered the fall

in equity indexes.

The fact that the FTSE 250, U.S. futures and the Euro STOXX felt at the exact same time does

make the case for Ross stealing the show from Draghi.

On a general note though, given the gloomy PMIs this morning, the head of the ECB

acknowledging risks on the downside and the U.S. government saying no end to the trade war in

sight, the pan-European STOXX 600 could sure be doing worse than reducing their gains to flat.

However, euro zone bank stocks were clearly bruised by the lack of announcement from

Draghi on a hoped-for TLTRO/LTRO programme. The index is now down 0.7 percent and the worst

sectoral performer in Europe as interest rate rises look ever more elusive.

(Julien Ponthus and Helen Reid)



While tech has gone out of fashion for many investors as fears of tighter regulation and

proof of slowing economic growth dented performance towards the end of last year, some are

sticking to their guns or even going into some of the highest-profile tech stocks for the first


Among them is Carmignac, in the news after founder Edouard Carmignac stood down yesterday

from running their flagship Patrimoine fund, having suffered billions of euros in outflows last

year over bad bets on Europe's recovery and Argentine financial stocks.

Head of Equity David Older is now at the helm with fixed income head Rose Ouahba, and he's

betting on tech to turn things around.

Older says the fund has rebuilt a position in Facebook (NasdaqGS: FB - news) despite negative headlines

about the company and signs penetration gains had hit a ceiling at 2.2 billion users.

Advertisers tell Carmignac they find no better platform for targeted advertising and

Instagram could become a leading platform for apparel purchases.

"This is something that Facebook has been building the infrastructure for quite quietly,"

Older says. "This idea of going to a nine-story department store wandering around to find

something that appeals to you is very archaic."

Turning to Chinese e-commerce giant, Older said the company was set to rebound

from a major correction last year as it began to reap the gains from a massive, but expensive

build-out of its logistics network, which he said should allow them to fill orders in one day

for most of the country.

"At the end of the year in December we built up a position in the stock and we think it

could be good performer for 2019," Older said. "We believe in 2019 they are going to be able to

start to show operating leverage, combining 20 percent plus revenue growth with a stabilisation

in investment which will result in margin expansion."

As you can see below, 2019 earnings expectations for worldwide technology stocks have fallen

off a cliff, having had two very strong years in 2017 and 2018:

(Leigh Thomas and Helen Reid)



The ECB just published its statement and there just ain't much to talk about as it is very,

very, very similar to the last one except maybe for the date and the fact that there's no need

to repeat that QE ended last year.

Understandably, little reaction on the trade floor and little expected at least until the

presser at 1330 GMT.

Heave a look:

(Ritvik Carvalho and Julien Ponthus)



Less than 15 minutes to go before the ECB announcement and one thought:

Many are the investors who believe monetary normalisation and the end of QE has been a key

factor in the market gloom of the second half of 2018.

Here's Michael Hewson at CMC Markets (LSE: CMCX.L - news) stating out loud what a lot are still thinking


"It can’t be a coincidence that markets in Europe topped out in the middle of last year at

precisely the time the ECB started talking about the prospect of looking at implementing an exit

policy, of ending QE and then raising rates".

Looking at the chart below, one would be tempted to use the famous quote from The

Incredibles and say: "Coincidence, I think not!"

(Julien Ponthus and Helen Reid)



Extreme bearish sentiment drove Bernstein to make a "buy" call on the market on Dec (Shanghai: 600875.SS - news) 17. As

markets have risen since then, they're now closing that call, saying sentiment levels have

returned to neutral.

They now say investors should back Low Volatility stocks - which tend to oscillate less than

the market - in these uncertain times.

"Our outlook for equity markets this year is one which should suit Low Volatility – low

returns, increased volatility and a slowing cycle," Bernstein's quantitative strategy team, led

by Sarah McCarthy, writes.

Low Volatility stocks are generally cheaper than high volatility stocks globally and within

sectors, they find. Low Vol has been de-rating for the past two years as investors flocked to

Momentum plays instead.

Interestingly, Bernstein recommends putting this trade on within sectors as it removes the

sector bias which occurs when screening for low volatility across the market (which currently

skews to financials and utilities on a global level, and consumer staples in Europe).

As you can see below, Low Volatility tends to move inversely to the market:

(Helen Reid)



... but it's still too early to go long.

That's the main takeaway from UBS (LSE: 0QNR.L - news) strategists led by Nick Nelson after meetings with more

than 70 individual investors in North America.

And their view may really tip the balance for Europe as U.S. is "the key swing net buyer of

European equities", UBS says.

While valuations now look attractive to investors across the pond, the macro backdrop,

exposure to a slowdown in emerging markets and Brexit remain a reason of concern.

"Many saw Europe as cheap (particularly the banks), but were looking for catalysts," UBS

adds, listing four potential triggers:

* stabilisation in Eurozone PMIs

* improved China data

* détente between the US and China over trade

* more clarity around Brexit

After some euphoric buying in the first half of 2017 in connection to the French elections

U.S. investors have unwound their net buying, as you can see in the charts below.

(Danilo Masoni)



European shares are eking out small gains in early deals after yesterday's lacklustre

session, as STMicro provided some much-needed cheer among the chipmakers after reporting

better-than-expected profit margins.

The tech index is up 1.6 pct and AMS (IOB: 0QWC.IL - news) , Siltronic (IOB: 0R8P.IL - news) and STMicro have hit their highest levels

since Dec. 4 in early deals.

(Josephine Mason)



European stocks are set to inch higher in subdued trading as investors awaited an ECB

meeting at which Mario Draghi’s comments on Europe’s sharp slowdown will be carefully dissected.

Results will keep trading active, though, with STMicro, Tod’s, and Fevertree among those


Italian fashion group Tod's is seen falling 3-5 percent after it reported a fall in

like-for-like sales as the luxury sector suffers from slowing economic growth in Europe and

China. Tod's blamed a worsening of performance in Italy and the rest of Europe.

Chipmaker STMicro said it expected first-quarter sales to fall by 21 percent, cementing a

poor outlook from the sector after ASML (Milan: ASML.MI - news) also warned of a weak start to the year due to

chipmakers delaying orders. Its better-than-expected Q4 margin should help the stock rise by 1

percent, though, traders said.

Panalpina is called 3 to 5 percent lower after Kuehne & Nagel said a takeover offer from

Denmark’s DSV (LSE: 0JN9.L - news) overvalued the company, traders said.

AIM investor darling Fevertree, which produces premium mixers, is seen jumping 5-10 percent

after saying it expects its full-year revenue to be almost 40 percent higher, driven by strong

demand in the UK.

The dealmaking chatter around Deutsche Bank (IOB: 0H7D.IL - news) and Commerzbank (Xetra: CBK100 - news) continues. The banks' shares are

seen rising around 1 percent, traders said, after daily Frankfurter Allgemeine Zeitung reported

Germany's government is in talks with representatives of Commerzbank and private equity firm

Cerberus on a potential merger between Deutsche Bank and Commerzbank.

Finance Minister Olaf Scholz and Deputy Minister Joerg Kukies had held a number of meetings

on the issue over the last months, the paper reported.

(Helen Reid)



Futures for the FTSE 100 and euro zone benchmarks are inching higher, indicating stocks will

make an attempt at gains this morning, but how long they will hold onto them is unclear given

the myriad worries stalking investors at the moment and an ECB meeting which could be eventful.

"Expect a focus on forward guidance and reinvestment/expansion plans of the LTRO/TLTROs,"

writes Chris Bailey, European strategist at Raymond James.

"Tone all-important here as the market is currently continuing to push out the date of an

ECB rate rise."

UK results are starting to come in with AIM darling Fevertree in focus as well as, among

larger stocks, asset manager St James' Place and miner Anglo American (LSE: AAL.L - news) ones to watch.

(Helen Reid)



It's the first bumper Thursday of Europe's earnings season today and there's no shortage of

news both from company results and ongoing sagas like Renault (LSE: 0NQF.L - news) 's leadership, no-deal Brexit

preparations and emissions lawsuits.

STMicroelectronics (LSE: 0INB.L - news) , Tod's, and Gjensidige are among those reporting today.

The chipmaker will be particularly closely watched after the tech sector came out of favour

late last year as the U.S.-China trade war ramped up a clash over technology and IP. STMicro

said it saw Q1 sales falling by about 21 percent, joining peers predicting a slowdown.

Italian fashion group Tod's reported a fall in like-for-like sales as the luxury sector

suffers from slowing economic growth in Europe and China. Tod's blamed a worsening of

performance in Italy and the rest of Europe.

Norwegian insurer Gjensidige said its 2018 was "significantly impacted by extraordinary

weather conditions" and that even when adjusting for these, it was "not satisfied" with its


We'll see the next step in the Carlos Ghosn saga today with Renault's board meeting to pick

a successor.

Airbus adds to a long list of companies sounding the alarm about a no-deal Brexit, with

Chief Executive Tom Enders warning in a video released on the planemaker's website that it could

shift future wing-building out of Britain in the absence of a smooth exit.

And lawyers suing Fiat Chryself in a U.S. case over excess emissions are seeking more than

$100 million.

Here's your sweep of headlines:

Airbus CEO sees 'harmful decisions' for British presence in a no-deal Brexit

Renault board meets to choose successor to Ghosn

Lawyers suing Fiat Chrysler in U.S. diesel case seek over $100 mln

Tod's like-for-like sales fall 3 pct in 2018

STMicro sees Q1 net revenues sink by 21 pct from previous quarter

Activist target Pernod boosts board independence with new role

Denmark's DSV to keep hunting big targets after Panalpina - CEO

Elior Group Q1 Consolidated Revenue Increases To 1.75 Billion Euros

(Helen Reid)



Spreadbetters don't expect any fireworks this morning from European shares, but a slew of

earnings reports will keep trading busy at least at the stock level.

Today's ECB meeting is also eyed as a potential catalyst for markets which have seen subdued

trading the past few days.

"The first ECB meeting of the year (today) is unlikely to lead to any material changes to

communication or forward guidance," Societe Generale (Swiss: 519928.SW - news) economists write, "although the risk

assessment should move further to the downside."

"The state of the economy is of immediate concern for the ECB at the start of the year,"

they add.

Asian shares were subdued overnight as political uncertainty in the United States and

worries about weakening global economic growth left investors wary of riskier assets.

Financial spreadbetters at IG (Frankfurt: A0EARV - news) expect London's FTSE to open 3 points lower at 6,840,

Frankfurt's DAX to open 9 points lower at 11,062 and Paris' CAC to open 2 points lower at 4,838.

(Helen Reid)


(Reporting by Helen Reid, Danilo Masoni, Julien Ponthus and Josephine Mason)