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LIVE MARKETS-Europe off lows as trade war ping pong continues

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: rm://julien.ponthus.thomsonreuters.com@reuters.net


EUROPE OFF LOWS AS TRADE WAR PING PONG CONTINUES (0512 GMT)

European shares managed to end the session a bit off initial lows as traders continued to play ping pong on trade headlines.

In particular it was a Wsj report saying China has invited top U.S. trade negotiators for a new round of talks in Beijing that helped avoid a deeper sell-off.

Also this one (U.S., China on 'doorstep' of trade war deal, but 'phase one' tariff removal holding up talks- SCMP) helped, while the twitter handle of Global Times Editor Hu Xijin remained silent, in what looked an attempt to soften down the tone.

"What has helped prevent a full-blown market freak out is the peppering of optimism-chasing soundbites, mainly from China...," said Connor Campbell, analyst at Spreadex.com.

The STOXX 600 fell 0.4%, having lost more than 0.9% earlier in the day. The trade-sensitive DAX even managed to rise 0.1% at one point before ending down slightly.

Here's your closing snapshot and below a UBS chart showing the swings between "Trade fear" and "Trade complacency" since February 2018.

(Danilo Masoni)

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UK NATIONALISATION, FRENCH PRIVATISATION: WELCOME TO 2020? (1441 GMT)

"Not a success, it's a triumph!".

Euronext's French boss Stephane Boujnah didn't exactly go for a British understatement when commenting on the IPO of the French lottery on the Paris bourse this morning.

Granted, the shares are surging over 16% despite having been priced at the high end of the range and it was oversubscribed with French mom-and-pop investors forming an orderly queue.

The successful "privatisation amuse-bouche", as our colleagues at BreakingViews nicknamed it, is likely to encourage Emmanuel Macron to push for another round of sales, notably the state's 51% stake in Aeroports de Paris or a chunk of Energy group Engie.

Does the French president hope that a successful wave of privatisations will in some way be for him what the 1984 IPO of BT, was for Margaret Thatcher's in terms of a policy flagship?

Maybe, and there's surely a bitter-sweet taste of irony to be felt on the tongue of the French president as today is precisely the day which Labour chose to unveil a nationalisation programme which echoes the one implemented by French socialist president François Mitterrand after his victory in 1981.

"We will bring rail, mail, water and energy into public ownership to end the great privatisation rip-off and save you money on your fares and bills", the Labour manifesto pledges, adding that "the broadband-relevant parts of BT" would be brought into public ownership.

Sadly for adventurous stockpickers, a comprehensive list of companies targeted for nationalisations wasn't provided but more details emerged with a promise to bring into public ownership "the supply arms of the Big Six energy companies".

Markets' reaction to Labour's push to bring "natural monopolies" into public hands was fairly muted as Corbyn's perceived chances of getting into 10 Downing Street are very low.

In a way, the pound tells pretty much the story.

An alert around 11h35 GMT about a poll giving the Tories a 16% lead on Labour saw sterling go for a nice jump despite Jeremy Corbyn detailing his program at the same time.

At currently 1.2950 against the dollar, it's fair to say that the fear of nationalisations isn't keeping many investors awake at night.


A bit of reading:

UPDATE 1-FDJ shares surge in French lottery group's market debut

Labour manifesto:https://bit.ly/34bUKPC

BREAKINGVIEWS-French lottery IPO is a privatisation amuse-bouche

BREAKINGVIEWS-French lottery IPO may be as good as Macron gets nL8N2812AE

And below a chart which shows how the pound and British midcaps track the chances of the Conservatives holding on to Downing Street.


(Julien Ponthus)

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FOUR RISKS FOR STOCKS (1420 GMT)

Markets are lower today and while some have decided to cut their risk exposure following the recent euphoria that lifted Wall Street to new records, Credit Suisse strategists believe investors should be long equities versus bonds and credit.

But it's a "low-conviction" call and the the Swiss bank team led by Andrew Garthwaite discuss four key risks as we head towards 2020:

The first one is (surprise, surprise!) Trade: "Trade remains the biggest uncertainty, with President Trump having been difficult to predict in his policy positioning."

The second one is U.S. wage growth. If that starts to pick up aggressively, "This would signal that we are at full capacity in the labour market and it would also threaten to cause a change in Fed policy"

No. 3 is China. "We have said on many occasions that China has had something of a triple bubble in credit, real estate and investment."

Last (but not least) is the US presidential election. "The policies of some of the Democrat candidates, as highlighted in our US section, could be potentially problematic for sectors such as technology, pharma or banks".


(Danilo Masoni)

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TIME ALREADY TO CUT YOUR EQUITY EXPOSURE? (1047 GMT)

The recent rally towards new highs was not accompanied by any positive development in companies' earnings expectations.

As a result valuation multiples in many markets including the United States and Europe have expanded quite a bit to levels that now look historically stretched.

For some fund managers that - along with the deterioration in noise surrounding trade talks between the world's two largest economies - means it's time to reduce risk exposure.

Fund managers at Anthilia in Milan, for example, have decided to downgrade both U.S. and European equities to neutral.

"Tactically, the situation in terms of sentiment and positioning has reversed. Many indicators signal excess optimism and complacency," Anthilia's CIO Andrea Cuturi said.

"Furthermore, the trade war picture could soon get complicated, due to difficulties in overcoming differences on intellectual property and the level of tariffs between the parties".

On Europe he said that monetary stimulus could now start to have an impact on the economy but in the short term the region's equities are unlikely to escape from any pull back at Wall Street.

(Danilo Masoni)

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EURONEXT: WHOSE FAT FINGER WAS THAT? (1028 GMT)

Just a few minutes after the open, Euronext shares suddenly lost more than 8% and hit for a brief moment the bottom of the STOXX 600, which was already a crowded place with big losers such Royal Mail, Thyssenkrupp and Fiat Chrysler for instance.

Of course, one of the first things that came to mind was that a rumour saying something like the pan-European bourse operator had decided to splash billions to outbid Switzerland's SIX to take over Spain's BME was freaking out investors.

But very quickly, it was clear there were no signs of news reports or filings indicating that Euronext would launch a rival bid for the Spanish bourse.

"For us it's a fat finger", said Mikael Jacoby, head of continental European sales trading at Oddo Securities, adding that there was a possibility someone just didn't give up selling shares despite volumes being insufficient to carry the trade.

The fact that Euronext shares quickly bounced back to their opening levels shows the move wasn't triggered by a hypothetical news event, which, as a matter of fact, nobody can find a trace of, he added.

Here you can see how Euronext shares fell over 7% then bounced 9% within just a few minutes:



(Julien Ponthus)

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OPENING SNAPSHOT: NOT MUCH RELIEF IN THE SEA OF RED (0845 GMT)

European markets have started the day deep in the red with corporate news providing little relief as the fresh fears on the U.S./China trade war take their toll.

Every major bourse is down at least 0.7% and it's hard to find blue chips to brighten up the overall gloomy mood.

Thyssenkrupp is down over 10% after scrapping its dividend in the face of widening losses and Fiat Chrysler takes a 3.3% hit on General Motors' racketeering lawsuit.

Royal Mail is the top loser on the STOXX 600 with a whooping 16% fall as its turnaround plan gets behind schedule.

British American Tobacco is a rare bright spot, up 5.9%, following good news overnight from the US. Liberum analysts say: "The Fall Unified agenda, which sets the regulatory priorities for the year ahead withdrew the nicotine standard rule... It appears the FDA has bigger fish to fry with the youth e-cigarette crisis"

As you can see below, the top movers in Paris, Milan and Frankfurt are all deep in the red. Same applies to sectors which are all down in unison.


(Julien Ponthus)

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ON THE RADAR: THYSSENKRUP, LVMH AND PSA/FCA (0756 GMT)

AS expected, futures are pointing to a lot of red at the open with Germany’s Dax, Europe's popular gauge of trade war greed and fear, suffering the most.

The Energy sector is also expected to be under pressure with oil prices retreating due to the trade tensions.

Fears political risk may hinder growth next year was illustrated this morning by French perfume maker Interparfums blaming geopolitical and economic uncertainties for slowing growth.

While we wait to see if there will be any surprise in the list of companies Labour will seek to nationalise should it win the Dec 12 election, Royal Mail and Severn Trent, already targeted, both published trading updates. The first is seen taking a hit while Severn Trent is expected to rise.

Another big news development for one of Europe’s stock market darlings is French luxury group LVMH entering due diligence with U.S. jewellery chain Tiffany & Co after raising its bid to close to $16 billion.

As a blow to investors hoping for a recovery story, Thyssenkrupp scrapped its dividend after its full-year net loss widened five-fold. Shares are expected to take a 5% hit at the moment.

While the impact (if any) on the Fiat Chrysler Automobiles/PSA planned merger isn’t clear at this point, news that General Motors filed a racketeering lawsuit against FCA, alleging that its rival bribed United Auto Workers (UAW) union officials, may possibly scare off some investors.

Two different outcomes in financial services: CMC Market is seen rising after raising its guidance while Investec could disappoint with lower profits.

(Julien Ponthus)

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BRING ON THE "LABOUR NATIONALISATION HIT LIST"! (0702 GMT)

Labour will unveil its manifesto this morning at 11h00 GMT in Birmingham.

The event will be closely watched by investors after last week's surprise pledge by Jeremy Corbyn to part-nationalise BT.

"BT hadn’t believed it was on the Labour nationalisation hit list", Neil Wilson, chief market analyst at Markets.com commented at the time as the pledge took analysts by surprise.

So whether there will be another surprise target for nationalisation is the multi-billion pound question that on everyone's mind!

Corbyn seeks to reverse privatisations began by former Prime Minister Margaret Thatcher in the 1980s, promising to nationalise rail, mail, water, and BT's broadband network to provide free internet for all.

Coincidence? Royal Mail and Severn Trent both publish trading updates this morning.

Anyhow, in a bid to manage readers expectations, it may be important to stress that given Labour's perceived low chances of being in power post the Dec. 12 election, the "Labour nationalisation hit list" may not trigger crazy market price action.

See Friday's LIVE MARKETS-BT nationalisation: Who cares?

(Julien Ponthus)

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MORNING CALL: DOWN WITH THE FLOW (0624 GMT)

No reason for European stocks to be spared from the global pull-back really.

Wall Street and Asian markets retreated sharply overnight amid fears the very much hoped-for "phase one" Sino/U.S. trade deal would be delayed due to fresh tensions between Washington and Beijing.

Financial spreadbetters expect London's FTSE to open 31 points lower, Frankfurt's DAX down 69 points and Paris' CAC to lose 31 points at the open.

"The US-China trade spat has been rumbling on for over one year, and traders are used to the back and forth", commented David Madden at CMC Markets, adding that the latest twist in the saga could be seen as "an excuse to unwind some positions".

(Julien Ponthus)

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