* European stocks inch up as trade talks loom
* LVMH jumps, driving luxury stocks up
* Lonza tumbles after sales miss, CEO retiring
Jan 30 - Welcome to the home for real-time coverage of European equity markets brought to
you by Reuters stocks reporters and anchored today by Josephine Mason and Helen Reid. Reach them
on Messenger to share your thoughts on market moves:
GOT LEGS? (1334 GMT)
Investors are wondering how much longer the surprisingly strong start to the year in
equities can last given the swathe of economic and political uncertainties keeping investors on
The STOXX 600 is up more than 6 percent and on track for its best monthly performance since
October 2015 while the S&P 500 is up 5.3 percent this month and set for its biggest monthly gain
since January last year.
It's unlikely to keep up that pace of gains.
But Willem Sels, chief market strategist at HSBC Private Banking, reckons global equities
have legs to rise another 10 percent before the end of the year. EM will outpace that growth and
Europe will be slightly lower, he says.
That's partly because December's brutal sell-off was overdone.
But markets are also close to reaching a level where analysts have slashed earnings
expectations and stocks look cheap enough to lure investors back, he says.
Of course, much still depends on the outcome of the protracted U.S.-China trade dispute, the
health of the Chinese economy, Brexit and EU elections in May to name a few events and issues
that will keep investor sentiment cautious.
"I think we're now getting to a much healthier level (of expectations)," he says.
"We have a transition period with lack of clarity on the economic cycle and politics. We're
not going into a recession in the U.S. or even in the bulk of Europe and China. Once stimulus
measures kick in Q2 or H2 this year, then the market will gather more confidence."
Q4 EARNINGS MELTDOWN: LIKED THE DATA? SEE THE GRAPHIC! (1251 GMT)
So, what to make with the STOXX 600 earnings growth expectations being slashed week after
Well, as you know, some argue it's well priced in the market and some argue it's not.
So before you make up your mind, have a look at how bad the cuts have been since November:
IT'S GONNA GET BETTER BEFORE IT GETS WORSE! (1200 GMT)
equities, investors better "enjoy it while it lasts" because it won't!
Their advice is to take advantage of the current market optimism to get defensive and ready
for the big bad downturn which they forecast for the end of the year.
"We see downside for global equity indices in 2019, including European indices, as the
spectre of U.S. recession in early/mid-2020 is likely to begin impacting equity markets by the
end of the year," they write.
Their STOXX 600 forecast for end-year is particularly dire given that we are now just below
to "maximum pain" given the gloomy macro scenarios priced in. They did however warn of possible
earnings downgrades along the road.
(Julien Ponthus and Sudip Kar-Gupta)
CREDIT: HOW WORRIED SHOULD EUROPEAN EQUITY INVESTORS BE? (1137 GMT)
Credit has been the talk of the City for a few months now, as investors and analysts alike
point to company debt as a worrying area which could spill over into stock markets. But, for
both asset classes, January has been a month of recovery with the market wondering if things are
really as bad as they feared.
A potent cocktail of high balance sheet leverage, weaker earnings growth and tightening
strategy head Emmanuel Cau and team write.
But "fears of a full-blown credit crisis and contagion to equities should not be
exaggerated," they reckon, listing a handful of reasons why concerns may be overdone.
"Credit fundamentals are not getting any better, but headwinds look manageable for now, as
central banks are showing policy flexibility, banks are in a better shape than they were a
decade ago, and cost of debt is still low," writes Cau.
The bearish scenario, according to them, would be a choppy 2019 creating difficulties for
companies issuing bonds, and a recession in Europe in 2020 - which would spell trouble for
maturities in 2021.
Barclays' conclusion? "Care should be taken with generally challenged companies with
meaningful maturities in 2020/2021 and beyond."
You can see below how closely the STOXX 600 moves in concert with an ETF tracking the Itraxx
5-year Crossover (a CDS index tracking 5-year maturities for the 75 most liquid sub-investment
HEALTHY PAIR: LONG DRUGS, SHORT STOXX (1017 GMT)
As debate over making portfolios more defensive in the face of a slowing economy continues,
has been pleasing for a while already: Long Healthcare/short STOXX 600.
The pair has yielded more than 11 percent over the past 12 months and it's fair to ask
whether it's now too late to jump in. Benoist doesn't think so.
"Although a relative... P/E Ratio analysis seems to point towards a possible reversal in the
trend, we remain convinced that the European pharma sector will continue to benefit from the
current economic uncertainty," he says.
And here in bullets the drivers he thinks will forge the sector's performance going forward:
* Macroeconomic tensions are unlikely to dissipate in Europe this year
* Pharma valuations and financial metrics remain attractive
* Fears of margins contraction in the U.S. are probably overblown
* EM markets: the next billion patients
* Cash rich pharma majors will continue to pursue aggressive acquisition policies
OPENING SNAPSHOT: LVMH LIFTS LUXURY; LONZA AND NOVARTIS TUMBLE (0857 GMT)
Consumer discretionary is the top boost to European stocks today thanks to LVMH's
surprisingly strong results, which came as a relief to investors in the luxury sector and are
nice 6 percent lift to LVMH.
All that pessimism about luxury being dented by a Chinese slowdown has kept the sector muted
for a while, so no surprises that this good news is driving some of those bearish trades to
The STOXX 600 is far from being exuberant overall, though, only just managing a 0.1
Novartis is down 1.9 percent and the biggest drag to the STOXX as analysts are not impressed
by its 2019 earnings growth guidance. Lonza is the biggest European faller, down 5.3 percent
after it reported sales under expectations and said CEO Richard Ridinger is retiring.
Over in the UK, the FTSE 100 is up 0.8 percent thanks to sterling's slide overnight boosting
its dollar-earning exporter stocks with BAT a top gainer.
Here's your snapshot of top movers:
WHAT'S ON THE RADAR: LVMH REASSURES, SIEMENS DISAPPOINTS, OPHIR GETS TAKEOVER BOOST (0750
European shares are set for a muted open as investors hold their breath ahead of crucial
U.S.-China trade talks. The FTSE 100 cut through the gloom with futures indicating a 0.6 percent
gain thanks to the translation effect of a weaker pound boosting London-listed multinational
LVMH shares are seen jumping 2-5 percent after cheery results from the luxury conglomerate
which said it is “cautiously” confident as fourth-quarter sales held up despite fears of a China
Ferragamo, on the other hand, could lose 2-3 percent, traders say, after the Italian luxury
group reported sales fell in 2018.
Weaker results from Siemens are likely to take 1 to 2 percent off the shares. The industrial
conglomerate reported weaker-than-expected industrial profit for its first quarter due to
profits at its power business plunging.
opposition, saying it will be interesting to see if European mobility will be decided by
"backward-looking technocrats" or "future-orientated Europeans".
Also in M&A news, French IT consulting firm Atos said it would distribute 23.4 percent of
shares in its subsidiary Worldline to shareholders. Worldline is indicated down 1-2 perecnt.
flow for this year, and its shares are set to fall 2 percent.
Pharma giant Novartis is indicated down 1-2 percent after it said it sees mid-single-digit
sales growth from its core businesses in 2019, but traders said its dividend was slightly less
In the UK, oil exploration firm Ophir is seen jumping 5-10 percent after agreeing to be
bought by Indonesia’s Medco.
HEADLINES ROUND-UP: SIEMENS, KPN, LVMH, NOVARTIS (0715 GMT)
Futures are treading water this morning, indicating a slight dip for the Eurostoxx 50 and
the DAX, while the FTSE 100 is set to get a boost from the weaker pound.
Results from some of Europe's biggest hitters in industrials, luxury, and pharma are likely
to drive stock moves today while investors also look to the start of trade talks between the
U.S. and China, and the Fed.
Weaker results from Siemens could hurt the shares: the industrial conglomerate reported
weaker-than-expected industrial profit for its first quarter due to profits at its power
Siemens' CEO also fired some shots at the EU over the Alstom-Siemens merger facing
regulatory opposition, saying it will be interesting to see if European mobility will be decided
by "backward-looking technocrats" or "future-orientated Europeans"
Dutch telecomms firm KPN also reported earnings that missed estimates and guided to lower
cash flow for this year.
And from after the close yesterday, some cheery results from LVMH could help lift the mood
in the luxury sector: the luxury conglomerate struck a "cautiously" confident tone for the year
ahead as Q4 sales held up despite fears of a China slowdown.
Pharma giant Nobartis said it sees mid-single-digit sales growth from its core businesses in
2019 as it sheds its Alcon eyecare unit and a U.S. generics pills business to focus on newer
Siemens CEO calls on Europe to approve Alstom rail merger
Siemens misses Q1 profit forecast as power problems persist
LVMH reassures on China as Vuitton handbags boost sales
Novartis sees 2019 growth as it sheds eyecare unit, narrows focus
KPN Q4 earnings miss estimates; sees lower cash flow in 2019
Santander Q4 net profit 2.07 bln euro
French Q4 growth better-than-expected at 0.3 pct
FTSE BOOST BUT EURO ZONE UNDER PRESSURE (0633 GMT)
We've got a mixed start in Europe this morning, with Frankfurt and Paris under pressure amid
continued caution ahead of policy guidance from the Fed and the latest U.S.-China trade talks
and London drawing support from the weaker pound overnight to extend yesterday's rally following
the Brexit votes in parliament.
We've got an action-packed day with the Fed deciding on interest rates later in the session
and fresh talks between Washington and Beijing over the protracted trade dispute kicking off.
After raising rates gradually last year, the Fed is taking a wait-and-see approach to further
tightening in the face of an overseas slowdown and market volatility.
which warned earlier this month about a slowdown in China, reported sharp growth in its services
Financial spreadbetters expect London's FTSE to open 35 points higher at 6,869, Frankfurt's
DAX to open 4 points lower at 11,215 and Paris' CAC to open 9 points higher at 4,937.
Back in the UK, the market would like more certainty that a no-deal Brexit was off the cards
rather than having to wait for PM May to head back to Brussels to attempt to renegotiate the
terms of the backstop again.
"The market was clearly not cheered by a result that legally keeps no deal on the table,
given that sterling has responded by surrendering some of its recent gains. Investors would have
appreciated a more conclusive view on rejecting such an outcome," said Geoffrey Yu, head of UK
investment office, UBS Global Wealth Management.
"All eyes will turn to the EU as the question now becomes what is achievable in new
negotiations. As things stand, an extension is not entirely unthinkable."
(Reporting by Josephine Mason, Helen Reid, Julien Ponthus, Danilo Masoni)