* European shares climb to 2-week high
* FTSE 100 lags behind as pound 'finds its mojo'
* Earning updates back in focus
* BT lifts guidance, ING beats
Nov 1 - Welcome to the home for real-time coverage of European equity markets brought to you
by Reuters stocks reporters and anchored today by Danilo Masoni. Reach him on Messenger to share
your thoughts on market moves: email@example.com
HONEY, I SHRUNK THE RESEARCH BUDGET (1404 GMT)
No surprises that the market for equity research has shrunk in the brave new post-MiFID II
world, but the scale of the decline is quite impressive.
"Research budgets among the largest European equity investors for 2018 average over $8
million, representing a 19% decrease on a weighted basis from 2017," Greenwich Associates
So investors are spending nearly 20 percent less on research than they were last year.
The cutbacks could be slowing down, though, meaning the worst may be over for sell-side
"Looking into 2019, investors expect only a 5–6% further reduction in budgets, with
research/advisory provider lists likely to be stable after a significant initial decline,"
analysts at Greenwich Associates add.
HOUSEBUILDERS CHEER BREXIT PROGRESS NEWS (1246 GMT)
UK housebuilders are among the stocks seeing the strongest rally today as news of progress
in Brexit talks lifts the sector among the worst-hit by the vote to exit the EU.
They're seen as the most vulnerable to a messy Brexit, so signs of progress towards a deal
are driving a strong surge.
"I think this is all related to sentiment changing around Brexit," says Charlie Campbell,
housebuilders and building materials analyst at Liberum.
"The currency market adjusted in half a second and the equity market takes a day," he adds.
"Sentiment towards Brexit is the dominant theme at the moment in housebuilding shares," he
reckons, and with a large short base in many of these stocks, even a little positive news causes
big moves as shorts are squeezed.
But those investors long housebuilders are probably not bringing out the champagne just yet:
Persimmon, for example, is only back at its levels of end-September, when investors were very
nervous about a no-deal Brexit.
Overall the housebuilding sector is still down quite sharply this year, and
trading around the levels it was before the Brexit vote.
EUROPEAN INVESTORS WERE CAUGHT WRONG-FOOTED BY DEFENSIVES' RISE (1055 GMT)
European equity funds were caught off guard by last month's outperformance of defensives
over cyclicals, HSBC says in its investor allocation note - arguing investors should buy
defensives, and specifically utilities, to catch some of the rotation underway.
"Cyclical sectors, where funds are overweight, have underperformed," they note. Meanwhile
utilities and consumer staples - among the most unloved defensive sectors globally - have
outperformed the MSCI All-Country World index (ACWI) index substantially in October.
As you can see below, European funds have been tilted towards capital goods, semiconductors,
software, and suffered from it.
HSBC sees defensives continuing to outperform and advise funds to "ease their pain" by
increasing their defensive positioning.
In Europe, they recommend utilities - where positioning is, according to their
number-crunching, at its lowest level since 2012. There's also a rates angle: if bond yields
rise only slightly (as HSBC expects), then utilities could be more attractive for yield-seeking
On the other hand, they say capital goods look over-owned as investors have increased their
positioning over the past six months - and cyclical indicators point to risks ahead for
STRONG STERLING HURTS UK EXPORTERS (1014 GMT)
It's a pattern which may become familiar if progress in Brexit talks continues and boosts
the pound: UK-listed big multinational firms could see their shares suffer.
Sterling has rallied after a British official said London is close to sealing a deal to give
UK-based financial services firms basic access to EU markets, and the FTSE is lagging European
markets as a result.
The biggest UK-listed exporters are all in the red (see below) while a Goldman-compiled list
of domestic stocks are all rising strongly thanks to the stronger pound.
"Potential easing in Brexit uncertainty into year-end could support GBP, which is unlikely
The surge in sterling has eased somewhat, helping the FTSE climb into the positive, but it's
still significantly underperforming Europe.
EUROPE IN A MOOD OF ITS OWN (0825 GMT)
Asia got off to a positive start for November, but it was a bit murkier for Europe in the
few minutes after the open. While the FTSE had a good reason to be in negative territory with
the pound jumping on good Brexit news, it was less easy to find one for European bourses.
But 25 minutes into the session and the overall picture isn't that gloomy after all, with
the STOXX 600 up 0.4 percent and today's batch of earnings not such a negative one.
BT is shining, up 7.1 percent, and so is ASM with a double digit increase of 12.4 percent.
Here are the top movers on the STOXX 600:
WHAT YOU NEED TO KNOW BEFORE THE OPEN (0752 GMT)
European shares are set to open lower today with a mixed bag of corporate updates curbing
enthusiasm after yesterday's Halloween rally pushed the STOXX 600 regional benchmark further
away from the 22-month lows hit last week.
Euro zone stock futures were trading down around 0.5 percent with FTSE futures lagging
behind, down 0.7 percent, as the pound strengthened on renewed Brexit optimism sparked by
reports of a deal with Brussels on financial services.
In the cheap but unloved banking sectors, Credit Suisse was called down 1-3 percent after
third-quarter profit at Switzerland's second-biggest bank lagged estimates even though it soared
74 percent as operating expenses fell faster than a 2 percent decline in net revenues.
a better than expected profit as it continued to grow on an underlying basis despite being fined
for failures to prevent money laundering.
Also on the watchlist is Lonza after news it sold its water care business for $630 mln,
while miner BHP could get a lift after it stuck to its promise of returning $10.4 bln to
Eyes also on BT (+3% pre-market) after the British broadband company reported a 2 percent
rise in first-half earnings and nudged its guidance for the full year higher.
In the oil sector, which already got a big boost last week from "blowout" numbers from BP,
on 2018 earnings
GOOD NEWS FOR BREXIT! BAD NEWS FOR THE FTSE! (0742 GMT)
Can't have it both ways: the pound is surging and on track for one of its biggest rises of
the year, but that's obviously bad news for the FTSE.
The FTSE Future, down 0.8 percent, is underperforming European peers while sterling is up
0.9 percent after the Times reported Theresa May had sealed a tentative deal with Brussels on
Here's a link to the Times story: https://bit.ly/2yMThBE
HEADLINES ROUND-UP: EARNING UPDATES LOOK A MIXED BAG (0655 GMT)
It's another heavy day for earnings and the updates released so far this morning are
somewhat of a mixed bag.
Just take the cheap but unloved banking sector: profit growth at Credit Suisse has
lagged estimates even though it rose sharply on falling operating expenses, while ING
reported a better than expected profit, as it continued to grow on an underlying basis despite
being fined for failures to prevent money laundering.
Also on the watchlist is Lonza after news it sold its water care business for $630
mln, while miner BHP could get a lift after it stuck to its promise of returning $10.4
bln to shareholders. Here's your headlines roundup:
Credit Suisse Q3 profit jumps 74 pct, lags estimates
Swiss bank Vontobel says advised client assets rise 19 pct
ING underlying growth continues despite money laundering penalty
Novo Nordisk Q3 profit slightly below forecast, nudges up 2018 sales outlook
Carlsberg Q3 sales beat forecast, confirms lifted 2018 outlook
Lonza sells water care business for $630 mln
BHP to return $10.4 bln in buyback, special dividend bonanza
EUROPE SEEN MIXED AS NOVEMBER STARTS, FTSE TO LAG BEHIND (0634 GMT)
After the Halloween rally that made the scary October less terrible, shares in Europe are
set to open mixed with the FTSE 100 lagging behind on strength in the pound.
"Brexit optimism has returned, and the pound has found its mojo," says Jasper Lawler, Head
of Research at LCG. "Comments by Brexit Secretary Dominic Raab that a Brexit deal should be
nailed down by 21st November, in addition to reports that a tentative deal has been struck for
UK financial services has sent the pound 1% higher across the previous session and overnight".
Raab's department later said that while Nov. 21 was the date suggested by the chair of
parliament's Brexit committee, that did not mean a firm date had been set for a deal to be done.
Overnight, Asian stocks as bruised investor sentiment got some relief from another robust
Here are your opening calls, courtesy of LCG:
FTSE to open 30 points lower at 7098
DAX to open 9 points higher at 11458
CAC to open 4 points lower at 5089