* European shares turn positive; banks fall
* ECB to end bond buys, keep rates steady through next summer
* Fed raises rates as expected, signals 2 more rate hikes this year
June 14 (Reuters) - Welcome to the home for real-time coverage of European equity markets
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INVESTORS DIGEST ECB DECISION: TOO HASTY? (1525 GMT)
The ECB's policy announcement came earlier than most market watchers expected, and its
perceived dovishness is dividing opinions.
While stock markets are rallying on the news - no doubt partly fuelled by the drop in the
euro delivering a boost to euro zone stocks - some investors are uncertain it's the right move,
but for different reasons.
"Although we now know that QE is scheduled to end under Draghi's watch, we think the ECB
could wait a little longer before starting to raise interest rates," says David Zahn, head of
European fixed income for Franklin Templeton.
"hasty" and saying "Mario Draghi obviously succeeded once again in selling an ultimately hawkish
decision as dovish to financial markets."
On the other side of the fence, Nick Peters, multi-asset portfolio manager at Fidelity,
argues keeping lower rates for longer could be harmful: "Not only does the Eurozone have to
contend with an economy that has peaked and is underperforming the US, medium-term geopolitical
concerns, and higher oil prices - now it may not see positive interest rates before the next
global downturn, and enter that downturn with very little ammunition."
lower rates for longer support market liquidity, a boon for Europe's equity markets. "One of the
key drivers for risk assets has been and continues to be liquidity, beyond all other things. The
longer they delay rate hikes the longer liquidity stays decent," he says.
Banks have had to rethink their expectations for a rate rise: while UBS Wealth Management
out its expectations for a first deposit rate hike by three months, from June 2019 to September
Pressed for a more specific date during the press conference, Draghi did say, somewhat
sassily, that if "through the summer" meant September, they would have said September.
Core European stock markets, particularly those that benefit from a weaker euro, are
rallying sharply - here's Germany's DAX on course for its best day in 2 1/2 months. Autos
too are set for their best day since early April, up 2.2 percent - though one trader
says it's "hard to get too bullish" on them bearing in mind potential trade tariffs.
DRAGHI WORKS HIS MAGIC, BUT NOT FOR BANKS (1354 GMT)
Today's was indeed a "live" European Central Bank meeting but what caught markets by
surprise was the central bank's dovish tone on interest rates, rather than the well-anticipated
decision to wrap up its stimulus programme.
It looks like Mario Draghi has worked his magic for the stock market, pushing the broader
euro zone index up 0.9 percent to its highest level in more than two weeks.
There is one exception however: banks, whose traditional lending business can reap better
margins when interest rates rise. Their sectoral index was down as much as 0.6 percent.
Karen Ward, chief market strategist at JP Morgan Asset Management, however, sees the glass
half full for the sector.
"At face value the fact that interest rates will stay lower for longer is not positive for
the financial stocks. However, it is too simplistic to argue that financials need higher rates.
If low interest rates support the health of the economy – not least via a weaker exchange rate –
then that will help demand for lending and volume bank lending," she said.
(Danilo Masoni and Helen Reid)
ECB STATEMENT SENDS STOCKS HIGHER AS RATE HIKE SEEN FURTHER AWAY (1230 GMT)
Euro zone stocks have hit session highs, now up 0.2 percent, after the ECB issued a
statement saying rates will remain steady through next summer and announcing a tapering of its
asset purchases. The statement caused relief for stocks and bonds while the euro fell as it
pushed expectations of a rate rise further out.
Interest-rate sensitive autos and utilities stocks rose sharply after the statement, with
the autos sector up 0.9 percent and utilities up 0.1 percent. Meanwhile euro
zone bank stocks, which stand to gain from higher rates, swung wildly in choppy trading
and are now down 0.1 percent on the day.
Investors now await the press conference at 1230 GMT for further details.
"We still think the first rate hike is distant, but await more information... We especially
look for more clarification on the new guidance, which will further help to assess the ECB's
thinking on the likely next steps changing policy," say Nordea analysts.
Here's a reminder of global assets' performance since the ECB signalled the start of QE:
WHO TO BET ON FOR THE WORLD CUP? BOOKMAKERS! (1115 GMT)
Investors are making their bets ahead of kick-off for the 2018 World Cup at 1500 GMT today
with Russia v Saudi Arabia. And among those set to benefit the most in the corporate arena are
Interestingly, Berenberg analysts say the tournament usually drives higher betting margins
than other international football events because of such a high number of games. The previous
) of the total amount bet on sports that year on digital platforms.
The World Cup will probably boost quarterly numbers for GVC, William Hill, Paddy
lesser extent, they say, and accordingly the bookmakers' campaigns to win customers have reached
fever pitch with special offers and marketing ploys.
Kindred's Unibet has launched a World Cup chatbot to allow users to find odds and place
"For GVC we think the potential volume impact in the UK, together with the boost to revenues
in Germany (if the campaign proves successful) could more than compensate the negative effect of
the Italian football team (sadly) not being in the tournament," write Berenberg, adding the
tournament will also be "critical" for PPB to gain back market share in the UK.
Read our story for more on the companies set to rake in cash during the
OIL EXPLORATION BUDGETS? "THERE'S FLEXIBILITY TO THE UPSIDE" (1030 GMT)
The oil price rally has made the energy sector one of the best-performing in Europe
but investors remain on the lookout for any further sign of improvement.
oil companies may also have room to increase their exploration budgets this year.
"This (demand for seismic) is being driven by a range of customers from majors to smaller
E&Ps and by a number of geographies (West Africa and South America were highlighted as 'hot
spots') suggesting that the confidence improvement is widespread," they say in a note.
"Customer conversations also suggest that there is some flexibility to the upside in
exploration budgets for 2018 if oil prices remain around $75/bbl (this was seismic specific so
does not mean overall spend is going up)," they add.
ECB MEETING: THE END OF QE? (0854 GMT)
Analysts and investors are weighing in with their thoughts ahead of the ECB's meeting today
with high expectations that the end of QE could be signalled. It's an interesting divide between
those who think the recent political shake-up in Italy is spurring the ECB to act sooner, and
those who think it will in fact be a motivation to put the brakes on.
Paul Donovan, chief economist at UBS Wealth Management, has a good summary of expectations:
"There are hopes of either 1) an announcement of the timetable to end bond buying, or 2) an
announcement of an announcement of the timetable to end bond buying."
Arne Petimezas, rates analyst at AFS in Amsterdam, says: "I think they will announce that
they will announce the final taper of QE for the fourth quarter today, and say not much else.
There have been rumours that decision could be delayed to July, but with Italy they want to
teach people a lesson."
One trading desk sent this note round: "It'll discuss, and possibly announce, an end to
asset purchases, even as more evidence of slowing growth emerges. But there's unlikely to be
anything specific about rates."
the ECB QE program was always expected to be in 2018 – the timing of the announcement, against a
backdrop of under-performing equity markets and renewed political turmoil in Italy and Spain,
appears strange in our view. If nothing else, such definitive action takes away optionality and
flexibility for the ECB at a time when these feel like a distinct benefit."
And one investor points out the ECB will not only have to take into account European
economic forces but also global ones, with European companies so reliant on emerging market
growth: "Draghi is pretty stuck - Europe is slowing down and if U.S. rate rises impact on
emerging growth that's an added problem for Europe."
Here's a reminder of the ECB's massive asset purchase programme:
OPENING SNAPSHOT: EUROPEAN SHARES FALL AFTER FED AS ECB LOOMS(0718 GMT)
Sandwiched between two central bank meetings, European shares are selling off this morning
after a more hawkish than expected Fed signalled two more rate hikes this year, more than the
market had priced in.
Bank stocks are leading falls across European benchmarks with all the STOXX 600 sectors in
A crucial ECB meeting also awaits investors anxiously anticipating more concrete guidance
from Draghi on when to expect the end of QE.
Shining among the selling are Aveva, jumping 8.4 percent after its full-year revenues rose,
WHAT YOU NEED TO KNOW BEFORE THE OPEN (0652 GMT)
European shares are set to open lower with rate-sensitive sectors in the spotlight after the
Fed signalled two more interest rate hikes this year and ahead an ECB meeting that will debate
whether to end its asset purchases by year-end.
The pan-European STOXX 600 index has been moving within a tight 2-percent range since end
May and it is unlikely to deviate from that today with futures last trading down 0.4-0.6
Autos, recently hit by worries of higher US import tariffs, could also be in focus after
news of a 1 billion-euro fine for VW over emissions cheating and an FT report saying that
Renault CEO will likely step down before his mandate ends. VW shares are seen down 1 pct in
Other stock movers: Rolls-Royce to cut 4,600 jobs to save 400 mln stg a year (+1% pre-mkt);
GSK's two-drug HIV treatment meets main goal in late stage studies (+1-2% pre-mkt); Sweden's
radio; Fashion retailer Gerry Weber issues a profit warning and said it was implementing a
restructuring programme (-7% pre-mkt)
For more headlines check out the previous post.
EARLY MORNING HEADLINES ROUND-UP: AUTOS IN FOCUS (0554 GMT)
Turning to corporate news that could move single stocks today, here are the top headlines
that caught our attention.
It looks that the auto sector, recently hit by worries the US could apply higher import
tariffs, could be in the spotlight with VW fined 1 billion euros over emission cheating and a
report saying Renault CEO will likely step down before his mandate ends.
VW fined 1 bln euros by German prosecutors over emissions cheating
Italian banks to shed 70 bln euros in bad loans this year -PwC
Italy's Benettons tap GIC among bidders for Cellnex holding vehicle - sources
And here some top market headlines:
> Asian shares slip on Fed hike, trade fears and soft China data
> Wall St falls as Fed signals two more hikes this year
> Nikkei drops, risk sentiment hit by hawkish Fed tone, trade war worries
> U.S. yields climb after Fed flags 2 more rate hikes this year
> Fed-driven dollar surge fades, focus moves to ECB meeting
> Gold slips as Fed signals more rate hikes, but trade worries limit losses
> Copper slips to near one-week low after soft China data
> Oil falls on lower China refining activity, fresh U.S. crude output record
MORNING CALL: EUROPEAN SHARES SEEN DOWN AFTER FED, BEFORE ECB (0513 GMT)
European shares are expected to open lower this morning after the Federal Reserve raised
interest rates and signalled two more hikes this year and ahead of the European
Central Bank meeting that will debate whether to end its huge asset purchases by year-end
Here are your morning calls, courtesy of David Buik at CORE SPREADS.
Over in Asia, the Fed's more hawkish tone in forecasting a slightly faster pace of
tightening drove shares lower, while concerns about U.S.-China trade frictions kept investors on
edge. Here are the highlights of our latest global markets report.
* Fed raised rates as expected, sees 2 more rate hikes this year
* Concerns about U.S.-China trade war cast shadow
* China data surprisingly soft
* Dollar quickly loses steam after jump on Fed, focus on ECB