LIVE MARKETS-Just say no: The Powell put is a puff
* European shares dip under 4-month highs
* U.S., China sketch outlines of trade deal -sources
* Centrica, Maersk down after results; Barclays up
* Trump threatens tariffs on European cars
Feb 21 - 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: danilo.masoni.thomsonreuters.com@reuters.net
JUST SAY NO: THE POWELL PUT IS A PUFF (1548 GMT)
Are investors high? There's a sense of disbelief among strategists looking at how
enthusiastically markets have bounced back since Christmas and what was the worst December since
1931.
"Investors, like marijuana users, are high once again on the promise of renewed monetary
injections," writes SocGen's permabear Albert Edwards.
"With their senses now numb to the reality around them, investors could miss the fact that
the economic cycle is deteriorating sufficiently rapidly that it is about to crush their equity
portfolios," he adds.
"Have central banks finally created traders’ paradise?" asks Stephane Barbier de la Serre at
Makor, who also finds there's a strange smell in the air.
"EITHER the whole (investment) universe and its dog has suddenly become ultra-groovy and
looking for highs all the way (govies, credit, equities, cyclicals, defensives, copper, oil,
gold, the whole gang really!) OR hallucinatory complacency is now the real name of the game…"
In other words, does the Fed's dovish evolution equate to a Powell put or a Powell puff?
For those of you who read this far down, here is an interesting fact in Edwards' Global
Strategy Weekly: "there is a clear causal relationship between surging fatalities of pedestrians
and legalising marijuana" in certain U.S. states.
(Julien Ponthus)
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SMALL IS STILL BEAUTIFUL IN EUROPEAN STOCKS (BUT CHOOSE CAREFULLY) (1344 GMT)
Perhaps surprisingly, given the slowing growth plaguing the euro zone from Italy to Germany,
small- and mid-cap stocks are still beating the market both in continental Europe and in the UK,
says JP Morgan's small & mid-cap strategist Eduardo Lecubarri.
Daring investors may want to dip in, but should focus on areas that were oversold last year,
according to him.
"It is clear that investors have little appetite for chasing the market here, and instead
remain on "bargain hunting" mode," writes Lecubarri in a note detailing the "top picks" in
Europe (see below).
JPM recommends investors overweight pan-European small and mid-cap stocks versus large, and
in particular:
* Focus on oversold stocks with a preference for "quality value"
* Overweight Germany and Switzerland for safety in balance sheets and EM-driven growth
* Overweight Italy and Finland - the cheapest, most depressed markets in Europe
* Avoid big sector bets as there's "no clear leadership" of cyclicals or defensives
Overall, though, the euro zone is still not a good bet, JP Morgan's equity strategists say.
"For Eurozone to outperform, the region's earnings need to beat the U.S., and the Eurozone
Banks need to lead. We don’t see either anytime soon, and still do not find Eurozone to be
attractively priced," they write.
(Helen Reid)
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BREXIT: AND THEN SUDDENLY AT 1128 GMT...(1214 GMT)
A strong disturbance in the force (as Obi-Wan Kenobi would say) occurred at 1128 GMT
precisely when this Reuters headline hit the screen:
21-Feb-2019 11:28:36 - BREXIT: UK GOVT SOURCE SAYS IT DOES NOT FEEL LIKE WE WILL HAVE A
BREXIT DEAL BY NEXT WEEK
The effects gradually faded away but the impact of that story sure was
spectacular as you can see below.
Moving forward, similar bursts of volatility seem unavoidable. This morning we had Juncker
saying he was not "very optimistic" while Hammond claimed talks had been constructive and that
MPs could vote on a revised deal as early as next week.
Consensus still seems to be for a last minute deal being reached though.
Christopher Graham from Standard Chartered kind of captures the mood in his note today: "our
core view remains that a deal will eventually be passed in Parliament, but only just."
"All other options, ranging from a no-deal exit to a second referendum, remain on the
table," he adds.
(Julien Ponthus)
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FROM EUROBOOM TO EUROGLOOM, ARE EXPECTATIONS TOO PESSIMISTIC? (1056 GMT)
The euro zone PMI this morning were mixed (terrible manufacturing and strong services) but
overall expectations over the region's economic performance have been worsening significantly
over the course of the past year.
The narrative has clearly shifted from euroboom in 2017 to eurogloom but have markets become
too pessimistic now? Perhaps the fact that the euro strengthened this morning after the French
business activity was surprisingly firm in February could be a clue.
UBS economists Anna Titareva, Reinhard Clus, Felix Huefner have looked into this to conclude
that the bar for more disappointments is now fairly high.
"Uncertainty over Brexit and US-China trade relations is likely to persist over the coming
weeks and the risk of US import tariffs on European cars is something that might not be
sufficiently appreciated," they say.
"Hence, we can’t be sure that the string of negative surprises has come to an end. However,
we think the hurdle towards further growth disappointments in Europe is rising," they add.
Germany and France accounted for almost 90 percent of the sharp drop in their growth
surprise index but "that's not only because they are the heavy-weights in the index, but also
because they have been hit hard by a number of one-offs", they say.
Looking forward, the bounce back from these one-offs (flu wave, strikes, new car emissions
regime, low water in the Rhine, and the yellow vest protests) may be stronger than expected,
they say.
(Danilo Masoni)
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OPENING SNAPSHOT: SOME BIG SLIDES FROM CENTRICA, MOELLER-MAERSK, SWEDBANK (AGAIN) (0851 GMT)
While benchmarks are holding around flat, stealing the show are some pretty significant
falls after results from Moeller-Maersk, Siltronic, Centrica, and Hays while Swedish lender
Swedbank falls another 7.2 percent to its lowest since July 2016 in the second day of falls
after allegations of money laundering.
Moeller-Maersk, the world's biggest container shipper, is down 8.7 percent after saying it
estimates trade restrictions introduced during 2018 will reduce global container trade growth by
0.3 to 1 percentage points per year in 2019-2020 if U.S. tariffs are increased to 25% in March.
Chipmaker Siltronic is down 8.4 percent after it cut its guidance, saying its cost positions
were negatively impacted by tariff increases and rising electricity costs in Germany.
French oil services firm TechnipFMC is also falling 8.2 percent after reporting a
fourth-quarter loss, and Centrica is down 11 percent after saying a cap on energy prices would
hurt its 2019 results.
Italian cable maker Prysmian is tumbling 8.6 percent after reporting a system failure in
Westernlink Interconnection, an electrical cable connecting Scotland and Wales.
And UK defence firm BAE Systems is down 5.8 percent after warning it could be hit by
Germany's ban on arms sales to Saudi Arabia.
On the positive side a rare gainer is Genmab, up 7.9 percent after reporting its Darzalex
drug drove a boost to profits. Barclays is up 3.7 percent after it showed signs of progress in
its under-pressure investment bank, where profit for the full year increased 15 percent to 2.6
billion pounds as its equities trading unit saw income rise 25 percent.
(Helen Reid)
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WHAT WE'RE WATCHING BEFORE THE OPEN (0753 GMT)
European shares are expected to open at fresh 4-month highs today with stock index futures
up 0.1-0.5 percent as markets remain constructive on optimism over a Sino-US trade deal and
after the Fed minutes confirmed the central bank's dovish shift.
Speaking about trade, Trump said overnight the US would impose tariffs on European car
imports if it cannot reach a trade deal with the European Union. Even though the remarks could
weigh on autos, especially German carmakers Daimler, BMW and VW which are highly exposed to the
US, the threat is not new and a recent bounce in auto stocks indicates that investors remain
hopeful a worst-case scenario of a 25 percent import tariff could be avoided.
Elsewhere it's another heavy day for earnings reports.
Barclays reported a lower-than-forecast attributable profit for 2018, as it took a 150
million pound provision against Brexit losses and its under-pressure investment bank weathered a
difficult fourth quarter. Capital however beat expectations and Barclays shares are seen rising
at the open.
Shares in UK defence contractor BAE and French engineering firm Technip are seen falling
after their updates, while calls are mixed for Deutsche Telekom after the telecoms group
forecast its revenue and core earnings would continue to grow in 2019.
For more market-moving headlines check out the previous posts.
(Danilo Masoni)
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FUTURES POINT TO FURTHER GAINS (0722 GMT)
European stock index futures are up 0.1-0.3 percent with the STOXX 600 now likely to reach
fresh 4-month highs at the open.
Meanwhile we have some more corporate headlines that could liven up today's session.
Barclays reports 2018 profit of 3.5 bln stg, missing estimates
Relx sees solid business growth continuing in 2019
Outsourcer Serco lifts outlook as 2018 marks positive turning point
BAE Systems sees 2019 earnings growth despite geopolitical uncertainty
(Danilo Masoni)
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EARNINGS IN FOCUS: DEUTSCHE TELEKOM, INSURERS AND OTHERS (0655 GMT)
It's another day packed with earning updates.
Among the highlights so far is Deutsche Telekom which forecast that revenue and
core earnings would continue to grow in 2019, sending its shares up 1.5 percent in pre-market
trade, while results from insurers look mixed: AXA posted lower profit as a result of
charges related to its the IPO of its US unit as well as the impact of a spate of natural
disasters, while net profit at Swiss RE rose despite big claims.
We also have early updates from Accor Hotels and GAM Holding and many
other companies are due to report their results later on.
Auto stocks will also remain in the spotlight after Trump said overnight the USwould
impose tariffs on European car imports if it cannot reach a trade deal with the European Union.
"We're trying to make a deal. They're very tough to make a deal with - the EU," Trump said.
"If we don't make the deal, we'll do the tariffs."
Here's your headlines round-up:
Deutsche Telekom sees 3 pct growth in core 2019 earnings
Insurer AXA reports lower 2018 net profit after IPO costs and natural disaster
Swiss Re 2018 net profit up 27 percent despite big claims
GAM assets under pressure, sees "challenging" 2019
AccorHotels' 2018 profit rises, beefs up lifestyle loyalty initiatives
Standard Chartered sets aside $900 mln to cover U.S., British fines
MEDIA-Deutsche Bank lost $1.6 bln on a bond bet- WSJ
UBS CEO says French appeals process to take "several years"
France's Wendel to sell 40 pct stake in Allied Universal to Canada fund
Millicom spends $1.65 bln on Telefonica Central America mobile businesses
Glencore will 'vigorously contest' $680 million tax demand
Swedbank confident about its anti-money laundering measures
Slovenian bank NLB 2018 net profit falls by 10 percent
Italian payment services group SIA may list on stock market -CEO
(Danilo Masoni)
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MORNING CALL: EUROPEAN SHARES SEEN HIGHER (0621 GMT)
European shares are expected to open higher this morning, supported by renewed optimism over
a possible trade deal between the United States and China and more patience signalled by the
Federal Reserve.
Financial spreadbetters at IG expect London's FTSE to open 7 points higher at 7,235,
Frankfurt's DAX to open 66 points higher at 11,468 and Paris' CAC to open 24 points higher at
5,220.
"Renewed signals of a trade agreement harvested a risk on sentiment overnight, putting fresh
legs on the risk-on rally which had been showing signs of slowing," says Jasper Lawler, Head of
Research at LCG.
According to sources familiar with the trade negotiations, the US and China have started to
outline commitments in principle on the stickiest issues in their trade dispute, marking the
most significant progress yet toward ending a seven-month trade war.
Later in the session eyes will be on a barrage of data in Europe with PMI squarely in focus.
"PMI figures from the bloc, in addition to German inflation and minutes from the ECB
monetary policy meeting mean a volatile session could be ahead," adds Lawler.
Besides the macro, it's another heavy day for earnings reports.
(Danilo Masoni)
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