* Choppy session
* Early rally fizzles out
* May survives confidence vote but divorce deal still teetering
* ECB meeting in focus
you by Reuters stocks reporters and anchored today by Danilo Masoni. Reach him on Messenger to
share your thoughts on market moves: firstname.lastname@example.org
LONG STOXX 600? THIS COULD CHEER YOU UP! (1227 GMT)
Excluding the cheering possibility of a Xmas rally, the pan-European STOXX 600 seems to be
on its way to end 2018 in the red and is so far over 10 pct down year-to-date.
There's not that much to look forward to at the moment which would kickstart the benchmark
"At 350 (it's current level), the Stoxx 600 is 6 pct below the level implied by our model,"
"To make equities fair value at current levels, we would have to assume a Euro area PMI of
49, three points below the current 52.3 and a level that is consistent with euro area GDP growth
of 0%", which is clearly way below the consensus.
"Our macro projections are consistent with 10 pct upside for European equities by Q1 (to 385
on the Stoxx 600) as well as 15% upside for European cyclicals versus defensives."
A word of caution though, DB analysts expect a fade back to 345 by end-2019.
In a note about the euro zone's growth prospects, Bill Papadakis, macro strategist at
Lombard Odier Private Bank, says he is "optimistic about near-term euro-zone growth prospects"
with a "forecast for a pick-up to 2 percent in 2019".
The latest 'MacroTourist' newsletter from East West Investment Management also makes the
point that the American market is way over-crowded and that fund managers need a hell of a case
to invest in Europe.
"Do you know how difficult it is for a money manager to sit in front of the year-end-review
committee and justify an overweight in European or emerging market equities? I would rather Mr.
Blonde (character in Tarantino's Reservoir Dogs) have a run at me
Anyhow, here's a chart which shows why DB strategists believe the STOXX 600 should rebound
as PMIs improve:
STILL WANNA PLAY "BREXIT FOOTBALL"? TRY UK HOUSEBUILDERS (1157 GMT)
out with a timely note whose headline "Opportunity or looking down the abyss?" nicely
illustrates the dilemma facing investors over the battered sector.
"The UK housebuilders have become the 'Brexit football'," analysts at the Swiss investment
"Volatility will likely remain high until there is improved visibility on the UK's exit from
the EU and, more broadly, the political direction of the country," they add.
Despite this view, UBS is betting on an orderly Brexit and believes much has already been
baked in their share prices.
"We think the market is now pricing in a substantial decline in earnings/returns which we
think offers good risk/reward across most of the sector," they say.
On top of that, housebuilders' 10 percent dividend yield is attractive and balance sheets
and Berkeley seen offering the best risk-reward balance.
IS BREXIT FATIGUE GETTING TO YOU? (1126 GMT)
You'd be forgiven because clearly, many analysts are beginning to suffer from Brexit fatigue
and it's sure starting to permeate through some notes after Theresa May won the leadership
challenged thrown to her by disgruntled Conservative MPs.
"Theresa May, blah, sterling, blah, Brexit, blah blah," was surely a way for Neil Wilson
from Markets.com to get some frustration about the endless divorce process out of his system.
through Parliament, and cannot govern essentially. The question is how long she tease it out,"
Rabobank's Michael Every also had some steam to let off, writing:
"At one point yesterday I turned to the TV screen here on the trading floor and saw a large
Xmas tree outside the door of Number 10 Downing Street. My first thought was that it would make
a better leader than some of the other deadwood: strong, stable, and pine-y fresh to boot."
Paul Donovan, who has been describing the Brexit saga as a "tedious" process for a while
now, took the view that "probably 99% of the UK population just don't care anymore".
Here's a way people who suffer from Brexit grief (so that wouldn't include pro-Brexit
voters) might measure how they're coping:
(Julien Ponthus and Helen Reid)
UK MID- AND SMALL-CAPS NOT AS UNPOPULAR AS EVERYONE THINKS? (1044 GMT)
The FTSE 100 and FTSE 250 have both given back their early gains, with the former flat and
the latter down 0.4 percent now, as you can see below.
Given the widespread negative sentiment on the domestic smaller parts of the UK market in
of June 2016 UK mid-cap and small-cap equity funds have actually seen inflows.
"While the trend away from UK equities is clear, it is important to note that these figures
have been exacerbated by fund-specific issues on a small number of the biggest funds in the
category that led to significant redemptions from a loss of investor confidence," writes
Morningstar in a report.
They highlight LF Woodford Equity Income, Invesco Income, Invesco High Income, Invesco
Strategic Income, as funds which have lost a cumulative 24.8 billion euros over the period from
June 1 2016 to end-October 2018.
Factoring these out, "the picture is less clear about the extent of the negative sentiment
towards UK equities," the fund flows monitor writes.
OPENING SNAPSHOT: ITALY, BANKS RALLY LIFTS EUROPE, UK MARKET SHRUGS (0838 GMT)
Looks like Europe is set for a third straight day of gains, with Italy leading the way after
its government committed to a lower budget deficit target, bending to the European Union - and
the market's - wishes.
The FTSE MIB is up 1.1 percent with Italy's banks index up 3.1 percent and set
for its best day since Nov 26 when Rome first signalled a cut to its budget deficit goal.
Meanwhile UK markets are shrugging off PM May's no confidence vote win, with the FTSE 100 up
just 0.2 percent - lagging European peers - and the FTSE 250 flat.
In single stock movers, German retailer Metro is tumbling 8 percent, the worst STOXX 600
faller, after it warned poor performance in Russia would hurt profits.
G4S meanwhile is up 9 percent, among top STOXX gainers, after it said it was reviewing
second day of gains after a report Germany is seeking to ease a potential merger between the two
While it's been a relatively strong start for the European market it remains to be seen
whether it will hold on to gains - the STOXX 50 index has already trimmed gains to fall back to
WHAT'S ON OUR RADAR BEFORE THE OPEN (0746 GMT)
After staging their best two-day rally since July 2016 European shares are set for a softer
open with easing trade worries and signs of a possible compromise over Italy's budget tempered
by ongoing Brexit uncertainty as yesterday's confidence vote indicated that PM May still lacks
the numbers to pass her divorce deal through a divided parliament.
FTSE futures are little changed, while euro zone futures are trading up around 0.3 percent.
While the broader market direction is likely to be driven by macro factors with investors
also keeping an eye on today's ECB meeting for any indication over future rate hike, there is
some corporate news that could liven up the session.
Ericsson and Nokia have outperformed the market so far this year, gaining 55 and 33 percent
respectively as investors warm up to prospects of 5G roll-outs across the globe.
arbitration tribunal ordered the Panama canal construction consortium they are part of to pay
manager posted a big loss and omitted dividend, while German wholesaler Metro is also seen hit
after predicting a fall in profits due to its struggling Russia business.
The world's top security company, G4S, is seen rising 5-7 percent after it said it was
reviewing options to separate its cash solutions business.
reviews options to separate cash solutions business, TUI Group confident on earnings growth
after hotels, cruises lift 2018, Technipfmc sees 2019 subsea revenue $5.45.7 bln
MAY DAY: HAS ANYTHING CHANGED? (0715 GMT)
The PM survived the confidence vote last night, but it wasn't quite the firm affirmation she
may have needed as she heads to Brussels today to seek reassurances on her Brexit deal. Does the
result really change anything?
it's keeping its neutral stance on equities and reckons the result reinforces expectations for a
While the basic constraints on the specifics of the deal - the limited scope for
renegotiation with the EU - haven't gone away, Goldman analysts say the victory may embolden her
attempt to resist opposition in her own party to compromises in the Withdrawal Agreement.
But the political instability that has punished UK stocks this year - the blue chips and
midcap index are both on track for their worst year since 2008 - hasn't disappeared with the
country's tortured divorce from the EU.
Investors may not be rushing back into the market in droves.
The FTSE 100's exposure to international markets, with 70% of its income from abroad, may
stand it in better stead to withstand some of the jitters. But the market may move on pretty
quickly, with investors choosing instead to focus on easing U.S.-China trade tensions.
Take the pound: after bouncing off 20-month lows ahead of the vote, it's now down slightly
this morning, a sign that traders are nervously looking ahead to the Brexit vote in January.
HEADLINES ROUNDUP: EYES ON ERICSSON, NOKIA, PANAMA CANAL BUILDERS (0553 GMT)
While the broader market direction is likely to be driven by macro factors (Brexit/trade and
Italy budget), with investors also keeping an eye on today's ECB meeting, there is some
corporate news that could liven up the session.
On the watchlist are Ericsson and Nokia after a report said SoftBank
plans to replace equipment from China's Huawei with hardware from the two European vendors.
Sacyr and Salini Impregilo may come under pressure after an arbitration
tribunal ordered the Panama canal construction consortium they are part of to pay back nearly
$848 million. A big loss at no dividend at GAM Holding could also weigh on the Swiss
Here's your headlines round up:
* Japan's SoftBank to shun Huawei in favour of Ericsson, Nokia equipment -Nikkei
* MEDIA-Huawei pledges to do 'anything' to soothe security concerns- FT
* Tribunal orders Panama canal construction group to pay back $848 mln
* Swiss asset manager GAM sees big 2018 loss, omits dividend
* Australian regulator casts doubt on tie-up between Vodafone's local arm and internet
* Nissan to boost external board seats, set up compensation committee -source
FTSE SEEN FLAT AS MAY SURVIVES CONFIDENCE VOTE (0620 GMT)
tensions and hopes of a compromise over Italy's contested budget, although the UK's FTSE is set
to lag behind as uncertainty over Brexit continues.
British Prime Minister Theresa May survived yesterday's confidence vote by the Conservative
Party, but a mutiny by more than a third of her lawmakers indicated parliament was heading
towards deadlock over the country's divorce from the European Union.
"The 117 dissent votes coupled with the DUP and the opposition, add up to a clear majority
against May’s deal and if her deal fails in Parliament eventually, a no-confidence motion in
Parliament remains probable outcome," says Stephen Innes, Head of Trading APAC at OANDA.
DAX to open 33 points higher at 10,963 and Paris' CAC to open 10 points higher at 4,919.
(Reporting by Danilo Masoni)