* European shares gain after FED statement
* STOXX 600 up 1.7%
* Britain's blue chips up 2.6% Welcome to the home for real-time coverage of European equity markets brought to you by Reuters stocks reporters. You can share your thoughts with Thyagaraju Adinarayan (firstname.lastname@example.org), Joice Alves (email@example.com) and Julien Ponthus (firstname.lastname@example.org) in London.
LOOKING FOR A JOB. CERCO LAVORO. BUSCO TRABAJO (1345 GMT)
Expect to see those words ('looking for a job') in many European languages very often and very soon!
As the European economy is set to contract sharply in H1, unemployment rate is expected to soar especially in the UK, Italy and Spain.
These countries are the most vulnerable to job losses across the region as their economies are most exposed to consumer spending, Nomura's employment vulnerability index shows. Belgium is the least vulnerable. See below:
Nomura expects around 5% rises in the unemployment rate in the UK to 8.5% in Q3. In the euro area it will jump to 12.5% in Q2 from 7.3% currently.
Sectors seen suffering the highest unemployment rate are the usual suspects including consumer spending (grocery shopping excluded), larger service sector, travel and tourism.
"This is a different kind of recession. While there are always winners and losers in every downturn, this time (job) losses have been particularly concentrated – both over time and within sectors," Nomura notes.
Other impacts on European job market:
- More redundancies among part-time, temporary, zero-hour, gig workers and self employed (Spain has a larger portion of temporary jobs)
- Wage cuts following furlough schemes and employers' requesting staff to take lower pay
- Job losses likely to be concentrated among unskilled workers and low wage employment
THE PYJAMA EFFECT (1201 GMT)
As a big chunk of the world is under a lockdown and with most shops closed you would expect online retailers to be enjoying an incredible boost in sales. Think further!
Staying at home means some of us are working in our pyjamas and that parties and weddings are cancelled, which is feeding the coronavirus-induced demand crash
"We expect online retail to face a challenging period as containment measures curtail social outings; the primary occasion consumers tend to use online retailers for," writes BofA analysts.
The U.S. bank argues Boohoo is best positioned to weather the storm because its supply chain operates on relatively short lead times and therefore carries fewer inventories than peers and can respond fastest to shifts in trends.
But going into next year, things look brighter for the space overall, as COVID-19 may accelerate online shift, BofA estimates.
Here is BofA's expected evolution of earnings before interest and taxes for fashion retailers Asos, Zalando and Boohoo:
SAILING THE DIVIDEND STORM: ONE STRATEGY EXAMPLE (1142 GMT)
It's been quite a horrible quarter for shareholders of dividend heroes and bond proxies as former investors' darlings queued up to announce they were freezing, cutting or scrapping payouts.
The banking sector, which frequently offered dividend yields of over 6% before the crisis, was a major cause of losses when lenders bowed to the pressure of the ECB or BoE and froze payouts.
With that in mind, how are investors specialised in dividend-focused strategies adapting to the new financial environment in Europe?
Just as an example (not saying their strategy is sound or not), here's how French asset manager Gaspal Gestion said it changed its dividend fund to cope with the new environment.
1) Sold brewer AB Inbev which is suffering from bars and restaurants being closed during the lockdowns and has a large debt to service.
2) Sold French bank Natixis during a rebound due to the likely rise in NPLs and a drop in fees after problems with its H2O division.
3) Sold exposition to companies likely to give up dividend to benefit from state aid: exited banks but also companies such as French energy group Engie.
4) Increased positions in French household goods and kitchen appliances SEB which has now operational plants in China.
5) Increased its stake in French lottery group FDJ which went below its IPO level, arguing that some of its betting activities in places such as bars, could move online.
6) Increased exposition to pharmaceutical with Merck
7) Increased exposition to consumer staples through Nestle, Unilever
As an illustration of the hit taken by dividend investors, here's the performance of the First Trust STOXX European Select Dividend ETF in the last three months
CORONAVIRUS: IT'S BANKS ACTUALLY...(1046 GMT)
Since the very beginning of the virus crash, Travel and Leisure stocks have been the fear and greed gauge on stock markets.
Intuitively enough, nothing could really be worse than the collapse in revenues faced by cruise and cinema operators, pub chains or airlines due to the travel bans and lockdowns implemented across Europe.
Yet, bizarrely enough, European banks (-38.8%) have just overtaken the Travel and Leisure (-36.5%) index as the worst performers year-to-date on the STOXX 600.
Sure, shareholders in European banks can worry about the dividend freeze, the expected recession-triggered jump in NPLs and the lower-for-longer rates.
But even when taking all of that into account, the losses for European lenders do seem arguably harsh in comparison even considering that gambling stocks are a boost to T&L, such as France's recently listed FDJ.
Anyhow, it is what it is as you can see below with the blue line (T&L) going over the orange (bank) line:
A 25% RALLY IN 2-1/2 WEEKS! (0935 GMT)
World stocks are trading higher as the coronavirus death rate slows in Europe, and the U.S. is hoping the pandemic is close to peaking. Those hopes have sharply cut losses bourse have incurred YTD.
The S&P 500 is now down just 19% from Feb. 19 peak and it took just 2-1/2 weeks for it to recoup almost half of the losses. The U.S. index is up 26% from March 23 bottom.
During the same period, European stocks also gained 24% but have underperformed the U.S. with the losses from Feb. 19 peak now standing at 23%. Oil price crash perhaps is weighing on European heavyweights.
OPENING SNAPSHOT: IT'S RISK-ON! (0735 GMT)
As expected, European stock markets are up this morning and while the rise is not spectacular - +1.6% - there's clearly a positive mood on the trading floors ahead of the long Easter weekend.
One clear sign is that shares in the Travel and Leisure, a typical gauge of coronavirus greed and fear, are up close to 5% and leading industry indexes. Cinema operator Cineworld and cruise operator Carnival are up 11% and 9% respectively.
Cyclicals are generally among today's early morning winners with miners, banks, cars and industrial goods registering strong gains.
London is leading with the FTSE 100 up 2.3% and the FTSE 250 up 2.8%.
Among the top 5 winners of the STOXX 600, 4 are from the UK.
Homebuilder Redrow scored the highest rise, up 14% after reporting it has put 80% of its workforce on government-sponsored furloughs and has been approved as an issuer in the government's emergency COVID financing scheme.
ON THE RADAR: DIVIDEND UPDATES, EARNINGS AND PRODUCTION CUTS (0648 GMT)
European futures are firming up about 10 minutes from the open and are well above 1% now.
Corporate headlines piling up this morning continue to paint a grim picture of the economic damage already caused by lockdowns and that’s whether or not they can be lifted in the coming weeks or months.
French catering and food services group Sodexo for instance estimated a 25% revenue hit in the second half of its 2020 financial year while Business software maker SAP cut its full-year earnings guidance, saying it now expects a single-digit decline after earlier forecasting 10% growth.
Airbus said it would cut the output of its best-selling A320 by a third to 40 aircraft a month to adjust to aviation's worst industrial crisis. That echoes Air France KLM reporting passengers fell 56.6% in March from a year earlier.
In the UK, fresh data showed that more than half of small manufacturers in England plan to cut jobs despite the government’s support programmes.
There’s some optimistic notes however with global automakers seeking to restart factories using new safety protocols or Just Eat Takeaway reporting that volumes recovered strongly by the end of March. Still the auto industry is suffering badly as exposed by Nissan Motor requesting a $4.6 billion worth commitment line.
Also, even if it’s on the small/mid cap segment, Restaurant Group announced it managed to raise about 57 million pounds in equity.
On the battered dividend front, the trend remains roughly the same: Diageo withdrew its outlook on its sales and operating profit growth and suspended capital returns programme for the rest of the year.
Bowing to regulatory pressure UBS and Credit Suisse decided to pay out part of their dividend for 2019 later this year. One notable exception this morning is miner Rio Tinto which said it would go ahead with a $3.7 billion dividend payment despite some of its peers freezing pay outs.
MORNING CALL: POSITIVE THINKING (0526 GMT)
The perception that the coronavirus outbreak is peaking in Europe and in North America has propped up sentiment from New York to Asian bourses and is making its way to the old continent this morning.
Hopes that an oil production cuts can be agreed upon shortly, combined with belief in more stimulus to come are clearly encouraging investors to take on some risk.
In this rather favourable context, European futures are currently up about 1% after an overnight rally on Wall Street and comfortable gains in Asia.
(Reporting by Danilo Masoni, Joice Alves, Julien Ponthus and Thyagaraju Adinarayan)