* European stocks extend losses
* Banks, oil the biggest sector fallers
* easyJet flies high thanks to upbeat trading update
Jan 22 - Welcome to the home for real-time coverage of European equity markets brought to
you by Reuters stocks reporters and anchored today by Julien Ponthus. Reach him on Messenger to
share your thoughts on market moves: rm://email@example.com
LOOKING FOR SURPRISES IN 2019? SEARCH FOR "CORPORATE ACTION"! (1532 GMT)
limited upside may be scouting for firms with a potential for corporate action.
deliver surprises in 2019.
global markets... what companies can do to drive profitability and shareholder value through
their own means becomes a more distinguishing feature," they say in a note.
CHINA'S NEARLY TRILLION-DOLLAR CORPORATE DEBT PROBLEM (1315 GMT)
There's a lot of discussion about U.S. corporate debt that has ballooned in the decade of
cheap money and concerns about how companies will handle refinancing in the new era of
It's already high on asset managers' watch-list of potentially explosive issues for this
"It's going to be the real challenging question this year. The liquidity tide has gone out,"
said Royal London Asset Management Chief Investment Officer Piers Hillier.
A look at corporate leverage in China may also give some investors pause.
According to S&P Global Ratings, a staggering 6.06 trillion yuan in bonds, including those
with options for early repayment known as puttable bonds, will mature this year. That's up 15
percent from last year.
Converted into dollars, that's $890 billion, exceeding the estimated 673.4 billion euro
($765 billion) coming due for European companies and $721 billion in the United States this
An S&P report published today highlights how slowing economic growth in the world's No. 2
economy will dent companies' profits, straining their ability to cover interest rate and debt
That will lead to an increase in corporate defaults this year, S&P China country specialist
Chang Li wrote in the report called The Big Chill in China. Monetary easing will not fully
offset the risks faced by marginal, over-leveraged companies.
"This will be driven by rising debt maturities in 2019 and our expectation that financial
institutions and investors will remain risk averse against a more fragile economic backdrop,"
and metals, and real estate, the report says.
The findings will add further gloom to the sell-off across global equity markets today as
data pointing to a cooling economy piles up: exports and imports unexpectedly shrank last month,
falling factory orders point to a further drop in activity in coming months and more job
shedding. Yesterday's Q4 GDP was the icing on the cake.
Not surprisingly, credit risks are greater for small, over-leveraged companies.
"Credit divergence will likely be a key trend in 2019 with credit spreads for strong
corporates narrowing but weak companies continuing to face higher downgrade and default risk,"
said the report.
S&P charts show default rates hit record highs last year and LGFVs are the most vulnerable:
WHO PAYS CEOS BETTER? CAC, DAX, FTSE? (1218 GMT)
An interesting study published by the Vlerick Business School shows median CEO total
compensation for a few European benchmarks.
As you can notice, it's not immediately easy to compare pay as the median market cap and the
number of constituents differ greatly from index to index.
But when doing a very unscientific and rough ratio of pay/market cap, it appears quite
quickly that FTSE 100 CEOs aren't treated badly compared with their European peers.
Here's a link to the study: https://bit.ly/2RENIkm
HOLD TIGHT, VALUE INVESTORS! A VALUE BOUNCE IS WITHIN REACH (1156 GMT)
With oil and bank stocks leading the slide today in Europe, you'd be forgiven for thinking a
bounce in cheaply-priced sectors feels far off. Certainly many have been burned in Europe in the
past years hoping for a value rally when value traps have been far more frequent.
But Citi strategists reckon a value bounce is around the corner, pointing to a wide
valuation gap and deeply negative economic sentiment as signs.
The valuation gap between the cheapest and most expensive stocks is almost as wide as it was
during the Global Financial Crisis of 2008-09, note Citi's European equity strategists led by
"This suggests that a lot of bad news is priced in with investors concerned about recession,
liquidity and political risks," they write.
"A combination of sharply de-rated Value and strong support from the relationship between
equity sentiment, CESI levels and style returns both suggest that Value is due a bounce."
As you can see below, when the euro zone Citi Economic Surprise Index (CESI) is under -70
and U.S. sentiment is in Panic territory, value usually outperforms over the next year.
"THE DE-RATING OF 2018 PROVIDES SOME CUSHION" (1111 GMT)
The earnings season is getting into gear and unlike the last quarter it seems that
disappointments aren't provoking dramatic share price falls.
Why's that? Well, we must thank the big sell-off that turned 2018 into the worst year for
European shares in a decade, crashing valuations to levels that some investors deem attractive.
"Soft Q4 results may not be a shock to the market as the de-rating of 2018 provides some
"FY2019 estimates still look too high, but global economic surprises may be close to bottom
and trade newsflow is turning more constructive," they add.
Royal London Asset Management Chief Investment Officer, Piers Hillier, agrees the Q4
sell-off has taken a bit of hot air out of the market and provided some opportunities for a
targeted bargain hunt.
"I was cautious in September last year, but I feel a bit better coming into this year
because of that correction," he said. "When you get 20-percent correction in a market, it gives
you a chance as a stock picker to buy better business models at lower prices."
That being said, Barclays strategists expect cyclicals to see more downgrades ahead, but
valuations and positioning have improved, possibly reviving investors' interest.
In sectors, they believe it's time for some tweaks, moving tech to marketweight from
underweight at the expense of staples, which are now at underweight. Materials remain their
preferred beta play, while industrials still warrant caution.
(Danilo Masoni and Josephine Mason)
OPENING SNAPSHOT: BANKS DRIVE EUROPEAN SHARES LOWER (0822 GMT)
European shares have opened lower this morning with banks being the biggest drag following a
across the sector, as investors digested a flurry of other corporate updates.
UBS was down more than 4 percent after it reported fourth-quarter pretax profit below
expectations and said tepid investor mood would continue dampening first-quarter results. Other
Top faller on the STOXX was IG Group, down 8.8 percent as stricter regulation contributed to
a 17-percent slump in first-half profits, while some well-received updates from the likes of
The STOXX was down around 0.3 percent, while other regional benchmarks were also posting
ON THE RADAR: UBS, HUGO BOSS, LOGITECH AND SO MUCH MORE! (0750 GMT)
Same gloom, day 2.
Global growth pessimism is the dominant narrative at the moment but that doesn't mean
there's any kind of shortage of corporate news to animate the session:
Today’s big earnings, UBS, is seen as a disappointment and is expected to open down at least
2 percent, dragging Credit Suisse with it.
sector, IG Group profits are hit by regulatory clampdown which would also weigh on competitors.
The drone saga at Gatwick has a price tag on it for easyJet but pre-market indication don’t
point to a fall.
$3.8 billion, according to WSJ. The packaging firm's shares are seen jumping as much as 10
percent at the open.
In executive moves: Kier and Jupiter CEO Will Stand Down Immediately
Here's some key headlines:
Hugo Boss sales accelerate in key Christmas quarter
Logitech raises FY outlook after gaming-powered third quarter
Ricardo Plc Says HY Rev Slightly Ahead Of Prior Period
Drone disruption at Gatwick hits easyJet operations and costs
Swiss testing firm SGS reports 2018 profit rises 3.5 pct
Kier Says CEO Will Stand Down Immediately
Jupiter CEO Slendebroek to step down, Andrew Formica appointed
Dixons Carphone's Christmas sales rise 1 pct
IG Group profit hit by regulatory clampdown
French company Bonduelle in talks to buy U.S. plant from Seneca Foods
UBS posts $862 mln Q4 pre-tax earnings, missing expectations
China's thirst for cognac helps Remy Q3 sales beat forecasts
(Julien Ponthus and Josephine Mason)
FUTURES POINT TO ANOTHER RISK-OFF SESSION IN EUROPE (0721 GMT)
Seems Davos 2019 probably won't be a vintage remembered for its irrational exuberance with
the IMF cutting its forecast a day before the official start of the event.
Anyhow, as the rich and the powerful gather in the Swiss Alps, European futures are falling
between 0.3 percent and 0.5 percent.
As a bonus, Davos delegates in a graphic: https://tmsnrt.rs/2HgY4lx
NO REBOUND FOR EUROPEAN STOCKS AS GROWTH WORRIES WEIGH (0628 GMT)
New day, same gloom: European stocks are set to start the session in negative territory as
the same growth worries which broke a streak of four positive session session yesterday hit
global market again.
Financial spreadbetters expect London's FTSE to open 22 points lower, Frankfurt's DAX to
lose 40 points lower and Paris' CAC to go down 16 points lower.
Pessimism for risky assets has been felt earlier on Asian shares and is still hitting U.S.
futures and oil prices.