UK Markets closed

LIVE MARKETS-Closing snapshot: European stocks end in positive territory, FTSE at a record

* European shares end higher

* Euro rises on German coalition hopes

* FTSE on new records as GKN (Frankfurt: 694194 - news) surges

* Kering (LSE: 0IIH.L - news) to spin off Puma (Swiss: PUM.SW - news)

* Europe stock funds post inflows

Jan 12 (Reuters) - 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

CLOSING SNAPSHOT: EUROPEAN STOCKS END IN POSITIVE TERRITORY, FTSE AT A RECORD (1708 GMT)

The STOXX 600 has ended the week with a slight gain on the back of a broad-based rally,

while Britain's FTSE 100 is up at a record close, shrugging off any sterling strength.

Here's your closing snapshot - have a good weekend, and see you next week for more market

action!

(Kit Rees)

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EUROPEAN STOCKS WEEKLY RECAP: ITALY LEADS, IRELAND LAGS (1545 GMT)

As we enter the last leg of the trading day in Europe, here's a look at some of this week's

winners and losers:

∙ STOXX 600 +0.2% this week

∙ Best performing index: Italy' FTSE MIB +3.5%

∙ Worst performing index: Ireland (Other OTC: IRLD - news) 's ISEQ -1.2%, FTSE 250 -0.4%

∙ Best performing sector: Basic resources (Frankfurt: W8Z.F - news) +3.7%

∙ Worst performing sector: Real estate -1.7%

∙ Best performing stock: Fiat Chrysler +12.8%

∙ Worst performing stock: Steinhoff -22.5%

(Kit Rees)

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WHAT WAS THAT ON THE FTSE? AN ALGO. (1455 GMT)

Sterling jumped to its highest since the Brexit vote, sending the FTSE into negative

territory and a session low. But the FTSE soon returned to its previous level.

What happened? Well, according to Nomura a number of machines really liked a Bloomberg story

reporting that "Spanish and Dutch finance ministers have agreed to work together to push for a

Brexit deal that keeps Britain as close to the European Union as possible".

"A big algo move driving GBP on that headline about SOFT BREXIT from the Dutch and the

Spanish", Nomura said.

(Julien Ponthus)

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WHAT DO PREMIUMS ON ABLYNX AND GKN TELL US? (1430 GMT)

Perhaps it's a sign of the buoyant market mood that Belgian biotech Ablynx (LSE: 0HNK.L - news) is

trading at an impressive 20% premium to the 30.50 euros bid it rejected from Novo Nordisk (LSE: 0QIU.L - news)

.

That's enough to scare away some investors as the market is pricing "a very optimistic

scenario", a merger arb manager commented.

At 36.70 euros, not only are Ablynx buyers assuming a bid for the company will go through,

but also that it will either be substantially sweetened or that a rival offer will spike the

price higher, he said, adding: "I'm not touching it".

It's easy to get vertigo when looking at the Ablynx chart. It's up 77 percent already this

year after surging 91 percent in 2017.

Interesting to note too that GKN, currently up 25% at 416 pence, is also trading higher than

the 405 pence offered by its rejected suitor, showing shareholders agree with management that

Melrose (LSE: 136541.L - news) 's offer undervalues the company.

(Julien Ponthus)

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BAML RECKONS EUROPE'S EARNINGS UPSIDE STILL NOT IN THE PRICE (1131 GMT)

BAML is the latest in a list of brokers voicing the thought that European equities are

underappreciated.

Despite strong macro data and recovering margins, BAML's European equities strategists think

earnings upside for Europe is still not priced in.

"There is little evidence of euphoria on European equities," BAML's strategists write,

pointing to inexpensive valuations (see chart below).

While they don't think rising rates pose a problem for equities, they do caution against

spikes in bond yields.

BAML says it is positioned for the sell-off in bonds to continue, with overweights in banks

and insurance and underweights in food & beverage and utilities.

(Kit Rees)

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STOCKS SHRUG OFF EURO SPIKE (1112 GMT)

The euro has spiked to a three-year high following news of a breakthrough in German

coalition talks but European shares have barely moved. While a stronger euro can be a headwind

for exporters and erode earnings, it appears equity investors are looking on the bright side:

more political certainty is one more reason for the economy to improve.

Here's a quick take from Peter Rosenstreich, head of market strategy at Swissquote Bank in

Geneva: "FX tends to be the canary in the coal mine when it comes to politics in Europe, it has

always been a barometer of political uncertainty in the euro zone, less than the equity market".

As you can see from this chart, a strengthening of the single currency since the middle of

last year has not stopped shares making big progress.

(Danilo Masoni)

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OUTFLOWS FROM EUROPEAN EQUITY ETFS AS U.S. BECOMES FLAVOUR OF THE MONTH (1043)

Signs of a preference among investors for U.S. stocks over Europe are multiplying, with some

of the latest ETF flows data confirming a shift which could be related to bets on the U.S. tax

bill.

European equity ETFs (Shenzhen: 395013.SZ - news) suffered their first outflows of 2017 (-0.5 billion euros) in December

while U.S. equity ETFs had their best month of the year (+2.6 billion euros), fresh data from

Lyxor ETF shows. The tax bill "could open up some short-term opportunities," Marlène Hassine

Konqui, head of ETF research at Lyxor, said.

In total over the year U.S. equity ETFs collected 12.5 billion euros of fresh money.

One thing the data shows for sure is the rising popularity of index-tracking funds in

Europe: Lyxor found an all-time high for inflows to equity, fixed income, and commodity ETFs

listed in Europe.

Here's their chart of flows:

(Helen Reid)

"IT IS UP TO ITALIANS TO DECIDE HOW TO VOTE, BUT.." (0920 GMT)

Italy's general election in March is being seen as Europe's biggest political risk right

now. A victory for the anti-establishment 5-Star Movement could destabilize the EU while

Brussels is already having a hard time with the Polish and Hungarian governments, not to mention

the UK and Brexit.

It would also rock the EU agenda of French President Macron, who just gave some overt public

support for incumbent Italian PM Paolo Gentiloni.

"It is up to Italians to decide how to vote, but let me say that Europe has been very lucky

to have Gentiloni and I hope we can continue the work that we have started," Macron said

yesterday at the end of a two-day visit to Rome. Just to make sure everyone got the message,

Macron's office sent out the transcript of his comments this morning.

(Julien Ponthus)

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Opening snapshot: Europe edges up (0824 GMT)

European shares are slightly recovering, up 0.1 percent, from yesterday's ECB-led euro jump

amid quite a heavy M&A news flow, with Kering spinning off Puma and GKN rebuffing a bid from

British rival Melrose.


(Julien Ponthus)

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PUMA: EASY TIGER? (0753 GMT)

Premarket indications show that the spin-off of Puma isn't expected to send Kering surging,

we have modest 1-2% rises from traders so far. Puma on the other hand is seen falling 3-6

percent as some investors believe the spin-off means no buyer could be found.

(Julien Ponthus)

****

WHAT YOU NEED TO KNOW (0739 GMT)

European shares are expected to recover following two days of losses with futures pointing

to gains of around 0.3 percent.

The pan-European STOXX 600 benchmark is set to end the week little changed as the new year

euphoria cools down amid a strengthening euro and expectations that the ECB could reduce its

stimulus sooner than expected.

A notable exception are rate-sensitive banks, which have risen for eight sessions in a row

and are up around 4 percent on the week. The STOXX however remains close to 2 1/2 year highs as

rosy developments on the economic front have resulted in Europe Equity Funds posting consecutive

weekly inflows for the first time since late October thanks to retail commitments, according to

the latest update from US-based EPFR.

On the corporate front, top movers today could be Kering after the Gucci owner announced

plans to spin off German sports brand Puma to the French conglomerate's shareholders as it

sharpens the group's focus squarely on its luxury brands. Both stocks have outperformed the

broader marker over the last 12 months. A trader said the news could prompt Puma minority

shareholders to sell their shares that were hoping in a takeover from a new strategic investor.

Also in focus could be the media sector after acquisitive French media conglomerate Vivendi (Swiss: VIV.SW - news)

trimmed its revenue and core earnings (EBITA) forecasts for 2017, while in the UK, builder Bovis

said it was on track for significant profit growth in 2018.


Other stock movers: Roche's star MS medicine Ocrevus wins EU approval; Fiat Chrysler to

invest $1 bln in Michigan plant, add 2,500 jobs; Audi (IOB: 0FG8.IL - news) , BMW (EUREX: BMWE.EX - news) workers stage strikes amid talks over

wages, hours; German prosecutors probe Bosch (BSE: BOSCHLTD.BO - news) over Audi emissions; Carillion (Frankfurt: 924047 - news) asks creditors for

more time to tackle debts

(Danilo Masoni)

*****

FUTURES ON THE UP (0705 GMT)

European stock futures have opened higher, pointing to a recovery of losses suffered

yesterday when benchmarks were weighed down by a stronger euro.


(Danilo Masoni)

****

ITALY BYPASSED AS EUROPE FLOWS LEAP FORWARD (0652)

The main Italian stock index may have risen for the seventh straight session

yesterday to fresh highs but when you look at fund flows the picture is less rosy, according to

fund tracker EPFR Global.

"The possibility that Italy's general election in March will open the door to a Eurosceptic

coalition remains a concern, but any pain was limited to Italy Equity Funds which extended their

longest outflow streak since 1Q17," writes Cameron Brandt, Research Director at US-based EPFR.

"Europe Equity Funds posted consecutive weekly inflows for the first time since late

October, helped by the first retail commitments in nearly two months, as investors responded to

some rosy forecasts for the region's economic growth and Eurozone business confidence at levels

last seen in 2000," he adds in his latest weekly update.

(Danilo Masoni)

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SPIN-OFF TIME (0640 GMT)

Spin off deals and break-ups look to be on the rise. The latest example has been provided by

Kering last night.

The Gucci-owner said it planned to spin off German sports brand Puma to the

French conglomerate's shareholders as it sharpens the group's focus squarely on its luxury

brands.

Here's how shares in the two companies performed over the last year.


(Danilo Masoni)

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MORNING CALL: HIGHER (0621 GMT)

Good morning and welcome to Live Markets. European shares are set to recover yesterday's

losses following another record session on Wall Street on optimism about the upcoming earnings

season and with the focus today on CPI data from the U.S.

Asian stocks also resumed their ascent, supported by a rise in oil prices .

Here are your early calls, courtesy of CMC Markets (LSE: CMCX.L - news) :

FTSE 100 is expected to open 3 points higher at 7,766

DAX is expected to open 47 points higher at 13,250

CAC40 is expected to open 19 points higher at 5,507

(Danilo Masoni)

*****

(Reporting by Danilo Masoni, Helen Reid, Kit Rees and Julien Ponthus)