* European shares turn positive, back to August highs
* Wall Street opens higher as tech shares gain
* Oil & gas stocks climb after crude rally
* Fear of easing China stimulus holds market back
* Umicore plunges on 2020 earnings warning
* Healthcare bounces back, banks under pressure
April 23 - Welcome to the home for real-time coverage of European equity markets brought to
you by Reuters stocks reporters and anchored today by Helen Reid. Reach her on Messenger to
share your thoughts on the market: email@example.com
ONCE UPON A TIME EUROPE WAS A CROWDED SHORT TRADE... (1522 GMT)
Growth fears and record outflows have made European stocks a very popular short trade. But
for contrarians Europe may just be a neglected rag-dressed Cinderella before she gets her
Juliana Auger, investment specialist at SYZ Asset Management in Geneva, believes the analogy
is quite fitting - with European equities' valuations at five-year lows.
"Lost among the macro headlines is the fact that Europe is home to many of the world’s
leading businesses. Yes growth has slowed but it has not fallen off a cliff. We take the
viewpoint that market uncertainty and unease represent a window of opportunity to purchase the
best companies that most see as wearing 'rags' rather than 'ball gowns'," she argues.
"We view the negative international sentiment for European equities as overdone,
representing an excellent contrarian buying opportunity," she says.
She adds that to find hidden gems it may be worth having a deeper look into the energy, auto
and tech hardware sectors whose valuations imply we are in a mild recession.
Above, actress Lily James as Cinderella in a 2015 movie.
SUFFERING FROM RANGE-BOUND BEHAVIOUR? EARNINGS GROWTH IS THE CURE (1357 GMT)
European stocks have been moving at multi-month highs over the past three weeks but trading
has remained confined in a tight 1.5-percentage-point range, indicating caution ahead of the
start of the reporting season this week.
More broadly, Deutsche Bank strategist Binky Chadha and team say European stocks have been
in a range for nearly 2 years, mirroring earnings trends.
"European equities have been in a range (STOXX 600 365-395) since mid-2017, reflecting
earnings which have been flat since Q4 2017. The Q4 selloff last year saw equities fall below
but with the sharp rally this year they are back near the top of but still within the range,"
"Whether they can break out hinges critically on a return to growth for earnings," they add.
That being said, what can be expected from Q1? Despite the string of downgrades to earnings
expectations over the last few months, it seems that's not all doom and gloom.
* Healthier signs under the surface: "Consensus points to a sharp -6% fall in aggregate
earnings, the worst in 3 years. However the aggregate measure tends to be noisy and is often
impacted by outliers, especially for larger companies. To reduce the impact of noise and
outliers we also look at median company earnings growth, which points to a healthier albeit
still very slow growth of +1%".
* Q1 earnings marking the bottom: "Aggregate earnings growth is expected to snap higher to
+4 percent in Q2, stay there in Q3 and then rise much more sharply to +14% in Q4, largely due to
base effects. Median company growth is also expected to bottom in Q1 and then rise steadily to
+10% by Q4."
RELATIONSHIPS ARE SO LAST YEAR (1255 GMT)
You heard it here first: European traders, asked what they value most in a broker's
services, say they don't care much for the broker's relationship to their covered companies.
This shift relative to traders in other regions shows the consequences of sweeping MiFID II
regulation which totally recalibrated the way brokerages and the buy-side worked together.
Traders in Europe's post-MiFID II world demand low-touch (highly automated) execution
service and market structure expertise, according to a new report by Greenwich Associates which
surveyed sell-side actors between May and October last year.
The overall relationship of a broker with its coverage, along with "high-touch" (complex and
less automated) trading service, are less valued in Europe relative to the U.S. and Canada.
"This is a clear reflection of the shift in perspective brought about by the MiFID
regulations, and a sign of how North American markets may evolve as MiFID-like practices
permeate into these equity markets," writes Greenwich's Richard Johnson.
ARE STOCK MARKETS TOO COMPLACENT? (1211 GMT)
Saxobank's head of equity strategy Peter Garnry has echoed the thinking of his UniCredit
counterpart Christian Stocker, concluding that stocks may be vulnerable to another blowout as
specs pile on bearish bets on the U.S. volatility index at break-neck speed.
"Q4's wall of worry has been replaced by complacency about the many problems in the global
economy," he says in a note this morning.
Friday's weekly CFTC report for the week to April 16 showed the speculative net short in the
VIX rose to just under 170,000 lots, from 164,000 the previous week (see the chart
According to the bank, that's just 5,000 shy of the October 2017 record set shortly before
the February blowout last year.
"Again we have all the ingredients for a major reset in equity markets if the right catalyst
presents itself," Garnry says.
Two equity strategists do not a consensus make, but it feels like it's building momentum.
WHAT UMICORE'S WARNING TELLS US ABOUT THE ELECTRIC VEHICLE MARKET (1130 GMT)
Fourteen percent is a sizeable move for chemicals and battery materials firm Umicore - in
fact, the stock is set to seal its worst one-day drop since November 2008.
A warning of lower than previously expected growth in revenue and earnings in 2020 has taken
a toll, and dragged peer Johnson Matthey down slightly too.
The factors Umicore points to as catalysts for its warning shed a light on the broader
picture for electric vehicles. These include:
* Lagging electric vehicle demand in China
* Larger than expected cuts to subsidies for EVs in China (which have been a key driver of
* Delayed launch of a large EV platform in China
* An increase in artisan cobalt mining driving cobalt prices down, hurting margins in its
"Previously subsidies usually accounted for one-third of the battery EV price and close to
10% of the plugin hybrid vehicle price," write UBS analysts.
"With increasing EV competition and some OEMs already setting prices on a post-subsidy
basis, this cost pressure may also be shared upstream with suppliers, something already seen in
electric buses," they add.
Equita analysts' take: "We believe that such a rapid growth process can have periods of
slowdown but that does not change the underlying trend."
UBS sees little read-across to Johnson Matthey which has only recently announced its first
investment in battery materials.
Investec analysts reckon Umicore "remains strongly placed for auto electrification, but its
impressive growth expectations are clearly under pressure".
It's those impressive growth hopes that have driven Umicore shares up sharply over the past
years - as you can see below, Umicore has easily outperformed European peers in the electric
vehicle battery race, but its shares have slowed down recently.
OIL EARNINGS: RESILIENT DESPITE TOUGHER MACRO (1030 GMT)
After nine straight quarters of rising year-on-year crude prices, the macro backdrop for oil
companies toughened in Q1 but for Bernstein that'll just show how resilient they've become after
the big cost cuts made in the wake of the 2014 price downturn.
"We find that despite 40 percent lower oil prices in 1Q19 vs the 2011-2014 peak, CFO (Cash
flow from operating activities) will only be 6 percent lower," analysts at the U.S. investment
firm say, confirming their overweight on the sector.
And, going forward, geopolitical uncertainty around Iran and other areas may provide further
upside risks, as this week's huge spike in crude prices would suggest.
"We continue to expect a record FCF year at our $70/bbl oil price deck, leading to another
year of strong shareholder returns," they say, also highlighting how cheap the sector remains
compared to the broader marker.
THIS MAY NOT BE THE END OF EARNINGS DOWNGRADES (0853 GMT)
After sharp cuts to earnings estimates since the end of last year, many investors and
analysts are predicting a bottoming out, with earnings forecasts to rise from here as Q1 results
start coming through. A stabilisation in earnings revisions has fed that theory.
But Goldman Sachs analysts disagree.
"The historical relationship suggests EPS could be revised up during the season - albeit
modestly," Goldman Sachs' head of European equity strategy Sharon Bell writes. "But the
predictive power of market moves for EPS revisions is not strong - especially when central bank
policy moves have helped drive market gains."
Besides, the pace of earnings revisions has remained above the 10-year average (see chart
"From here downgrades are still likely, albeit at a slower pace," Bell and team conclude.
They see STOXX 600 earnings growing 2 percent this year and 2 percent in 2020 - much less
EUROPEAN STOCKS SLIDE DESPITE OIL BOOST, UMICORE SINKS (0733 GMT)
Oil stocks are up 1.7 percent this morning after a crude rally, set for their biggest
one-day gain since February 5 this year. But that boost isn't enough for Europe's stock markets
which are falling 0.1 to 0.2 percent as fear of less stimulus from China and weak results from
Umicore and Melexis drag sentiment down.
Overall, the market is being driven down by falling metals prices amid worries China may
ease its stimulus measures after its economy showed signs of recovery.
A top party decision-making meeting in China on Friday affirmed authorities' support for the
economy, but also said they would push forward structural de-leveraging and prevent speculation
in the property market, suggesting attention may be turning back to debt risks that any further
major stimulus measures may create.
Umicore is sinking 15 percent after warning 2020 profits and earnings will be lower. The
warning is dragging the chemicals sector down 1 percent.
In car parts stocks, Faurecia is up 2 percent after sticking to its full-year profit target,
while auto chipmaker Melexis is down 6.5 percent after its weak Q2 guidance.
Dutch supermarket chain Ahold Delhaize is another big faller, down 4.7 percent after saying
strikes at its U.S. "Stop & Shop" business would hurt 2019 margins.
Wirecard is down 3.9 percent after Germany's market regulator lifted a ban on short selling.
A rare gainer was driven by M&A hopes: Thomas Cook shares are jumping 12 percent after Sky
News reported of possible bidders for the tour operator including Chinese conglomerate Fosun
WHAT'S ON THE RADAR: UMICORE WARNING, AHOLD MARGIN SQUEEZE, THOMAS COOK BIDDERS (0649 GMT)
European shares are set to rise slightly as equity investors returned from an Easter break
to find oil prices at five-month highs. The rally in crude should help the oil major-heavy FTSE
100 outperform, with futures up 0.4 percent, while futures for France, Germany and Spain were up
0.1 to 0.3 percent.
Earnings are streaming in, with battery maker Umicore among the biggest movers pre-market
after it warned revenue and earnings growth in 2020 would be lower than previously expected. Its
shares are seen down 5 to 10 percent.
Car parts and automotive semiconductor companies are also among those reporting, with varied
results. Plastic Omnium warned of a decline in worldwide auto production while reporting an
increase in Q1 revenues, and auto chipmaker Melexis said slowing global car sales and trade
tensions had weighed on performance.
Plastic Omnium is seen down 2-3 percent, along with Melexis. Faurecia meanwhile is expected
to rise 2 percent after it confirmed its full-year target and reported a rise in Q1 sales.
Shares in French supermarket Casino are seen rising slightly after it announced it was
expanding its partnership with Amazon after a successful earlier deal with its Monoprix chain in
Dutch supermarket chain Ahold Delhaize is expected to fall 2 percent after saying an 11-day
strike at its “Stop & Shop” chain in the U.S. would hurt margins. Bernstein cut the stock to
'neutral' from 'outperform'.
In M&A news, Thomas Cook shares could jump 10 to 15 percent, traders say, after a Sky News
report on Saturday said the tour operator has been approached by potential bidders.
And Anglo American shares could rise after the Telegraph reported the miner has called in
investment banks to help it defend against a possible takeover bid from Volcan Investments.
FUTURES INCH UP AS RESULTS STREAM IN: FAURECIA, MELEXIS, CASINO IN FOCUS (0612 GMT)
Futures for European indices are edging higher this morning with the FTSE 100 in the lead -
likely boosted by oil majors Shell and BP - while earnings start to roll in.
We've got results from a couple of French car parts suppliers - Plastic Omnium and Faurecia
- which show different pictures with Plastic Omnium warning of a decline in worldwide auto
production while Faurecia confirmed its full-year target.
Belgium's Melexis, which makes chips for cars, also said slowing global car sales and trade
tensions had weighed on performance.
French retailer Casino is also in the spotlight: it announced the expansion of a partnership
with Amazon, and also sold a portfolio of hypermarkets and supermarkets to U.S. asset manager
Apollo Global in a deal worth up to 470 million euros ($528.6 million).
Here are your headlines:
France's Casino expands partnership with Amazon
French fashion group SMCP forms partnership with China's JD.com
TechnipFMC wins major contract for ConocoPhillips TOR II development
Car parts group Faurecia confirms FY target as Q1 sales climb
BRIEF-Melexis Q1 EBIT Down At EUR 15.7 Mln
Danone's Bledina France arm wins B-Corp certification
Plastic Omnium's Q1 revenues rise, expects decline in worldwide auto production
French retailer Casino sells assets to Apollo Global
Activist Knight Vinke calls for Uniper split to end Fortum deadlock
Barclays to cut investment bankers' bonuses- FT
BRIEF-Umicore Sees FY 2019 Recurring EBIT Between 475 And 525 Million Euros
EUROPEAN STOCKS TO DRIFT HIGHER AS OIL JUMPS (0534 GMT)
Oil is in the spotlight today, with Brent crude hitting its highest since November 2018
yesterday after Washington announced all Iran sanction waivers would end by May.
Helped in part by this jump in crude, European stocks are set to make some progress as
investors return from Easter break to face a busy week of earnings reports.
Stocks in Asia rose marginally as many markets reopened after the long Easter break, while
oil jumped to its highest this year as the United States tightened sanctions on Iran.
Financial spreadbetters expect London's oil major-heavy FTSE 100 to open 22 points higher at
7,482, Frankfurt's DAX to open 11 points higher at 12,233, and Paris' CAC 40 to open 4 points
higher at 5,584.
($1 = 0.8891 euros)
(Reporting by Helen Reid, Danilo Masoni, Josephine Mason and Thyagaraju Adinarayan)