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LIVE MARKETS-Bad Q1 for carmakers but risk still under control

* Global equities rally

* STOXX 600 up 3%, set for weekly gains

* Travel and Leisure, cars outperform

* Trump's plans to gradually reopen boost sentiment

* Drug hopes prop up morale 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 (, Joice Alves ( and Julien Ponthus ( in London and Stefano Rebaudo ( in Milan.


Carmakers had a really bad time in Q1 amid pandemic-induced lockdowns and production disruptions, but liquidity risks appear to be under control, at least for the next few months.

"Total liquidity and credit lines enable OEMs to last 3-12 months in a near zero production environment," Jefferies says in an equity research note.

In any case leverage, more than ever in these times of coronavirus, is the main concerns for this addicted-to-capital industry and, if this pandemic crisis lasts longer than expected "capital structures may need a re-building or structural change, including consolidation."

Jefferies, which cut its full year earnings estimate, said shutdowns lasted a bit longer than expected, towards 6 weeks from the initial 4-5 and there were "higher provisioning for cost of risk."

Shares in European carmakers are rallying right now, up about 5%, thanks to a risk-on mood across European stock markets and despite Acea (European Automobile Manufacturers Association) dire data on registrations which were already priced in.

Among individual stocks, the Fiat Chrysler (FCA)-PSA combination can unlock value, according to Jefferies, which expects "parties will make the necessary amendments to complete their deal."

The investment bank also focuses on Daimler thanks to internal restructuring, scope to reverse FCF under performance, interest from Chinese shareholders.

Here's a chart from the note which shows how car sales fell in the U.S., China and the EU in the last months:

(Stefano Rebaudo)



This session has started like a textbook coronavirus risk-on rally: cyclicals are on all cylinders and virus safe havens are clear laggards.

Hopes of economies reopening and of a potential drug against the virus are brushing off the macro doom and gloom.

Travel and Leisure stocks, at the frontline of the crisis, are leading the winners' pack with a rise of about 5%, closely followed by basic materials, autos and banks.

As an example, cinema operator Cineworld, which faces weeks and months of revenue cuts was up close to 20%.

At the bottom are the sectors where investors typically seek refuge during the outbreak: healthcare, telcos, utilities, food and beverages.

Mind you, these sectors are still doing fine and all trading well in positive territory.

Same goes for regional bourses which are mostly all comfortably in the black with the pan-European STOXX 600 up about 3%.

At this rate, the index which was set for a weekly loss, will pull off a slightly positive performance for the week.

(Julien Ponthus)



In terms of sectors , it’s clearly a gloomy day for autos: passenger car sales tumbled by more than 50% in Europe's major markets. That comes just after Volkswagen withdrawing its 2020 guidance after operating profit to dropped 81% in the first quarter.

Orange might also dampen the mood in the telecom sector, one of the most resilient during this coronavirus crisis, after it cut its dividend for 2019 and put its pay-out policy under review. M&A speculation surrounding 5G Network equipment maker Nokia had boosted sentiment for the sector yesterday.

Another downer is LVMH trimming its proposed dividend and reporting a 17% drop in comparable sales in the first quarter. But it’s definitely not all doom and gloom with L'Oreal, the world's biggest beauty firm by sales, providing an upbeat outlook last night despite a 4.8% fall in comparable first-quarter sales.

Consumer staples seems a relatively safe area to be in this morning. Nordic consumer goods maker Orkla reported a sales boom in March as customers stocked up on food and other essentials.

The trend seems pretty solid with Danish food ingredient producer Chr Hansen also reporting a sales boost from the virus lockdown.

In the tech sector, shares in German chipmaker Infineon are set for a strong rise after the chairman of the German chipmaker said the company had sufficient strategic liquidity.

(Julien Ponthus and Stefano Rebaudo)



There's plenty of speculation going around about how a recovery could look like: a 'V', an 'L', a 'U' or a 'W', you name it!

One that is rarely mentioned is the square root sign, as mentioned by Byron Wien from Blackstone Group in our latest global markets report.

"Some believe when the crisis is over, everything will quickly return to what life was like in January, but I think there will be some lingering effects," he said.

"I think the recovery will look like a square root sign, a "V" at the beginning and then a gradual recovery."

(Julien Ponthus)



European futures are trading firmly in positive territory, between 2.7% and 3.2%, as the continent's stock markets get ready to catch up with solid gains on Wall Street and Asia.

Boosted by hopes of a gradual re-opening of the U.S. economy and a potential promising drug to treat the new coronavirus, stocks were on the rise again overnight as investors felt comfortable in taking more risk on.

The pan-European STOXX 600 is about 3% to 4% away from reclaiming highs not seen in over a month while horrid macro data like the historic surge in U.S. unemployment or the first contraction in Chinese GDP on record seem to be quickly brushed off.

Overall, while the index was set for a 2% weekly decline, it currently seems it might be able to pull off a stable or even positive performance for the week with S&P futures trading up 3.7%.

(Julien Ponthus)


(Reporting by Joice Alves, Julien Ponthus and Thyagaraju Adinarayan)