UK markets closed

LIVE MARKETS-STOXX flat, autos into reverse, BME +38%, new record for SMI

* European shares end little changed

* Trade war concerns hit DAX, defensives outperform

* Euronext considers Madrid bourse bid

* Qiagen surges as it explores sale 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:


European stocks were flat at the open and were flat at the close, as investors await that progress in trade talks between Washington and Beijing turns into a proper initial trade deal.

Under the surface, auto stocks suffered their worst day since early October, down 2.1%, amid doubts on whether the U.S. will impose tariffs on EU carmakers, while a bidding war for BME sent shares in Spanish bourse soaring 38%.

While the STOXX ended flat and slightly negative signs prevailed across Europe, defensive stocks found some support. The Swiss index SMI, where some big defensive pharma and food stocks are listed, was an exception: it rose 0.4% to a new record high.

Here's your closing snapshot:

(Danilo Masoni)



Spanish equities have been a painful trade so far this year -- and perhaps rightly so because of all the political uncertainty in Madrid -- but the tide could turn going into 2020.

Scrolling through Morgan Stanley's top trades this one pops out: long Madrid's IBEX (and London's FTSE 100) against the defensive Swiss index SMI.

"UK and Spain, both affected by varying degree of political uncertainty, have some of the highest dividend yields globally. Swiss stocks are some of the most expensive globally," they say.

The IBEX, which offers a 4.4% dividend yield, trades and a 27% discount to the SMI on a forward PE basis, which is well above the 5-year average.

(Danilo Masoni)



"Big Mac's a Big Mac, but they call it Le Big Mac", Vincent (John Travolta) famously tells Jules (Samuel L. Jackson) in Quentin Tarentino's 1994 Cannes Palme d'Or sensation Pulp Fiction.

Well, same thing goes for FOMO.

"Noel avant l'heure, le FOMO bat son plein", is the headline today of the note of Nicolas Chéron, head of research at France's

Straightforward translation is: "Early Christmas, FOMO in full swing".

The fact that the term "FOMO" is proving so popular across world markets these days tells quite a lot about the current narrative.

Looking at the speed at which S&P 500 records have been broken lately and fresh money flowing in risk assets, many cautious strategists are now upgrading their ratings on at least some spots of the equity market and a buying another ticket to the 10 year-old highway to bears' hell.

"What markets have simply powerfully redemonstrated over the last few weeks is the fact that, all else being equal, FOMO tends to be stronger than the fear of losing", writes Stephane Barbier de la Serre at Makor.

"Fears of missing out" was also the headlines to Jefferies' Equity Strategy note this morning in which the broker noted that "inflows into equities have finally reflected the improving risk appetite".

With suddenly positive equity inflows, the STOXX 600 is in touching distance from a record high despite the Q3 season showing that Europe Inc is stuck in a corporate recession and still very vulnerable to a trade war.

"This is in line with the latest fund manager survey insights where the EZ underweight continued to reduce in magnitude", wrote Chris Bailey, European Strategist at Raymond James.

On Sunday, Stephen Innes, chief Asia market strategist at AxiTrader, wrote that "FOMO, as equity markets grind higher into year-end, is increasing as investors desperately want that significant dividend payout that sits at the end of the trade talk rainbow".

On Friday, Goldman Sachs reported that its "Risk Appetite Momentum indicator" which tracks investor sentiment, had increased sharply and was close to all-time highs.

"So far, early signs of FOMO are coming from the options market, where short-term call options have been well bid."

Here's "LE FOMO":

(Julien Ponthus)


VALUE, A 2020 BET? (1157 GMT)

With European equities firmly back to 2015 levels it's getting harder to see the broader benchmarks climbing much further -- and indeed the STOXX 600 has been moving in a tight, 1 pct-point range since the start of the month.

Under the surface however bigger moves may be in store as we head into the new year

UBS says Value stocks could be a good bet, as the rotation out of Growth might continue.

"The current Value bounce is roughly ½ the magnitude and ¼ of the length of previous bounces... And we are starting from a more extreme valuation spread," UBS strategists say.

"Growth appears more expensive than Value appears cheap.. Hence the downside in Growth might offset the upside in Value leading to a run to Value while the market stands still," they add.

On the other hand, they say Cyclicals might need a break, following their YTD to date outperformance vs Defensives.

"In 2020 we prefer Value to Cyclicality," they say.

In the snapshots you can see how Value weighs on each sector in Europe. Most are Cyclicals but there are also Defensives.

(Danilo Masoni)



Sharp falls in the share prices of fashion group Asos and tonic water maker Fevertree drinks contributed to dent the average value of trading on London's AIM, according to data compiled by accountancy group UHY Hacker Young.

"Companies listed on the Alternative Investment Market (AIM) have seen the average value of the daily trading in their shares fall 18% to £271,120 over the last year (Oct 1 2018-Sept 30 2019) from £328,860", according to UHY Hacker Young.

The finding highlights the massive size and influence of a handful of AIM behemoths on the market place.

"The Top 10 shares on AIM accounted for 43% of trading by value and ASOS for 10% of all trading in October", UHY Hacker Young added.

As you can see below, Fevertree, Asos and Burford Capital have had a rough ride in the last 12 months:

(Julien Ponthus)



Well by the way they have been fined lately for misbehaving, one would certainly be tempted to think so!

"While U.S. banks were particularly hit by misconduct costs in the immediate aftermath of the global financial crisis, European banks have been more exposed since 2015", a study published today by the ECB found.

10 years ago, fines were mainly related to the subprime crisis and targeted mainly U.S. banks. More recently however, European lenders have been hit the most for misbehaviours such as sanction violations, money laundering and tax evasion.

See below in the chart how UK, EU and Swiss banks have overtaken their U.S. peers in terms of fines:

"Past misconduct by banks has weighed on global bank profitability and equity positions over the last decade, with the related costs amounting to over USD 350 billion or 15% of total bank equity", according to the ECB paper.

In this light, European lenders can blame their own behaviour for a good chunk of their past and current misfortunes rather than, say, on tighter regulations, capital requirements and sluggish growth in Europe.

"Euro area banks' net income could have been one-third higher over the same period without these misconduct costs, potentially helping strengthen capital buffers, if earnings were retained", the study reckons.

It's not only about fines denting profits, misconducts costs are also about reputational effects, compliance costs or higher provision.

"As past misconduct cases are uncovered, conduct redress may put further pressure on euro area bank valuations", the ECB study found.

Here's the link to ECB page:

(Julien Ponthus and Marc Jones)



European stocks are flat at the open.

We are still waiting for some trade headlines to set a directional trend as automakers wait for Trump to decide whether he will impose up to 25% tariffs on U.S. car and auto part imports.

A top news item for equity markets this morning are Euronext (-0.5%) and the Spanish bourse BME holding talks about a tie-up which could yet speed up consolidation in the sector after the battle for the Oslo exchange.

The main market mover is genetic testing specialist Qiagen which is up around 13% as it reviews a possible sale.

In the UK small cap world, Consort Medical jumped over 40 percent after receiving an offer from Sweden's Reciphram.

BT, which is now are on Labour’s so-called ‘nationalisation hit list’, is down 1% and continues to be closely watched.

On that front, interesting to note that while the privatisation of BT was an iconic moment of Thatcherism, France’s Macron could be on the verge of pulling out a success with the IPO French national lottery drawing subscriptions from retail investors worth 1 billion euros.

If this goes smoothly this week, more big asset sales may come such as airports operator ADP and a stake in power group Engie.

(Julien Ponthus)



The STOXX 600 is just 9 points shy or 2% from its April 2015 record high as European shares start the week with a tiny bit of wind from Asia in their sails.

A surprise move by China's central bank to cut a key interest rate triggered speculation more stimulus was on its the way and lifted markets in the region despite unrest continuing in Hong Kong.

After securing six weeks of gains in a row despite a challenging Q3 earnings season, European stocks are expected to start the day slightly higher.

Financial spreadbetters see London's FTSE opening 2 points higher, Frankfurt's DAX up 5 points and Paris' CAC 1 point higher.

(Julien Ponthus)


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