UK Markets open in 3 hrs 32 mins

LIVE MARKETS-Throw away your wallet: digital currency by cen banks soon?

* Europe's STOXX 600 up 0.4%, boosted by mining stocks * European blue-chip index hits highest since Jan' 18 * FTSE 100 (+0.7%) outperforms as BoE policymaker hints rate cuts; sterling down * Micron warning hits European chip stocks Welcome to the home for real-time coverage of European equity markets brought to you by Reuters stocks reporters and anchored today by Josephine Mason and Joice Alves. Reach them on Messenger to share your thoughts on market moves: and THROW AWAY YOUR WALLET: DIGITAL CURRENCY BY CEN BANKS SOON? (1357 GMT) Cryptocurrencies: Facebook is in it, banks have toyed with the idea, major corporations have expressed interest and it looks like central banks are finally convinced that digital currencies are the way forward. "The central banks are probably going to have to make some move within the next two to three years, after all Facebook has put pressure by suggesting they could launch in the coming year. I think you have already got some sense of urgency among the policy community," ING's chief economist Mark Cliffe says. Earlier today, the Swiss National Bank's Governing Board Member Thomas Moser said he wouldn't be surprised to see a first central bank issue its own digital currency within the next year. This comes nearly a month-and-a-half after a senior Chinese central bank officer said the world's second-largest economy is "almost ready" to issue the country's own sovereign digital currency. Why go digital? Cliffe believes turning digital might open up a range of other options for the central banks to help/support economic activity in the next downturn. So the million bitcoin question is? When and which digital currency is going to replace the DOLLAR? (Thyagaraju Adinarayan) ***** BEWARE THE RISE OF JUNK BONDS (1343 GMT) More European and U.S. companies are taking advantage of low interest rates to issue debt with junk ratings, raising concerns about the vulnerability of the market in the event of an economic downturn, according S&P Global Ratings Research. The proportion of speculative-grade issuers rated 'B-' in both the U.S. and Europe has risen markedly since 2017, hitting an all-time high of 20.5% in the second quarter in the United States, S&P said. With low interest rates, companies have rushed to take on more debt, predominantly in a handful of sectors. High tech, media, entertainment, healthcare and consumer products account for more than 50% of the B- issuance in the U.S. and in Europe. There is no sign B- rated companies will lose their appetite for cheap debt. According to S&P, the number of new issuers in 2019 is on track to reach 87 by the end of the year. Downgrade and default rates tend to increase with lower ratings and collateralized loan obligations (CLO) investors are particularly concerned, as these issuers are one notch above the 'CCC' rating category, for which they haircut the value of loans when calculating coverage tests. The outlook is not positive as trade tensions have started to weigh on certain sectors. Economists have raised their forecast on the chance of a recession in the U.S. to a 30%-35% in August next year, according to the report. "We expect the default rate to increase over the next 12 months in the U.S., as signs of stress have started to appear in financial markets and the economy," it says. (Joice Alves) ***** OSLO AND LONDON STORM SEPTEMBER (1334 GMT) The star performers this month have so far been London's FTSE and Oslo indices but for rather different reasons - the UK's blue-chip market has been boosted by a sinking pound amid fresh jitters over Brexit and is having quite the run-up today after dovish comments from a BoE policymaker this morning. In contrast, Oslo's bourse has risen about 3% after the country's central bank defied the global shift and raised its interest rates mid-month, giving banking stocks a major boost. Switzerland, which is stuffed with defensive stocks like Nestle, has been on the backfoot. Among the individual sectors, banks is the only sector across Europe in the red for the year to date, as investors continue to shun the industry amid negative interest rates and heft regulation. (Josephine Mason) ***** SEE IT TO BELIEVE IT! S&P 500 TRACKING 2013 (1216 GMT) If S&P 500 moves exactly this way (i.e. tracking 2013 path), the index could end up gaining nearly 30% for the year. In 2013: Apple's latest iPhone was the 5S, which introduced the fingerprint login, House of Cards had just started on Netflix, Obama was U.S. President, Greece was in the middle of a massive debt crisis. That's with the U.S. and how did European stocks move in 2013? The STOXX 600 was up 17% that year, just 1 percentage point higher than the gains we've seen so far in 2019. So, Europe could also put up a similar show. (Thyagaraju Adinarayan) ***** REDUCE RISK, TIME TO PLAY DEFENSE (0939 GMT) A risk-on equities rally in September amid U.S.-China trade war, looming Brexit and a slowing global economy shows investors still believe a turnaround is imminent. But is it? The recent flash PMI numbers have only confirmed that Germany is very likely slipping into recession as it continues to get crushed between the trade war and Brexit hitting the manufacturing-heavy economy. "We think investors should use the September equity rebound and bond market sell-off as a chance to reduce some risk, until the economic and political concerns that confront growth-sensitive assets fade or valuations become more attractive," Barclays' Ajay Rajadhyaksha says. He says global growth is expected to remain weak well into 2020, but the world and the U.S. will most likely avert a recession. Given the backdrop, "investors should reduce exposure to equities in favour of higher-yielding fixed income assets." Let's not forget that the recent encouraging noise on U.S.-China trade war doesn't mean impact from existing tariffs will fade. Are investors ignoring those risks? Barclays says: "Despite recent encouraging noise on US-China trade talks, there are more tariffs in place than three months ago. Every major economy is seeing a full-blown industrial/manufacturing slowdown, global trade volumes continue to fall, and less than half the deceleration in US-China trade volumes (due to existing tariffs) has played out, on our estimates." We're a couple of weeks away from the earnings season and Barclays says equities look more vulnerable to an outbreak of anxiety about corporate health or unsettling political developments, while it struggles to see substantial upside risks in the 3-6 months ahead. Here's a look into the battered European auto sector's earnings and valuation, which shows the industry is trading at a big discount to the benchmark index and analysts have been consistently revising down their earnings estimates for almost a year: (Thyagaraju Adinarayan) ***** OPENING SNAPSHOT: FTSE ON A TEAR, EUROPE SHOWING RESILIENCE (0732 GMT) Wow, London's blue-chip index is on a tear in early deals, rising as much as 1% and hitting two-month highs as sterling tanks after a senior policymaker at the Bank of England hinted at looser monetary policy if global growth remained lacklustre and Brexit uncertainty continued to drag on one of the world's largest economies. The rest of Europe is putting in a surprisingly strong performance due to the weak euro, which is offsetting a slew of bad news overnight, from Micron's profit warning, reports of fresh scrutiny of U.S. suppliers to Huawei and the release of the whistleblower report on U.S. President Trump rattled investor confidence again. As expected, chipmakers Infineon and Siltronic are down 1.5% to 1.6%. (Josephine Mason and Joice Alves) ***** AHEAD OF THE OPEN: STOCK FUTURES MAKE TENTATIVE GAINS (0659 GMT) Europe's stock futures are making tentative gains in early deals, shrugging off for now pressure overnight in Asia and on Wall Street amid worries over the impact of the impeachment process on the world's top economy as investors draw comfort from reports Washington and Beijing will meet for the next round of trade talks in a few weeks. The Eurostoxx is up 0.4%. Paris stocks may get an extra lift from a government pledge to cut taxes by more than 10 billion euros ($10.9 billion) next year. Dark clouds are looming though with a profit warning from U.S. chipmaker Micron overnight renewing concerns about demand from smartphone makers and after reports that the United States may reinstate curbs on American companies supplying China's Huawei, one of the world's top smartphone markets. Dealers expect Infineon, AMS, Siltronic and STMicro to fall 2%. Europe's major stock indices are on track for their third straight monthly gain, but it's been a tough week for the region's markets amid political chaos in London and Washington, dire data renewing worries about the bloc's health and as investors brace for U.S. import tariffs to be slapped on billions of dollar worth of European goods. The pan European STOXX 600 and euro zone benchmark are on track for their first weekly drop since mid-August. Elsewhere on the corporate front it's relatively quiet. More bad news to digest from the embattled banking sector with Commerzbank warning on FY revenue. Its shares are down 3% in premarket. (Josephine Mason and Joice Alves) ***** ON OUR RADAR: CHIPS ARE DOWN (0637 GMT) For a Friday, it's relatively busy on the corporate news front, but the main focus for investors will likely be chipmakers after Micron's warning overnight which will underscore worries about the health of smartphone demand amid tensions between the United States and China. Infineon, AMS, Siltronic are seen under pressure. Italian oil and gas group Eni will be in focus after news its chief executive, Claudio Descalzi, was under investigation for a conflict of interest issue over dealings in the Congo. Its Var Energi AS has bought Exxon Mobil's Norwegian oil and gas assets for $4.5 billion. Good news for Pirelli after shareholder Camfin said it has underwritten a financial instrument which gives the holding company the right to increase its stake in tyremaker up to 15% from current 10.1%. Elsewhere in Italy, one dealer says Telecom Italia shares may get a lift after chairman Conti has resigned. Europe's beleaguered banking sector remains in the spotlight - Commerzbank has warned it no longer expects a rise in underlying revenue this year while its supervisory board approved plans announced last week to cut thousands of staff and close a fifth of its branches. Shares are down 2.6% in pre-market trade. Here are some early headlines: Commerzbank cuts revenue forecast as board approves overhaul Eni CEO searched, under investigation over dealings in Congo Exxon to sell Norway assets to Eni's Var Energi for $4.5 bln Westinghouse to buy Rolls-Royce's North American Civil Nuclear unit BMW not interested in settling EU cartel investigations - WirtschaftsWoche Telecom Italia chairman quits as shareholder feud subsides Capgemini Receives Clearance For Its Proposed Acquisition Of Altran Carrefour completes sale of 80% stake in Carrefour China to Rheinmetall AG Regional Disruption Of Production Due To Malware At Rheinmetall Automotive (Josephine Mason and Joice Alves) ***** MIXED SIGNALS IN EUROPE (0544 GMT) European stocks are expected to open higher, displaying some resilience to pressure overnight in Asia and Wall Street amid renewed optimism, albeit fragile, about the U.S.-China trade tensions with reports of another round of official talks aimed at ending the protracted spat due in two weeks. But gains will be tentative after a Q1 profit warning from U.S. chipmaker Micron which has stirred anew worries about demand for memory chips and about the damage from Washington's dispute with Beijing. Micron's shares were down nearly 6.5% on Wall Street and the news has upset Asian rivals overnight. Adding further gloom to the tech sector were media reports that Washington is unlikely to allow American firms to supply China's Huawei Technologies , one of the world's top smartphone makers, undermining hopes of a complete deal between the world's top two economies. IG financial spreadbetters expect London's FTSE to open 12 points higher at 7,363, Frankfurt's DAX to open 10 points higher at 12,299, and Paris' CAC to open 3 points lower at 5,618. Still, the pan European and euro-zone benchmark indices have had a torrid week amid fresh political tumult on both sides of the pond and worries about the euro-zone economy and are set for their first weekly drop since mid-August. (Josephine Mason and Joice Alves) ***** (Reporting by Danilo Masoni, Josephine Mason, Joice Alves and Thyagaraju Adinarayan)