LIVE MARKETS-A tough summer ahead for banks
* European shares set for 5 straight day of gains
* Brexit secretary Davis resigns, FTSE up
* Asian stocks rally on U.S. jobs relief
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: julien.ponthus.thomsonreuters.com@reuters.net
A TOUGH SUMMER AHEAD FOR BANKS (0953 GMT)
Financials will be a closely watched sector this week as U.S. banks JP Morgan and Citi kick
off results on Friday. UBS (LSE: 0QNR.L - news) analysts reckon global banks are in for a "tough summer", among the
worst-performing sectors worldwide this year so far, and highly oversold. They've got a lot to
prove this earnings season against investors' pessimistic forecasts.
Analysts at the Swiss bank point to the flatter yield curve and sluggish lending as signs
the U.S. banks may be late in the cycle, while trade wars have dented sentiment for the sector
globally - though they reckon the fundamental impact will be modest even for trade-sensitive
HSBC and Standard Chartered (BSE: 580001.BO - news) .
In the Eurozone meanwhile the rate cycle is being pushed out with rate rises now expected to
be later, and earnings expectations have been downgraded accordingly with banks' net interest
and fee income likely at risk. In short, not a very encouraging picture for results around the
corner.
"In light of the challenging near-term outlook, we advocate a more defensive approach to
stock selection," writes UBS. Their picks in Europe are UK domestics and Nordics, pointing to
Lloyds and Danske
(Helen Reid)
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OPENING SNAPSHOT: STOXX EXTENDS WINNING STREAK, FTSE TOO (0714 GMT)
European shares are off to a positive start today with Friday's strong U.S. jobs report and
modest wage growth providing more fuel to the recent rebound and sending the STOXX 600
index up 0.5 percent, set for its fifth straight session of gains.
The FTSE too is joining the party, up 0.4 percent and set for three days of gains,
after the resignation of Brexit minister David Davis.
"It's unwelcome timing for the PM ahead of the UK’s white paper on Brexit, and before
crucial talks with Brussels, but markets welcome the removal of a major impediment to a
pro-business 'soft-Brexit'," said Mike van Dulken and Artjom Hatsaturjants at Accendo Markets.
In less than one hour the successor of Davis will be announced.
Here's your snapshot:
(Danilo Masoni)
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ON THE RADAR AT THE OPEN: OPTIMISM AND SARCASM (0752 GMT)
Stock markets are expected to open slightly up this morning and there's a bit of sarcasm
floating around as to why things seem so rosy with no shortage of worries, such as the Brexit
crisis in the UK or the escalating trade war.
Talking about sarcasm, here's how Rabobank analysts started their daily comment: "And so it
came to pass that the trade war began; and markets thought that it was good."
Pushing the argument even a bit further they asked whether "using a simple model, perhaps if
they put more tariffs in place today equities will go up again?"
Anyhow, common explanation on the street is that U.S. job data is really good and there’s no
need to sell stocks further until there's evidence that the tariffs are actually having an
impact on the economy.
On the bright side too this morning, ING noted that "German exports rebounded in May,
providing more evidence of a strengthening of the economy in the second quarter".
In terms of individual movers, French telcos could be sensitive stocks after Orange (LSE: 0OQV.L - news) said it
was ready to discuss potential tie-ups with other operators.
Eyes also on Daimler (IOB: 0NXX.IL - news) which temporarily halted deliveries of a truck engine after finding
that, in certain driving conditions, its emissions of nitrogen oxide could exceed legal limits.
Good news for Air France KLM which reported higher passenger traffic for June on Monday.
In the UK, U.S. satellite group EchoStar Corp said it does not intend to make an offer for
Inmarsat (Other OTC: IMASF - news) after the company rejected a $3.2 billion takeover approach.
Mears Group (LSE: MER.L - news) said its chairman Bob Holt would not stand for re-election at the company's 2019
annual general meeting, two days after a shareholder called for his removal.
As a sign that the return of volatility is starting to bite, industrial group OC Oerlikon
became the third Swiss company this year to shelve a planned stock market listing when it halted
the share offering for its drives unit on Monday.
(Julien Ponthus)
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STYLE POLICE: DON'T USE "DESPITE" IN A HEADLINE (EVEN TODAY!) (0617 GMT)
One simple rule in journalism is to always tell your readers WHY something happened and not
DESPITE of what.
Today seems like it's going to be a difficult one on the style front because it is obviously
tempting to write that Asian stocks markets are up DESPITE the trade war escalation and the
pound is rising DESPITE the resignation of British Brexit Secretary David Davis and the FTSE is
expected also to rise DESPITE all of that.
One way to look at it, writes Jasper Lawler, an analyst from LCG, is that Friday's job
report data shows that the "U.S. economy was soaring with a healthy labour market".
Given the resilience of the U.S. economy, "sentiment could remain resilient until we see
solid evidence of these trade tensions feed through to softer economic data, particularly in
China", Lawler argues.
As for why the pound has not fallen on the new Brexit crisis hitting Theresa May's cabinet,
well it does suggest that "investors believe she will keep hold of the reins", Lawler also
writes.
Here are European futures at the open:
(Julien Ponthus)
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MORNING CALL: DON'T LET A TRADE WAR OR A BREXIT CRISIS GET IN THE WAY (0531 GMT)
The mood in Asia is definitely on a 'risk-on' mode and investors are not, at least at the
moment, letting fears of a full-blown trade war getting in the way of a positive session.
The optimism is spreading to Europe where financial spreadbetters expect Frankfurt's DAX to
open 66 points up and Paris' CAC to rise 28 points.
London's FTSE is expected to open 41 points higher as two members of the British government
resigned over Brexit and put the future of Prime Minister Theresa May in doubt.
The pound now is stable after initially edging down on the resignation of Brexit Secretary
David Davis who said he was not willing to be "a reluctant conscript" of Prime Minister Theresa
May's plans to leave the European Union.
(Julien Ponthus)
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