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LIVE MARKETS-UK economy is poised to pick-up post after election

* European shares fall from July 2015 highs

* STOXX 600 down 0.4%, IBEX down 1.7% at 5-week low

* Trump dashes hopes for details about China trade deal

* Intensifying unrest in HK also weighing

* U.S. futures point to weaker Wall Street open Welcome to the home for real-time coverage of European equity markets brought to you by Reuters stocks reporters and anchored today by Danilo Masoni. Reach him on Messenger to share your thoughts on market moves: rm://danilo.masoni.thomsonreuters.com@reuters.net


UK ECONOMY IS POISED TO PICK-UP AFTER ELECTION (1438 GMT)

That's not coming from a politician or from the manifestos of parties contesting the Dec. 12 election, but from an investment bank.

Decent GDP growth path is not too far away as the chances of a resolution of Brexit-induced uncertainty is likely and a sizeable fiscal impulse is on the horizon, Goldman Sachs economists say.

With Conservatives being favourites to return to power, Goldman Sachs believes clarity on the UK's terms of exit should emerge faster than under a Labour government.

Goldman has raised its 2021 GDP forecast to 2.0% from 1.6%, and for 2022 it sees 2.1% growth versus its previous expectation of 1.8%.

"The prospects for Brexit and the scope for fiscal stimulus lead us to upgrade our UK growth outlook," GS said.

(Thyagaraju Adinarayan)

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WHERE DO YOU SEE THE STOXX END-2020?

It's the time when big banks publish their views for next year and UBS's take on European equities is dominated by a big question: "Trade War or Peace?"

That said, and with stocks in the region having climbed to 4-year highs, strategists at the Swiss bank have opted to take a bearish view for the end of next year.

"Multiples have now normalised, there is downside risk to earnings and sentiment is no longer bearish," they say.

Their end 2020 target for the STOXX 600 is 380, which implies a downside of around 6%.

But of course there's an upside scenario.

"If we were to see a rollback on tariffs, some clarity on Brexit or lead indicators bottoming out, we could move rapidly to our upside scenario," they add.

(Danilo Masoni)

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VIX SHORTS, COMPLACENCY AND FEBRUARY 2018 MEMORIES (1215 GMT)

Have the scars of the February 2018 volatility hurricane healed yet? Have the burns of those who shorted the VIX disappeared?

Clearly not and there's a sense of unease as more and more investors try to profit from the stubbornly low levels of capitalism's fear index.

"What is clear is that the current VIX slope is attracting many speculators, but these trades always come with a tail-risk of a violent upward move in the VIX Index as we saw in February 2018", wrote Peter Garnry, head of equity strategy at Saxo Bank.

Back in the days, betting on calm stock market conditions was a very successful trading strategy until a massive selloff in U.S. stocks derailed some popular short volatility exchange traded products, triggering massive losses.

For Joshua Mahony, a market analyst at IG, "record VIX shorts might indicate overwhelming complacency among investors, but if the playbook from 2017 is any guide, then we might be in for a period of low volatility and sustained gains".

But again, it's dangerous business.

"Looking at past cycles this short Vix trade looks susceptible to a short-term spike in volatility that crushes everyone", Neil Wilson, an analyst at Markets.com wrote to his clients.

See below the VIX and its European cousin over the last two year. Shouldn't take you long to find the February 2018 volatility shock.


(Julien Ponthus)

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THIS TRADE WAR IS SOOOO 2019 (1238 GMT)

Amid trade war fatigue, European stock markets are once again driven (down about 0.6% at the moment) by Trump commenting on the negotiations with China.

There seems to be a growing sense of frustration among strategists who are required to daily comment, analyse or adjust their outlook to the latest developments in the U.S./China row, even if it turns out to be quite insignificant.

"One of our banks reckons all trade headlines should be taken with a grain of salt; I'm thinking a keg", Stephen Innes chief Asia market strategist at AxiTrader wrote this morning.

Alain Bokobza, head of global asset allocation at SocGen told us during a chat on Tuesday afternoon that reading markets on the short term was more than tricky.

"Markets driven by tweets are becoming more unpredictable", he said, alluding to Trump's habit of posting regular comments on the trade war on social media.

Anyhow, the good news is that the creeping trade war fatigue could be a very 2019 theme and perhaps even go away in 2020.

Speculation goes that Trump might want to ensure success on that front during his re-election campaign.

A Reuters poll with over 180,000 respondents on Twitter shows that a clear majority of people believe the 2020 U.S. election will drive markets next year, not the trade war:

Bonus: a link to Reuters' Global Investment Outlook 2020: https://www.reuters.com/summit/Investment20

(Julien Ponthus)

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POLITICS MATTER: MADRID AT RELATIVE ALL-TIME LOW (0953 GMT)

Madrid is lagging the market as investors brace for more instability after the Socialists and the far-left Podemos party formed a government pact that still lacks majority, following an inconclusive general election - the second this year.

The IBEX is down 1.6% and the STOXX is falling 0.8% -- a gap that at a first glance isn't too scaring.

But if you chart the index relative to the STOXX, it turns out that Madrid is trading at its lowest levels on record, a pretty clear illustration of how deep its underperformance has been over the years and that after all, politics matter.

And analysts seem to a agree that as long there there's a political stalemate in Madrid, the IBEX will struggle to recover, even though the Spanish economy is in much better shape than other countries'.


Turning to the most immediate worries, Rabobank notes: "We are still a decent way away from Spain having a functioning government, which in turn means that the passing of a new Budget (for 2020) still looks very difficult".

(Danilo Masoni)

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EUROPE DROPS, MADRID LAGS, EARNINGS DRIVE BIG MOVES (0828 GMT)

Trump's speech disappointed and no surprise that Europe has started the session on the back foot with cyclical and trade sensitive plays from banks to autos feeling most of the pain.

Declines however aren't dramatic with the broader pan-European STOXX 600 benchmark index down just around 0.3% in early trading, after hitting its highest in more than four years in the previous session.

Madrid's IBEX is being left behind, down 1%, as investors braced for more political instability in the euro zone country after the Socialists and the populist Podemos party formed a government pact that sill doesn't have a majority.

Among individual stocks there some big moves.

Tullow Oil is being hit hard, down 18% to its lowest level since early January, after the oil company forecast lower free cash flow for the year due to problems at its Ghana fields.

A JPMorgan downgrade to neutral is sending shares in SES down 13.1%, while cable maker Prysmian is down 5.7% after it lowered its 2019 profit guidance.

Not all updates were disappointing: German IT-systems provider Bechtle and property group Deutsche Wohnen confirmed their guidance, pushing their shares to the top of the STOXX.

Here's your opening snapshot:

(Danilo Masoni)

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WHAT'S ON OUR RADAR AT THE OPEN (0752 GMT)

European shares are expected to fall from July 2015 highs at the open today after Trump's much-anticipated speech failed to provide details on an initial trade detail with China, while intensifying unrest in Hong Kong isn't going to help either.

Futures on main regional benchmarks are down 0.3-0.6%.

In corporate news there are a few earnings updates to digest. Italy's Enel, Europe's biggest utility by market value, raised its core earnings target for the year after nine-month operating results topped expectations, lifted by its network business in Latin America. One trader sees its shares opening up around 1%. Shares in Deutsche Wohnen are up 1.5% in early trade after the German real estate company, recently hit by plans to freeze rents in Berlin, repeated its forecast and said it would back shares for 750 million euros.

Among other stocks that are expected to rise at the open following results are Italian luxury group Ferragamo, which posted a Q3 core profit above expectations even though sales were a miss, while Germany's Bechtle and Nordex are up in early Frankfurt trade after results.

Dutch bank ABN Amro reported a higher-than-expected 24% drop in third-quarter net profit as costs of client oversight rose amid an investigation into the lender's alleged incapability to spot money laundering. Its shares are seen falling 1-2% at the open. In the same sector, HSBC and Standard Chartered could fall amid the unrest in Hong Kong, where bank branches were closed.

Also seen falling after results are shares in cable maker Prysmian, while Tullow Oil could take a big hit after it cut its 2019 oil production outlook and forecast lower free cash flow for the year due to problems at its Ghana fields.

In trade-sensitive autos sector lack of details on possible tariffs may weigh. Sector officials however told Reuters they still expect Trump will again this week push back a self-imposed deadline on whether to put up to 25% tariffs on auto imports from the EU. German carmakers could also come under pressure after Tesla said it would build its planned European plant in Germany.

(Danilo Masoni)

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MORNING CALL: DOWN FROM HIGHS AS TRUMP SPEECH FALLS SHORT (0626 GMT)

European shares are expected to open lower after climbing yesterday to July 2015 highs as U.S. President Donald Trump's highly anticipated speech failed to deliver those details about an initial trade deal with China that markets were hoping for.

Spreadbetters at IG expect London's FTSE to open 26 points lower at 7,340, Frankfurt's DAX to open 58 points lower at 13,225 and Paris' CAC to open 19 points lower at 5,901.

"What was missing (in Trump's speech) were details about progress on phase one of the trade deal with China or the status of auto tariffs which may be placed on imports from the European Union," said Chris Zaccarelli, Chief Investment Officer for Independent Advisor Alliance.

"He mentioned that the 'China deal could happen soon,' but he's said exactly the same thing in the past, so that wasn't anything new," he added.

Intensifying unrest in Hong Kong isn't going to help either.

(Danilo Masoni)

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