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LIVE MARKETS-Unravelling the FTSE's dividend appeal

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* European bourses higher

* Autos, miners leading gains

* STOXX 600 on track for 4th straight weekly gain

* Vodafone hits lowest since July 2010

MyWelcome to the home for real-time coverage of European equity markets brought to you by

Reuters stocks reporters and anchored today by Josephine Mason. Reach her on Messenger to share

your thoughts on market moves:


The FTSE 100's handsome dividend yield is often cited as a reason to dip your toe into UK

stocks even as the country wrestles with the chaotic process of leaving the European Union.

With (Other OTC: WWTH - news) a yield of 4.75 percent, the blue chips' average yield is well above their European

peers on the euro zone STOXXE (3.54 percent) and almost double the 2.6 percent on the S&P 500 on

the other side of the pond.

But even that appeal may now be unravelling.

Take Vodafone. The shares are getting hammered today, hitting their lowest in almost nine

years after the world's No. 2 mobile operator reported weaker-than-expected revenue growth due

to continued price competition in Italy and Spain and a weaker South African market.

Why such harsh punishment for issues that were generally well known?

Mike van Dulken, analyst at Accendo Markets, reckons some investors are calling time on the

stock because they don't believe the company's generous dividend policy is sustainable.

With a whopping 9.2 percent dividend yield, it's the fourth highest on the FTSE 100 behind

Evraz (LSE: EVR.L - news) , Persimmon (Frankfurt: 882058 - news) and Taylor Wimpey (LSE: TW.L - news) .

But van Dulken notes, its projected one-year dividend cover, the ratio of earnings over the

dividend paid to shareholders, is as low as 0.7 percent.

Anything below 1 means analysts doubt the company will generate sufficient profits to

finance its dividend policy in the long run.

"A 9-percent yield is huge, but the risk is they will struggle to pay it. I think people

have been bailing out on that," says van Dulken.

Energy provider SSE (LSE: SSE.L - news) with a cover ratio of 0.8 percent is as another example of where

concerns are growing that the company won't be able to sustain its yield of 8.6 percent.

"The dividend yield is only good if you're happy you're going to get paid it. It's like

taking a job as a opportunity to earn £250,000, but 99 percent of it is on commission," he


Check out these charts which illustrate the FTSE's dividend bonanza:

(Josephine Mason and Ritvik Carvalho)



European markets are clearly in an upbeat mood this morning but that probably tells us more

about the state of global markets than the economic health of the old continent itself after

yesterday's PMI gloom and ECB dovishness.

With autos and miners leading the way, cyclicals are in a good shape thanks to a rather

positive view on trade.

As Andrew Milligan from Aberdeen Standard, just told us, "for those who are looking to put

money in the market", the latest on the U.S.-Sino (Dusseldorf: 1205802.DU - news) trade front isn't a negative.

The "wind from Asia" is also stirring hopes of Chinese stimulus while Wall Street echoed of

some positive earnings and hyped-up chipmakers.

Bourses from Paris to Milan are rising well above 50 beeps and the export-heavy DAX, up a

vigorous 1.2 percent, shows perhaps how investor optimism is targeting the global economy rather

Europe itself.

The latest edition of Bank of America Merrill Lynch's Flow Show reminds up how unpopular

European stocks are with outflows during 45 weeks out of the past 46.

Here's a snapshot of European markets at 1028 GMT:

(Julien Ponthus)



Futures for euro zone benchmarks are pointing to a pretty buoyant open this morning, with

the headline EuroStoxx 50 up more than 0.6 percent after hitting their highest level since

December 5. Germany's DAX futures are up as much as 0.8 pct.

FTSE futures are underperforming as the strong sterling drags.

So far, the markets appear to be shrugging off Intel (Euronext: INCO.NX - news) 's profit and sales warning and Q4 sales

miss which has further stoked fears of stagnating smartphone demand and a cooling Chinese

economy after sales warnings from Apple (NasdaqGS: AAPL - news) , Samsung and Taiwan Semiconductor earlier this month.

European chip stocks, battered after the nasty headlines, rallied yesterday as investors

focused on STMicro's upbeat outlook for the second half of the year and ignored the gloomy Q1

guidance. Whether that will continue today is not clear.

Investors are also bracing for a heavy newsflow next week - U.S-China trade talks,FEd

meeting and Brexit vote in the UK on Tuesday - that could determine direction amid shaky market


"There's been a lot of speculation of the last couple of weeks and Wilbur Ross' claim that

the two sides are “miles and miles” from a deal with “lots and lots of issues” isn’t going to

fill people with confidence," says Oanda analyst Craig Erlam.

"Still, these negotiations do typically come with posturing from both sides and investors

may will willing to look through it, with previous commentary being much more positive."

There was mixed news from the telecoms sector: Ericsson (Hanover: ERCB.HA - news) 's shares were expected to rise 4

percent after its consensus-busting Q4 results while Telia shares were seen lower after the

Nordic telecom group's weaker-than-expected earnings.

Vodafone, the world's second-largest mobile operator, has warned that revenue growth slowed

in its third quarter due to price competition in Spain and Italy and a slowdown in South Africa.

Here's your snapshot:

(Josephine Mason)



With earnings season in full swing, there's plenty of earnings to digest this morning.

Telecoms firms will be in focus with Ericsson, Telia and Vodafone reporting.

Let's start with the good news: Swedish mobile telecom equipment maker Ericsson has reported

a significantly smaller Q4 operating loss than expected and said it was on track to reach its

financial goals.

The operating loss was 1.9 billion crowns ($209.7 million), against a 19.3 billion loss a

year ago, and a mean forecast for a 3 billion loss expected in a Reuters poll of analysts.

Now (Frankfurt: 11N.F - news) the not so good: Telia's fourth-quarter core earnings were below market expectations and

the company said it expected the challenging conditions in Sweden, its largest market, to


But some shareholder-pleasing news: it has proposed a dividend of 2.36 crowns, above a

median forecast of 2.30 crowns.

Vodafone will issue its trading statement later this morning. Its shares were hammered

yesterday after its South African unit Vodacom's weak numbers.

In other more downbeat results news, fragrance and flavour maker Givaudan (LSE: 0QPS.L - news) said its

weaker-than-expected net income in 2018 was hit by higher financing costs and foreign currency


Online retailers, which have been the big winners of the Christmas holiday sales, may get a

boost from a report in The Times that Britain has ruled out an online sales tax proposed to help

high street vendors in the country as it would fall foul of the European Union rules.

French dairy group Savencia (LSE: 0DTK.L - news) may be in focus after its unit Sodilac said it was recalling

infant formula sold in pharmacies in France and produced at a Spanish factory due to possible

links with salmonella cases among babies.

Here are the other headlines:

Swatch plans to reduce capital via repurchased shares

Air Liquide Makes A Strategic Investment In The Production Of Decarbonated Hydrogen

America Movil buying Telefonica (LSE: 826858.L - news) operations in Central America

MEDIA-Three funds, not Autogrill (Milan: AGL.MI - news) still in race for Elior (Paris: FR0013204435 - news) 's Areas division -Les Echos

BRIEF-Accorhotels Announces Two Bond Issues For 1.1 Billion Euros

(Josephine Mason)



Spreadbetters expect European shares to extend yesterday's gains and build on rises on Wall

Street and in Asia overnight, but trading may be cautious as investors brace for a slew of

crucial events next week from the Fed meeting, a key Brexit vote in London on Tuesday and the

latest round of U.S.-China trade talks.

Watch out for sterling. The pound breached the psychologically important $1.3 to the dollar

overnight after The Sun reported that Northern Ireland's Democratic Unionist Party has privately

decided to offer conditional backing for Prime Minister Theresa May's Brexit deal next week.

That added further fuel to hopes the UK might avoid a no-deal Brexit on March 29.

Still, financial spreadbetters at IG (Frankfurt: A0EARV - news) expect London's FTSE to open 21 points higher at 6,840,

Frankfurt's DAX to open 71 points higher at 11,201 and Paris' CAC to open 25 points higher at


CMC Markets (LSE: CMCX.L - news) are expecting slightly small gains - the FTSE to rise 14 points, the DAX up 65

points and CAC 40 up 22 points.

(Josephine Mason)