Register
Login:
Share:
Email Facebook Twitter


Tech company Mporium delivers an outstanding set of Q1 results says CEO De Groot
IronRidge Resources CEO hails spectacular lithium project and money making potential for gold


Finance & Stock Market News


LIVE MARKETS-Does $13.8 trillion sound turbulent enough?

Tue, 12th Feb 2019 15:32


* European shares trade higher * FTSE 100 lags euro zone peers amid Brexit fears * Online trading platform Plus500 sinks after profit warning * Michelin outlook boosts autos * Kering shines after results Feb 12 - 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. Reach her on Messenger to share your thoughts on market moves: rm://josephine.mason.thomsonreuters.com@reuters.net $13.8 TRILLION: SOUNDS TURBULENT ENOUGH? (1525 GMT) "Turbulent" is how the World Federation of Exchanges (WFE) describes 2018 and according to their data, it certainy was. Global market capitalisation shrank 14.9 percent from roughly 88.2 trillion dollars in Q1 2018 to 74.4 trillion dollars at year-end, which is, well, a lot of money. "The return of volatility was against the backdrop of a global economic slowdown, geopolitical and trade tensions, concerns about tightening monetary policy, and increased scrutiny of the technology sector," the industry association writes. "In the presence of such high volatility, trading activity was up on 2017," WFE adds, noting value and volume of trades rose 15.4 percent and 11.5 percent respectively. Have a look at the WEF report here https://bit.ly/2N3uTl6 or https://bit.ly/2N3uTl6. (Julien Ponthus) ***** GUESS WHO'S DOWN SO FAR IN FEBRUARY? (1412 GMT) December was a disaster, January was joyful, so what about February? Well, with some big investment houses such as Credit Suisse turning more cautious on global stocks it looks safe to assume this month won't be a repeat of the previous one. Take Christopher Potts, strategist at Kepler Cheuvreux, who says: "February should be a down month for equity values". "We suspect that February will be characterised above all by low investor conviction. The legacy of 2018 is an investment community that is cautious and much more defensively positioned." So are there cracks already emerging, and where are they? In Europe, the mighty DAX is down 0.4 percent this month and Madrid's IBEX is down 0.5 percent, while at the sector level, autos are down 3.4 percent followed at a distance by basic resources stocks and the unloved telcos, both down 0.8 percent. More broadly, the MSCI world index, which tracks shares in 47 countries, is also down, by a skinny 0.1 percent, and for the record, the S&P is up 0.2 percent. To conclude on a more forward-looking note, here's an extra quote from Potts: "The shift from monetary normalisation to neutrality by the Fed has led us to conclude that we will probably not see this year the kind of dramatic market moves that characterised 2018". "Still, monetary neutrality will not halt the downturn in the global business cycle. Nor does it remove the risk that this downturn may be prelude to recession. Net earnings revisions in developed markets promise to remain negative for an extended period". (Danilo Masoni) ***** CONTRARIAN TRADE OF THE DAY? ITALY! (1331 GMT) The main news from BAML's February survey was emerging markets labelled "most crowded trade" - a bad omen for the asset class if prior "crowded trade" Bitcoin's rise and plunge is anything to go by. But the survey also showed some interesting developments in European stocks - most notably a record underweight on Italian stocks, making it a contrarian "buy". Italy's FTSE MIB is up 1.1 percent today and up 8 percent since the start of the year. While sector positioning is low-conviction, not deviating much from the benchmark, country positioning has hit extremes, BAML strategists say. Investors have a record underweight on Italian stocks with a net 53 percent underweight, prompting them to say "Contrarians would buy these stocks on a tactical basis." In sector positioning, the market's rally has helped some of the most hated stocks: * January's two biggest underweights - Autos and Basic Resources - have almost totally reversed, jumping by 29 percentage points in a single month. * Healthcare is the most overweighted sector, while Chemicals becomes the largest underweight, falling from net 16 percent underweight to net 31 percent underweight. The outlook on earnings growth has also improved slightly since the January survey: * A net 31 percent expect lower EPS growth over the next 12 months (down from net 42% last month) * Net 78% expect less than 10 percent EPS growth (down from net 87%) (Helen Reid) ***** 2019 COULD GO TWO WAYS: ARE YOU CYCLICAL-READY? (1246 GMT) While most strategists say there isn't any convincing evidence a recession is lurking on the horizon just yet, the constant data doom and gloom does make one wonder if we're close to a tipping point. "2019 could go two ways: either we see a mid-cycle slowdown where the global economy just barely avoids a recession, or the downside dynamics in play prove too strong for the current policy measures in place to avoid this," writes Peter Garnry, head of equity strategy at Saxo Bank. This, it turns out, might also be a time of opportunity for the brave. "This part of the business cycle is also one where great returns can be made via contrarian equity buys," Garnry writes, adding that "perhaps the key thing is to prepare for the recovery phase when it arrives, because this period will offer interesting upside opportunities in cyclical equities." (Julien Ponthus) ***** EARNINGS RECESSION, ARE YOU SURE THERE WON'T BE ONE? (1107 GMT) Bernstein strategist Inigo Fraser-Jenkins and team are not so sure and their earnings indicator is now pointing to a 0.1 percent earnings drop over the next 12 months for Europe due to a sharp increase in policy uncertainty. That surely provides food for thought, especially it you consider that even excluding the effect of policy uncertainty, Bernstein gets to a 3.8 percent growth forecast, which is still well below the consensus of 7.4 percent for 2019. In the snapshot you can see all the variables Bernstein used to construct its earnings indicator but for more on the indices to measure policy uncertainty, check out: http://www.policyuncertainty.com (Danilo Masoni) ***** U.S.-CHINA TRADE TALKS: WHERE TO FROM HERE? (1032 GMT) As U.S. trade representative Robert Lighthizer arrives in Beijing for high-level trade talks between the world's two largest economies, Citi reckons the market is already partly pricing in a deal, even though it could be more complicated than that. "Markets seem to be positioned for a U.S.-China trade deal, but trade war risks remain," Citi strategists write. Citi expects additional trade and investment restrictions, especially on emerging technologies and sectors related to the "Made in China 2025" plan even if a preliminary trade deal is achieved. Their base case (with a 55% probability) is a "veneer" of a deal with chances of a deadline roll-over, though a tariffs limbo remains. They think the deal could include the following commitments by China: * Reduce the goods trade deficit by $100-$200 billion by end 2020 * Grant (by mid-2020) higher market access for U.S. exports and services * Structural changes like enforcing stricter intellectual property protection * Increase transparency on currency practices Their bear case (with a 40% probability) is that the U.S. increases pressure on the Chinese economy and increases the tariffs on Chinese imports from 10 to 25% on March 2. Citi sees global equities falling 10 to 15 percent in the short term. The bull case has only a 5% probability: a comprehensive deal, a rollback of tariffs and a softening of the U.S. stance on China. This would boost global equities up around 10 percent by end-2019 Below you can see their full scenarios and impact on different asset classes: (Helen Reid) ***** OPENING SNAPSHOT: TRADE & TYRES (0846 GMT) European shares are up for a second day after taking a beating last week, helped by hopes around the resumption of trade talks between China and Washington and a strong update from Michelin, which is rallying 10 percent to the top of the STOXX 600 after the tyre maker pledged a profit gain this year. Its gains are spreading to the whole autos sector, while shares in other companies that supply the automotive industry, such as chipmakers, are also doing well. Well-received results also from German wholesaler Metro and staffing company Randstad boosted their shares, while a small beat from luxury giant Kering failed to impress investors. Also lifting sentiment is the possible aversion of a second government shutdown after U.S. lawmakers reached a tentative deal on border security funding. Here's your opening snapshot: (Danilo Masoni) **** WHAT WE'RE WATCHING BEFORE THE OPEN (0755 GMT) European shares are expected to open higher, boosted by optimism about the U.S.-China trade negotiations and relief after U.S. lawmakers reached a tentative deal on border security funding to avert another government shutdown. Futures on main euro-zone benchmarks are trading up more than 0.5 percent, with trade-sensitive DAX up as much as 0.8 percent. Earnings will also help drive direction, with strong numbers from Gucci owner Kering, Michelin and Randstad, while Thyssenkrupp delivered a mixed report. The German steel-to-elevator maker stood by its 2018/19 targets but warned the global economic environment is darkening after reporting a big drop in Q1 results. Its shares are up 1.5 percent in early Frankfurt trade. Randstad, the world's second-largest staffing company, posted a 1 percent rise in fourth-quarter underlying earnings, slightly ahead of analysts' estimates, amid slowing European markets. German online classifieds company Scout24 stood by its 2019 guidance. Its shares were indicating higher. Gucci owner Kering reported a 24.2 percent rise in comparable sales in the fourth quarter, slightly above forecasts even against a cooling economic backdrop in China. Echoing upbeat comments from rival LVMH about China's appetite for luxury goods last week, the company said it did not observe any sales slowdown among its Chinese clientele in Q4. Elsewhere in retail, Germany’s Metro shares are up 2.8 percent after its results, while embattled department store Debenhams is expected to get a boost after securing a 40 million pound in funding. Some good news for the autos suppliers which, like luxury goods companies, has been rattled by worries over China demand - Michelin pledged to deliver a further rise in operating profit this year despite challenging conditions in its main tyre markets as it posted better-than-expected results for 2018. Its shares were seen up 2-3 percent. But Renault will be in focus after Nissan slashed its FY outlook. In banking, Vontobel posted a 14-percent rise in adjusted full-year net profit, as Swiss private bank and asset manager took in 5 billion Swiss francs ($4.98 billion) in fresh client money. Its shares were indicated to open down 2 percent. Hot on the heels of its profit warning last week, TUI said underlying losses had widened in its first quarter, inline with company expectations. In dealmaking, pressure is mounting for logistics firm Panalpina, with Artisan Partners, which owns 12 percent of the company, calling on the board to reassess DSV's takeover offer. Other headlines of interest: Online trading platform Plus500 expects 2019 results to be below expectations; Indivior Says Court Denied Its Motion To Prevent Sale Of Suboxone Copycats; Norway's Kvaerner to pay first dividend since 2015; 'Hold your nerve on Brexit,' Theresa May to tell British lawmakers; Debenhams Announces Additional 40 Mln Stg Credit Agreement; Bayer's Monsanto wins arbitration ruling over royalties from Indian seed company; European insurer ERGO to sell non-life business in Russia; Norway's sport retailer XXL scraps dividend for 2018 amid poor results; Renault's Senard to meet Nissan CEO Saikawa in Japan this week - Nissan (Josephine Mason) ***** EARNINGS A PLENTY (0658 GMT) We've got plenty of earnings to digest this morning: Gucci-owner Kering, TUI, Thyssenkrupp and Bank Vontobel to name a few. Just days after its FY profit warning, TUI has reported a widening loss in its first quarter to end-December, inline with the company's expectations, and said it expects bookings broadly inline with the previous year. Thyssenkrupp saw a drop in Q1 adjusted EBIT and warned that the global economic environment is darkening, but the number was higher than the Refinitiv estimate and the German industrial giant stood by its 2018/19 targets. In banking, Vontobel posted a 14-percent rise in adjusted full-year net profit, as Swiss private bank and asset manager took in 5 billion Swiss francs ($4.98 billion) in fresh client money. Delivering an increase in 2018 revenue and operating income, Kering CFO has just said the company did not observe any sales slowdown among Chinese clientele in Q4. That echoes comments from LVMH last week. Elsewhere in retail, Norwegian sport retailer XXL has scrapped its dividend, citing disappointing results in the fourth quarter of 2018. That follows a major profit warning in December. Some good news from the autos sector which, like luxury goods companies, has been rattled by worries over China demand - Michelin pledged to deliver a further rise in operating profit this year despite challenging conditions in its main tyre markets as it posted better-than-expected results for 2018. British Airways owner, IAG has said it would cap ownership of its shares by non-Europeans at the current 47.5 percent level to maintain its status as a European-owned airline. That will ease concerns about possible disruption after Brexit. In seed and drug news, Bayer's Monsanto unit has won proceedings against Indian seed maker Nuziveedu Seeds Ltd (NSL) in a royalty dispute, lawyers familiar with the matter said. (Josephine Mason) ***** EUROPE SEEN STRONGER (0623 GMT) European shares are expected to open higher this morning There's no new news on the trade talks, mind, and there might not be for days (if at all) - discussions among deputy-level officials started on Monday before minister-level meetings later in the week. At the end of January, talks ended with some progress, but mostly U.S. declarations that much more work was needed. Underscoring the risks facing the world's No. 2 economy as it navigates the trade spat though, China's commerce ministry warned that consumption growth is likely to slow further this year as the economy cools. Financial spreadbetters IG expect London's FTSE to open 17 points higher at 7,146, Frankfurt's DAX to open 63 points higher at 11,078 and Paris' CAC to open 31 points higher at 5,045. (Josephine Mason) *****



(c) Copyright Thomson Reuters 2019. Click For Restrictions - https://agency.reuters.com/en/copyright.html




Back to Finance News


Share Price, Share Chat, Stock Market news at lse.co.uk
FREE Member Services
- Setup a personalised Watchlist and Virtual Portfolio.
- Gain access to LIVE real-time Regulatory News (RNS).
- View more Trades, Directors' Deals, and Broker Ratings.
Share Price, Share Chat, Stock Market news at lse.co.uk




Datafeed and UK data supplied by NBTrader and Digital Look. While London South East do their best to maintain the high quality of the information displayed on this site,
we cannot be held responsible for any loss due to incorrect information found here. All information is provided free of charge, 'as-is', and you use it at your own risk.
The contents of all 'Chat' messages should not be construed as advice and represent the opinions of the authors, not those of London South East Limited, or its affiliates.
London South East does not authorise or approve this content, and reserves the right to remove items at its discretion.