Finance & Stock Market News

* European shares end lower as Syria anxiety takes hold * Tesco jumps 7 percent after beating profit guidance * Telecoms boosted by Deutsche Telekom on new Sprint merger talks April 11 (Reuters) - 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: danilo.masoni.thomsonreuters.com@reuters.net CLOSING SNAPSHOT: U.S.-RUSSIA TENSIONS TAKE THEIR TOLL (1538 GMT) European bourses end the day in negative territory amid brewing tensions between the United States and Russia over possible U.S. military action against Syria. Here's your closing snapshot: (Julien Ponthus) ***** FROM SHANGHAI WITH LOVE: STOCKS LINK COULD BOOST UK MARKET (1501 GMT) China's newly-appointed central bank governor Yi Gang pledged to increase foreign investors' access to Chinese capital markets at a forum in Boao yesterday. What UK market watchers have focused on is his announcement that China would launch a trading link between Shanghai and London stock markets this year, potentially a boost for the UK which is being shunned by global investors. "The announcement today that the third Chinese stock connect is to be between China and the UK should provide unprecedented access to the fastest growing mutual fund industry," notes Northern Trust Capital Markets' Gary Paulin, pointing to Credit Suisse, Jupiter, Aviva, Legal and General, Man Group, Standard Life Aberdeen, Rathbones, Aviva, Schroders, Prudential as potential beneficiaries. The announcement comes at a time of pretty poor sentiment towards the UK, and as such could be seen as a boost for a market which still accounts for a significant chunk of trading in Europe. "While most of the measures had been announced in November last year, the timing of increasing foreign investment limits is sooner than expected," write Morgan Stanley analysts. (Helen Reid) ***** FROM VALUE TRAPS TO VALUE OPPORTUNITIES (1425 GMT) Growth has outperformed value by around 60 percent over the past 11 years (and by 80 percent in Europe), the longest and strongest period of relative outperformance since the mid-70s, according to Goldman Sachs. The outperformance of growth against value has come hand in hand with the dominance of U.S. equities - naturally, as they are more "growthy". The boom of capital-light tech companies has also been a big driver of this outperformance. But GS strategists reckon this could all change now. "Recently, U.S. equities have started to underperform both in local currency and USD terms. This trend is likely to continue as the USD remains weak and selected Value starts to recover," they write. Sectors like banks, oil and utilities are "transitioning from 'value traps' into genuine value opportunities" and this could open the way for Europe, which has a value bias, to start performing better against the U.S.. Overall, the post financial crisis market landscape, which has been "like no other", have caused macro factors to dominate in sector performance, making "growth vs value" a secular rather than cyclical dynamic, Goldman strategists argue. As the financial system begins to normalise, this could change. "We expect less of a 'Macro market' driven by binary choices between factors (cyclicals vs defensive or growth vs value) and prefer having an eclectic mix," they write. (Helen Reid) ***** BEWARE LEVERAGED FINANCE AS CREDIT CYCLE PEAKS (1343 GMT) Be afraid, be very afraid, seems to be the key message of an S&P note on leveraged finance, which highlights the fact that private equity firms around the world are sitting on 1.7 trillion dollars of 'dry powder' just waiting to be multiplied into fresh new debt. According to the ratings agency, the leveraged finance sector would struggle to cope with a brutal end of the credit cycle which is "reaching a high that could turn sharply" due to rising interest rates or a full-blown trade war. "Lenders and borrowers are therefore increasingly vulnerable to a dramatic and sustained change in risk appetite and capital flows", S&P's analysts say, urging lenders to demand terms and returns that match the risks they're taking. "The hunt for yield is eroding debtholder returns at a time of escalating risks. As a result, the risk/return profile of many leveraged loans issued so far in 2018 is at its weakest level since late 2008". S&P has an additional piece of wisdom for you: "History shows us that the worst debt transactions are done at the best of times--so, with the global economy strengthening in a near synchronized manner, now is the perfect time to be cautious." (Julien Ponthus) ***** MIDSESSION UPDATE: STOXX HITS DAY'S LOW (1147 GMT) As we draw nearer to the release of the hotly-anticipated U.S. inflation data, European shares have hit a session low after a tweet from U.S. President Donald Trump warned that missiles "will be coming" in Syria. U.S. stocks futures have also extended losses while safe-haven gold is at a session high as are oil prices. Here's your snapshot: (Kit Rees) ***** APPETITE FOR TECH REMAINS DESPITE FACEBOOK SCANDAL, ETF DATA SHOWS (1132 GMT) Just after Facebook Chief Executive Mark Zuckerberg finished navigating through a five hour U.S. congressional grilling, ETF data shows there is no lack of appetite for American tech stocks. "Surprisingly, flows in the technology sector remained unscathed by the Facebook scandal," SocGen analysts commented in a note this morning, referring to the fall in the social network's share price after it came to light that up to 87 million users' personal information was harvested by Cambridge Analytica. Seems BlackRock's Turnill (see post below) call that there is no "tech wreck" on the horizon might be proved right. Here's SocGen's chart: And here's Facebook share price since the Cambridge Analytica scandal made headlines: (Julien Ponthus) ***** NO "TECH WRECK" JUST YET (1014 GMT) That's the view from BlackRock's global chief investment strategist Richard Turnill, who sees strong earnings growth driving future returns for the sector. "We believe recent weakness reflects rising risks but is not a tech wreck in the making. Strong fundamentals underpin our preference for the sector," says BlackRock's Turnill in a note. Turnill cites sales growth for the global tech sector, which is seen outstripping that of the broader market (see BlackRock's chart below), and also an expectation that we're going to see a "wave" of business investment into tech equipment and services. "Our text analysis of corporate conference calls suggests companies across industries are looking to deploy their tax windfalls on tech spend. This could spur more upgrades for tech sales," says Turnill. Meanwhile in tech land, we've got day two of Facebook CEO Mark Zuckerberg's testimony, scheduled for 1400 GMT later today... (Kit Rees) ***** VIEW FROM THE BUYSIDE: TOO SOON TO PICK TRADE WAR WINNERS (0957 GMT) While focus has shifted slightly today to escalating tensions in Syria, investors are still picking apart the implications of likely trade tariffs between the U.S. and China, which could result in relative advantages for some European firms trading with China. Valentijn van Niewenhuijzen, chief investment officer at NN Investment Partners, told us it's too early to make any specific plays on this. On whether there could be European winners from a trade war, he says "I have no doubt that is the case." "Everything is always around relative prices," he adds. "Although the overall impact of a potential trade conflict I am convinced is a negative, the way that this negative is distributed across sectors, companies, and consumers is of course very different and obviously some exporters in other countries that like to bring their goods to the Chinese market would benefit if access for the U.S. to that market is constrained." But the situation is too fluid to take any active positive positions on individual countries or sectors, van Niewenhuijzen says. "We haven't specifically tilted towards any specific European companies... That might change if we get a bigger conviction on how it pans out." Van Niewenhuijzen also reckons the idea that the U.S. has the upper hand is incorrect. "They have a very worthy opponent in terms of negotiation," he says, adding that China has more room to play hardball than the U.S., with mid-term elections approaching. "I think China can stomach a lot more pain as a result of this than the U.S.; will not be worried to have some pain if he feels it's needed to win this game." (Helen Reid) ***** FTSE KEEPS STIFF UPPER LIP AS UK FACTORY OUTPUT UNEXPECTEDLY DROPS (0918 GMT) The first drop in British manufacturing output in almost a year and a fall in construction output has been met with no shortage of phlegm on the markets with the FTSE rising a notch in sync with a slightly retreating pound: This fresh new batch of worse-than-expected indicators is bound to reinforce the views of the bears for whom the narrative of "global synchronised growth" is dead and buried, particularly in light of negative trends for earnings revisions and this week's global PMI data: (Julien Ponthus) ***** OPENING SNAPSHOT: IN THE RED (0724 GMT) Europe's shares have opened in the red today as heightened geopolitical tensions over Syria, with air strikes looming, make investors more cautious. Top gainers are Tesco, boosted up 4.3 percent after it beat guidance with a strong full-year profit increase, and Deutsche Telekom, up 4.1 percent after Sprint Corp restarted talks to merge with its T-Mobile unit. Commodities are back to being a drag on the market today, with oil prices hit by the Syria developments. Travel stocks are also among the worst-performing, with Carnival, Intercontinental Hotel down 1 to 1.9 percent on the FTSE 100 and budget airlines Ryanair and easyJet also falling. Escalating tensions in Syria could be weighing on the stocks after Eurocontrol warned airlines to exercise caution in the eastern Mediterranean due to possible airstrikes in the next 72 hours. In a bit of a reversal of trend for UK retail, shares in the fast-growing online fashion brand Asos are sinking 10 percent after the company said it would invest more, and reported sales and profit slightly under analysts' expectations. (Helen Reid) ***** WHAT'S ON OUR RADAR BEFORE EUROPE OPENS (0653 GMT) European shares are set to open lower, giving back part of the gains seen on Tuesday, as the soothing effect of Chinese President Xi's speech fizzles out and investors turn their focus on the U.S. inflation data and Fed minutes due later in the day. Futures on main European stock benchmarks are down 0.3 percent. On the corporate front, reports that Sprint has restarted talks to merge with Deutsche Telekom unit T-Mobile could lift shares in the German telecoms operator, which are indicated up 2 percent in pre-market. Sources told Reuters that Sprint and T-Mobile decided to restart talks partly because they want to share the financial burden of investing in their networks. Investors are starting to look again at battered telecoms stocks, as valuations are starting to become attractive after years of underperformance. Sky is expected to open lower, down 1 percent pre-market, after news the European Commission raided the offices of a number of companies involved in sports broadcasting rights, including Fox Networks Group, a unit of Rupert Murdoch's Fox, which is battling to take over the British pay-TV company. In earnings, Tesco beat guidance with a 28 percent rise in full-year profit, underlining the recovery of Britain's biggest retailer under Chief Executive Dave Lewis. Its shares are up 2-3 percent in premarket. Other stock movers: Hammerson advises shareholders to reject new Klepierre bid of 635 pence (up 10 pct pre-market) MSCI may delete Sulzer from indexes amid new U.S. sanctions (down 1.7 pct pre-market) Lufthansa, easyJet submit revised offers for Alitalia Fiat Chrysler, U.S. Justice Dept in diesel emissions settlement talks Barry Callebaut confirms targets after H1 results beat expectation (up 1 pct pre-market) Aramco signs $12 bln worth of deals with France's Total, Technip and Suez Google in talks to buy Nokia's airplane broadband business - Bloomberg New GSK shingles vaccine off to strong start in key U.S. market Tesco beats guidance with 28 pct full-year profit increase (up 2 percent pre-market) Online retailer ASOS ups investment as sales grow 27 pct (Danilo Masoni) ***** DAX, FTSE FUTURES FALL SLIGHTLY (0618 GMT) European shares are set to give back part of the gains seen yesterday with stock index futures pointing to declines of around 0.3 percent for top regional benchmarks DAX and FTSE. Michael Hewson, Chief Market Analyst at CMC Markets UK, says that after Chinese President Xi's speech soothed market jitters over a possible trade war yesterday, investors may now want to see evidence of action following words. "... for equity markets to regain a sense of equilibrium we need to start to see progress on the road away from a potential trade war, and currently there is no evidence of that whatsoever," he says in his morning note. Later in the session the focus will turn to the U.S. CPI and the Federal Reserve minutes. Here's your snapshot: (Danilo Masoni) ***** EARLY MORNING HEADLINE ROUNDUP (0556 GMT) EU carries out antitrust raid at firms dealing with sports media rights Unit of Murdoch's Fox says cooperating with Brussels inspection UPDATE 6-Sprint in new talks to merge with T-Mobile -sources Lufthansa, easyJet submit revised offers for Alitalia Air France-KLM says has no interest in bidding for Alitalia Fiat Chrysler, U.S. Justice Dept in diesel emissions settlement talks UPDATE 1-Barry Callebaut confirms targets after H1 results beat expectation Britain's M&C Hotels picks industry veteran Jennifer Fox as new CEO Aramco signs $12 bln worth of deals with France's Total, Technip and Suez Google in talks to buy Nokia's airplane broadband business - Bloomberg New GSK shingles vaccine off to strong start in key U.S. market Eni CEO says Q1 oil and gas production rose 4 pct Anglo American fined $21 mln for Brazil pipeline leaks UPDATE 2-Boeing beats Airbus on Q1 jetliner data, rejigs backlog INTERVIEW-Telefonica Brasil to expand ultra-fast broadband to 20 new cities BRIEF-Air Liquide Signs Long-Term Contract With LyondellBasell In The U.S. German state of Lower Saxony eyes possible cash infusion for NordLB EXCLUSIVE-Rusal triggers Iran-style defence after U.S. sanctions - source UPDATE 3-Hundreds of flights cancelled in Germany as airports hit by strikes German minister rejects joint fund with industry to refit diesel cars Sanctions expected to prevent Rusal from servicing Eurobond UPDATE 2-Rio Tinto reviewing Rusal ties, mum on Queensland venture UPDATE 2-Brazil court orders Hydro to set aside $44 mln for cleanup Air France raises pay offer in bid to end strikes Rusal director Glasenberg quits, bonds slump as U.S. sanctions bite NEWSMAKER-Cost-cutter Diess seen driving change as Volkswagen CEO BREAKINGVIEWS-New VW boss would only part-solve its problems (Danilo Masoni) ***** MORNING CALL: EUROPEAN SHARES SEEN LOWER (0520 GMT) European shares are expected to open higher today with the U.S. CPI and the Federal Reserve minutes likely to be in focus later in the day. On Tuesday the STOXX 600 rose 0.8 percent. Financial spreadbetters expect London's FTSE to open 24 points lower at 7,242, Frankfurt's DAX to open 47 points lower at 12,350 and Paris' CAC to open 14 points lower at 5,293. Over in Asia, stocks rose modestly, paring earlier gains as optimism that trade ties between Washington and Beijing were on the mend gave way to questions about the next phase of the diplomatic tit-for-tat between the two countries. (Danilo Masoni) *****