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LIVE MARKETS-Closing snapshot: FTSE ends on a record close

Thu, 17th May 2018 16:54

* European stocks rise to fresh 15-week high * FTSE 100 makes new record, Italy's FTSE MIB recovers * Ocado shares surge as much as 80 pct after U.S. deal * UK bookmakers recover despite gambling stake restriction LONDON, May 17 (Reuters) - Welcome to the home for real-time coverage of European equity markets brought to you by Reuters stocks reporters and anchored today by Kit Rees. Reach her on Messenger to share your thoughts on market moves: CLOSING SNAPSHOT: FTSE ENDS AT A RECORD CLOSE (1642 GMT) So much for all that early morning sterling wobbling over the UK government's plans (or lack of) concerning the EU customs union: the FTSE ended the day at a record close at 7787.97 points (up 0.7 pct) while the FTSE 250 also hit a record high of 21,019.44 points (up 0.9 pct). Ocado definitely took the spotlight as it's quite rare to see a stock that size gush/spurt/surge/spike/skyrocket/burst/leap/escalate (pick your favourite verb) as much as 81 percent during a trading session. Here's your closing snapshot: (Julien Ponthus) ***** TIME TO SHORT THE NASDAQ? (1526 GMT) Well according to SocGen's strategists, there might be a case for selling Wall Street's mighty tech index and buying the MSCI index for Emerging market equities. In their monthly cross asset note "The Long Term View", analysts from the French bank argue that U.S. tech companies face the threat of new government regulation and are likely to suffer when the current economic expansion starts fading, which is seen happening sooner rather than later. "As we get closer to an end-cycle dynamic in the U.S., we believe U.S. tech presents an asymmetrical risk-reward profile," they wrote, adding they were noticing "net shorts" on the index. It's also a bet on the mid-term dynamics: "Being long MSCI EM versus the Nasdaq 100 with a medium-term investment horizon in mind could be a good way to navigate two important themes: demographic potential and technology improvements from emerging economies". Here are, according to SocGen, the pros and cons of this trade: (Julien Ponthus) ***** BANKS VS UTILITIES: WHAT'S BETTER? (1512 GMT) It's not a great day for European banks and 2018 so far hasn't delivered either: the sector is down 4 percent so far while the broader market is up 1.5 percent. Some analysts however including Jan Wolter, head of European banks at Credit Suisse, believe pessimism may have gone a bit too far. "Given banks' high correlation with bond yields, we are not surprised by the underperformance, but note the sector has sold off more than what is justified by the fall in bond yields," says Wolter and his team in a note. "In addition, the 16% underperformance compared with Utilities year-to-date looks overdone," he adds. That being said he affirms his preference for cash return stories, picking Lloyds, ABN Amro, Danske, Intesa Sanpaolo, Natixis and UBS . In this chart you can see how utilities have outperformed banks in Europe over the past 12 months, while in the U.S. where the Fed is further ahead in normalising extra-loose monetary policy, the exact opposite is true. (Danilo Masoni) ***** WHAT DOES OCADO-KROGER DEAL MEAN FOR RETAIL? (1348 GMT) The Ocado-Kroger deal isn't as much of a game changer for retail as Amazon's takeover of Whole Foods, but it's still quite significant for U.S.-exposed European retailers, and adds nuance to the grocery e-commerce trend. "This deal will change the perception of incumbent grocers in the U.S.: from lame ducks into leaders of grocery e-commerce, similar to Europe and China," says Bernstein's retail analyst Bruno Monteyne, adding it will also be a positive for Dutch retailer Ahold Delhaize, which is highly active in the U.S. While Kroger is up 3.3 percent at the open I nthe U.S., Ahold shares are however down 2.8 percent today, among the worst-performing in the retail sector which is up 1.4 percent overall. But Monteyne reckons it could gain from the deal, as it's highly correlated to Kroger's valuation multiple, likely to be boosted, and has little overlap. "From a trading perspective there is very limited overlap between Kroger and AD and it will take 2.5+ years before the centres go live. So no impact on earnings for many years to come." In general, U.S. grocers have been seen as behind on the e-commerce trend compared to Europe and China, but this move from Kroger could change that perception and push their valuations up from depressed levels. Amazon may yet face some pushback from supermarkets in the online food arena, if this deal is anything to go by. Meanwhile Ocado is now up 44.7 percent, though it's been very volatile today and was up as much as 81 percent earlier. (Helen Reid) ***** WORLD CUP: 60 PCT CHANCE THAT GERMANY, BRAZIL OR SPAIN WINS (1228 GMT) UBS has done the maths and found there is a 60 percent chance one of these three teams wins the football tournament in July. The Swiss bank stresses this prediction is by no means a finger in the wind estimate. "We’ve applied the insights and tools from our daily work as investment strategists to predict the likelihood of each team doing in the tournament," UBS analysts said, adding however that "past performance is no guarantee of future results". As a reminder, an informal survey of investors by JP Morgan in March found that over a third thought Germany would win: Here's UBS' detailed chart: (Julien Ponthus) ***** STILL SHUNNING ENERGY STOCKS WITH CRUDE AT $80 (1215 GMT) You would think that with WTI crude at $80, a flurry of broker upgrades and a steady outperformance of the sector (+13 pct ytd), there would be a rush into oil stocks. But no. Sanlam's head of global equities Pieter Fourie told us this morning that he still prefers to stay out of oil stocks. "The fact that energy stocks have done very well this year is hurting us, but we're not going to invest in those names any time soon," he said. His reasons? "Very high capital intensity, low margins and the fact you have no pricing power: you're basically a price taker, not a price maker." He's not alone: it seems like quite a few investors remain sceptical of energy stocks despite their surge. BAML's European fund manager survey on Tuesday found that oil & gas is "not yet" a crowded sector. That's despite persistent plugging from Goldman Sachs, leading the commodities bull charge. Late yesterday its analysts noted oil is currently enjoying its strongest year-to-date returns in a decade. "The rally likely has room to run," they wrote in a note titled "The case for commodities strengthens". GS has an $82.50/barrel target. (Helen Reid) ***** MIDDAY SNAPSHOT: NO REBOUND FOR ITALY AS COALITION DEAL NEARS (1134 GMT) It was a short-lived rebound: Milan is back in the red after a tentative recovery in early trading as Italy's two anti-establishment parties try to finalise a coalition deal which is spooking financial markets by the stress it could add to the country's debt pile, worth about 130 percent of GDP. Benchmark yields on 10-year government have hit a fresh near three-month high at 2.18 percent with investors such as Craig Veysey, manager of the Sanlam Strategic Bond Fund, cautious on the market. "We did have quite a constructive stance on Italian bonds (...) but we cut it entirely a couple of weeks ago as a result of what's turning out to be a much more fraught political situation, particularly statements about cancelling some of the outstanding Italian debt and not proceeding with pension reforms," he told us this morning. Elsewhere, Ocado is on a supersonic high, up as much as 81 percent and the broader market is sluggishly up, with the STOXX up 0.23 percent. Here's your snapshot: (Julien Ponthus and Helen Reid) ***** IT'S GETTING TOUGHER FOR EUROPEAN ASSET MANAGERS (1038 GMT) UBS has taken a look at how the first quarter went for European asset managers and the main takeaway is that the first three months of 2018 saw the first sequential decline in assets under management since early 2015, as turbulent markets dissuaded investors from adding exposure. Looking ahead they predict AUM growth rates for 2018 to be about half the 2016-2017 levels. "We have argued 2018-19 will likely be fundamentally more volatile as the cyclical component of volatility increases. This suggests more variability in market performance and weaker inflows in the coming quarters," UBS analysts Michael Werner and Federico Braga say in a note. Among single stocks, they note how Ashmore and Amundi were the only asset managers under their coverage to report growth while Jupiter posted the sharpest decline. It may be little surprise then that Jupiter has been the worst performer so far this year among the European asset managers covered by UBS. (Danilo Masoni) ***** OPENING SNAPSHOT: ITALY GAINS GROUND, OCADO JUMPS (0739 GMT) After a relatively subdued open, European shares have pushed higher thanks to a recovery among Italian equities and a jump in Ocado's shares after the company signed a partnership deal. Earnings are also helping with Altice and Suez up after results, while firmer commodities prices are boosting miners and oil majors. The FTSE is also in positive territory, shrugging off a rise in sterling after a media report saying that Britain would tell Brussels it was prepared to stay in the European Union's customs union beyond 2021, which has been dismissed today by a source in Theresa May's Downing Street office. UK betting stocks are on the backfoot, however, after the UK government cut the top stake on FOBT gambling machines to 2 pounds, but the likes of William Hill, GVC and Paddy Power Betfair have regained some earlier losses and are down only 0.7 to 3 percent. Here's your opening snapshot: (Kit Rees) ***** WHAT WE'RE WATCHING AHEAD OF THE OPEN (0657 GMT) European shares are expected to open roughly steady on a busy day of earnings and political developments. FTSE futures are currently lagging, however, after a media report that the UK is ready to stay in a customs union beyond 2021 boosted sterling. Meanwhile Italy will continue to be a big focus as the two anti-system parties remain on the verge of reaching a deal to form a coalition government. Among earnings, the UK property sector is in the spotlight following earnings updates from British Land and Foxtons, the latter of which is seen tumbling around 10 percent after its revenue dropped 15 percent in the first quarter on lower sales and lettings income. Another sector to feel the pain today are UK bookmakers, after the UK government slashed the top stake on FOBT gambling machines to 2 pounds. William Hill has said that the limit could have an annualized impact on its total gaming net revenue of 35 to 45 percent. Traders see shares in William Hill down 5 to 10 percent. On the positive side, Ocado is seen surging 20 percent after signing a deal with U.S. retailer Kroger to use Ocado’s technology for grocery deliveries. Here are key headlines for European companies: Conglomerate Bouygues keeps full-year goals in spite of weak Q1 Maersk profit lags forecast; flags geopolitical and trade risks Dutch insurer NN Group raises cost-savings target as Q1 profit plunges Telecom Italia Q1 earnings fall on golden power provisions Altice's French unit shows first signs of recovery in first quarter Ceconomy sales disappoint after tax campaign ended Higher waste volumes boost Suez's Q1 core earnings Telekom, Daimler settle truck toll dispute with German government Merck KGaA's lung cancer drugs show promise in early-stage trials RTL faces headwinds in Q1 but confirms guidance YNAP to delist June 20 after Richemont reaches 94.999 pct of group Angry Birds maker Rovio doubles first-quarter profit UK's National Grid reports profit rise helped by U.S. business Thomas Cook says on track to meet annual forecasts 3i reports $1.9 bln FY total return British Land's FY NAV rises on strong London office business UK's National Grid reports profit rise helped by U.S. business UK estate agents Foxtons sees revenues fall as sales drop Royal Mail revenue rises boosted by GLS, parcel volumes Just Group Q1 retirement sales jump, beat forecast UK's Mothercare to close 50 stores, reappoint Newton-Jones as CEO (-source) U.S grocer Kroger signs deal to use Ocado's home delivery tech Britain slashes top stake on gambling machines to 2 pounds (Kit Rees) ***** EUROPEAN STOCKS FUTURES RISE, FTSE LAGS (0628 GMT) European stocks futures are slightly higher, though FTSE futures are in negative territory. A report in the Telegraph late on Wednesday that the UK will tell the European Union that it is prepared to stay in the European Union's customs union beyond 2021 has sent sterling higher, which in turn is expected to weigh on the internationally-exposed FTSE 100. "A potential soft Brexit has lifted the pound 0.4 percent higher in trading overnight, wiping all of the losses from the previous session. Should the report be confirmed as true then this rally could have a lot further to go, but right now traders are awaiting some form of confirmation," Jasper Lawler, head of research at London Capital Group, said in a note. Here's your futures snapshot: (Kit Rees) ***** EARNINGS STILL ROLLING IN (0548 GMT) Even though around 80 percent of European firms have already reported their Q1 earnings, we've still got a few companies set to give updates today, notably Maersk and full year results from British Land, National Grid, 3i Group and Experian in the UK. Earnings growth might not have been as stellar as in the U.S., but it is still clocking at a health 13.7 percent for MSCI EMU companies, in dollar terms. Here's a list of European companies reporting results today: BLND.L Full Year 2018 British Land Company PLC Earnings Release PLT.MI Q1 2018 Parmalat SpA Interim Management Statement Release SZUG.DE Q4 2018 Suedzucker AG Earnings Release ACTI.ST Q1 2018 ACTIVE Biotech AB Earnings Release EING_p.DE Q1 2018 Einhell Germany AG Earnings Release ALMB.CO Q1 2018 ALM. Brand A/S Earnings Release VT9G.DE Q1 2018 VTG AG Earnings Release MAERSKb.CO Q1 2018 AP Moeller - Maersk A/S Earnings Release HLAN.AS Q1 2018 HAL Trust Interim Statement Release ONCO.ST Q1 2018 Oncopeptides AB Earnings Release SILMA.HE Q1 2018 Silmaasema Oyj Earnings Release GEPH.PA Q1 2018 CGG SA Earnings Release MWDP.PA Q1 2018 Wendel SE Trading Statement Release ECT.AS Q1 2018 Eurocastle Investment Ltd Earnings Release NG.L Full Year 2018 National Grid PLC Earnings Release III.L Full Year 2018 3i Group PLC Earnings Release FUTR.L Half Year 2018 Future PLC Earnings Release INVP.L Full Year 2018 Investec PLC Earnings Release ERM.L Half Year 2018 Euromoney Institutional Investor PLC Earnings Release EXPN.L Full Year 2018 Experian PLC Earnings Release (Kit Rees) ***** MORNING CALL: EUROPEAN SHARES SEEN OPENING HIGHER (0530 GMT) Good morning. European shares are expected to open broadly higher this morning, according to financial spreadbetters, though the focus will continue to be on Italian stocks and debt as the country's two anti-system parties try to form a coalition government. Overnight in Asia, however, Chinese and Hong Kong equities slipped ahead of the beginning of trade talks between China and the U.S. later in the day, while Wall Street saw a positive session, shrugging off a rise in 10-year U.S. Treasury yields. Spreadbetters see Britain's FTSE taking a breather today and opening 4 points lower, while Germany's DAX is expected to rise 13 points and France's CAC is seen gaining 10 points. (Kit Rees) (Reporting by Danilo Masoni, Helen Reid, Kit Rees and Julien Ponthus)

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