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LIVE MARKETS-Will Italian stocks keep going?

Tue, 17th Apr 2018 12:33


* European shares rise as risk appetite returns * Sterling hits highest since Brexit vote * U.S. stocks futures climb April 17 - Welcome to the home for real-time coverage of European equity markets brought to you by Reuters stocks reporters and anchored today by Julien Ponthus. Reach him on Messenger to share your thoughts on market moves: julien.ponthus.thomsonreuters.com@reuters.net WILL ITALIAN STOCKS KEEP GOING? (1133 GMT) Political uncertainty is not affecting Italian stocks which continue to do better than peers in this turbulent start of the year following a stellar 2017. But what drove past gains and more importantly are they sustainable? We've put these questions to Matteo Ramenghi, Chief Investment Officer at UBS WM Italy, who believes company updates and developments in Rome are key now that the country's relative valuations are no longer that cheap. "We must look at earnings updates and what happens at the political level. Going forward we are tied to the newsflow," says Ramenghi, adding that UBS WM has a neutral view on the country's equities. "The good performance has not been driven by investors rushing to buy the Italian market as a whole but rather by stock pickers lured by bottom-up factors from bank restructurings to extraordinary operations in the industrial sector," he says. On top of that Italian stocks were priced at an important discount compared to the rest of Europe and last year the economy grew by 1.5 percent, nearly twice as much initial forecasts, filtering through year-end 2017 company results. But now? "Probably we've already seen much of the impact of the discount effect and the strong 2017 balance sheet," he says. Hence the focus on earnings and politics. Meanwhile today, Italian banks are rising strongly, up 1.8 percent, after Intesa Sanpaolo sold a bad loan portfolio on better than expected terms, fuelling expectations other banks could also sell soured debt at favourable prices, further cleaning their balance sheets and potentially helping them lend more. (Danilo Masoni) ***** MIDDAY SNAPSHOT: STOXX IS UP AND AWAY (1105 GMT) European shares have been climbing steadily through the first half of the session and now almost every sector is in positive territory, except for travel & leisure and personal & household goods. It's also looking like Wall Street is going to see a firm start to the day's trading with U.S. stocks futures up around 0.5 percent. Here's your midday snapshot: (Kit Rees) ***** UBS' FANTASTIC CAPEX FOUR (1028 GMT) While breakups and makeups have been a big theme for European equities this year, a pick-up in capex is also on investors' radars. Following on from a survey of around 600 Eurozone corporates and their capex intentions, UBS strategists have identified four stocks in particular to play this theme: Wartsila, Arkema, Aveva and ISS. UBS analysts point to a rise in shipyard orders for Finnish marine technology firm Wartsila over the past 12 months plus growing demand from renewable energy also benefiting the firm, while commodity earnings staying close to current levels for longer than expected and specialty chemicals are seen helping France's Arkema. UBS' stock picks also include those which are more tech-facing, as companies are expected to increase spending on digitisation. That's where UBS' choice of Aveva comes in, which they say is a potential play on the Internet of Things theme as well as being a beneficiary of the marine cycle. UBS expect Denmark's ISS, an outsourcer, to see a boost from its "leading position in facilities management digitalisation". (Kit Rees) ***** WHY M&A SPECULATION ON FRENCH TELCOS STICKS (1011 GMT) Some rumours simply won't go away, especially when so many investors wish they were true! France's telecoms sector has been the centre of M&A speculation for years amid failed attempts to reduce the number of players from four to three, the latest (official) one being in 2016. Bouygues poured cold water on the latest rumour, but the buzz isn't going away: Altice is up 1.8 percent this morning after closing up 5.4 percent on Monday. Buy-side analysts have had their eyes on the sector for a while and some of them have already placed their bets. "For me consolidation is necessary and should happen in 2018," Estelle Ménard, who manages the Europe Special situation fund at CPR AM, told us as early as October. The origin of M&A rumours can be traced back to the price war following the arrival in 2012 of low-cost operator Free, which had investors (though not consumers of course) pleading for a way to ease competition and stop EBITDA from bleeding further. And that's the point: while sell-side analysts can't give their clients any certainties on if, when and how the sector will concentrate, they do have a clear conviction: it makes sense. "We see a strong rationale for French four to three mobile consolidation, given potential for regulatory support as well as much needed market repair," Barclays said in a note where it described concentration in France as "plausible". Goldman Sachs analysts took "no view on the likelihood of any transaction," but wrote that "consolidation in French telecoms could be a material positive for all operators in the market, namely Altice, Bouygues, Iliad and Orange." Despite the fact defensives shares are becoming more popular among equity strategists worried about a downturn, the sector is a clear underperformer with a 4.4 percent fall year-to-date while the STOXX 600 is down only 2.6 percent. As a trader put it a few weeks ago, M&A speculation, be it national or cross-border, is key to keeping investors' interest alive as one can see this morning through Vivendi's standoff with Elliott Advisors over Telecom Italia. "Without M&A the sector sucks". Here's what the French market looks like, from Goldman's note: (Julien Ponthus) ***** OPENING SNAPSHOT: EUROPEAN STOCKS PROGRESS AS FOCUS TURNS TO EARNINGS (0719 GMT) It's a stronger open for Europe today with gains across benchmarks, though the FTSE 100 is lagging its peers on the continent, which could be partly down to sterling climbing to its highest level since the Brexit vote. Financials and materials are leading the charge on the STOXX as risk appetite returns with a renewed focus on corporate earnings. Top of the charts today is Intrum Justitia, up 12 percent after bidding for $13 billion of Intesa Sanpaolo's bad debts. The Italian bank itself is up just 0.7 percent. Bayer leads the DAX, up 2.1 percent after selling a 3.6 percent stake to Singapore's state investment company Temasek. Polymetal International, which was hit by Russia fears yesterday, is recovering to trade up 4 percent, while ABF is up 3.6 percent after results. Some big movers in UK mid-caps too: emerging markets asset manager Ashmore is up 6.8 percent at the top of the FTSE 250 after its results, while strong earnings, driven by demand for trainers and track pants, are boosting JD Sports shares up 6.5 percent. (Helen Reid) ***** WHAT'S ON OUR RADAR BEFORE THE OPEN (0640 GMT) European stocks are set to open in positive territory on Tuesday and to catch up somewhat with Wall Street and Asia after a weak session on Monday. Sentiment is back to risk-on even if caution is still warranted due to the ongoing tensions in the geopolitical arena with the aftermath of the U.S. missile strike on Syria and tensions still high with Russia. On the macro front, there’s likely to be more "peak growth" for the Euro zone headlines with Germany ZEW Economic Sentiment expected lower for April. No major corporate news but AGM season is here and there could be a few interesting ones such as France’s Vinci and L'Oreal, Italy’s Assicurazioni Generali or TomTom in the Netherlands which also released Q1 above estimate. On the earning’s front French supermarket retailer Casino posted a 3.1 percent rise in first-quarter sales on Tuesday that reflected stronger sales at its Geant Casino hypermarkets and a resilient performance in Brazil despite food inflation. In the UK, Associated British Foods reported a 1 percent fall in first-half profit, with a resilient performance at its Primark fashion business offset by a previously flagged reduction in sugar revenues. Swiss construction chemicals group Sika reported first-quarter sales slightly above expectations. On the M&A front, Lagardere, the French media group whose assets include Paris Match magazine and Europe 1 radio is selling some eastern European radio assets to Czech Media Invest. Italy's Atlantia said on Monday it would sell a 29.9 percent stake in Spanish telecoms mast group Cellnex to Edizione, which is the Benetton family holding company and also its controlling shareholder. In a headline which might reassure investors further that NPLs are no longer a bogeyman the Italian banking sector, Sweden's Intrum Justitia has filed a binding bid for Intesa Sanpaolo's debt collection unit in a 3.6 billion euro deal that rids the Italian bank of 10.8 billion euros in bad debts. In the UK, Gatemore Capital Management has built a stake in Wincanton and called on the British logistics company to break itself up by selling one of its two divisions, according to a letter sent by Gatemore to its own investors. Here are some of the main headlines on our radar: Intesa to shed $13 bln in bad debts with Intrum deal Singapore's Temasek hikes Bayer stake in $3.7 bln share sale Navigation firm TomTom posts higher Q1 core earnings, beats estimate France's Lagardere sells eastern European radio assets to Czech Media Invest Primark-owner AB Foods' first-half profit held back by sugar Alexandre de Rothschild to take over at helm of Rothschild bank Retailer Casino's Q1 sales rise as French hypermarkets improve Swiss group Sika Q1 sales scrape past estimates amid Saint-Gobain battle Trump administration delays new sanctions on Russia -official UK's JD Sports profit surges on demand for trainers, track pants (Julien Ponthus) ***** EUROPE SET TO CATCH UP WITH WALL STREET, ASIA (0607 GMT) Futures are trading up, confirming earlier indications from financial spreadbetters that European bourses are set to somewhat catch up with Wall Street and Asia after Monday's weak session. Here's how it's looking at the moment: (Julien Ponthus) ***** MORNING CALL: EUROPEAN BOURSES SEEN RISING AT THE OPEN (0524 GMT) European bourses missed out last session, losing some ground to Wall Street and Asia where the mood was more optimistic thanks notably to data showing China's economy grew a little faster than expected. Some catching appears in order. According to CMC Markets, the London's FTSE 100 is expected to open 12 points higher at 7,210 points, Germany's DAX 42 points higher at 12,453 points and Paris' CAC 40 17 points higher at 5,330 points. (Julien Ponthus) *****



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