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* European shares rally after Brussels, London agree Brexit deal
* DAX hits Aug 2018 highs, FTSE midcaps jump to 1-year highs
* CAC 40 has risen to highest levels since Dec 2007
* Deal still need approval in Parliament
* Gains led by UK housebuilders and banks
* Ericsson rallies after results, Temenos tanks
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
TIRED OF BREXIT? WANNA TALK EU FISCAL STIMULUS? (1101 GMT)
"Interminably tedious" is how UBS's Paul Donvan has been describing the EU-UK divorce and
indeed headlines on Brexit have been growing exponentially as of late, and more are to come as
the deal out of Brussels now faces Parliament scrutiny.
Reuters alone has sent about 800 Brexit-prefixed headlines since the start of October, three
quarters of September's total. Not bad!
So what about deviating for a moment from Brexit and talk about fiscal stimulus in Europe,
now that all 2020 budget documents have been submitted to the EU?
Let's do so. After all fiscal easing in Europe is going to be a key theme for investors
going into the new year, as the ECB runs out of ammunition and growth in the region is slowed by
a manufacturing recession.
UBS - again - has provided a nice read-out.
They see the euro-zone budgets providing a "moderate" fiscal stimulus to the region
resulting in 0.1-0.2% more GDP growth.
"While the size of the overall stimulus is similar to the most recent EC forecasts, the
country composition is changing: more stimulus from Germany and the Netherlands, less from
Italy," they say.
Clearly less spending in debt-laden Italy has been welcomed by investors, while more from
fiscally-conservative Germany is also good, even though there is little to get too excited
about.
UBS however says things may change with Germany possibly lifting spending if macro
deteriorates further, as the budget will go through parliament discussions.
"Thus, there is still hope for a more expansionary stance," UBS economists conclude.
If you want to have a go at reading the European budgets, from Germany to Italy, the
Netherlands, France and Spain, check out this page: http://tiny.cc/mjnoez
(Danilo Masoni and Thyagaraju Adinarayan)
*****
GHOST OF Q4 PAST (1032 GMT)
The ghost of Q4 past is haunting stock markets at the moment.
Legal & General Investment Management took some money off the global equities table on
Tuesday betting that there's limited room for upside after the recent run-up on hopes of a
U.S.-China trade and Brexit deals.
Edmund Shing, global head of equity derivatives strategy at BNP Paribas, says investors
would really just like this year to be over, and are locking in profits, holding onto their cash
and waiting on the sidelines til the new year.
"People are paranoid about a repeat of Qq4 last year when equities took a bath in Q4.
Investors are thinking ‘it's been a good year for risk. Whatever you've invested in, you've done
well’," he says.
"They're all hunkering down and just waiting for the year to end and maybe they'll look at
risk again come January."
The general feeling among investors is it's best to stay in neutral for now given the
markets could go either way with investors glued to trade and Brexit.
"It's just a very difficult situation at the moment where you have risk in both directions.
Most of the recession risk comes from Brexit and trade," says LGIM strategist Lars Kreckel.
Of course, one thing that's clear from the explosive moves in UK domestic and European
stocks earlier - investors aren't positioned for good news, so even a glimmer of positive news
would be enough to set off a big buying spree.
One gauge of the angst and stasis among investors is in the futures market. The Eurostoxx 50
futures have had a stellar rally - gaining almost 25% since the start of the year - but
have hit huge resistance just above 3,600, which marks a January 2018 high.
After testing it for the past three days, it needs to break towards 3,650 to really gain
momentum.
"If we were to break through 3650, a clear break to the upside and there was a clear break
above 3,000 on the S&P, it could become self-fulfilling, you'd get money flowing back into
futures which would drive it higher still," Shing adds.
Need reminding of the Q4 2018 horror, check out below:
(Josephine Mason)
*****
WE HAVE A DEAL! ...OH HANG ON (1004 GMT)
Woah! We have just had another explosive move higher across stocks and sterling after PM
Boris Johnson and European Union officials agreed a Brexit deal and the size of the rally is
another sign of the pent-up demand for much-shunned UK assets .... or rather a reflection of the
bearishness towards some of the world's most unloved assets.
JPMorgan's basket of London-listed companies that make their cash at home
rallied 2.2%, hitting its highest since April, the FTSE 250 has hit a one-year high and
Germany's DAX, which has suffered from the triple whammy of Brexit, trade uncertainty and the
country's manufacturing recession, is at 14-month highs.
Not to pour cold water on the euphoria, but Northern Ireland's Democratic Unionist Party
says it doesn't support the deal and without that Johnson won't get his agreement ratified in
Parliament.
"DUP saying their stance hasn't changed, so frankly, it all comes down to Saturday vote in
Parliament (reminder: last 3 turned over!!). So much still in the air, but certainly very
positive that a hard-liner is the one who agreed to the deal. I imagine that makes it easier to
digest for Leavers in the house," a London-based trader says.
(Josephine Mason and Julien Ponthus)
*****
UNDER THE FLAT SURFACE, EARNINGS DRIVE BIG MOVES (0746 GMT)
Renewed concerns over whether we're going to have a Brexit deal this week are keeping
investors on edge and unsurprisingly European shares are off to a subdued start.
The FTSE is managing to stay above parity, while elsewhere the picture is mixed.
The domestically focused FTSE 250 is down 0.4%, tracking the weaker pound and
illustrating the Brexit uncertainty.
Under the flat surface, however, a flurry of earning updates are making for big moves among
single stocks.
Ericsson is surging 6% to the top of the STOXX 600 after the telecoms equipment
maker lifted its market forecast for this year and its sales target for 2020, saying demand for
superfast 5G networks was taking off earlier than expected.
Ericsson's upbeat tone is lifting shares in rival Nokia, while Tele2
is also getting a nice boost, up 4.7%, following a solid update, while still in telco world,
Telia is down 5.7% after sales fell short of expectations.
On the downside, Temenos is under heavy pressure. Shares in the Swiss banking
software supplier have fallen to April lows, down 16%, following a disappointing update.
Those numbers and weaker-than-expected revenue from IBM overnight are dragging French
software companies Dassault, Atos and CapGemini down more than 1%
and to the bottom of the Paris CAC 40.
Among the biggest STOXX 600 fallers are UK housebuilders and building materials suppliers,
hurt by Grafton's warning on FY results due to weak UK demand as well as the weak
sterling.
Underwhelming updates also from Moneysupermarket.com and Faurecia.
Here's your opening snapshot:
(Danilo Masoni)
*****
BREXIT AND RESULTS ON OUR RADAR AT BREAKFAST (0656 GMT)
European shares are set to fall slightly as hopes of a Brexit deal at the two-day summit
starting today in Brussels are more than offset by concerns that any accord won't have enough
support in the UK Parliament.
These concerns were revived this morning when Northern Ireland's DUP said it could not
support the Brexit deal as it currently stands, sending European stock futures down 0.3%, while
FTSE futures turned higher as the pound weakened.
Besides Brexit the main focus is the start of the earnings season.
An upbeat note came from telecoms equipment maker Ericsson which posted quarterly
core earnings far ahead of market expectations and lifted its 2020 sales target citing a
stronger market and currency effects. Traders see the shares opening up 2-3%.
Telia Company posted third-quarter core earnings just above expectations and
repeated its forecast for 2019.
Food giant Nestle announced a new share buyback programme of up to 20 billion Swiss
francs ($20.1 billion) and a revamp of its struggling water business after organic sales growth
slowed slightly to 3.7% in the third quarter. Traders say the numbers were broadly in-line but
the size of its share buyback underwhelming.
Growth also slowed for Pernod Ricard, which is being targeted by activist investor
Elliott. The French spirits maker posted a 1.3% rise in first-quarter underlying sales,
reflecting slower growth rates in China and India.
The numbers fell short of expectations and shares are seen opening down 2%. One trader said
Pernod's comments on China may hurt Salvatore Ferragamo and Diageo.
In the same sector, Unilever reported weaker-than-expected third quarter sales,
blaming softer demand in India and a slowdown in China, two of its biggest emerging markets.
Meanwhile in autos, car parts group Faurecia kept its 2019 guidance for higher
operating profits and margins as it posted an increase in third-quarter sales. Quarterly sales
however fell short of expectations and traders are calling the stock down 2-3%.
Traders also said that weak IBM numbers may pressure SAP, Cap Gemini, Atos and Dassault,
while United Rentals could hurt Ashtead. Results from TSMC could instead support
European chipmakers. Finally, solid Swiss export numbers could lift Richemont and Swatch
.
(Danilo Masoni)
*****
IT'S ALSO GETTING BUSY WITH EARNINGS (0552 GMT)
Besides Brexit, investors will also have to digest a number of earnings updates.
On top of this mornings' list so far we have food giant Nestle which announced a
new share buyback programme of up to 20 billion Swiss francs after organic sales growth slowed
slightly to 3.7% in the third quarter.
Growth also slowed for Pernod Ricard, which is being targeted by activist investor
Elliott. The French spirits maker posted a 1.3% rise in first-quarter underlying sales,
reflecting slower growth rates in China and India.
Telecoms equipment maker Ericsson instead posted quarterly core earnings far
ahead of market expectations and lifted its 2020 sales target citing a stronger market and
currency effects.
Still in telco world, we have another solid-looking update. Telia Company posted
third-quarter core earnings just above expectations on Thursday and repeated its forecast for
2019.
Meanwhile in autos, car parts group Faurecia kept its 2019 guidance for higher
operating profits and margins as it posted an increase in third-quarter sales.
There is more to come later on and we'll keep you updated, while over in the U.S.
heavyweights of the caliber Morgan Stanley and Philip Morris are due to report.
(Danilo Masoni)
*****
EUROPE ON THE EDGE WITH BREXIT DEAL IN FOCUS (0533 GMT)
No fireworks are expected at the open today as investors eagerly await that the EU and
Britain work out a Brexit deal during a two-day summit in Brussels .
It seems we're really close to the parties coming to a sort of agreement over the UK's Oct
31 divorce from the EU but then Britain's PM Boris Johnson will have to win approval at home by
parliament which gathers for a special session on Saturday. And that looks all but certain.
"... the truth is, even if the leaders came to an agreement among themselves, there is only
a slim chance for Boris Johnson to find sufficient support in Parliament to give it a green
light," says Ipek Ozkardeskaya, Senior Market Analyst at LCG in London.
Spreadbetters at IG expect London's FTSE to open 2 points higher at 7,170, Frankfurt's DAX
to open 12 points lower at 12,658 and Paris' CAC to open 4 points lower at 5,693.
Over in Asia, stocks paused after a five-day rally as soft U.S. retail sales data raised
fears about the health of the world's largest economy, while Brexit deal hopes kept sterling
volatile.
(Danilo Masoni)
*****
($1 = 0.9936 Swiss francs)
(Reporting by Danilo Masoni, Joice Alves, Josephine Mason, Julien Ponthus and Thyagaraju
Adinarayan)
