Barclays Share News (BARC)

March 19 - Welcome to the home for real time coverage of European equity markets brought toyou by Reuters stocks reporters and anchored today by Helen Reid. Reach her on Messenger toshare your thoughts on market moves: helen.reid.thomsonreuters.com@reuters.net CLOSING SNAPSHOT: FTSE 100 UNDERPERFORMS (1709 GMT) European shares have finished broadly lower today as investors braced for Wednesday’s firstU.S. interest rate rise, while an outlook warning from Micro Focus took the shine off techstocks. The pan-European STOXX 600 benchmark fell 1.1 percent but the FTSE 100 was the clearunderperformer after Britain and the EU agreed on a post-Brexit transition which boosted thesterling but weighed on the internationally exposed index, sending it down 1.7 percent to a15-month low. Here's your snapshot: (Danilo Masoni) ***** AVOIDING TECH POTHOLES (1528 GMT) It's been a terrible day for tech, with Facebook tumbling on reports of data misuse and theUK's Micro Focus losing half its value in one session after a sales warning and thedeparture of its CEO. But there may have been warning signs, including a near-17 percent one-day drop in Januaryafter Micro Focus flagged disappointing sales from the software assets it bought from HewlettPackard Enterprise. Until this year, MCRO's shares had enjoyed six years of solid gains (see chart below), buttoday's drop demonstrates the perils of diving into anything that falls under the tech umbrella. Analysts at Northern Trust Capital Markets said they ended their recommendation on MicroFocus last week. "We don’t know how it can grow profits beyond the current integration plan," they said."Investing in a roll-up company — which relies on snapping up businesses using cheap debt thencutting costs to drive growth — made sense when there was little global growth. But when growthwas picking up and interest rates and debt costs were rising, that model was less attractive." Northern Trust Capital Markets have today initiated a trading sell recommendation on Sophos,citing concerns around high leverage, an acquisitive strategy and "risk of an inflection inearnings drivers". Sophos' shares dropped around 17 percent back in February when it reported slower billingsgrowth. It is set to report full-year earnings on May 17. (Kit Rees) ****** WHAT COULD GIVE EUROPEAN EQUITIES A HELPING HAND? (1452 GMT) Favouring European stocks over Wall Street because of a big valuation gap was consensusthinking at the start of the year, but just three months on it's clear to everyone that such abet is not paying off: the STOXX has underperformed the S&P 500 by 4.7 percent year-to-date. Natixis economists, who also mistakenly had expected Europe to do better, have taken a lookat which factors have historically (since 1990) helped Europe beat Wall Street to better assesswhat is actually needed for a comeback. Here's their bottom line: "While the EUR/USD can be expected to continue to play againstEuropean equities, their salvation over the medium term could come either from a slowdown of theUS economy and/or from a normalisation on the downside of earnings growth forecasts for USequities." Is this going to happen? Well, it's hard to predict but in this chart you can see how U.S. earnings growth forecastsfor 2018 have been constantly revised upwards while European forecasts have come down a bit. (Danilo Masoni) ***** BANKING ON BANKS M&A (1419 GMT) The debate is still raging over European banks and whether they're a good investment. "Generalists and macro investors are doing work on European financials and seem to thinkthat, despite a widening valuation gap vs. the U.S. (in particular for banks), it still feelssafer to invest in the new versus the old world," write Goldman analysts. But ABN AMRO is more positive on the prospects for consolidation to turbocharge the Europeanbanking sector. Total assets of the euro area banking sector are still far greater than in the U.S. andJapan, as a share of GDP. Peaking at about 340% of GDP in 2012, they've fallen to around 280% ofGDP - compared to 88% in the U.S. (see graph below). While regulatory obstacles have been a challenge, analysts at the Dutch bank reckon it's nowtime for consolidation to change the landscape of the banking sector. "As this trend increases it will be essential to be on the side of the banks that are movingquickest and we will pay attention to the profitability of the smaller banks over the nexttwelve months," they add. (Helen Reid) ***** UK REITS: NOT SO UNTOUCHABLE AFTER ALL (1341 GMT) Klépierre's rebuffed swoop for Hammerson this morning highlights a perhaps surprisingenthusiasm from foreign buyers for a stock in the real estate investment trust (REIT) sector,one often touted as being the single most exposed to Brexit. Is UK real estate more resilient than it looks? "Despite significant political uncertainty and rapid structural change... the UK Real Estatemarket is surprisingly robust," Goldman analysts wrote on Friday, adding Hammerson to their'conviction list' - in hindsight a well-timed move. Goldman noted, however, that mixed results are likely from different parts of the realestate market. They see London office values declining gradually by 29 percent, while residential propertyprices could slide 15 percent due to rising interest rates. Industrial rents should increase 33percent by 2021, however. (Helen Reid) ***** DEMAND AND CAPEX: THE TRADE WAR CUSHION? (1314 GMT) Morgan Stanley's economists point out that a recovery in the global capex cycle "tends tohave a stronger influence on global trade", and that the broader backdrop of global demandshould offset U.S. trade policy uncertainty. They note the latest round of trade measures from the U.S. will impact an estimated 1.7percent of U.S. goods imports, taking into account exemptions for Mexico, Canada and Australia.So not a huge hit. So how to play this protectionist theme? Morgan Stanley highlight that sectors with thebiggest exposure to exports and a stronger currency are also some of the most expensive andoverbought, such as chemicals, industrials and autos. While they would avoid these, they do likethe European market more broadly. "What’s odd is that investors appear to be selling the entire market, rather than thesectors that actually have the largest exposure to exports and a stronger currency," MorganStanley's strategists say. (Kit Rees) ***** SPIN-OFFS GALORE (1233 GMT) Last week was thick with spin-offs with Prudential's split and German utility giants E.ONand RWE's deal to break up Innogy, and according to Goldman Sachs there's more to come. Goldman analysts see these as further fueling their corporate simplification andrestructuring theme, with more and more companies turning to portfolio restructuring to createvalue. If the current level of spin-off activity is maintained, it will be Europe's busiest yearsince 2006 for corporates spinning off assets, they note (see chart below). European corporates including Ascential, Standard Life, Accor, GKN, Altice and Rolls Roycehave had spin-offs recently, and these have generally been met with positive reactions from themarket. Not only did the parent companies perform well but the off-spins also outperformed in thesix and twelve months following. GS says since 2005, companies that have divested an asset worthmore than 5 percent of market cap have tended to outperform the broader market by 3.6 percent ona 12-month horizon from the divestment date. The sectors where GS sees most opportunities for simplification and restructuring are autosand utilities. They highlight FCA, Enel and Standard Life as potential gainers from this theme. (Helen Reid) ***** POUND CELEBRATES, FTSE NOT SO MUCH (1204 GMT) "The pound is celebrating this morning on positive headlines regarding a Brexit transitiondeal," writes Jane Foley, Senior FX Strategist at Rabobank, as cable is up at a 3-week highagainst the dollar. And here are the latest headlines with EU's Barnier saying "we have a transition deal". On the equity market however the FTSE is hovering at 2-week lows, down 1.3 percentand underperforming other European markets, as strength in the sterling clearly doesn't help theinternationally-exposed index. After the Brexit referendum in June 2016 the FTSE has tended to move inversely to the poundalthough the negative correlation looks to be evaporating, as you can see in this chart. (Danilo Masoni) ***** TARIFF FEEDBACK FROM TEXAS (1141 GMT) Barclays analysts travelled to Texas last week to find out the potential impact of steeltariffs on makers (Tenaris, Vallourec and Voestalpine) and distributors (CTAP, Sooner,PremierPipe) of the so-called OCTG (Oil Country Tubular Goods) tubes used in oil and gasproduction. The result? Spot prices have already risen 20-25 percent, although further material priceincreases appear unlikely as the system looks already well supplied of pipes, they say. And there is one winner among the stocks they cover. "In this environment we see Tenaris as a key beneficiary of the new tariff regime, while forVallourec its relatively small U.S. exposure (24% of capacity) would merely offset headwindselsewhere," they add. As you see in the chart Tenaris has clearly outperformed its peers since the U.S. firstunveiled the tariffs plan last month. (Danilo Masoni) ***** KLEPIERRE OFFER TO HAMMERSON - WHAT NOW? (1126 GMT) Though Hammerson rebuffed Klepierre's offer, saying it under-values thecompany, the market is abuzz as a potential successful takeover could jeopardise Hammerson'songoing merger with Intu and burn merger arbitrage funds. Merger arbs are positioned long Intu, short Hammerson, says one trader. "If a deal breaks,arbs will suffer as Hammerson will roof and Intu could go down," he notes. Jefferies analysts argue Hammerson's protracted merger process with Intu is losingcredibility, hence Klepierre swooping in today. "The positive of a rival offer for Hammerson is a partial cash element (rather than theallstock swap at 0.4765 HMSO per Intu share) so Klepierre's interest in Hammerson could upsetthe marriage proposals with Intu," they say. This is reflected in today's moves: Intu shares are up just 2 percent whileHammerson is still up 24 percent, suggesting the market is worried about Intu. The offer of course makes sense for Paris-based Klépierre seeking to secure a foothold inthe UK market, with Hammerson shares at their cheapest in nine years (see below) - made evencheaper for the French company thanks to a favourable euro-sterling exchange rate. (Helen Reid) ***** TIME TO MOVE INTO DEFENSIVES? (0958 GMT) Tech is no longer unshakeably the favourite, it seems, as UniCredit strategists downgradethe sector and argue investors should increase exposure to more defensive areas of the market. Micro Focus' 55 percent slump today indicates investors have very limited patience for anysigns of strain in tech stocks whose valuations have surged up in the past years. Strategists at the Italian bank downgrade tech to neutral, and upgrade utilities fromunderweight to overweight. "The latest developments and the levels of leading indicators suggest a period in whichdefensive sectors will become more attractive," write Unicredit strategists. The mammoth deal last week between RWE and E.ON to break up Innogy would have helpedsentiment on utilities, but Unicredit also argues the sector is relatively insulated from "tradewar" fears. They also have overweight recommendations on the defensive food & beverage, and healthcare,sectors. (Helen Reid) ***** OPENING SNAPSHOT: EUROPEAN STOCKS OPEN LOWER AS MICRO FOCUS DIVES (0818 GMT) A drop in Micro Focus' shares and Henkel are contributing to the muted mood among Europeanshares this morning, which have opened lower. Likewise falls among energy stocks and basic resources are also weighing. On the positive side, Hammerson is the biggest gainer after that takeover approach fromKlepierre, while British betting firms have jumped after a report from the UK's gamblingcommission which recommended a stake limit of at or below 30 pounds sterling for fixed oddsbetting terminals (FOBTs). Here's your opening snapshot: (Kit Rees) ***** WHAT WE'RE WATCHING AHEAD OF THE OPEN (0752 GMT) European stock futures were down 0.2 to 0.5 percent, pointing to a more feeble start to abusy week with investors’ eyes on Wednesday’s Federal Reserve meeting and the EU summit onBrexit. With earnings season drawing to a close, there are however results from Henkel and MicroFocus which could jolt the shares. Henkel warned the year was off to a slow start, its shares are indicated down 2-3 percent.Micro Focus meanwhile is seen falling as much as 15 percent after it said annualrevenue would fall more than expected due to lower licence income and complications from itspurchase of Hewlett Packard assets, prompting its CEO to quit. M&A continues apace, and Hammerson’s rejection of Klépierre’s takeoveroffer is likely to boost the UK commercial real estate firm’s shares. It is offers such as these that many UK investors are hoping for when they buy into whatmany see as the stocks most at risk from a disorderly Brexit, such as commercial real estateinvestment trusts. European companies like Klépierre have all the more to gain from buying the depressed shareswith the euro/sterling exchange rate so favourable. With the offer valuing Hammerson’s shares ata 40.7 percent premium to Friday’s closing price, and the market’s short position on Hammersongrowing in the past month, the shares are likely to jump this morning. News that activist investor Sherborne acquired a more than 5 percent stake in Barclays should shake up the British bank’s shares too. (Helen Reid) ***** COMPANY HEADLINES: MORNING ROUND-UP (0741 GMT)Melrose pledges to inject 1 bln stg in GKN pension schemeApple is developing own MicroLED screens - BloombergPilots set up pan-European association to challenge RyanairDaimler cars unit invests to ramp up output to 3 mln vehiclesSherborne acquires voting rights over 5.16 pct in BarclaysFrance's Klepierre says offer to buy Hammerson rejectedMicro Focus downgrades 2018 revenue forecast, CEO steps downUK gambling commission makes recommendations on FOBT machinesHenkel warns that delivery woes in North America damp Q1 startCEO of Germany's GEA Group to leave in April 2019Societe Generale hopes for resolution to IBOR, Libya investigations within weeksShipping firm CMA CGM sees industry rebound continuingRocket Internet explores IPO of online shopping group Jumia - sourcesKering says Swiss activities tax-compliant (Tom Pfeiffer) ***** FUTURES POINT TO SLOWER START AS FED LOOMS (0712 GMT) Futures are down 0.2 to 0.4 percent across the main European benchmarks, confirmingspreadbetters' calls of a more cautious start to the week. With earnings season drawing to a close, corporate news is thin on the ground but M&A newsis still coming in: Hammerson has just announced it rejected an acquisition offer byKlépierre which valued the UK real estate company's shares at a 40.7 percent premiumto their closing price on Friday. (Helen Reid) ***** MORNING CALL: CAUTION DOMINATES FIRST DAY OF BUSY WEEK Good morning and welcome to Live Markets. European stocks are called down this morning, following the lead of Asian markets which hita speed-bump in the first trading day of a busy week. Britain prepares for a critical EU summitthis week, and investors are also eyeing Jerome Powell's first press conference as FederalReserve Chair and the central bank's decision on Wednesday. Asian shares were mixed as tension built ahead of this week's Fed meeting which will likelyresult in an interest rate hike. Spreadbetters call the DAX 17 points lower at 12,373, the CAC 40 down 17 points at 5,265,and the FTSE 100 16 points lower at 7,149. (Helen Reid) *****