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Welcome to the home for real-time coverage of European equity markets brought to you by Reuters
stocks reporters. You can share your thoughts with Joice Alves (joice.alves@thomsonreuters.com)
and Julien Ponthus (julien.ponthus@thomsonreuters.com) in London and Stefano Rebaudo
(stefano.rebaudo@thomsonreuters.com) in Milan.
ECB FOREVER (1115 GMT)
What is in investors’ mind in times of COVID-19 might give interesting indications about
future flows and financial markets behaviour.
August credit investor survey by BofA signals a sort of ‘central banks measures in place
forever’ mindset.
Investors say that there is no other choice but for central banks to be “’all in’ for years
to come". And the more central banks intervene now, the tougher it will be for them to exit,
BofA says.
Meanwhile, "COVID lingering" and a global recession are the main worries as investors point
that without a vaccine coronavirus fears might lead to “unpredictable moves in the business
cycle.”
When it comes to asset valuations, investors say that the near-record global stock of
negative yielding debt and Nasdaq valuations “make them uncomfortable”.
They worry about the poor performance of bank stocks too. Given that bank debt levels as a
percentage of total euro investment-grade debt is at a record low, it could mean that the ECB
will have to remain the ultimate provider of credit for a long time.
(Stefano Rebaudo)
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EU BANKS: MORE PAIN IN THE OFFING? (0933 GMT)
European banks results on average were roughly in line with expectations, but what is going
to happen to the sector when central banks and governments support will subside?
Berenberg analysts think that “uncertainty remains high, as support schemes mask the true
stress conditions of borrowers”.
CET1 ratio targets for full year 2020/2021 have been maintained for nearly all the European
banks, the note says.
While support schemes such as furlough compensation and payment holidays are in place there
is limited credit rating migrations, which will increase when these schemes expire over the next
12 months, resulting in actual losses for banks, Berenberg adds.
A decrease in CoR (cost of risk) is likely in the coming quarters. “Yet it will remain to be
seen whether this decrease will be significant” as it is based on specific macro assumptions.
Investors should remain selective, despite EU bank shares are still underperforming the
broader European market by 15% since March 2020 lows.
Berenberg has preference towards banks with strong risk focus and capital position, such as
Nordea, Barclays, ING, AIB, Bank of Ireland, NatWest, Standard
Chartered, UniCredit and Unicaja.
Banks with greater capital buffers than peers, such as Nordea, ING and
NatWest, are better positioned to absorb such losses and restart capital distributions.
(Stefano Rebaudo)
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OPENING SNAPSHOT: EX-DIV, U.S. TARIFFS, AEGON, THYSSENKRUPP (0738 GMT)
European stocks are in negative territory ending a four-day winning run as the U.S.
government left tariffs on Airbus and a host of other European goods unchanged.
Meantime a fresh basket of earnings reports also weighs on the pan European index,
which is down 0.4%, with Aegon and Thyssenkrupp leading losses, down 11-12%
after results.
Shares in Danish brewer Carlsberg are down 5.6% after the company said Q2 sales
fell 15% and it expects organic operating profit for the FY to decline 10%-15%.
The FTSE 100 fell for the first time in five days as a batch of blue-chip firms traded
ex-dividend, including Phoenix and Legal & General.
(Joice Alves)
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ON THE RADAR: NORDEX , THYSSENKRUPP, RABOBANK, TUI (0635 GMT)
Futures are pointing to an open in the red for European bourses with investors seeing a long
road back to health after the UK historic GDP drop, and as German companies say they expect
business to return to normal in an average of 11 months.
In terms of corporate news, shares at Thyssenkrupp are down 5.7% in early trade
after results, while Nordex shares are down 11.7% results as the German wind turbine maker
reports a H1 loss.
Zurich Insurance's H1 operating profit fell 40% as payouts linked to the COVID-19
pandemic and weaker financial markets dented its business.
Dutch lender Rabobank said its H1 net profit fell 81% as impairment charges
soared due to the coronavirus pandemic.
Danish brewer Carlsberg said second-quarter sales fell 15% from a year earlier.
It now expects organic operating profit for the full year to decline 10%-15%.
TUI, the world's largest tourism company, posted a 1.1 billion euro loss in its 3Q.
Frankfurt listed shares in Airbus are down 3.8% in early trade after U.S. left
tariffs on Airbus aircraft unchanged at 15%, despite moves by the European Union to resolve a
16-year-old dispute over aircraft subsidies.
A Scotch Whisky group said it is disappointed with the U.S. decision to retain tariffs.
On a brighter note, Lundbeck raises its 2020 operating profit forecast as the
Danish drugmaker slightly beat Q2 sales expectations.
Other corporate headlines:
Heidelberger Druck Q1 orders plummet as pandemic stunts investment
RTL Group sees ad decline slowing in current quarter
Aegon H1 earnings miss expectations on U.S. coronavirus impact
Swisscom trims 2020 sales guidance as H1 revenue slips
UPDATE 1-Deutsche Telekom Q2 results buoyed by Sprint consolidation
(Joice Alves and Stefano Rebaudo)
MORNING CALL: LONG CLIMB BACK TO HEALTH (0535 GMT)
European stocks are seen opening lower this morning as the historic 20% crash of the British
economy in Q2 confirmed that the world's sixth-biggest economy entered a recession.
The UK GDP drop was the most severe contraction reported by any major economy so far, with a
wave of job losses set to hit later in 2020.
Helping a little sentiment, data showed this morning that French unemployment fell to 7.1%
in Q2 from 7.8% in Q1.
While in Asia, stock markets followed Wall Street higher, as investors returned to tech
stocks and gold after steady virus figures and a surprising jump in U.S. inflation boosted
sentiment.
Financial spreadbetters expect London's FTSE to open 47 points lower at 6,233, Frankfurt's
DAX to open 6 points higher at 13,065 and Paris' CAC to open 6 points lower at 5,067.
(Joice Alves)
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