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* European shares rise to 9 week-highs
* Oil, miners boost European stocks
* Infineon lowers guidance, AMS skips div
* Solid results from BP, Assa Abloy
Feb 5 - 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
TIME FOR SOME VALUED LOVE? (1343 GMT)
Investors in value stocks, the unloved companies that have struggled to garner much love during the technology-led boom, have clung to the rout in FAANGs and high-growth stocks as a sign that the tide may be finally turning in their favour.
Indeed, value stocks mostly outperformed growth during the Q4 sell-off. The MSCI U.S. value index has held that pole position even during the new year rally of the past month, although in Europe the two segments have started to converge (see the green and blue lines in the chart below).
James Bateman, chief investment officer of multi-asset at Fidelity International, reckons the segment could get a further injection of love as investors look to the cheapest stocks to squeeze the last dregs from the decade-long bull run.
"There's still a massive dispersion (between growth and value) if you go back to 2009 onwards. That is something we expect to revert," he says.
"It's entirely conceivable that the last full leg of this bull market is driven by the stocks that haven't yet rerated upwards."
As the cycle draws to a close and the macro data shows signs of a cooling global economy, investors will seek safety in value stocks which fell much less than growth during the recent rout and trade at or under fair value.
"There is going to be a debate about whether to own Apple or Netflix at enormous multiples or do I want to own some cyclical industrials that are priced as if we're in a recession already?" he says.
Fidelity favours non-banking financials like insurers and asset managers (banks could be a value trap he warns), industrials and consumer staples.
Hold onto your hats because he reckons that change in investor heart could happen in the first half of the year - and when it comes it'll be dramatic rather than a gradual six-month rotation.
(Josephine Mason)
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RESULTS ARE ONLY AS BAD AS EXPECTED (1251 GMT)
Infineon is rising today despite having cut its guidance. That's unusual, especially for a semiconductor stock - a sector that's been widely hated recently, and is highly cyclical.
Reactions such as Infineon have been a feature of Europe's earnings season so far, and a sign that pretty poor results were already expected by investors.
Don't get us wrong, the overall picture remains pretty bleak.
EPS growth is expected to decline sharply in 2019 across the world due to the following factors, Amundi's Chief Investment Officer Pascal Blanqué writes in a note:
* Deceleration in global GDP growth
* Fading impacts of U.S. tax reform
* Declining sector contributions from oil and commodities
* Rising labour costs
But results have been only as bleak as investors expected.
"Most bad news already seems to be priced in, as confirmed by the more muted reactions to negative news," Blanqué adds. "In Europe, we seek value in cyclicals, in many cases now discounting a recessionary environment."
As you can see below, cyclicals have risen slightly in the past weeks relative to defensives in Europe, while the economic surprise index has stalled at low levels:
(Helen Reid)
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CHASING THE RALLY? HOLD YOUR HORSES! (1216 GMT)
There are a lot of compelling reasons to chase the rally which has lifted world markets since January and is currently boosting the STOXX.
The first one being that, with indexes now flirting with two-months highs, FOMO is getting hard to resist.
Beyond the newfound optimism there are also rational arguments such as the dovish Fed, more stimulus in China, and less angst around a full-blown trade war.
Still, some of the market's heavyweights are far from jumping on the exuberance train.
"We see reasons for caution," BlackRock warns in its weekly market comments.
"We caution against chasing the rally in risk assets, particularly in areas vulnerable to growth downgrades, geopolitical risks or sudden shifts in supply/demand dynamics."
Yes, "a more growth-friendly stance could trigger a renewed bull market" but for the time being, "a carefully balanced investment approach" is in order, the asset manager believes.
Similar words of warning come from Goldman Sachs, which has picked the brain of Howard Marks, the founder of Oaktree Capital Management, who recommends a cautious stance.
"GS economists and strategists generally agree (...) While they do not believe the current bounce will give way to a sustained bear market, they expect a period of relatively low returns across risky assets, and high vol-of-vol".
Here's a graphic from BlackRock's geopolitical risk dashboard, showing how global trade tensions have eased recently.
(Julien Ponthus)
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HOME SWEET HOME (1151 GMT)
Decalia Asset Management's Michele Pedroni is among those portfolio managers who are wary about stock market prospects, but he believes that the real estate sector in Europe is a place where investors can find shelter.
"It's a tiny sweet spot on the market: it's domestically focused and little exposed to trade war risks," he says.
Indeed the sector, which today is performing poorly being the only one trading in the red, has done great since the start of the year, widely beating the broader market.
Behind its outperformance is an unexpected dovish turn to central banks' stances and a string of gloomy economic data from Europe which has arrested the rise in yields.
And that, according to JP Morgan analyst Neil Green, could lead to upgrades in the sector.
"If the headwind of rising yields continues to subside, our cost of capital inputs could be too high for certain stocks," he says.
"Adjusting our input bund yield from 1.75 percent... to 0.5 percent in our German residential models for example could suggest fair value upgrades of circa 7 percent," he adds.
Europe's real estate index, which tracks shares including Vonovia, Unibail Rodamco and Deutsche Wohnen, is up more than 10 percent so far this year.
(Danilo Masoni)
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SMALL IS BEAUTIFUL: CORPORATE SIMPLIFICATION TO CONTINUE IN 2019 (0922 GMT)
Simplification is still flavour of the month, Goldman Sachs analysts say, arguing measures to spin off parts of complex businesses will continue to unlock value in Europe this year.
In recent examples of simplification they cite Electrolux, whose shares hit an eight-month high on Friday after it announced plans to spin off its most profitable business to shareholders - and Atos, whose spinoff of listed payments subsidiary Worldline was also cheered by investors.
There are a handful of drivers of this trend, according to GS:
- The premium on "growthy" stocks remains high, meaning a company could do well out of spinning off the fastest-growing parts of a varied business
- Pure-play competition from emerging markets and online players is ramping up, making it harder for big conglomerates to compete
- Total shareholder return (TSR) measures in European CEO compensation becoming more prevalent
As you can see below, companies with fewer business segments deliver, on average, higher returns than more complex firms. GS sees Ferrovial, Novartis, and RWE as stand-out opportunities to unlock value in coming years (it rates all three as "buy"s).
Private equity dry powder is also continuing to rise, they add, making take-private moves more likely. "Our LBO (leveraged buy-out) model suggests that around 50 companies in our European coverage generate internal rates of return (IRR) of over 15 percent," GS strategists write (IRR is a metric commonly used by private equity to measure the attractiveness of an investment).
They point to French cable maker Nexans, Finnish mining processing firm Outotec, and Spanish telecoms firm Masmovil, as having IRRs of more than 15 percent.
(Helen Reid)
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OPENING SNAPSHOT: OIL AND MINERS TO THE RESCUE (0832 GMT)
Oil and mining shares have come to the rescue this morning after BP's consensus-busting results and fresh concerns about a drop in iron ore output from top miner Vale helping keep pan-European shares in positive territory.
That's helping London lead the pack, with the FTSE 100 up 0.6 percent followed by Germany's DAX up 0.4 pct.
Those gains are offsetting some weak corporate earnings, most notably from Apple supplier AMS, whose gloomy Q1 earnings guidance has reinforced worries about the worsening outlook for the chip sector as China's economic growth cools. AMS is down 14 percent and Dialog Semiconductor is down 1.1 pct.
In contrast though, Infineon shares have turned positive after early losses, even after the German chipmaker lowered its FY sales guidance and warned of "increasingly difficult" business conditions.
Among other individual moves, drugmaker Lundbeck and Alfa Laval are down 8 percent and 7.1 percent respectively after their results while Danish charm-bracelet maker Pandora is rallying 13 percent after launching a cost savings programme to boost slowing revenue growth.
Still, U.S futures are pointing to a weaker open on Wall Street after the fall in Google owner Alphabet's shares overnight on worries over an increase in spending, which outweighed better-than-expected results.
Here's your snapshot:
(Josephine Mason)
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WHAT WE'RE WATCHING BEFORE THE OPEN (0753 GMT)
European shares are expected to open higher today, tracking gains in Asia and on Wall Street overnight and with services PMIs set to be closely watched for more clues on the health of the slowing euro zone economy. Futures are up 0.3-0.4 percent.
There are also lots of earnings updates to digest.
Chipmakers will be in focus after results from Infineon and AMS confirmed the worsening outlook for the sector, while the fall in Alphabet shares overnight on worries over an increase in spending, which offset consensus-beating results, highlighted how investors have become nervous about the once high-flying tech sector.
Infineon shares are seen down 2-3 percent after it cut its outlook, while AMS shares could fall 5-10 percent after the sensor specialist and Apple supplier skipped its dividend and predicted a fall in first quarter revenue.
Poor-looking updates also from Swedish machinery maker Alfa Laval, jeweller Pandora, and British online supermarket and technology group Ocado.
Newsflow for airlines, recently under pressure because rising crude oil prices lift their fuel bills, is also not looking good: German airline Germania filed for insolvency while Aeroflot warned that fuel prices would cost it $732 mln in 2018.
Among stocks set to gain following solid updates are oil major BP and Swedish lock maker Assa Abloy, while Husqvarna posted a smaller than expected loss.
Other stock movers: Drugmaker Lundbeck lowers dividend range to fuel growth; MTG Q4 core profit just beats forecast; U.S. judge lets most emissions claims against Daimler proceed; T-Mobile pledges three-year price clampdown if merger is approved
For more headlines, check out the previous post.
(Danilo Masoni)
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FUTURES RISE, CHIPMAKERS IN FOCUS AFTER INFINEON, AMS UPDATES (0707 GMT)
Turning to the corporate front, chipmakers will be on the watch list today after updates from Infineon and AMS confirmed the worsening outlook for the sector, while the fall in Alphabet shares overnight on worries over an increase in spending, which offset consensus-beating results, highlighted how investors have become nervous about the once high-flying tech sector.
Meanwhile European stock futures have started trading, up around 0.3-0.5 percent.
Here are some more hadlines:
Infineon lowers 2018/19 guidance on revenue growth to 9 pct
Apple supplier AMS sees weak Q1, skips dividend
Alfa Laval Q4 order intake misses forecast on scrubbers slowdown
MTG Q4 core profit just beats forecast
Roche seeks to freshen up Kadcyla label amid biosimilar defense
German airline Germania files for insolvency
Russia's Aeroflot warns fuel prices to cost it $732 mln in 2018
Britain's FirstGroup selling one of its largest regional bus divisions -Telegraph
U.S. judge lets most emissions claims against Daimler proceed
Telecom Italia auditors unable to convene shareholder meeting requested by Vivendi
Deutsche cuts back correspondent banking after Danske scandal
Britain's Metro Bank hit by fraud attack
(Danilo Masoni)
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EUROPEAN SHARES SEEN EDGING HIGHER (0626 GMT)
Stocks in Europe are expected to open slightly up today, supported by gains in Asia and Wall Street overnight, although worries over the economic outlook may curb the enthusiasm about central banks' dovish stances, while the closure of domestic Chinese markets for the Lunar New Year may add to investors' caution.
Today's euro zone PMI services will be closely watched for more clues on the health of the economy.
"Last week’s manufacturing PMI's showed little sign of a pickup in January, apart from a decent number from Spain, and today's services numbers might well be similarly disappointing," says Michael Hewson, analyst at CMC Markets.
Financial spreadbetters at IG expect London's FTSE to open 34 points higher at 7,068, Frankfurt's DAX to open 28 points higher at 11,204 and Paris' CAC to open 19 points higher at 5,019.
Over in Asia, stocks extended gains as the Federal Reserve's cautious turn underpinned appetite for riskier assets, while the dollar held firm on last week's upbeat U.S. data.
(Danilo Masoni)
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