* Choppy session, STOXX +0.2%
* Travel stocks, real estate weigh
* Miners and tech save the day
* Wall Street futures rise
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and Julien Ponthus (firstname.lastname@example.org) in London and Stefano Rebaudo
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DOES U.S. ELECTION MEAN ROTATION TOWARDS VALUE? (1217 GMT)
Undoubtedly the U.S. election will be a market catalyst in the second half of the year and
as the Democratic and Republican conventions are starting, UBS sees global markets keen to
rotate towards value stocks.
"In equities, we expect last week's rotation towards value will extend, as the party
conventions bring U.S. election into focus," say UBS analysts.
"Amidst the counter currents of vaccine hopes and declining policy help, markets flat-lined,
but there was a rotation towards Value," with autos, energy and financials as key performers,
the Swiss bank says.
UBS expects the rotation to value to continue and "if the virus is brought under control,"
it sees incremental upside into the year end.
But the rotation won't hit all markets equally. "Of all regions we see most limited room for
Value to run in EM," it says.
LUXURY: "CREEPING MONOPSONY" MEETS "GRADUAL OLIGOPOLY"(1116 GMT)
Growth in the luxury sector will predominantly come from Asia and China in this COVID-19
era, which makes it tricky to stock pick the shares that will cope the best, Jefferies analysts
say in their latest report on the sector.
"The threat of a creeping monopsony" due to the reliance on the Chinese consumer increases
the risk profile of the sector, the broker believes, adding that the bigger players such as LVMH
are likely to emerge victorious from that struggle.
As an end result, "the gradual shift towards a gradual oligopoly" will likely strengthen in
the coming future.
As a consequence, alongside upgrading LVMH to 'buy', Jefferies also lifted the target price
of Kering from 520 euros to 570 euros. Burberry was also upped to 'hold' with a target price
increased to 1400p from 1250p.
As you can see below from their chart, growth is almost exclusively seen coming from Asia
"STUCK BETWEEN E-COMMERCE AND COVID-19" (1021 GMT)
That headline, which pretty much sums up the challenges faced by European real estate groups
comes from a BofA report on Unibail, which just admitted it is currently considering
BofA analysts believe the group would need to raise something in the range of 5 billion
euros in equity rather than the 3 billion euros mentioned by Friday's Bloomberg report.
"The pandemic accelerates the structural shift from offline to online commerce", the broker
argues as deserted malls continue to hit retailers' ability to pay rent.
Today's decision of Berenberg to cut its target price for Unibail from 90 euros to 52 euros
Anyhow, the read-across impact is weighing with investors putting all companies "in the same
basket", as Mikael Jacoby, head of continental European equity sales trading at Oddo just told
The sector, which lost close to 20% since the year began, is now down 0.7% so far this
session and one of the main drags on the choppy STOXX 600.
OPENING SNAPSHOT: THAT TRAVEL STOCKS DRAG (0744 GMT)
About half an hour into the open, it looks like the STOXX 600 has tried to embark on a
tentative upward trend but a sharp fall in travel stocks decided otherwise.
The pan- European index is now flat with the travel and leisure sector down 1.4%,
having fallen up to 1.7%, with airlines sustaining heavy losses such as a 4.7% fall for BA owner
ICAG or a 4.2% hit for Ryanair.
As you can see, the gloom triggered by the new quarantine measures now implemented by the UK
is still taking its toll but the upbeat mood among miners, up 1.4%, and tech, up 0.6%, has
Sentiment is nevertheless fragile and we're still looking to what seems to be a choppy
ON THE RADAR: SANOFI M&A, COVID-19 VACCINE NEWS (0639 GMT)
Nothing dramatic came up from the corporate front to help structure sentiment across
European bourses so far this morning, so Sanofi's $3.7 billion acquisition of U.S. company
Principia Biopharma has everyone's (among those not on holiday) attention.
And it does seem the pharmaceutical sector is a key one for this session with France's Ose
Immunotherapeutics saying it got positive preclinical covid-19 vaccine results.
Probably an increase in interest for Pernod Ricard shares is to be expected after Barclays
upgraded the French spirits maker "overweight" as it expects both revenue and profitability
improvement throughout 2021.
In what's reassuring news for home builders and real estate companies operating outside of
London, Britons bought and sold a record number of homes between mid July and early August.
It seems that lockdown has convinced many to leave London which has bucked the usual summer
slowdown with property website Rightmove reporting the highest number of home sales agreed since
it began tracking the data more than 10 years ago.
In another lockdown-triggered trend, Tesco said it will offer free grocery delivery in a bid
to head off Amazon's attempt to break into the British online grocery market, according to the
Anyhow, as noted by many analysts earlier this morning, it sure feels like a quite August
trading day so far.
Comments from Oanda's analyst Jeffrey Halley a few hours ago still seem appropriate as the
clock ticks closer to the open.
"With a lack of market-moving headlines to sink their teeth into, equity markets are likely
to continue listlessly ranging for the remainder of the day".
MORNING CALL: NO CLEAR TREND YET (0525 GMT)
European futures are moving just very slightly in the red this morning, down about 0.1%,
while their U.S. peers are trading more firmly in positive territory, up to 0.5% for the Nasdaq.
The record contraction of Japan's economy didn't trigger much of a sell-off on the Nikkei
which fell about 0.6%.
And there's nothing that wrong with the mood in Asia with MSCI's broadest index of
Asia-Pacific shares outside Japan gaining 0.6%. Oil prices are also on the rise
with China's ever strong appetite for crude.
U.S./China political tensions are still however clouding the picture, and so is the feeling
that the global macro picture can't justify equity markets rising that much further.
"There appears to be an increasing nervousness, despite the gains of the last 100 days, that
for all of the optimism over recent economic re-openings, that economies are reaching the limits
of what they can do, without increasing the risk of a surging second wave of cases, as we head
towards the autumn months", said CMC analyst Michael Hewson in his morning note.