Last checked at 
* Shares jump as Covid-19 deaths slow
* Stoxx up 3.1%, FTSE 100 gaining 2.6%
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 Thyagaraju Adinarayan
(thyagaraju.adinarayan@thomsonreuters.com), Joice Alves (joice.alves@thomsonreuters.com) and
Julien Ponthus (julien.ponthus@thomsonreuters.com) in London.
WHAT IF GOVERNMENTS RAISE CORPORATE TAXES? (1325 GMT)
The global response to COVID-19 emergency is unprecedented and it is clear that governments
will emerge from the crisis with meaningfully higher debt ratios.
Governments announced $2.8 trillion - including a U.S. $2.1 trillion package - in stimulus
measures in response to the coronavirus outbreak, the equivalent to 3.3% of the global GDP.
How will they pay for it? Will European governments brace for more corporare tax to cover
the higher expenses, BofA asks.
If governments opt to raise taxes, a 5-percentage point rise in the corporate tax rate from
27% (average of the STOXX 600 companies) to 32% would lower the value of European
equities by 6%, says BofA.
If the average corporate tax rate rises by 10 ppt to 37% in 2021 and then stays at that
level, this would lower the market fair-value by 13%.
But higher taxes are not the only option, says BofA.
- Governments could accept permanently higher leverage, supported by monetisation: "i.e.
central banks absorbing the additional bond supply via government purchases, as in Japan, where
the Bank of Japan now owns more than 50% of outstanding JGBs"
- Governments could accept a period of higher inflation, "leading to a decline of the ratio
of fixed debts to rising nominal GDP (as happened after World War II)".
(Joice Alves)
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VOLATILITY SIGNALS (1201 GMT)
Is volatility trying to send us a signal today? It sure looks like it.
On the equity front, volatility for the STOXX 50E went down to 41.3 points, the
lowest since a month.
It's roughly the same for Wall Street's fear index and quite importantly, both indicators
are trading below their 30 day moving average as you can see below:
Also note that volatility is also slowing down on the FX side of the market as you can see
with this fresh news flash headline:
06-Apr-2020 12:29:36 - EURO-DOLLAR 1-MONTH IMPLIED VOLATILITY FALLS TO 1-MONTH LOW TO 9.25%
EUR1MO=FN; DOLLAR-YEN VOLS FALLS TO 11%
(Julien Ponthus)
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BITCOIN: JUST ANOTHER RISK-ON/RISK-OFF TRADE? (1029 GMT)
Bitcoin has joined this morning's light-at-the-end-of-the-tunnel rally, and is up over 5% in
what is quite an exceptional rebound since its March 13 lows.
Moves are often extreme when it comes to the crypto king, which has surged 85% since then
after losing over 60% the month before that:
But in the grand scheme of things, it's quite similar to what the S&P 500 experienced from
the record highs of mid-February to the coronavirus crash and the current tentative rebound. So
much for the safe-haven that enthusiasts said bitcoin would offer in times of financial and
economic stress.
Anyhow, optimism sure seems to be back for bitcoin. Craig Erlam, a market analyst at Oanda
wrote that there's further room to go if it can rise above $6,500-$7,500.
"If it breaks through those levels then we could be looking at a healthy surge and another
run towards $10,000," Erlam wrote to his clients this morning.
(Julien Ponthus and Tom Wilson)
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DIVIDENDS ALMOST SAFE WITH TELCOS, BUT POLITICAL RISKS LOOM (0912 GMT)
European telcos are thought to be somewhat of a dividend safe-haven even in a
pandemic-induced recession scenario, but Barclays warns there are some risks of 'political'
pay-out cuts.
With cash at hand to cover at least 24 months of refinancing needs and no pressure to
preserve cash as capital buffer like banks do, Barclays says the sector is a "relative dividend
safe haven in these environments given their strong and resilient FCF generation".
The investment bank recently cut its free cash flow estimates for EU Telecoms by some 10%
for COVID-19 but believes dividends are relatively safe with the only risk appearing to be
political.
Some "telcos could feel some pressure to make financial concessions to wider stakeholder",
Barclays argues, noting that governments could impose restrictions on companies requesting state
aid.
Following cuts at Telia and Proximus, Barclays now models a dividend
cut only at BT, while KPN is seen as safest.
(Stefano Rebaudo)
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CORONAVIRUS STOCK PICKING: WHAT WOULD MOM AND POP DO? (0852 GMT)
Netflix and chill?
When it comes to stock picking, UK retail investors seem to trust in what they see around
them and that's TV binge watching and Amazon deliveries.
"Many retail investors are investing in the companies we are all turning to help us weather
the COVID-19 storm, such as streaming services like Netflix, delivery services like Amazon and
supermarkets like Tesco", said Iqbal Gandham, UK Managing Director at eToro.
The trading platform has just released the top 20 most bought shares in March and here's how
it looks:
(Julien Ponthus)
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OPENING SNAPSHOT: RISK-ON (0730 GMT)
Investors have clearly switched to risk-on this morning with the pan-European STOXX 600 up
about 3%. All regional bourses and industry indexes are firmly in the black as faith that
lockdowns are proving effective in flattening the curve of the outbreak boost morale.
Travel and Leisure stocks, a typical gauge of coronavirus fear and greed, are rising 4.6%
with stocks at the front line of the crisis, such as cruise operator Carnival up 12%. Cyclical
stocks are also in high demand with the automotive sector leading gains with a whopping 6% rise.
Another big winner is Rolls-Royce which scrapped its final 2019 dividend but said it secured
an additional 1.5 billion pound revolving credit facility, bringing its overall liquidity to 6.7
billion pounds.
(Julien Ponthus)
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ON THE RADAR: LIGHT-AT-THE-END-OF-THE-TUNNEL RALLY (0650 GMT)
The perception that the lockdowns implemented throughout Europe are starting to show some
results is boosting sentiment this morning with surging futures pointing to a likely rally when
the bell rings.
While falling oil prices were keeping a lid on investors' optimism earlier, brent crude
futures are now paring losses on hopes Russia and Saudi Arabia are getting closer to deal to cut
production.
That said there’s nothing particularly rejoicing in macro and corporate headlines this
morning.
For instance for auto stocks, export expectations in Germany's have fallen to their lowest
level since March 2009 and new car registrations in Britain are expected to show an annual drop
of more than 40% in March.
In the battered travel and leisure sector, Norwegian Air's passenger volume fell by 60%
year-on-year in March. British aero-engine maker Rolls-Royce also said it was scrapping its
targets and had decided against paying its last dividend.
Some investors seem reluctant however to adjust to the brave new world of a
coronavirus-struck economy which includes acceptance of dividend cuts (German regulator telling
banks to refrain from paying dividends) and actually willingness to inject fresh cash (WH Smith
securing new lending facilities conditional on raising new equity).
HSBC shareholders in Hong Kong are mulling possible legal action against the bank's
scrapping of dividend payments.
Stelios Haji-Ioannou, the founder of easyJet, has warned that he will not inject any fresh
equity into the airline until it terminates a contract with Airbus for 4.5 billion pounds.
That being said some companies are still sticking with shareholders payouts and are being
rewarded for that. AMS is seen jumping at the open with its buyback program.
One headline which just shows how times are changing fast is Singapore finance minister
saying all adult Singaporeans will get a one-off payment of S$600.
Helicopter money isn’t just an eccentric economic concept: it’s news.
(Julien Ponthus)
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MORNING CALL: POSITIVE MOOD (0540 GMT)
European futures and their U.S. peers are trading convincingly in the black - over 3% - this
morning as hopes that lockdowns implemented throughout the continent to fight the spread of the
coronavirus outbreak are starting to show some results.
Sentiment was also positive in Asia overnight with MSCI's broadest index of Asian shares
outside of Japan up about 1.5% and Japan's Nikkei rising 2.7%.
A big downer however is that oil prices are still suffering from oversupply concerns after
Saudi-Russian negotiations to cut output were delayed.
Another worry for the London bourse is that Boris Johnson was still in hospital on Monday
morning, suffering persistent coronavirus symptoms 10 days after testing positive for the virus.
(Julien Ponthus)
*****
(Reporting by Thyagaraju Adinarayan, Joice Alves and Julien Ponthus and)
