* European stocks rise slightly
* German sentiment boosts DAX, Euro STOXX
* Eyes on Trump speech for news on Sino-US trade talks
* Trump expected to delay European auto tariff decision
* Iliad rallies on buyback news, earnings drive top movers
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
BREXIT: EXPECT THE UNEXPECTED (1415 GMT)
Easing Brexit concerns are a tangible thing -- at least on the stock market
where, according to the BAML fund survey, allocations to UK equities have jumped
to a one-year high.
But what if investors are being too complacent and things go in the wrong
direction.
To the purpose, ING has had a thought about what a nightmare scenario would
look like in the upcoming Dec. 12 election.
"What if neither major party can form a government?" ING economist James
Smith wonders.
"Well that could be a nightmare scenario for financial markets because it
would raise urgent questions about whether that January Brexit deadline could be
extended again," he says.
"So there is plenty of room for big market moves. And if there's one thing
we've learned over the last few years is to expect the unexpected when the UK
goes to the polls," he cautions.
(Danilo Masoni)
*****
STOCKPICKING A GERMAN FISCAL STIMULUS (1311 GMT)
Sure, a lot of things could go wrong while we move into 2020: a full blown
trade war, a U.S. recession, a monetary policy mistake, you name it!
There are also - to use a slightly nerdy jargonish term - upside risks.
A big one in that category is Germany finally bowing to economic pressure
and spending its way out of its current slowdown (technical recession?) thanks
to its humongous surpluses.
Another version of that scenario would be a grand new monetary deal whereby
the ECB would end the negative interest rate experiment in exchange for some
real spending action across the euro zone.
Anyhow, it doesn't really matter how it happens but if "pressure on
European politicians to boost fiscal policy" is successful, UBS analysts have
identified stocks that might benefit from a German fiscal stimulus and climate
change related investments.
Here they are:
(Julien Ponthus)
*****
GERMANY'S ZEW GIVES EUROPEAN SHARES A LITTLE BOOST (1132 GMT)
It seems like the session is gradually switching to "risk-on" as the ZEW
survey showed about an hour ago that economic sentiment in Germany is much
better than expected.
As you can see below, both the DAX and Euro STOXX got a nice little boost as
investors who are betting on Europe bottoming, see their case validated further.
Germany's DAX and the STOXXE have accelerated to up 0.6% and 0.4%
respectively and are both in flirting distance with their Jan 2018 highs.
But as noted by Paul Donovan at UBS, the ZEW is just a survey. What
investors will focus on is the actual German GDP data on Thursday even if that
also can be taken with a pinch of salt.
"The market focus this week is whether the German economy had two
consecutive quarters of negative growth – a meaningless concept that does not
matter to anyone living in the real world", Donovan wrote ahead of the data
being released this morning.
The UK job data on the other hand had little impact on indexes.
A bit of a glass half empty or half full: while the unemployment rate fell
back to its lowest level since early 1975, Britain's employers cut have more
jobs from July to September than in any quarter for four years.
Of course today's session could all go wrong again if the hopes on Trump
delaying his decision to slap tariffs on auto imported from Europe are proved
wrong.
(Julien Ponthus)
*****
EUROPEAN CYCLICALS: "WE STAY OVERWEIGHT BUT..." (1013 GMT)
Cyclicals, here in old Europe, have had a comeback as the poor macro has
bottomed out.
But now that their gains have helped lift benchmark indexes to 21-month
highs and there's still uncertainty over US trade policy, people have turned
somewhat more cautions.
Take Andrew Garthwaite and his team of strategists at Credit Suisse, who say
"We stay overweight of European cyclicals, but find the case has become less
clear-cut", indicating three reasons behind their view.
1. cyclicals are now discounting PMI new orders of 50, implying 0.8%
eurozone GDP
growth
2. sector risk appetite is now high (although not extreme)
3. relative earnings revisions have yet to improve
That being said, they still think that PMI new orders can rise to 55.
"Historically, 90% of the time PMIs have risen, cyclicals have outperformed,"
they say
(Danilo Masoni)
*****
OPENING SNAPSHOT: STAYING BELOW HIGHS (0835 GMT)
News that Trump is expected to announce this week he is delaying a decision
on whether to slap tariffs on auto imported from Europe (likely for another 6
months) is making for a slightly positive start in Europe this
morning.
The broader STOXX 600 index is up 0.2% with most country benchmarks
also posting slight gains but staying just below recent highs, suggesting that
investors are looking for more clarity on U.S. trade policy.
In single stocks, Iliad is shooting up 18% after the French
telecoms group said on it would spend up to 1.4 billion euros to buy back
shares.
Other top movers are also reacting to earning updates: Electrocomponents
and B&M European are down 11% and 9% respectively, while Dialog
Semi and Infineon are rising 6.4% and 5.8% respectively.
(Danilo Masoni)
*****
WHAT YOU NEED TO KNOW AT THE OPEN (0757 GMT)
European shares are expected to edge up at the open today, staying near
recent highs, as investors await news on Sino-U.S. trade talks and on a likely
delay to Washington's decision on whether to slap tariffs on European auto
imports.
Futures on main regional benchmarks are up around 0.2-0.4%, also helped by
good-looking earnings updates as the Q3 season nearly draws to its end.
EU officials said Trump is expected to announce this week he is delaying a
tariff decision on car and auto parts imported from the European Union, likely
for another six months. Traders see auto stocks rising 1% at the open.
In earnings, Deutsche Post DHL is up 1.5% in early Frankfurt
trade after it reported an almost tripling of Q3 quarter operating profit and
said it expected a strong Q4, while utility Uniper is up 3.5% after
saying it expects a strong end to the financial year. Shares in United Internet
and Evotec are also seen higher after results.
UK aerospace supplier Meggitt is seen up 4-5% after it raised its
outlook for annual organic revenue growth, although it warned of pressured
margins due to the grounding of Boeing's 737MAX, and Vodafone is
expected to rise 3-4% after the world's No.2 mobile operator lifted its FY
earnings guidance.
Shares in Dialog Semi are up 3.5% in early Frankfurt after the
Apple supplier raised its long-term margins guidance, while elsewhere in the
chip sector, Infineon forecast slower growth in the year ahead,
seeing no improvement in the all-important car market and describing the
economic environment as "fraught with uncertainty".
Shares in consumer-exposed stocks will be on the watchlist after Alibaba
data showed that Chinese shoppers snapped up food supplements, facial
masks and baby milk powder at the world's largest shopping festival, with brands
such as L'Oreal and Nestle among the biggest winners. Its
Singles' Day shopping blitz brought in a record 268.4 billion yuan ($38.4
billion) in sales, more than six times the amount of online sales made in the
U.S. on Black Friday last year.
A 1.4 billion-euro share buyback at a large premium is expected to give a
big boost to Iliad shares in Paris. Traders see the stock shooting up
20% at the open.
In deal-making, ProSiebensat.1 is expected to rise 4% after
Mediaset raised its stake in its German rival as it presses ahead with
plans to create a pan-European TV platform.
(Danilo Masoni)
****
ON OUR RADAR: SHOPPERS, AUTOS, RESULTS AND DEALMAKING (0700 GMT)
Turning to the corporate front, shares in consumer-exposed stocks will be on
the watchlist after Alibaba data showed that Chinese shoppers snapped
up food supplements, facial masks and baby milk powder at the world's largest
shopping festival, with brands such as L'Oreal and Nestle
among the biggest winners.
Autos will also be watched after EU officials said Trump is expected
to announce this week he is delaying a decision on whether to slap tariffs on
cars and auto parts imported from the European Union.
There are also some earnings to digest as the Q3 season draws to its end.
Updates this morning don't look bad.
Deutsche Post DHL reported an almost tripling of Q3 quarter
operating profit and said it expected a strong Q4, while utility
Uniper on Tuesday said it expects a strong end to the financial year.
Infineon however forecast slower growth in the year ahead, seeing
no improvement in the all-important car market and describing the economic
environment as "fraught with uncertainty".
There's some minor dealmaking t hat could liven up the session: Brewer AB
Inbev will buy out Craft Brew Alliance own in a deal valuing
the US company at about $321 million, while Italy's Mediaset
raised its stake in German rival ProSiebensat.1 as it presses
ahead with plans to create a pan-European TV platform.
(Danilo Masoni)
*****
MORNING CALL: FLAT (0634 GMT)
After a flat close yesterday not much action is expected at the open as well
this morning.
Investors are looking for clearer signals over how Sino-U.S. trade talks are
progressing and Trump's trade speech later today at the Economic Club of New
York will be surely watched.
Spreadbetters at IG expect London's FTSE to open flat at 7,328, Frankfurt's
DAX to open flat at 13,199 and Paris' CAC to open 1 point lower at 5,893.
Over in Asia, share markets flatlined as uncertainty over Sino-U.S. trade
talks and political strife in Hong Kong dogged sentiment.
(Danilo Masoni)
*****
(Reporting by Danilo Masoni, Joice Alves, Julien Ponthus and Thyagaraju
Adinarayan)
