* European stocks extend gains
* 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
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)
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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)
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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)
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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)
