Last checked at 
* STOXX 600 up 0.4%
* Tech stocks shine, up 2.4%
* Wall Street futures mixed
Oct 13 - Welcome to the home for real-time coverage of
markets brought to you by Reuters reporters. You can share your
thoughts with us at markets.research@thomsonreuters.com
THG: WHAT TO MAKE OF NOT "A GREAT DAY" (1255 GMT)
Losing close to 2 billion pounds in a day ain't just another
day at the office.
"it has not been a great day", THG founder Matthew Moulding
told the Daily Mail after a selloff wiped out over a third of
the value of the British online retailer which only last year
completed the biggest London IPO since Royal Mail in 2013.
But while the investor day organised on Tuesday to reassure
investors sure didn't go according to plan, there were signs
even earlier that THG's honeymoon with investors had ended.
"The Hut Group is no longer the City's digital darling", was
The Telegraph's headline on Tuesday, hours before the
presentation.
Indeed the company was already trading below its floating
price, having been on a nasty downward trend since mid-September
and starting to attract the attention of short-sellers.
According to the Daily Mail, it had been identified as a
short-selling opportunity at the beginning of October.
Moreover, investors seem strangely reluctant to buy the dip,
despite some big brokers advising clients to buy.
Jefferies has a target price of 920 pence for THG, which is
over three times the company's current share price of around 282
pence.
Jefferies reckons THG failed to convince investors about
its equity case but sees "ongoing Q3 commercial progress as a
timely reminder that execution to date has lived up to the IPO
commitments".
Citi, also has a also 'buy' tag on the stock and a 900 pence
target price. Goldman Sachs reduced its target from 900 pence to
700 pence but retained its buy recommendation.
For Russ Mould, investment director at AJ Bell, the dilema
facing investors can be summed up as following:
"On one hand, sentiment is incredibly weak towards the stock
and there is no point going against the flow if the market has
decided THG is a dud", he wrote.
"On the other hand, investors are now being given the chance
to snap up shares in a business at a price where the original
source of excitement is now essentially thrown in for free".
Mould was referring to Ingenuity, the unit THG said in May
it planned to spin off. The recent slump in THG shares means the
e-commerce services business market-implied value is now close
to zero.
(Julien Ponthus)
****
REAL ESTATE BUBBLES (1115 GMT)
Speaking of bubbles induced by excess liquidity, real estate
is, of course, on top of the list.
So we might use some insight from UBS. According to the
bank's global index, major cities of European countries are well
in the red, which means there is a bubble risk (see chart
below).
Households have to borrow increasingly large amounts of
money to keep up with higher prices, and the growth of
outstanding mortgages has accelerated almost everywhere.
Meanwhile, the “debt-to-income ratios have risen—most
markedly in Canada, Hong Kong, and Australia,” UBS analysts say.
“Housing markets have become even more dependent on very low
interest rates, meaning a tightening of lending standards could
bring price appreciation to an abrupt halt,” they add.
(Stefano Rebaudo)
*****
NETWORK FAILURE: STRESS HITS FRANCE'S BIG TECH IPO (1028
GMT)
When it comes to IPOs, timing is everything and for France's
OVHcloud, due to make its debut on the Paris bourse on Friday,
it just got trickier.
The general market environment is not helpful but there's
little the French national cloud services champion can do when
it comes to interest rates rising and cutting the premium
investors are willing to pay for tech and growth stocks.
The company has already cut the amount of money it plans to
raise in its stock market debut to 350 million euros amid signs
of a faltering IPO market.
But cagey investors won't be reassured by this morning's
network failure which OVHcloud said was caused by a "human
error" during the reconfiguration of one of its data centres.
OVHcloud also had a fire tear through a data complex housing
servers amid IPO speculation last June.
The price tag on the company values it between 3.5 billion
and 3.7 billion euros and many investors will no doubt see the
IPO as a test for what's to come for European equity capital
markets in general and the tech segment in particular.
Here's the tweet of founder and chairman Octave Klaba
explaining how the outage occurred.
Some reading:
Cloud computing firm OVHcloud experiences network outage
France's OVHcloud trims IPO target to 350 mln euros
France's OVHcloud re-commits to IPO after fire, gives no
timetable
(Julien Ponthus and Abhinav Ramnarayan)
*****
EUROPE'S Q3: NO COLD FEET! (0852 GMT)
We'll be entering the thick of Europe's earnings season next
week but so far there's no obvious sign that investors should
run for the hills. On that note, SAP lifting its guidance this
morning will surely boost sentiment.
The latest Refinitiv I/B/E/S data shows an uptick in
earnings growth expectations to 46.7% for the STOXX 600 in Q3,
that's 1.1% higher than last week.
More good news: expectations for the following quarters are
also ticking up: from 39.5% to 41.3% in Q4, from 9% to 9.5% in
Q1 2022 and 2.1% to 2.3% in Q2 2022.
Now, the percentage gap between upwards and downwards
revisions is closing down with the former being at 51% and the
latter at 49%.
In terms of sectors, there's little surprise to see that
earnings for energy stocks are the ones being mostly adjusted up
(over 70%) with financials, cylicals and technology also
enjoying a majority of upward revisions.
Among the sectors for which analysts are now more
pessimistic about are real estate and utilities.
See below:
(Julien Ponthus)
*****
THE SAP RISES, SUPER MAN FLIES (0748 MGT)
Tech stocks are propping up European equities with German
systems giant SAP up 3% after lifting its full-year
guidance.
The Stoxx 600 index is flat with the tech stock
index up 1.3%, while miners fall 0.9%.
Markets are mainly waiting for U.S. consumer price inflation
data later. It's the last instalment before the U.S. Fed’s next
meeting in three weeks time. It comes of course against the
backdrop of surging energy prices which are pushing up power
bills, which also eating into many firms' profit margins.
UK fund manager Man Group is another high flyer.
Its shares are up 6.7% after solid net inflows drove Q3 to new
peaks.
THG stocks fall again though after a double-double
slump on Tuesday following its investor presentation.
(Stefano Rebaudo)
*****
STAGFLATION BLUES (0719 GMT)
Even by the conservative standards of global organisations,
the International Monetary Fund is known for its cautious
forecasts. So, when the Fund cut 2021 growth forecast on Tuesday
and said it was growing more concerned about entrenched
inflationary pressures, there is reason for investors to take
notice.
So ahead of the release of September U.S. CPI, the big data
point of the day, markets are nervous. U.S. stock futures are in
the red and major government bond yield curves retain a
steepening bias. The growing stagflation fears indicate that
risks from the data are asymetric; a higher print than the 0.3%
forecast in a Reuters poll could lead to a bigger market
reaction than a small miss.
In some ways, it feels like the market is trying to call
central banks' bluff on the “transitory inflation” mantra, with
money markets in the developed world moving over the past week
to aggressively price interest rate hikes
Indeed, according to Deutsche Bank’s latest monthly survey,
for the first time since June, COVID is no longer perceived to
be the biggest risk to the markets with the top spot taken by
higher inflation and bond yields.
Latest Asian macro data was a mixed bag, with Chinese export
growth beating expectations, an unexpected decline in Japanese
machinery orders and a fall in Australian consumer confidence.
So global stocks are not too far off May lows while a gauge
of currency market volatility is creeping towards 2021 highs.
However, the recent rise in Treasury yields has stalled for now
and the dollar is on the backfoot against other major currencies
Wednesday also marks the unofficial kick-off of the U.S.
corporate earnings season, with JPMorgan the first major bank to
report. Banks have had an impressive run this year, with shares
outperforming the market by a wide margin but investors will
listen out for what bank CEOs say on the outlook.
Key developments that should provide more direction to
markets on Wednesday:
U.S. Federal Reserve Minutes
August Euro area industrial production, UK GDP returns to
growth territory in August after contracting in July
Central bank speaker corner: BOE's Cunliffe, ECB's Visco
German business software group SAP raised its
full-year outlook for a third time on the back of a strong
showing in the third-quarter.
Shares in THG Ltd lost over a third of their value
on Tuesday just as the company gave a presentation to investors.
Sales at French luxury group LVMH's fashion and
leather goods division rose strongly in the third-quarter.
(Saikat Chatterjee)
*****
UNEASY MOOD (0619 GMT)
European stock futures are flat with no clear direction yet
as investors seem unwilling to place large bets while the
corporate reporting season is officially getting underway.
Expectations are for a steady increase in profit warnings as
supply chains bottlenecks and rising energy prices weigh on
company results.
Also contributing to the uneasy mood, investors are waiting
for U.S. consumer price inflation data to be published today and
for the minutes from the September FOMC, which will include
discussions regarding inflation and the labour market.
(Stefano Rebaudo)
*****
