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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 Joice Alves (joice.alves@thomsonreuters.com)
and Julien Ponthus (julien.ponthus@thomsonreuters.com) in London and Stefano Rebaudo
(stefano.rebaudo@thomsonreuters.com) in Milan.
CLOSING SNAPSHOT: U.S. CONSUMER BLOW KNOCKS STOXX INTO THE RED (1540 GMT)
European stocks seemed set to finish the day in positive territory after a bullish start but
news of U.S. consumer confidence falling for a second straight month in August spoiled the mood.
"Improved business sentiment in Germany this morning has been undone by the lowest U.S.
consumer confidence reading since this crisis began", wrote Joshua Mahony at IG.
The STOXX 600 ends the session down 0.2%, which isn't that much of a setback but the same
cannot be said of the FTSE 100 losing over 1%.
As you can see below, UK blue chips suffered from a pretty bad miners/energy/consumer
staples combo:
In New York, the DOW is down 0.5% but the S&P is still - just - keeping up on the floatation
mark.
(Julien Ponthus)
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"THE FTSE 100 HAS GONE NOWHERE OVER THE LAST 20 YEARS" (1210 GMT)
That's quite a harsh statement from Kingswood's chief investment officer, but then again the
irresistible surge of big U.S. tech dwarfing European stocks seems to have triggered some kind
of general awakening moment across the old continent.
It is hard to stomach that Tesla, which was founded in 2003, is actually worth more than any
European blue chip, like Nestle that has over 150 years of history.
But the market capitalisation of Apple at $2.1 trillion, pretty much at the same level as
the entire FTSE 100, takes European FOMO to another league.
For Kingswood's Rupert Thompson, "this pattern of technology outperformance and UK
underperformance" has been a long term structural trend, not just the effect of say, a seasonal
growth versus value gone wrong during a temporary bubble.
"Sadly, it also reflects the fact that the market cap of the FTSE 100 has gone nowhere over
the last twenty years", he writes, adding that while UK stocks are roughly 25% cheaper than the
rest of the world, no sudden turnaround should be expected short term.
And while U.S. big tech have privacy rights campaigners and taxmen from all over the world
looking over their shoulders, secular tailwinds in favour of the FAANGS should keep them going a
while longer.
Anyhow, for what it's worth, here's Apple versus the FTSE 100 during the last 20 years
(warning, this could sting your eyes a bit!):
(Julien Ponthus)
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SLOWING ECONOMIC DECLINE? NOT SO FAST (1046 GMT)
German better-than-feared economic output decline is helping to spark a wave of optimism
across Europe.
Europe's largest economy contracted by a record 9.7% in the Q2, but this marked a minor
upward revision from an earlier estimate of -10.1%.
Looking across the region however, UBS expects things will not improve much this year in
another big European economy.
The Swiss bank is cutting its UK GDP forecast and is now seeing it declining 10.1% in 2020
before rebounding 7% in 2021.
"Looking beyond a likely strong GDP rebound in Q3, the speed of the recovery remains highly
uncertain, with significant downside risks to domestic demand," says Anna Titareva at UBS.
She cites a slow recovery in spending in sectors involving social interaction, an increase
in unemployment, a slow recovery in business investment and ongoing Brexit uncertainty.
(Joice Alves)
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OPENING SNAPSHOT: RISK ON! (0748 GMT)
In a classic COVID-19 risk on session, Europe's travel and leisure stocks are gaining
momentum up 2%.
The space, known as a gauge of fears of the pandemic, jumped as global sentiment is
upbeat on renewed optimism over a U.S.-China trade deal and on hopes for a coronavirus vaccine
and treatment.
A slightly smaller-than-feared decline in German economic output also helped European stocks
and fuelled a rally in the DAX (+1%), which hit a 1-month high.
Airlines groups IAG and Easyjet jumped more than 4% to the top of the pan
European index, which is up 0.7% in a second straight session of gains.
The banking sector is also having a nice day, up 1.9% with Raiffeisen and Bank of
Ireland shares gaining around 4%.
Retailer DFS Furniture shares jumped 16% after saying its performance over the
last six weeks was significantly above its initial expectations.
(Joice Alves)
******
ON THE RADAR: M&A DEALS, LUXURY AND ASTRAZENECA (0635 GMT)
Futures point to gains for European bourses this morning as global sentiment is quite upbeat
on hopes for a COVID-19 vaccine and treatment, as well as on renewed confidence in a China-U.S.
trade deal.
But GDP data from Germany may cap these gains. The euro zone largest economy contracted by a
record 9.7% in the Q2 as private consumption, investments and exports all collapsed at the
height of the COVID-19 pandemic, the statistics office said in a minor upward-revision to an
earlier estimate.
In terms of corporate headlines, there is a couple of interesting ones around luxury M&A
with French giant LVMH and U.S. jewellery chain Tiffany giving themselves
another three months to complete their $16.2 billion tie-up after the deal did not close on the
Aug. 24 date set out in deal documents, a person familiar with the matter said.
While spectacles maker EssilorLuxottica said it may appeal against an earlier
court verdict regarding its planned takeover target GrandVision, after it lost a Dutch
court case which could jeopardise the deal.
AstraZeneca started early stage trials for an antibody-based treatment for the
prevention and treatment of COVID-19, as the British drugmaker also ploughs on with its vaccine
candidate.
Meantime, British software company Aveva Group reached a deal to buy U.S.-based
real-time industrial data software and services provider OSIsoft for $5 billion.
In the banking space, Credit Suisse intends to generate 100 million Swiss francs
($110 million) in annual savings by merging subsidiaries in the canton of Aargau and cutting the
number of branches in favour of more digital bank.
Staying in Switzerland, the competition watchdog has launched an investigation into Swisscom
, which is accused of charging excessively high prices in its tenders for projects to
connect company sites.
(Joice Alves)
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MORNING CALL: WE HAVE IT ALL (0540 GMT)
Meaning China-U.S. trade deal talks, Germany GDP data, treatment hopes and COVID-19 fears,
all weighing on markets sentiment this morning.
As a result, European bourses are seen opening higher, on track for a second day of gains as
renewed confidence in a China-U.S. trade deal after talks between the countries and fresh
vaccine helped lift the mood.
Asian stocks rose following reports that top U.S. and Chinese officials see progress in
resolving concerns around the Phase 1 trade deal reached between the two countries in January.
Markets have also been supported by optimism about medical solutions to end the coronavirus
pandemic, including the use of the blood plasma from recovered patients as treatment.
That seemed to overshadow a rise in cases in Europe and the first documented case of
re-infection, where a man in Hong Kong caught the virus twice.
Meantime, Germany Q2 GDP and IFO Business Climate survey are due today.
"Today’s latest iteration of Germany’s latest Q2 GDP revision is expected to affirm how
badly the German economy fared as a result of the lockdown period," writes Michael Hewson, chief
market analyst at CMC Markets UK
Financial spreadbetters at IG expect London's FTSE to open 16 points higher at 6,121,
Frankfurt's DAX to open 86 points higher at 13,152 and Paris' CAC to open 25 points higher at
5,033.
(Joice Alves)
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