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* European shares rise 0.3%
* STOXX slightly below previous record high
* Concerns over U.S.-Iran standoff ease
Welcome to the home for real-time coverage of European equity markets brought to you by Reuters
stocks reporters and anchored today by Julien Ponthus. Reach him on Messenger to share your
thoughts on market moves: rm://julien.ponthus.thomsonreuters.com@reuters.net
EUROPEAN SHARES BOUNCE BACK (1652 GMT)
European shares recovered today amid signs Iran would unlikely strike back against the U.S.
after the killing of a top Iranian general by the U.S. forces, which led to a two-day global
stocks selloff.
In the absence of any fresh escalation by the two countries, the pan-European STOXX 600
index rose 0.3% with the technology sector gaining 1.35%.
Chipmaker Infineon Technologies was the biggest gainer on the German index.
Here is a snapshot of the European bourses a few minutes after the close:
(Joice Alves)
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"SENTIMENT IS FAR FROM BEING EXUBERANT" (1408 GMT)
With markets starting the new year on the backfoot, we're not short of bearish calls from
the Street on equities (see our earlier post from Kepler's Potts), but don't lose hope yet on
the record bull run, some say.
Take strategists at Exane BNP Paribas who say that while their bullish and pro-Value stance
on stocks appears to have become somewhat consensual in sell-side circles, investor positioning
remains light and that is a good thing.
"What is important... is that the buyside consensus has yet to fully follow through.
Firstly, flows into equities over the past 6 months remain near historic lows. Secondly, hedge
fund exposure to equities is still very low. Sentiment is far from being exuberant", they say.
They highlight that global equity funds saw inflows for $6 billion in December. Surely a big
number that "pales" however if compared to the $180 billion of outflows in the prior 11 months.
"A continuation of recent inflows is likely to drive equity markets higher", they conclude.
(Danilo Masoni)
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ASTON MARTIN: LIKE A FERRARI GOING REVERSE (1152 GMT)
Granted, it looked much worse prior to the open when some traders were expecting Aston
Martin shares to crash at the speed of -25%.
Still, the latest profit warning by James Bond’s brand of choice has cut the luxury
carmakers's market value by over 10%, quite a blow for a stock which had already plunged close
to 75% since its October 2018 IPO.
"Aston Martin has been one of the biggest flops on the stock market in living memory and
today's trading update does nothing to improve its tarnished reputation", wrote Russ Mould,
investment director at AJ Bell.
Mould believes the underperformance is at least partially to blame on not getting the
marketing/advertising right and taking the brand beyond its 007 tag.
If other luxury car makers can make it, why not Aston Martin, asks Mould, which points out
that Rolls-Royce Motor, by contrast, is on a roll.
The BMW-owned brand just announced it recorded a 25% jump in sales in 2019 thanks notably to
its Cullinan model, its first-ever SUV.
Clearly there's a feeling that Aston Martin can blame only itself for its current woes.
The listing of Ferrari in 2015 is widely seen as a big success in terms of
unlocking the value in the luxury car market.
For Aston Martin, it's precisely the opposite.
Here's how the Ferrari/Aston Martin race went on the stock exchange since the British
company went public in 2018:
(Julien Ponthus)
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JANUARY: A "SIGNALLING MONTH" OF PROFIT TAKING? (1056 GMT)
European shares and world stocks alike are at striking distance
from making new record highs but for Christopher Potts, top strategist at Kepler Cheuvreux, 2020
could be very different from 2019 and this month could give a first taste of what's in store.
"We expect the return of market disruption this year because we consider that the transition
to a new investment environment in the developed world is incomplete. January trading should
provide the appropriate warnings signs," he writes.
More precisely he sees a 60-70% probability of a significant market correction unfolding
this year with January expected to be a "signalling month" of profit taking.
Potts says the buyers should return later this quarter, aided by a perception of the Federal
Reserve providing liquidity support, but eventually the bulls will succumb, lacking a proper
economic recovery.
"The absence of an authentic recovery of the growth of world output and of corporate profits
this year will make itself felt eventually. Central Banks cannot repeat the effect of their
policy reversal of 2019. Uncertainty about the outcome of the Presidential election should also
become influential from mid-year," he argues.
"We may have to wait until the summer before a really significant correction of the current
wave of equity advance unfolds," he warns.
(Danilo Masoni)
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OPENING SNAPSHOT: ONE POINT FROM RECORD HIGHS (0859 GMT)
By most standards, it can be safely argued that the threat of a Iran/U.S. war and the
massive fires in Australia constitute a poor start to 2020.
That being said, the STOXX 600, up 0.7% at 419.70 points, is about just one tick
from another record high with investors refusing to put their money on a worst-case scenario.
Signs that the mood is not on defensives, tech is leading the gainers, followed by retail.
Talking about the latter, Britain is leading the show with Marks & Spencer up 4.8%
(rating upgrade) and Morrison gaining 3.1% on a not so disappointing trading update.
Another symptom of the bullishness out there are banking shares, which are slightly
outperforming, up 0.7%. UBS is up 2.3% after reports it is restructuring its wealth management
unit.
Other big movers include Aston Martin, down about 15% after its profit warning,
Premier Oil up 14% after buying stakes in North Sea oilfields and a gas project.
Norwegian Air is also having a good ride, up 5.5% as it continues to cut routes in
a bid to boost profitability. Easyjet (+1.7%) and Ryanair are also on the rise
(+1.8%).
(Julien Ponthus)
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ON THE RADAR: BANKING STOCKS AND ASTON MARTIN (0756 GMT)
Banking stocks will be closely watched at the open with UBS announcing a restructuring of
its wealth management unit. Pre-market indications give the Swiss group making solid gains.
With SocGen's CEO telling the FT that his bank wants to take part in the incoming
consolidation, investors might be tempted to believe that after a catastrophic decade, time has
come to reconsider a very unloved sectors if M&A and cost cutting can offset low interest rates
and tough regulations.
Among individual movers, Luxury British carmaker Aston Martin is seen falling up to 25% at
the open after issuing a profit warning.
In terms of M&A-related moves, Premier Oil said it is set to buy stakes in North Sea
oilfields Andrew and Shearwater from BP for $625 million and increase its stake in the Tolmount
gas project buying a bigger stake from Dana for $191 million.
Despite reporting lower sales, shares in Britain’s Morrisons could tick upward as they prove
less disappointing than feared.
Also Norwegian Air could benefit from its bid to regain profitability by removing
loss-making routes.
(Julien Ponthus)
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IT'S STILL GOOD (SO FAR) (0710 GMT)
Just a quick update to let you know that European futures are now all trading comfortably in
the black, suggesting a positive open that would mirror Asia and Wall Street's optimism that the
conflict between Iran and the United States will not get out of control.
(Julien Ponthus)
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MORNING CALL: IT'S ALL GOOD (FOR NOW) (0622 GMT)
There's been quite a change of mood across markets, with investors now taking the view that
WW III isn't about to happen right now after all.
Wall Street made it back to the black, Asian shares rebounded and oil prices fell as chances
of an all-out conflict between the United States and Iran seemed to decrease.
While this new-found optimism could vanish as quickly as it emerged, it is expected to boost
European bourses at the open.
Financial spreadbetters at IG expect London's FTSE to gain 33 points, Frankfurt's DAX 66
points and Paris' CAC 40 31 points.
(Julien Ponthus)
*****
(Reporting by Danilo Masoni, Joice Alves, Julien Ponthus and Thyagaraju Adinarayan)
