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* European shares extend losses on lockdown fears
* Refinitiv: 1/3 of STOXX 600 reported results, 73% beat
expectations
* HSBC shares up 7% on Q3 profit, strategy shift
* U.S. stock futures rebound after sell-off
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NON-TECH EUROPEAN STOCKS TO LEAD THE DATA ERA (1225 GMT)
As the pandemic has increased the importance of the
internet, tech stock valuation soared, pushing some analysts to
look for companies that might benefit from the growing need for
data but yet are not tech stocks.
Morgan Stanley has 18 names of non-tech stocks that are
leaders "in the adoption or application of new technologies that
are likely to generate shareholder value," it says, "but unlike
the wider IT sector, relative valuations of data era leaders are
not at multi-year high".
This includes stocks in a range of sectors, from utilities
to beauty and personal care names. Here's the full list, which
also includes 8 companies that have all it takes to become
leaders:
(Joice Alves)
*****
WHICH STOCKS TEND TO DO WELL AFTER U.S. ELECTIONS? (1116
GMT)
What history has to teach when it comes to which stocks
could outperform following the U.S. Presidential election?
Style Analytics looked into how stocks have performed in the
seven months following elections in the U.S. since 1984 and
found out that value, small cap and high volatility outperformed
in seven out of nice elections, regardless of which party won.
"One reason we believe that value, small cap and high
volatility stocks do well after elections is that new (or
re-elected) Presidents tend to push economic stimulus packages,
resulting in a recovery/growth economy that encourages a risk-on
investment approach," the report says.
Here are the results of the past nine U.S. elections:
(Joice Alves)
*****
KITCHEN SINKING AND POSITION CLOSING (1034 GMT)
With just one week to go before the increasingly
unpredictable presidential ballot in the world's biggest economy
and lockdown risks looming large in Europe nothing looks really
safe across the continent's equity space.
German software giant SAP has undergone what
amounts to a massive kitchen sinking, almost killing Europe
Inc's recovery narrative, and investors now look to be searching
for an exit, especially from the market's winners, as volatility
gauges indicate more turbulence ahead.
And today's price action is quite as telling following
yesterday's spectacular debacle. While the stay at homes are
doing well, it's perhaps more interesting that the so-called
hated stocks like banks are in demand at the expense of the
strong performers, which have come under pressure.
"Gives an air of position closing," says a trader in London.
"Sentiment damaged a lot yesterday, anyone who thought they
had 'safe' positioning ahead of next week and held SAP probably
now just keen to derisk," he adds, also noting how a lot of
stocks that reported quarterly updates are struggling.
As a result even the mighty DAX index, the best
performer among top country benchmarks in Europe, has joined the
club of those trading below the 200 day moving average -- a line
under which the bears usually have the upper hand.
Back to SAP, its shares are showing just a tiny rebound this
morning, and markets are wondering who's going to be the next in
line, as earnings expectations get dented for the whole market
with possible repercussions on investment decisions.
"To think that SAP is only going to be one of a small number
of companies who cut their guidance for Q4 and the first half of
this year is crazy," says Miller Tabak strategist Matthew Maley.
"Therefore, as the 'E' part of the 'P/E ratio' falls, it's
going to make this already very expensive stock market an even
more expensive one," he adds.
And while there's a return of favour for the unloved
stocks(, companies like SAP face a complex dilemma.
"The problem now is that the business is going to be
ex-growth for a couple of years, but isn't cheap enough to be
called value either", says Neil Campling, head of TMT research
at Mirabaud Securities in London.
Here's the DAX falling below its 200 day moving average for
the first time in four months.
(Danilo Masoni)
*****
A SAFE BET IN CASE OF TRUMP VICTORY (1022 GMT)
Joe Biden is way ahead of his rival Donald Trump in polls on
U.S. elections, but what if the unthinkable happens?
According to SocGen emerging market strategist, Jason Draw,
if you want to bet on Trump staying in the White House a short
of U.S. dollar-ruble offers “attractive risk reward.”
The Russian ruble has recently been one of the weakest
currencies in emerging markets while the Mexican peso and North
Asia’s currency bloc some of the strongest as a Biden win has
been priced in by investors.
Under a new president the U.S. administration is expected to
be harder on Russia and “take a more traditional, approach to
China,” Draw says in a research note.
Short on ruble against Mexican peso and yuan renminbi might
not be the perfect fit as investors are reducing forecasts of
interest rates cuts in Mexico and China’s economy is expected to
remain strong.
“Meanwhile Russian fundamentals are solid and removing
geopolitical risk premium suggests, at the current oil prices,
U.S dollar-ruble should trade closer to 72,” he adds.
(Stefano Rebaudo)
*****
EUROPEAN SHARES IN THE RED, BANKS RISE (0835 GMT)
Earnings fail to support the whole European equity market as
investors are saddled with worries about the economic impact of
a second wave of coronavirus infections. Not to mention a threat
of a contested outcome of U.S. presidential elections and
further delays of a stimulus package.
The STOXX 600 is down 0.4%, with banking stocks
rising 1.1% supported by strong results from HSBC, up
5%, and Banco Santander, up 3%.
Tech shares show just a modest rebound, up 0.3%,
compared to yesterday’s fall triggered by SAP's weaker
than expected results. Capgemini is up 6.1% after good
results and after saying it expects the fourth quarter to show a
further but limited improvement.
Basic material and automaker stocks are the
worst performers, down respectively 1.4% and 1.3%.
(Stefano Rebaudo)
*****
ON THE RADAR: BETTER THAN EXPECTED RESULTS (0745 GMT)
European stocks are poised to open higher after yesterday’s
sell-off but pandemic-related worries continue to weigh.
A batch of good results are on their way while shares in SAP
show a modest 2% rebound in premarket trade after a
double digit fall yesterday.
In the tech space there could be a positive read-across for
European chip stocks following results overnight from
U.S.-listed NXP Semiconductors.
Novartis reports third-quarter profit of $3.47
billion, down from $3.21 billion a year ago but better than
analysts’ forecast of $3.2 billion.
HSBC Holdings Hong Kong-listed shares rose 5% as
the bank says it will embark on a transformation of its business
model, after posting a less-than-expected 35% drop in quarterly
profit.
Santander profit more than trebles in the third
quarter to 1.75 billion euros compared to the same period a year
ago when earnings were affected by multimillion one-off charges
in the U.K.
BP swings to a small profit in the third quarter,
beating forecasts.
Capgemini reports stronger-than-expected quarterly
revenues and says it expects the fourth quarter to show a
further but limited improvement.
Covestro shows a better-than-expected
third-quarter profit, citing cost-cutting measures, improved
volumes in Asia-Pacific and demand recovery.
Whitbread reports revenue 99% behind the previous
year and says near-term visibility remains limited.
On the M&A front Tiffany & Co received regulatory
approvals needed for the completion of its $16 billion
acquisition by French luxury goods group LVMH after it
received a nod from the European Commission.
easyJet raises $398.6 million from the sale and
leaseback of nine aircraft to boost its finances.
(Stefano Rebaudo)
*****
EUROPE’S STOCK FUTURES IN THE BLACK (0633 GMT)
European stock futures are in positive territory along with
their U.S. peers after yesterday’s selloff, but uncertainty
about the pandemic impact on the economy continues to weigh.
Surging coronavirus cases and fears of a double dip scenario
hurt risk sentiment as a recovery is partially priced in.
Gold’s resilience overnight suggests that safe-haven
positioning is increasing, amid slow progress in negotiations on
a U.S. stimulus package and fears of a contested outcome of U.S.
elections.
(Stefano Rebaudo)
