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* JP Morgan Q3 profits rise
* European shares retreat from 5-week highs
* UK unemployment reaches highest level in 3 years
* Vaccine concerns hit risk appetite
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) and Danilo Masoni (danilo.masoni@thomsonreuters.com) in
Milan.
MINING: CHEAP VALUE STOCKS? (1352 GMT)
Barclays analysts say the mining sector looks attractive if commodity prices stay at current
levels.
Alongside solid demand from China in most key commodity-intensive areas (infra, property,
machinery, autos), the space has a positive "exposure to infrastructure spending, USD weakness
and inflation hedge characteristics are all themes that investors want to be exposed to,"
Barclays says.
Growing demand from renewable power infrastructure in China, EU and potentially the U.S.
could make mining even more attractive in the longer term, it adds.
Barclays is positive on the "relative cheap value" sector for the rest of 2020 and for the
H1 next year.
The British bank changed Norsk Hydro and Gem Diamonds rating from
underweight to equal weight and overweight, respectively. Anglo is their highest conviction in
the sector.
(Joice Alves)
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WHAT’S GOOD FOR STOCKS? BIDEN PLUS FRESH STIMULUS (1303 GMT)
It’s clear to everyone that a contested U.S. election is a major concern for investors and
that such an outcome might fuel further volatility if not a decline in stock prices.
But, barring this scenario, there might be a strong case to expect a further rise in
equities, according to Unigestion.
Let’s see the logic behind its stance.
Equities recently have been mostly driven by stimulus from governments and central banks. So
it seems that “no stimulus, no return on equity markets.”
Which is why over the past three months, Joe Biden's rising chances to win U.S. presidential
election have boosted stock prices as a “Democratic takeover in the U.S. would help open door to
a new wave” of support to the economy.
Then we have to take into account more factors, according to Unigestion: the magnitude of
current rescue packages is unprecedented and way bigger than during the global financial crisis;
the decline in interest rates now is likely “to be durable;” a strong increase of households
savings will be a pool for future growth.
While in 2008 savings in the U.S. increased by 2% of GDP, in 2020 they jumped by 18.6% of
GDP and all developed countries seem to be in a comparable situation, Unigestion says in a
research note.
(Stefano Rebaudo)
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WOMENOMICS OUTPERFORMANCE (1215 GMT)
Goldman Sachs just issued an in-depth report on the rise of the role of women within
Europe's top companies which stock pickers might find inspiring.
Even if the progress is slow, there's quite a lot of good news with the proportion of female
board members rising to 31% against only 9% in 2005 and the (stubbornly high) pay gap is
narrowing.
One of the key findings is that companies in which women are the most present in management,
particularly on the board, tend to have an edge on their competitors when it comes to stock
market performance with a 250 basis point per annum uplift since the great financial crisis.
Below you can see two charts from the Goldman Sachs report which show the correlation
between women representation and stock performance:
GS analysts however caution that "the price outperformance may be a function of flows into
ESG funds targeting diversity metrics, rather than more women producing better outcomes or lower
risks".
They nevertheless argue that "even if this were the case, we continue to believe investors
will value higher social and governance scores for companies, so companies that do perform well
on these metrics should continue to attract both flows and a premium".
One exception though is the tech sector, which has been a laggard in terms of improving
diversity, in which women in management doesn't seem to have had an impact on stock prices.
(Julien Ponthus)
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WHAT APPLE'S RALLY HISTORY CAN TEACH? (1058 GMT)
Consumers, investors and suppliers (STMicro, Dialog Semi, Infineon
, ASML) tend to look forward to Apple's products launches.
And as the U.S. tech giant is expected to unveil its newest iPhone today, all eyes are on
Apple.
Its shares have rallied ahead of the event that will launch the 5G smartphone, but if
history repeats itself the rally could soon be running out of steam.
"The stock’s history suggests that the markets have a classic habit of buying on the rumour
and then selling (or at least pausing for breath) after the fact,” says Russ Mould, AJ Bell
Investment Director.
Looking at how Apple shares have performed in the run up to big launches and afterwards, AJ
Bell may have a point.
In the six months before Apple’s eight generational product launches, shares at the company
surged 20% on average, but in the 3 months after the launch shares flattened out.
Here is Apple's performance ahead of the 8 top generational launches and how it performed
months later:
(data from Refinitiv, table from AJ Bell)
(Joice Alves)
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RISING VOLATILITY ON U.S. BIG TECH LEADERS (0957 GMT)
Some analysts argue the resurgence of the pandemic is boosting stay-at-home type of
technology stocks, after the Nasdaq hit its biggest one day rally in a month yesterday,
jumping by 2.56%.
UBS sees other factors fuelling volatility in 5 big tech leaders, namely an increase in open
interest on those shares.
The Nasdaq 11.6% rally in a little over two weeks looks similar to the 14.2% move from
August 11 to September 2.
“In both cases there were large increases in open interest across the 5 big Tech leaders,
Apple, Microsoft, Amazon, Facebook and Google, with
call options accounting for 60-65% of the change,” a UBS research note says.
A high gamma “helped accelerate the rally and also contributed to the sharp drawdown that
followed,” it adds.
“We would not presume the same pattern will play out again but the ingredients are in place
for Tech volatility to remain elevated.”
This scenario is supported by “both earnings and election related headlines over the next 4
weeks.”
(Stefano Rebaudo)
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OPENING SNAPSHOT: RISK OFF, MORPHOSIS AND SSE (0738 GMT)
After a three-day rally, it seems that it is going to be a risk-off session as investors are
growing more concerned about new waves of infections and more restrictions are being implemented
across Europe.
Additionally, uncertainties around the U.S. elections and a rescue package to fight the
adverse impact of the pandemic are also keeping investors on their toes.
At an European level, the EU recovery fund might be delayed as some details are currently
being debated in Brussels.
The STOXX 600 index is down 0.3%, with travel and leisure and banking stocks leading losses,
down respectively 1.6% and 1%.
Morphosys is the worst performer, with shares down 9.9%, after the company
launched a convertible bond offering. Stocks in SSE rose 4.2% after the company agreed
to sell its stake in West Yorkshire-based assets.
So far, we've seen mixed reactions among Apple's suppliers ahead of an event where the U.S.
giant is expected to launch its latest iPhone. STMicro, Dialog Semi, Infineon
, ASML stocks are down 0.8% to up 0.5%.
(Stefano Rebaudo)
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ON THE RADAR: ROCHE, NESTLE, SSE, PANDEMIC TRAJECTORIES (0647 GMT)
European stocks are poised to open flat amid more worrying news on the coronavirus front and
uncertainties around the U.S. elections, stimulus package.
U.S. stock futures are trading slightly lower.
The number of people being treated in French intensive care units for COVID-19 exceeded
1,500 on Monday for the first time since May 27, raising fears of local lockdowns being imposed
across the country. Meanwhile British Prime Minister Boris Johnson imposed a tiered
system of further restrictions on parts of England.
The war against the pandemic continues: Roche plans to start selling a higher-volume
COVID-19 antigen test for laboratories, which can provide results in 18 minutes, by the end of
the year. Its shares are up 1.1% in premarket trade.
Relief Therapeutics said that more people who received a 50-year-old drug that the
Swiss company is seeking to re-purpose against COVID-19 were alive beyond 60 days than were
those who did not get the medicine.
On the M&A front Aimmune Therapeutics shareholders have backed Nestle's $2
billion offer to gain full ownership of the first U.S.-approved peanut allergy treatment.
British utility SSE agreed to sell its 50% stake in West Yorkshire-based
Ferrybridge and Skelton Grange assets for 995 million pounds ($1.30 billion) in cash, as part of
its strategy to dispose of non-core assets by autumn 2021.
Major French unions on Monday signed a keenly awaited labour deal with Airbus
covering job reductions and furloughs for production workers affected by coronavirus-blighted
demand for passenger jets.
British clothing retailer French Connection Group said sales had halved, more than
tripling its underlying loss compared to the same period a year earlier.
Yamana Gold stocks are admitted to the London stock exchange.
(Stefano Rebaudo)
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MORNING CALL: RISK SENTIMENT IN CHECK (0533 GMT)
European stock futures are almost flat, with their U.S. peers in negative territory, as
uncertainties provided by the coronavirus, the U.S. elections and stimulus as well as Brexit
keep risk sentiment in check.
U.S. tech shares rallied on Wall Street overnight but, according some analysts, the
resurgence of the pandemic is boosting stay-at-home type of technology stocks.
Asian stocks failed to take the cue from the U.S. as possible tensions between Beijing and
Washington were also in view after the White House moved forward with three sales of advanced
weaponry to Taiwan. The move is going to anger China which considers Taiwan a renegade province.
(Stefano Rebaudo)
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