Last checked at 
* Wobbly session
* STOXX now slightly down
* U.S. futures still up
* Wirecard plunges again
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.
IT'S GREENER ON THE OTHER SIDE OF THE ESG FENCE (1310 GMT)
A lot has been said about the benefits of investing in companies and countries with better
environment/governance (ESG) credentials. Could the corona crisis convince the naysayers?
Figures from the Institute of International Finance (IIF) might help. The IIF, a group which
tracks investment flows worldwide, says that 75% of the sustainable equity indexes it tracks
outperformed non-ESG peers year-to date, with the median ESG fund turning in an 8
percentage-point lead. In Q1, 85% of indexes outperformed broader counterparts.
And looking at 10 fixed-income ESG indices, 70% of them have outperformed non-ESG
counterparts this year, the IIF said.
Actually, for all the talk, the investment industry hasn't actually sped to embrace ESG --
only 3,500 funds globally are ESG-focused, managing around $1 trillion. That's 2.5% of all
existing funds.
Nor are they evenly distributed. The euro area contains half of all ESG funds while the U.S.
investment industry has only 20%. Emerging market-domiciled funds comprise just 3% of ESG
universe.
But expect that to change if the ESG industry passes the COVID "stress test" with better
grades than the mainstream.
(Sujata Rao)
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HEDGE IT WITH TECH! (1216 GMT)
One of the big takeaways of the COVID-19 financial crash is that the best way to protect an
equity portfolio was to buy in a typically risky sector: Tech.
"Info Tech - a cyclical sector that has ranked among the riskiest sectors historically - has
become one of the lowest volatility sectors", writes Diana Baechle, a research director at
Qontigo in a note.
The financial intelligence firm notes that two sectors which are traditionally popular to
hedge risk, real estate and utilities have become more volatile.
"By the end of May, Real Estate became the second riskiest sector - superseded only by
Energy - and Utilities became the sixth riskiest sector", the firm note.
One sector which actually kept its defensive statute is healthcare, but given the very
nature of the crisis - a pandemic - it's not really that surprising.
While the outperformance of the Nasdaq, up a whopping 14% year-to-date, has been well
flagged, the outperformance of Tech in Europe is also worth mentioning.
The STOXX 600 tech subsector is up 4.8% since the beginning of 2020, the best
performer of the index which is down 12.3% for the same period.
It was not a given back in February that Tech would beat Helthcare (+4.3%) Utilities (-2%)
or real estate (-19%) by such a margin.
Here's the yearly performance of the STOXX 600 subsectors so far this year:
(Julien Ponthus)
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VIRUS IS SCARY, BUT IT'S NOT (1005 GMT)
The virus is still scary, but it's not.
Stocks started in the red after worrying data on the pandemic from the U.S. and from
Germany, but they are now in the black, as investors probably didn't make up their mind yet
about the medium-term trend.
The truth is that the sentiment has been swinging between risk appetite and aversion for
days, and it is probably still bound to do it for a while, unless there is more clarity about
the future of the pandemic and its impact on the economy.
"Fears of a second wave remain key for traders, with the German 'R' rate surging over the
weekend," Joshua Mahony, Senior Market Analyst at IG says.
Then with Europe and UK "loosening the economic shackles, the second half could bring
significant upside surprises for the economy," he adds.
Europe's Stoxx 600 index is now up 0.2%, after losing more than 1% in early trade.
The Stoxx 600 index quickly reversing early losses.
(Stefano Rebaudo)
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EU RECOVERY FUND? MAYBE TOO MUCH ENTHUSIASM (0932 GMT)
While everybody agrees that the ECB is in a 'whatever it takes' mood to fight the economic
impact of the virus, investors are a lot more uncertain about the attitude of the European
Union, even after the Commission's big step of proposing a EU recovery fund.
BofA already argued a couple of times that the fiscal stimulus in Europe is not enough to
deliver a healthy economic recovery.
A UBS research note looks at negotiations among EU countries trying to figure out what the
outcome will be after last week's meeting.
UBS analysts sound a lot more cautious than others who cheer the proposed recovery fund as a
big step towards a fiscal union. UBS argues the fund "represents a one-off mutualisation that
leaves the Eurozone's (sharply rising) legacy debt unaffected."
A deal in July is unlikely, but probably it will be in place by the fall, the note says.
Then most importantly, the 500 billion of grants proposed by the EU Commission "might be
reduced," while "rules for conditionality, country allocations and payout periods might be
tightened in a way that might limit" its redistributive impact, it adds.
According to EU preliminary simulations Italy and Spain will be the biggest beneficiaries,
but "we will not be surprised if the final agreement would include caps limiting" the payout for
the biggest recipients.
(Stefano Rebaudo)
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OPENING SNAPSHOT: VIRUS FEARS (0726 GMT)
Back in a risk-off mood as the coronavirus pandemic is stealing the stage also today on
worrying data across the world showing more cases.
While the U.S. is still seeing rises in cases and the World Health Organization (WHO) said
the pandemic is accelerating globally, the reproduction rate in Germany jumped to
2.88 on Sunday, above the level needed to contain it over the longer term.
The STOXX 600 is down 0.8%, with the travel and leisure index leading the losses down 2%,
oil and gas down 1.7%.
Lufthansa shares drop by 4.7% ahead of fresh talks about its rescue plan.
Glencore shares are down 5.3% after the company said Swiss prosecutors started a
criminal investigation for failure to have measures in place to prevent alleged corruption in
the Democratic Republic of Congo.
Shares in Deutsche Telekom fall 4.5% as the company goes exdiv this week. The
company said on Friday it will retain control of T-Mobile should Japan's Softbank
liquidate its stake, CEO Tim Hoettges said on Friday as he vowed to claim the top spot
in the U.S. market. DT has a right of first refusal under a four-year shareholder pact.
(Stefano Rebaudo)
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ON THE RADAR: WIRECARD, LUFTHANSA (0646 GMT)
European stocks are set to open lower as the virus is back in the spotlight along with
resurging fears that a second wave of shutdowns might weaken an economic recovery globally.
The U.S. sees a rise in cases and the reproduction rate in Germany jumped to 2.88 on Sunday,
above the level needed to contain it over the longer term.
On the corporate front, shares in Wirecard are down 40% in early trade, after the
company said assets totalling 1.9 billion euros ($2.13 billion) that auditor EY has been unable
to account for likely did not exist in the first place. Wirecard also hired U.S.
investment bank Houlihan Lokey to devise a new financing strategy.
Lufthansa shares are down 11% in early trade; its Chief Executive Carsten Spohr
said on Sunday it would seek to avoid a grounding and insolvency, before a showdown between the
airline's biggest shareholder and the German government over the terms of a 9-billion-euro
bailout.
Telefonica CEO Jose Maria Alvarez Pallete said his company will participate in the
consolidation of the sector in "the markets we want to be relevant," according to the Spanish
newspaper Expansion.
Italy is close to unveiling the approval of guarantees for a 6.3 billion euro ($7 billion)
financing of Fiat Chrysler (FCA), two sources familiar with the matter said, paving
the way for the largest crisis loan for a European carmaker.
French airports group ADP risks losing 2.5 billion euros ($2.8 billion) in terms of sales
due to the COVID-19 crisis, ADP's chairman and chief executive Augustin de Romanet told French
newspaper Le Journal du Dimanche in an interview published on Sunday.
GlaxoSmithKline is out of the race to test experimental immunisations against the
coronavirus as it prefers the slow and steady approach of focusing on an established technology,
its chief medical officer for vaccines Thomas Breuer said.
Mediawan announced a raft of deals, including the acquisition of Lagardere Studios,
as part of a broader expansion laid out by its founders, who will also establish a new holding
company for the business.
Atlantia is yet to submit a proposal which the government can accept to solve a row
over its motorway concession but a decision on the matter must be taken soon, Prime Minister
Giuseppe Conte said.
Phoenix Tower International has offered to buy the telecom mast unit of Italy's EITowers
for 550 million euros.
(Stefano Rebaudo)
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MORNING CALL: THE VIRUS KEEPS EUROPEAN FUTURES IN THE RED (0538 GMT)
European futures are in the red on fears that a second wave of shutdowns could weaken an
expected economic recovery globally, while its U.S. peers are in positive territory already
showing some resilience after Friday's Wall Street fall.
Apple said on Friday it would shut U.S. stores as coronavirus is on the rise in some states,
triggering a selloff on Wall Street, while according to the World Health Organization (WHO) the
pandemic is accelerating globally.
The coronavirus reproduction rate in Germany jumped to 2.88 on Sunday, taking infections
above the level needed to contain it over the longer term.
Asian stocks edged higher overnight, with Shanghai Composite supported by reforms in its
capital market to help bolster the economy.
(Stefano Rebaudo)
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