March 29 - Welcome to the home for real-time coverage of European equity markets brought toyou by Reuters stocks reporters and anchored today by Helen Reid. Reach her on Messenger toshare your thoughts on market moves: helen.reid.thomsonreuters.com@reuters.net PERMA-BEAR SMELLS SOMETHING ROTTEN IN THE STATE OF MARKETS (1012 GMT) Yesterday we reported a scent of blood from the rise in stress in the
U.S. money markets() but today it's a "sickly aroma of recession" that's on the menu. "The markets are now sniffing out a rising stench from decaying debt," SocGen strategistAlbert Edwards writes today, dismissing recent positive macro indicators from the
U.S. as mere"illusion of prosperity". Edwards, known as a perma-bear for his permanent long-term pessimistic views on markets,believes the huge stimulus package rolled out by the Fed after the 2008 financial crisis has ledto a credit bubble which is about to burst. Among the worrying signs he highlights in his weekly note are the "rapid flattening of the
U.S. yield curve" but also the "surge in charge-offs and delinquency rates on credit card loansmade by smaller US banks". Here's a chart from the financial news website Zero Hedge Edwards refers to: This suggests "the breaking point for the economy may come sooner than the Fed and bullsexpect," he says, adding that mortgage delinquencies are also on the rise. Edwards believes the
U.S. economy will not be able to cope with normalized interest ratesand offers his clients a scenario, which is pretty much in line with what you would expect froma permabear: "The risk is now, with the tide going out on the equity market that the SR (saving rate)jumps higher, growth flounders, and the iceberg of debt rips open the hull of this supposedlyunsinkable economic ship". (Julien Ponthus) ***** OPENING SNAPSHOT:
EUROPE GETS THAT HOLIDAY FEELING (0717 GMT) European stocks are drifting higher in early trade, lifted by a recovery in cyclical sectorssuch as basic resources which came under pressure yesterday. Deal talk is certainly sparking some moves in the autos sector as Renault jumps ona report that it is in talks with Nissan to merge. One area feeling the heat early on is the travel & leisure sector, down 0.5 percentafter Sodexo cut its guidance. Sodexo's shares haven't opened yet, but peers EliorGroup and Compass Group are both down 2.7 percent. Here's your opening snapshot: (Kit Rees) ***** WHAT'S ON THE RADAR FOR THE EUROPEAN OPEN (0642 GMT) Europe’s stocks are likely to enjoy a stronger open on Thursday, building on Wednesday’sdefensives-led recovery from a sharp tech stock sell-off. But the STOXX 600 benchmark is stillhurtling towards its worst quarter in two years, down 5.1 percent since the start of the year. For the FTSE 100, the wounds inflicted by this quarter’s mix of market stress, trade risksand tech stock concerns are even more severe: the leading
UK index is on track for its biggestquarterly fall in 6 ½ years (see below). The strengthening sterling has removed a key crutch forthe exporter-heavy index whose stocks have benefited from a weak exchange rate. Liquidity is likely to be lower as traders and investors trickle out for the long weekend. M&A news hasn’t packed up for the weekend yet, however, and the market will be keenlywatching GKN and Melrose as the deadline for shareholders to accept Melrose’s hostile bidexpires at 1200 GMT. CME Group just confirmed its acquisition of
UK brokerage services firm NEX Group for about3.8 billion pounds (
$5.4 billion). And a report that SoftBank is eyeing up a 25 percent stake inSwiss Re could also move the Swiss reinsurer’s shares. Traders see French food services firm Sodexo dropping 7 to 10 percent at the open after thefirm cut its sales and profit margin outlook, reporting a weaker Q2 than expected. (Helen Reid) ***** KEY EUROPEAN COMPANY HEADLINES (0638 GMT) Here's a round-up of the key headlines which have caught our eye this morning: Swiss Re weighs SoftBank partnership, shares rise Services group Sodexo cuts guidance after weak Q2 performance Facebook cuts ties to data brokers in blow to targeted ads CME Group to buy
Britain's NEX for
$5.5 billion Fate of GKN hangs in balance as investors decide on Melrose bid Teva wins reversal of
U.S. jury's
$235 mln GSK drug patent verdict
UK drinks wholesaler Conviviality close to administration
UK house price growth unexpectedly slows to 7-month low - Nationwide
UK car output falls in February as domestic demand slumps (Kit Rees) ***** EUROPEAN STOCK FUTURES MIXED (0610 GMT) As indicated by spreadbetters' calls, stock futures are mixed with Eurostoxx 50 futures up0.3 percent while FTSE and CAC 40 futures stay flat. More deal news just came through, with CME Group confirming it's reached anagreement with NEX to acquire the brokerage group. (Helen Reid) ***** BID DEADLINE FOR GKN, SOFTBANK EYES 25 PCT STAKE IN SWISS RE (0548 GMT) Lots of M&A news on the slate today. It's crunch time for GKN at 1200 GMT, when the deadlinefor shareholders to accept Melrose's 8 billion pound hostile bid for the engineering firmexpires. The result will decide a three-month battle for the company. Failure of the offer would openthe way for GKN to push ahead with an alternative deal struck with
U.S. axles and driveshaftsmaker Dana earlier this month to defend itself. Elsewhere
Japan's SoftBank was reported by Bloomberg to be eyeing up a 25 percent stake inSwiss Re, which would be worth around
$9.6 billion. Talks between the two firms over a potentialdeal to acquire a minority stake have been advancing since last month and are now centering on100 to
105 Swiss francs a share, according to the report. (Helen Reid) ***** MORNING CALL: EUROPEAN STOCKS TO OPEN SIDEWAYS (0533 GMT) Good morning and welcome to Live Markets. European stocks are likely to drift sideways today into the long weekend as tech pressuresease somewhat and liquidity thins out, despite a weaker session in
Asia. Asian shares fell overnight, weighed by tech stocks after the sell-off in
U.S. techcontinued into the close.
Japan's Nikkei rose, however, as a weaker Yen boosted exporter shares. Spreadbetters call the DAX 3 points higher at 11,944, the CAC 40 up 2 points at 5,133, andthe FTSE 100 20 points lower at 7,025. The
UK stock index's relative weakness could be down to astronger pound, boosted overnight by the latest GfK survey showing
UK consumers were at theirmost confident in 10 months in March. (Helen Reid) *****
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