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* European stocks fall for second straight session
* Wall Street futures rise
* Centamin shares down 20% after production update
* Construction sector dips 1.5%, real estate down 1.6%
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WHAT IS BIDEN WORTH IN TERMS OF STIMULUS? (1258 GMT)
What is a Biden victory at the next presidential election worth in terms of a U.S. stimulus
package?
Pictet Wealth Management, which today held a presentation on the U.S. vote, does not have a
straight answer but gave some interesting insights.
The asset manager expects a “modest fiscal package during the ‘lame duck’ session”, with
bipartisan support, focused on small business loans plus extended unemployment benefits close to
the Senate Republicans’ plan.
Senate Republicans have repeatedly stated their opposition to additional COVID-19 relief
spending near the $2 trillion mark, focusing instead on smaller initiatives. As negotiations
heated up, several were wary, non-committal or just plain negative about aid totalling $1.8
trillion or more.
Then a Biden victory with a small Senate majority “will probably mean another 1 trillion
dollars for cyclical purposes,” today’s Pictet presentation slides show.
With a Democratic majority the wealth manager expects a more structurally focused and green
focused fiscal plan, coupled with higher taxes on corporates and capital gains in the second
half of the mandate.
The White House and Democrats in the U.S. Congress moved closer to agreement on a new
coronavirus relief package on Tuesday as President Donald Trump said he was willing to accept a
large aid bill despite opposition from his own Republican Party.
(Stefano Rebaudo)
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SEVEN EUROPEAN STOCKS WITH "CONVICTION" (1242 GMT)
The Q3 earnings season in Europe has only just begun but Morgan Stanley has already updated
its list of "conviction into earnings".
The bank's analysts have added to the list of stocks they have high conviction going into
earnings season "three fresh ideas"- Sainsbury, Sanofi and WPP.
Here's the new list:
A mix of better guidance by management and COVID-19 restriction (Sainsbury), as well as cost
savings (Sanofi) and net sales growth (WPP) are supporting the new entries.
Meantime, MS has removed Vivendi and AkzoNobel from the 'Conviction Into Earnings' list,
after the two companies reported results.
(Joice Alves)
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HAVE LOCKDOWN HEROES LOST THEIR SUPERPOWER? (1215 GMT)
Some companies have had a stellar performance during the spring lockdown with shares in the
so-called WFH (Working from home) stocks, like food delivery companies and software developers,
rising beautifully.
Yet, as governments across Europe announce stricter restrictions, names like Hello Fresh
(+167% YTD), Delivery Hero (+38%), Sinch (+190%), TeamViewer (+30%) or Ocado (+87%) have failed
to impress this time around.
Why?
"The increase in the customer base for some of those companies perhaps has already been
priced in," says Connor Campbell at Spreadex. "So, new restrictions, don't necessarily mean we
are going to see an increase in business for those kinds of companies".
Joshua Mahony, at IG, says markets are preferring to look towards value stocks as, with
hopes for a vaccine, they think the worst is behind us. "It does feel as though we are entering
the final stretch".
Airlines and other hard-hit stocks are gaining ground over those WFH stocks, he says.
"One thing we have seen throughout this crisis is the willingness to look through the here
and now to reflect where things might be at the next stage of the crisis".
Deutsche Bank analysts reiterate their buy on Hello Fresh and Delivery Hero.
"We think a one day of sell-off (if sell-off could be called a 2-3% negative share price
reaction) does not change the fundamental positive trajectory of the groups", they say.
(Joice Alves)
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MESSY MARKETS! WHAT TO BUY? (1128 GMT)
A vaccine approval, shorter/less-strict social restrictions, coupled with a strong economic
growth, a moderate rise in inflation rates and a weak dollar are possibilities to look forward
to in 2021.
And, if this materializes, Credit Suisse analysts have some ideas:
- European renewables, as wind capacity is expected to rise by 15-fold in the next 20 years
and the carbon price to be at $100 ton by 2030; besides grids deserve un upgrade, including RWE
, EDP,, National Grid
- Mining stocks, thanks to Chinese infrastructure investments seen remaining strong. CS
analysts highlight Anglo American.
- Construction materials, as U.S. housing is set to grow 20% on very low bond yields and
governments are focused on infrastructure. They “like stocks exposed to insulation.”
- China tech, as P/E relatives are at 15-year lows while earnings revisions remain very
strong and there are “all the ingredients of a bubble that has yet to really start.”
- Defence, as spending will grow in a tri-polar world and telecom equipment with 5G a
superfast broadband seen as a necessity. CS says U.S. valuations in defence sector at 20-year
lows, with BAE “looking abnormally cheap.”
(Stefano Rebaudo)
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WHEN WILL UK DIVIDENDS BOUNCE BACK TO PRE-PANDEMIC LEVELS? (0900 GMT)
It's anyone's guess!
Link Group says the best case scenario is a recovery to 2012-13 levels in 2021.
UK dividends have recovered a tad from the depths of last quarter but they still had the
lowest third quarter in ten years, leaving investors eager to find out how much they will wait
to see payouts levels bouncing back.
Underlying dividends, which exclude special payments, fell 45.1% to £17.7bn in Q3, according
to Link Group.
"Though by any normal standards a fall of this magnitude is terrible for investors, it is
significantly better than the 57.2% drop in the second quarter," it says.
Link Group adds that investors will likely only see dividends recovering by March 2021 and
it pencils in a best-case increase of 15% and a worst case of 6% for next year.
"The fourth quarter this year and the first quarter next are set for further sharp declines,
but from April onwards, the anniversary of the lockdown, the comparisons will start to look more
favourable and we expect to see a bounce-back begin".
(Joice Alves)
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EUROPEAN STOCKS HEAD LOWER (0800 GMT)
European stocks dipped for the second straight day dragged down by construction, healthcare
and oil outweighing a decent batch of better-than-expected Q3 results.
The STOXX 600 is down 0.6%, with the construction sector leading the losses.
In terms of single stocks, Shares in Ericsson are up 7%, after quarterly core
earnings beat market estimates and the company says it is "more confident" in meeting its 2020
targets.
Mining company Centamin's shares fell to the bottom of the pan European index, down
18% after the company’s production update.
Shares in Iberdrola are down 0.6%, after the company issued results and announced
its U.S. unit Avangrid agreed to buy U.S. utility PNM Resources for around $4.3
billion.
(Stefano Rebaudo and Joice Alves)
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ON THE RADAR: IBERDROLA UNIT MERGER, AKZO NOBEL, ERICSSON (0639 GMT)
European stocks are poised to open higher, with sentiment boosted by hopes for a U.S. rescue
package and better-than-feared earnings results.
While concerns about the pandemic in Europe continue to weigh, we have a decent batch of
corporate news to cheer up investors, starting with a multi-billion cross border merger in the
renewable energy sector. Avangrid, the U.S. unit of Iberdrola, has agreed to
buy U.S. utility PNM Resources for around $4.3 billion. The merged company would have
assets worth $40 billion and generate core earnings of around $2.5 billion and net profit of
$850 million.
Akzo Nobel reports a better-than-expected 18% increase in third-quarter core
profit to 353 million euros.
Nestle stocks are up 2.7% in premarket trade after the company beats Q3 sales
expectations and raises its guidance for 2020.
Ericsson quarterly core earnings beat market estimates, helped by higher margins
and China's 5G rollout, and is "more confident" in meeting its 2020 targets.
Good news also on the vaccine front as AstraZeneca Plc's trial in the United States
is expected to resume as early as this week after the U.S. Food and Drug Administration
completed its review of a serious illness in a study participant.
But we still see pressure on the financial sector. Shares in GAM Holding are down
2.2% in premarket trade after results., while Handelsbanken reports
lower-than-expected quarterly net earnings due to restructuring costs.
Vinci expects earnings to continue falling in the second half of the year, as
weakness at its pandemic-ravaged airports business outweighs signs of a recovery in construction
and motorway traffic.
GlaxoSmithKline would move its experimental vaccine against the respiratory
syncytial virus (RSV), a cause of pneumonia in toddlers and the elderly, into the final stage of
testing, encouraged by mid-stage trial results.
Shares in Bilfinger are up 7.2% after press reports on possible takeover of the
company.
(Stefano Rebaudo)
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EUROPE CAUTIOUSLY IN THE BLACK (0528 GMT)
European stock futures are in the black along with their U.S. peers as hopes of a quick
approval of a U.S. stimulus package are propping up risk sentiment.
But investors continue to be cautious as coronavirus trajectories as well as possible new
restrictive measures are now seen as the single biggest near-term risk to the economic recovery.
Italy, Spain and Britain are considering new restrictions, including curfew in hard-hit
regions, to limit the spread of the pandemic. The latest curbs in Ireland will see GDP fall by
3.5% this year, Finance Minister Paschal Donohoe said.
(Stefano Rebaudo)
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