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* European shares up slightly: STOXX +0.2%
* Trading on Euronext resumes after 3-hour halt
* Upbeat earnings lift Julius Baer, Philips
* U.S. futures point to strong Wall Street open
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GOLD BACK IN THE SPOTLIGHT SOON? (1136 GMT)
Stocks trajectories have been under the spotlight for weeks, but just few investors are
currently thinking of making money with a defensive asset like gold.
Among them is the U.S. fund WisdomTree, which sees gold rising up to $2,410 per ounce by Q3
2021, as uncertainty about the economic impact of the pandemic is bound to persist.
According to the asset manager, cyclical market drawdowns have recently placed pressure on
defensive assets like gold and Treasuries, as it happened in March 2020.
“At that time investors were redeeming liquid assets due to pressure in other parts of their
portfolio,” a WisdomTree research note says.
But since an economic recovery coupled with no “aggressive tightening of monetary policy” is
expected, gold is likely to do well, it adds.
The Fed is likely to continue with a ‘yield curve control’ as Covid cases will keep rising,
while inflation could peak just below 3% and a lower for longer interest rate scenario will
weaken the U.S. dollar, according to WisdomTree.
In this scenario, gold could rise to $2,410 per ounce, posting close to 30% upside from
September 2020 levels.
(Stefano Rebaudo)
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TRADING BOOST IN STORE FOR EUROPEAN IBS (1043 GMT)
Wall Street banks got a strong boost from trading activity for the second running quarter in
Q3 and the same pattern can be expected for their smaller European rivals with UBS
kickstarting the season tomorrow on this side of the pond.
Analysts at Barclays expect European IBs to grow in mid-teens with FICC performing
relatively better than equities, although it remains to be seen whether this would actually help
their shares extend their outperformance.
"We think investors are already anticipating strength in trading revenues, along with
capital markets, and are looking for confirmation," say Barclays analysts.
"We see comps (comparisons) getting tougher from here for the IBs; partly the price
performance will depend on whether markets can remain strong," they add. "Any guidance on Q420
will be relevant, with Q419 being a strong quarter."
Back to the numbers, Barclays sees equities trading up 6% at UBS, up 8% at Credit
Suisse, and up 16% at BNP Paribas, although SocGen is expected to
post aa 27% drop. FICC trading is seen up 17% at Deutsche Bank, up 20% at HSBC
, up 16% at BNP and up 13% at Credit Suisse.
(Danilo Masoni)
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BLANK MONDAY IS BETTER THAN BLACK MONDAY (1010 GMT)
Exactly 33 years ago on this very day, Wall Street went through one of its worst session
ever, a market crash which went down in History books as 'Black Monday'.
Monday October 19th 2020 isn't that bad in comparison: a massive outage on Euronext means
there's currently no trading in Amsterdam, Brussels, Lisbon and Paris.
"Very unhelpful, Mondays are bad enough!", a trader complained while there was no
indication at to when trading would resume.
"No one can trade at the moment, everything is on standstill," said Mikael Jacoby, head of
continental European equity sales at Oddo Securities in Paris.
Blank Monday it is.
(Julien Ponthus)
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EUROPE’S SENSITIVITY TO U.S. ELECTION ODDS (0939 GMT)
No doubt the U.S. presidential election is the hot topic these days, as we are just a couple
weeks away from November 3.
UBS analysts on the other side of the Atlantic crunched some numbers to give their clients
an idea of what is the sensitivity of markets to changing presidential election odds.
It seems Europe is the among the global regions more "positively correlated to rising odds
of a Biden presidency,” a UBS research note says.
The investment bank sees a negative impact on S&P 500 EPS due to higher corporate taxes
under a Biden administration (from 21% to 28%), but believes that the higher fiscal spending in
a Democrat sweep scenario would partly offset this and the “drag would only be -1.5% off S&P
earnings over two years.”
“Instead currency may well be the main driver on relative earnings,” which would have an
adverse impact on sales to the U.S.
After taking into account not just change in Biden's odds, but also fiscal stimulus
sensitivity, the estimated tax impact, and exposure to China/tariffs, UBS sees Construction,
Autos and Consumer Durables sectors “as key potential beneficiaries of a change in U.S,
politics,” while it sees negative risks on “Tech (especially hardware), Transport, Media and
Healthcare.”
Then, separately, UBS has given a look at the impact on markets of the EU recovery fund.
Political uncertainty has fallen but no impact on equity, according to the investment bank.
(Stefano Rebaudo)
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SENTIMENT BUILDS UP AT THE OPEN IN EUROPE (0732 GMT)
Sentiment has gradually built up across European stock markets which are now decisively in
positive territory thanks to a few earnings beat.
All regional bourses and sectors are making comfortable gains, particularly banks and
financial services boosted by the results of Julius Baer in Switzerland.
Shares in the asset manager are up 4.6% and Swiss banks are definitely on a positive trend
with Credit Suisse and UBS rising by 2.8% and 2.4% respectively.
Philips is up 2% after the Dutch health technology company beat consensus due to string
demand for hospital equipment needed to battle COVID-19.
French food group Danone rose 1.9% after announcing a review of its assets and reshaping its
management to cope better with challenges caused by the coronavirus crisis.
There are very few stocks in the red when looking at the biggest swings but shares in
Swedish defence company Saab stand out with a 8.6% fall after it reported a Q3 core profit fall
and said it could not confirm its previous financial outlook.
Outside the STOXX 600, online fashion group Boohoo is getting a beating, losing over 12%
after news that PwC will not compete to be its new auditor amid reports into working conditions
at its suppliers.
(Julien Ponthus)
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ON THE RADAR: PHILIPS Q3 BEAT (0635 GMT)
Investors looking for evidence that Europe's Q3 earnings season may turn out better than
feared will note Philips's beat but then again, the Dutch health technology company is
benefiting from demand for hospital equipment needed to battle COVID-19, which is not
necessarily a sign that a broad V-shaped recovery is underway.
Channel tunnel operator Getlink is indeed clearly feeling the pain of travel restrictions
and had to withdraw its 2020 guidance this morning.
The tone from the CEO of French carmaker Renault is also not that upbeat on the short term.
Luca de Meo said in a newspaper interview published on Sunday that his group will unveil an
eight-year plan to turn the company around as the group contends with a demand slump exacerbated
by the coronavirus crisis.
Another French blue chip is having a deep look at its business: Danone said it was launching
a review of its assets and reshaping its management to better cope with challenges stemming from
the coronavirus pandemic.
More encouraging perhaps, shares in Julius Baer are rising in pre-market as the Swiss wealth
manager flagged an improvement in profitability for the first nine months of 2020 as client
activity increased and it cut costs.
A lot of the news in the healthcare industry: laboratory testing and diagnostics company
Eurofins said its new at-home COVID nasal testing product had received 'Emergency Use Approval'
(EUA) status from the U.S. FDA.
The European medicines watchdog has recommended approving AstraZeneca treatments for a form
of heart failure and a lung disorder, the British drugmaker said.
(Julien Ponthus)
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EUROPE WAKES UP CAUTIOUSLY (0532 GMT)
Equity markets in Europe seem set to open this new week more cautiously than in Asia where
MSCI's broadest index of Asia-Pacific shares outside Japan rose 0.6% despite
some disappointment regarding China's Q3 GDP.
Futures for the STOXX 50 are up 0.3% and slightly negative for the FTSE, while the futures
for the S&P 500 and the Nasdaq are rising by 0.7% and 0.8% respectively.
Hopes of fresh U.S. fiscal stimulus and that a vaccine could be available in a few months
are keeping global markets broadly optimistic but here in Europe, the resurgent pandemic
definitely weighs on sentiment.
(Julien Ponthus)
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