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* German govt agrees on extension of coronavirus relief
* Elekta jumps 14% on surge in Q1 profit
* Provident Financial shares up 17%, lifts UK mid-caps
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.
OPTIMISM IS GROWING FOR EUROPE'S 2021 EARNINGS (1040 GMT)
If you're in need of a bit of good news, there it is: analysts have become more optimistic
when it comes to 2021 earnings for the STOXX 600, the latest I/B/E/S Refinitiv data shows.
Profits are seen strongly bouncing back with a 68.7% rise in Q2 2021 and 55.9% in Q3 2021.
Granted, this is no sentiment turnaround, but it's quite better than last week when the same
data showed lower expectations of 65.3% and 51.2%.
The only downer is Q1 2021, which has been revised to +38.1% from +41.7%.
There's no change for Q3 and Q4 this year with falls of about 38% and 20.5%, respectively.
At the moment, Q2 2020 has shown a fall of 57.7% in earnings, and that figure is expected to
go down to 51.9% when all companies will have filed their trading updates.
(Julien Ponthus)
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"AMPLE DRY POWDER TO BUY EQUITIES" (1008 GMT)
Equity exposure is still light and mutual funds' cash holdings are still near record high
which means there's "ample dry powder around to buy equities", Barclays analysts said in a
strategy note today.
This could come in handy as Barclays said that many investors have missed the recovery
train, with equity flows lagging behind the bulls.
Anyhow, the question is how to spend it?
Barclays advised selectivity as many cyclical stocks are back to pre-crisis levels and
trading on "lofty" P/Es.
"We think Value offers more catch-up potential, in particular if bond yields continue their
recent bounce and vaccine newsflow improves," the analysts wrote.
At the moment, in terms of sector allocation, investors have turned more bullish, with big
inflows into cyclical stocks, Barclays also noted.
(Elizabeth Howcroft)
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THE INFINITE BALANCE SHEET OF THE NEXT BUYER (0943 GMT)
Investors seem upbeat and keen to invest in stocks, especially in the U.S. where both the
S&P 500 and the Nasdaq hit all-time closing highs on Tuesday.
As most corporates face a dramatic slowdown caused by the pandemic, why are investors this
keen to buy stocks?
Yes, developments in the U.S.-China trade saga and fresh progress in the vaccine and
coronavirus treatment front helped for sure.
But what is really moving the needle in favour of stocks is the "unconditional" support the
U.S. central bank is keen to provide, says Juha Seppala, director in the UBS asset allocation
team.
One investment tip a veteran shared with Seppala is that if you enter a deal you also need
to have a way out. "If you buy something, who is going to be the next buyer?"
These days "the next buyer has infinite balance sheet," he says as at any sign of market
turbulence, the U.S. central bank will step in to make sure the market is running smoothly.
"That really dramatically reduces the volatility and make everything look more attractive."
The European Central Bank is also providing support, but "the ECB support is not as
unconditional as the support by the FED," he adds.
(Joice Alves)
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OPENING SNAPSHOT: STIMULUS, ELEKTA AND AMBU (0740 GMT)
Hopes for fresh stimulus from Germany and France pushed European shares higher.
A German coalition parties agreed to extend measures to cushion the effects of the
coronavirus crisis. While PM Jean Castex said France is also set to present its economic
recovery plan on September 3.
The pan European index is up 0.2% with banks and real estate
stocks leading gains. Germany's DAX is up 0.3%, while the Paris-listed shares is gaining
0.1%.
In terms of single stocks, shares in Swedish radiation therapy equipment maker Elekta jumped
13% to the top of the index after it reported a bigger than expected Q1 profit.
While shares in Denmark's Ambu, which makes diagnostic and life-supporting devices, sank
after it cut its FY guidance saying COVID-19 significantly increased demand for resuscitators
and single-use scopes but the rest of its portfolio was negatively affected.
Meantime, the FTSE 100 slipped weighed by a sell-off in stocks ranging from energy to
consumer staples and financials, ahead of an annual central bankers' conference later in the
week. BP, Royal Dutch Shell, British American Tobacco and HSBC Holdings
Plc are among the top drags.
Doorstep lender Provident Financial surged 12% after it suspended its interim
dividend.
(Joice Alves)
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ON THE RADAR: HEALTHCARE, DEBT AND GUIDANCE (0645 GMT)
European bourses are on track for a third straight day of gains after top U.S. and Chinese
trade officials reaffirmed their commitment to a Phase 1 trade deal.
In the corporate front the news flow is a bit thin, but there are some interesting
development in the drug space.
Translate Bio said on Tuesday that an experimental coronavirus vaccine it developed
with Sanofi induced immune response in non-human studies, with trials in humans
expected to start in November.
This comes as concerns are rising about people's immunity to the coronavirus after two
European patients have been re-infected with COVID-19.
Another healthcare company, Novartis said its drug candidate asciminib notched a
trial win against Pfizer's Bosulif, as the Swiss drugmaker pushes to expand medicines
for chronic myeloid leukaemia in patients for whom other treatments stopped working.
Swedish radiation therapy equipment maker Elekta reported bigger-than-expected
fiscal Q1 profit despite a decline in sales.
In the meantime, results of doorstep lender Provident Financial sank to a loss in H1
2020 and suspended its interim dividend, as customers struggle to pay off their debts.
Vienna Insurance Group reported a 22% slump in H1 pre-tax profit due to pandemic
related write-offs on assets in Bulgaria, Croatia and Georgia and shied away from a guidance for
the full year.
In the M&A front, Italy has given approval to U.S. investment firm KKR to buy a
minority stake in Telecom Italia's secondary grid, daily La Repubblica reported.
(Joice Alves)
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MORNING CALL: HAPPY SUMMER (0540 GMT)
European shares are seen on track for the third straight session of gains on optimism about
China and U.S. commitment to a trade deal.
Top U.S. and Chinese trade officials reaffirmed their commitment to a Phase 1 trade deal,
which has seen China lagging on its obligations to buy American goods.
Data however is capping the optimism.
In the U.S., consumer confidence dropped to a more than 6-year low in August as households
worried about the labour market and incomes, casting doubts on the sustainability of the
economy's recovery from the COVID-19 recession.
Investors will also be watching France consumer confidence data out this morning.
Meantime, concerns are rising about people's immunity to the coronavirus as two European
patients are confirmed to have been re-infected with COVID-19.
Financial spreadbetters at IG expect London's FTSE to open 10 points higher at 6,047,
Frankfurt's DAX to open 16 points higher at 13,078 and Paris' CAC to open 7 points higher at
5,015.
(Joice Alves)
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