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* U.S./China trade deal hopes lifts markets
* European stocks at new highs
* Autos and mining stocks rise, defensive stocks underperform
* EU agrees to January 31 Brexit extension
* HSBC slumps after weak results, drops 2020 key outlook
* LVMH confirms interest in acquiring luxury jeweller Tiffany
Welcome to the home for real-time coverage of European equity markets brought to you by Reuters
stocks reporters and anchored today by Thyagaraju Adinarayan. Reach him on Messenger to share
your thoughts on market moves: rm://thyagaraju.adinarayan.thomsonreuters.com@reuters.net
RULING OUT CORBYN? NOT SO FAST (1611 GMT)
Remember 2016? When Brexit was considered a risk rather than a probability?
As the EU agreed today to delay Brexit again, the UK prime minister is pushing harder for a
general election. The noisy question is: How much of a risk Jeremy Corbyn is?
We just got three extra months to discuss Brexit - and we are all so excited about it. Boris
Johnson hopes a new election will get him the majority needed to deliver his "do or die" deal.
At the moment, Corbyn is merely a risk and not a probability, says Kevin Gardiner, Global
Investment Strategist at Rothschild & Co Wealth Management.
"Opinion polls are suggesting that the opposition party is even less popular, it seems hard
to believe but they're even less popular than the UK government," Gardiner says.
It seems unlikely now, but Corbyn could still pull out something of the hat and improve
during the campaign, says Chris Hiorns, manager of the Amity European fund at EdenTree
Investment Management.
"We can take back to the last election when Corbyn improved dramatically throughout the
course of the campaign. If something like that happened this time, it might be very negative for
the UK equity market because I don't think Corbyn is very equity market friendly," he says.
(Joice Alves)
*****
"HISTORY DOES SUGGEST THAT UK EQUITIES PERFORM BETTER UNDER..." (1229 GMT)
So, there's actually a possibility we'll know in the next two days or so whether UK will
head for a general election before Christmas.
We plan to get cracking on what that would mean for British stocks of course but in the
meantime, here's interesting data compiled by Russ Mould, investment director at AJ Bell.
He's looked at how the British stock market has performed since 1964 under different parties
and has a few takeways.
"History does suggest that UK equities perform better under Conservative PMs rather than
Labour ones and when the incumbent wins (markets do not like surprises, as a rule), although we
must accept that correlation does not mean causation", he wrote to us.
"In very crude terms, financial markets generally seem happier when there is a political
swing from left to right, or at least left to centre", he added.
Another piece of advice from Mould: "Unless investors think the result of any putative
General Election will lead to Government policies that could directly and materially affect a
company’s cash flows, then they are probably better off doing as little as possible, even if
there is scope for share price volatility in the run-up to the poll".
(Julien Ponthus)
*****
HOW'S Q3 GOING?
Morgan Stanley takes stock of quarterly results as the first of three busy weeks in Europe's
Q3 reporting season is now over.
A quite familiar pattern has emerged: companies are managing to deliver a modest beat,
although the bar had been lowered significantly, while macro newsflow has been supportive,
helping beats outperform by more than misses underperformed.
Anyhow, here are their main takeaways for the Q3 season so far:
1) Modest net beat: "30% of companies have beaten EPS estimates by 5% or more, while 27%
have missed".
2) Low quality: "Results so far are by no means suggesting any meaningful pickup in
profitability at this stage"
3) Macro newsflow: "...has therefore been a factor in some fairly pronounced price action in
the quarter, which looks positively skewed at this stage with beats outperforming by more than
misses underperformed on the day of results".
4) Downgrades: "We have yet to see any material downgrades to 2020 growth expectations,
which remain close to 10%. We continue to look out for corporate guide downs as a key risk to
markets, but acknowledge we have seen little of this in 3Q as yet".
(Danilo Masoni)
*****
AIM FOR IPO (0846 GMT)
Where would you list your company in Europe to raise fresh capital?
If you answered London, you are not alone.
Brexit hasn't discouraged investors from raising capital in London and the UK’s Alternative
Investment Market (AIM) has been in the spotlight managing to raise over twice as much new
capital for companies as all its largest rivals combined in the year to Sept 30, says an
accountancy group.
AIM raised 3.9 billion pounds of capital in the year, compared to 1.9 billion pounds raised
by its rival European growth markets combined, in IPOs and secondary fundraising, says UHY
Hacker Young.
Four out the top five IPOs by value on all growth stock markets, including Uniphar and
Loungers, took place on AIM.
"These numbers suggest AIM is currently streets ahead of its competitors elsewhere in
Europe," says Laurence Sacker, Managing Partner at UHY.
As the Brexit turmoil continues, surprisingly, no companies left AIM to join rival growth
markets in the year to Sept 30, the accountancy firm says. One year earlier, five companies did
leave AIM to join other markets, such as the Johannesburg Stock Exchange and the TSX Venture
Exchange in Toronto.
(Joice Alves)
*****
OPENING SNAPSHOT: L FOR LUXURY
Yes, it's again luxury's dominance that's offsetting major losses in some bourses as LVMH's
potential offer for Tiffany is driving gains in some European peers Pandora
, Salvatore Ferragamo and Swatch.
European stocks are largely unchanged (-0.1%) as the EU is all set to extend Brexit deadline
and U.S.-China are close to signing their "Phase One" deal.
It's risk-on in Europe with autos and mining sectors making sizeable gains, while food &
beverage and telecom sectors are taking a backseat.
HSBC as expected is sharply down (-3.6%) after third-quarter profit missed
estimated and the bank dropped its key target for 2020. The share move knocks $5.5 billion off
its market value.
(Thyagaraju Adinarayan)
*****
ON OUR RADAR: HSBC WARNING, LUXURY M&A (0738 GMT)
European stock futures open little changed as investors await on the sidelines for a Fed
rate decision later this week and breakthroughs in U.S.-China "Phase One" trade deal and Brexit
deadline extension.
While those issues remain unresolved, earnings season so far seems to be of no help in
helping investors guess the health of the global economy as companies continue to paint a mixed
picture.
HSBC's warning earlier today shows the escalating trade war between China and the
U.S., easing monetary policies, unrest in its key Hong Kong market which led to recession, and
Brexit continue to roil banking sector. Its Hong Kong-listed shares are sliding 2.6%.
In stark contrast, luxury companies continue to show resilience with a host of companies
beating earnings expectations last week showed Chinese shoppers continue are continuing to spend
heavily on luxury goods.
After reporting strong results in early October, LVMH has now approached Tiffany
with a $14.5 billion acquisition offer, according to sources. LVMH shares are seen up 2%
to 3%.
Cyclical sectors face the heat again this quarter with German chemicals maker Covestro
warning on profits, a week after rival BASF posted weak profits. Covestro
shares are seen opening 2% to 3% lower, according to dealers.
In other major moves, UniCredit shares are seen down 1% to 2% after it said that
it had identified a data breach involving a file created in 2015 and containing records of about
3 million Italian clients.
It's also worth keeping an eye out for Tenaris, BBVA and other stocks
exposed to Argentina after Peronists swept back into power on Sunday.
Key headlines:
Spain's Bankia Q3 net profit slumps 23% on higher provisions
HSBC drops profit goal, warns of restructuring pain ahead as outlook darkens
Chemicals maker Covestro narrows 2019 outlook amid tight economy
Hong Kong enters recession as protests show no sign of relenting
Philips Q3 core profit rises 3% on strong demand
German real estate firms Aroundtown, TLG agree terms of all-stock merger
Mothercare calls in KPMG to help as fears rise for UK stores - The Times
Prologis to buy warehouse rival Liberty in $12.6 bln deal
UniCredit identifies data breach in Italian client records
(Thyagaraju Adinarayan)
*****
QUIET START (0641 GMT)
European stocks are seen opening slightly higher as U.S. and China said they are "close to
finalizing" part of a Phase One trade deal, while EU-UK are are most likely to agree on a new
Brexit deadline today.
In corporate news, HSBC flagged softer revenue growth and dropped its key growth
target for next year as the bank is grappling with escalating trade war between China and the
United States, an easing monetary policy cycle, unrest in its key Hong Kong market, and Brexit.
Merger Monday: Louis Vuitton owner LVMH has approached U.S. luxury jeweler Tiffany
& Co with a $14.5 billion acquisition offer, people familiar with the matter told
Reuters.
Financial spreadbetters IG expect London's FTSE to open 1 point higher at 7,325, Frankfurt's
DAX to open 13 points higher at 12,907 and Paris' CAC to open 5 points higher at 5,727.
(Thyagaraju Adinarayan)
*****
(Reporting by Danilo Masoni, Joice Alves, Julien Ponthus and Thyagaraju Adinarayan)
