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* European shares dip
* Travel stocks under pressure
* Burberry CEO to leave, shares hit
* Nasdaq futures edge up
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FRANCE: STILL "AMONG THE TOP POLITICAL ISSUES FOR EUROPE"
(1230 GMT)
Investors were worried that France's far-right leader,
Marine Le Pen, would emerge as the main winner of Sunday's
regional elections.
It didn't happen: her party failed to win a single region
but that doesn't mean there is any less political risk than
before this electoral test.
While depriving Marine Le Pen of a chance to show her party
is fit for power ahead of next year's presidential election,
the results were equally bad for the party of French President
Emmanuel Macron.
All in all, the risk of having a French far-right French
president is still there.
"Along with the German election on 26 September 2021 and the
risk that Mario Draghi may fail in Italy, the question of
whether Le Pen may win in France is the top political issue for
Europe," Berenberg economist Holger Schmieding argues.
Generally speaking, Le Pen's continued opposition to closer
European integration is a concern for investors.
But even if Macron is re-elected, which is Berenberg's base
case, he may need "to build an uneasy coalition" with the
traditional centre-right in parliament, Schmieding warns.
"Whereas the centre-right is by and large in favour of
pro-growth reforms, a second term for Macron could be more bumpy
than the quite eventful first term," he adds.
Additionally, the very low turnout "should be a warning sign
that if voters' apathy were to persist into 2022, there would
likely be issues of legitimacy for the upcoming Presidential and
legislative elections," according to Citi analysts.
(Stefano Rebaudo)
*****
SUNBEDS AND SOCCER: ENGLAND/GERMANY TENSION RISING (1051
GMT)
As if the much-anticipated Euro 2020 showdown at Wembley
between Germany and England was not enough, a report that
Germany will push to ban British travellers from the EU is
fuelling tension between the two nations.
The rivalry on the football pitch is arguably as fierce as
the one to secure a sunbed in Spanish resorts between tourists
of both nations, so we might be heading towards a perfect storm.
"MERK PERMIT German Chancellor Angela Merkel launches bid to
ban Brits from Europe TODAY in blow for summer holidays", was
the headline of The Sun's website this morning.
In the world of stock markets, the hit is very real: BA
owner ICA drops 3.9%, TUI falls 3%, while Wizz Air, Ryanair and
easyJet are all down more than 2%.
Hotel groups are also feeling the heat British tourists
might get deprived of, with Accor and Intercontinental down
about 2.5%.
If there's any comfort to be offered to English football
fans who might also be eager to spend a week or two in an
all-inclusive resort of Spain's Costa Brava, it might be found
in Goldman Sachs' daily Euro 2020 note.
The investment bank sees the Three Lions beating Die
Mannschaft by 2 goals to one on Tuesday. Sadly however, the
model sees Belgium winning against England on July 11.
A good thing for the relations between the two countries is
that Germany has not taken the lead in the 'sausage war'
opposing the UK to the EU on the imports of chilled meats in
Northern Ireland, avoiding a 'wurst-case' scenario.
Here's the damage on the travel and leisure index this
morning:
(Julien Ponthus and Karin Strohecker)
*****
EASE OFF ON DEFENSIVES (0930 GMT)
Defensives have made a comeback as of late and the post-Fed
price action has only exacerbated the move with the further
flattening of the yield curve underscoring how markets may be
positioning for an end cycle trade.
But JPMorgan says investors should not be fooled by the
recent dynamics and believes the bounce in a number of sectors
like staples, real estate and healthcare seen in the last 2-4
months should fade.
"It is too early to be positioning for late cycle dynamics,"
strategists at the U.S. investment bank say, as they anticipate
the Fed won't go too far into hawkish territory.
"We look for higher bond yields in 2H, a steeper yield
curve, and a return to beta leadership," they add.
"Investors are likely to become more comfortable with the
view that, while the momentum has peaked, the pace of activity
will stay significantly above trend, Delta variant willing.
After all, the big chunk of reopening is still ahead of us, both
sectorally and geographically," they also say.
(Danilo Masoni)
*****
BURBERRY STEALS THE SHOW AT THE OPEN (0743 GMT)
European stock markets are off to a cautious start this
morning so with limited action on the big regional benchmarks,
it's fair to say that Burberry falling over 7% steals the show
this Monday morning.
Shareholders didn't take well CEO Marco Gobbetti leaving the
British fashion brand for Italy's Ferragamo.
On the other hand, shares in the Italian fashion company are
up 2%.
Another stock getting a lot of attention this morning is
Nokia, up over 6% after an upgrade from Goldman Sachs.
Finally, Ipsen is losing over 5% after an update on its
liver cancer drug candidate Cabometyx.
In terms of sector, it's the travel and leisure segment
which is under considerable pressure, down about 2% with the
COVID-19 situation in Europe as murky as ever.
(Julien Ponthus)
*****
FRENCH PRESIDENTIAL CLUES AND COVID WORRIES (0659 GMT)
French government bond investors may be breathing a sigh of
relief after the country's far right failed to win a single
region during Sunday's elections, undermining Marine Le Pen's
chances of winning her 2022 presidential bid.
While the extra yield typically required to lend money to
France over Germany is expected to ease this morning, a poor
showing for the party of President Emmanuel Macron also leaves
the door open to political risk building up into next year.
Uncertainty about the fight against COVID-19 is also on the
rise with the fast-spreading Delta variant denting sentiment in
Asia this morning and weighing on European futures.
The summer is unlikely to mark a return to normal life in
Europe with Germany reportedly attempting to ban British
travellers from the European Union regardless of whether or not
they have had a vaccine.
And in a rare glimpse into how deep the scars left by the
pandemic could be, Australia lowered its projections for
population and economic growth over the next 40 years due to the
impact of COVID-19.
Oil prices hit and then recoiled from highs last seen in
October 2018 ahead of this week's OPEC+ meeting, as the United
States and Iran wrangle over the revival of a nuclear deal,
delaying a surge in Iranian oil exports.
Gold prices slipped to a one-week low as the dollar firmed.
There's not much expected on the macro front in Europe but
investors will likely keep an eye on inflation gauges,
particularly with U.S. 10-year Treasury yields back above 1.50%.
Elsewhere, bitcoin is broadly stable at about $37,777 after
Britain's financial regulator said Binance, one of the world's
largest cryptocurrency exchanges, cannot conduct any regulated
activity and issued a warning to consumers about the platform.
Key developments that should provide more direction to
markets on Monday:
- Intesa Sanpaolo CEO says Italy's banking sector needs M&A
to create at least three major players
- German carmaker Daimler reports it is on track to spin off
Daimler Truck, the world's largest truck and bus maker, by the
end of the year.
- Nordgold cancellation rattles resurgent Russian IPO
market.
- BOJ confident in June meeting of recovery as vaccination
proceeds
(Julien Ponthus)
*****
CAUTIOUS MONDAY (0530 GMT)
European and Wall Street futures are trading broadly flat
this morning with Asian stock markets heading to the close
slightly lower.
Another wave of coronavirus infections is hurting investor
sentiment in the region but it's fair to say that worries about
the delta variant are global, even for countries with successful
vaccine rollouts.
There's not much expected on the macro front today in Europe
but investors will likely keep an eye on any inflation gauge,
particularly in the U.S. where the yield for 10-year Treasuries
have jumped back above 1.50%.
In terms of company news, one interesting development is
Intesa Sanpaolo's CEO saying Italy's banking sector needs M&A to
create at least three major players.
Another one is German carmaker Daimler reporting it's on
track to spin off Daimler Truck, the world's largest truck and
bus maker, by the end of the year.
(Julien Ponthus)
*****
