International Airlines Share News (IAG)

* European stocks extend gains: STOXX 600 up 0.8 at session
high
* DAX shrugs off weaker-than-expected German industrial
orders
* AMS, Osram slide after deal fails
* SIG sinks after profit warning, drags building materials
stocks
with it

Welcome to the home for real-time coverage of European equity
markets brought to you by Reuters stocks reporters and anchored
today by Julien Ponthus. Reach him on Messenger to share your
thoughts on market moves:
rm://julien.ponthus.thomsonreuters.com@reuters.net


THE PARADOX OF EUROPE'S CAPITAL GOODS (1526 GMT)
Worries over a manufacturing recession have been running
high but shares in European capital goods have done nicely,
creating a possible disconnect that investors will have to look
into as we go into the Q3 reporting season.
Deutsche Bank actually sees a "paradox".
On one side, it expects sector executives to become
increasingly bearish with no sign of imminent recovery but on
the other hand it argues that the negative macro may soon bottom
out. Hence the paradox.
"While the trough may not be far for macro indicators, the
paradox is that the sector's earnings are still close to
cyclical highs. So does it make sense to buy the recovery before
the downturn actually started to materialize in the numbers?",
say analysts at the German bank led by Gael de-Bray.

(Danilo Masoni)
*****


FUND MANAGERS LOOK FOR BREXIT BARGAINS (1428 GMT)
The chorus of voices saying now's the time to jump on
bargains in the UK stock markets is growing.
There is now a little bit of evidence that there has been a
warming, albeit small, towards the world's most-shunned equity
market.
While UK allocations by fund managers are still languishing
near record lows in the midst of Brexit-induced uncertainty, the
value trend has contributed to an uptick in the past month in
exposure to the UK, climbing to 7.48% from 7.41% of total global
investment, according to Copley Fund Research, which monitored
flows in 432 funds with $800 billion under management.
Here's the chart that shows Copley's research results:



The debate continues on whether the rotation into value
stocks and out of growth sectors will continue in earnest. River
and Mercantile's Hugh Sergeant says he is more convinced than
ever that now is the time to pounce given value's big discount
to growth.
"The opportunity set is arguably as great as I have known in
my career," he says. "Markets remain nervous but relative
valuations between value and growth have become more extreme
since the end of the last quarter and, as a result, our
conviction has increased, while recognising that we are
participants in a very unusual period for investors."
He runs the R&M UK Recovery and R&M Global Recovery funds.
To be sure, there have been periods like this over the past
decade or so and growth has won out after a brief rotation into
value that lasted a few months.

(Joice Alves and Josephine Mason)
*****

D FOR DISCONTENT (1206 GMT)
Hong Kong, Egypt, Russia, Ecuador, Britain - people are
taking to the streets around the globe, raising their voices
against threats from eroding civil liberties or climate change
to economic inequality.
Protests are hardly new. But whereas political risk in the
shape of popular protests has largely been confined to frontier
or emerging markets undergoing dramatic changes or reform
programmes, they have become much more prevalent and now have
major policy implications.
France's yellow vests or "gilet jaunes" forced Paris to
change economic policy, environmental group Extinction Rebellion
has helped put climate change on the agenda of many western
governments. The outcome of the showdown between Hong Kong's
protesters and the authorities is as yet unclear.
"The increase in the number and geographical reach of mass
protests in recent years has been remarkable," says Philippe
Dauba-Pantanacce, global geopolitical strategist at Standard
Chartered Bank.
Deep inequalities laid bare by the 2008 great financial
crisis (GFC) and a surge in social media use are some underlying
causes, says Dauba-Pantanacce, adding protest activities had
reached "unprecedented levels".
But there is also a general backsliding of democracy: 2018
marked the 13th straight year of deteriorating freedoms around
the world, according to the U.S. think tank Freedom House.
For markets, political risk has become a fact of life - and
one that isn't about to change.
"Protest momentum is likely to remain strong, fuelled by
disillusionment and technological change," says
Dauba-Pantanacce.


(Karin Strohecker)
*****

BARGAIN HUNTING IN LONDON (1127 GMT)
European stocks are seen as quite cheap compared to other
markets and UK stocks even more so, making them an ideal hunting
ground for bargain hunters.
UBS has done some math to spot where could the best London
opportunities be, saying that recent marketing events suggest
interest from investors is growing largely due to valuation.
"The recent move in sterling and outperformance of domestic
shares has also refocused investors on the potential for
significant moves under the surface of the UK equity market,"
analysts at the Swiss bank led by James Arnold write.
Putting aside political volatility, UBS says one way to
scout for ideas is to look at the FTSE 100 shares whose
valuation is low relative to their 10-year median. Under these
criteria, tobacco group British American Tobacco, bank
Barclays, airline IAG and builders Berkeley
Group and Persimmon rank among the top five
placed on the index.
Another way is to look at companies with a high
free-cash-flow yield and a headline debt-to-EBITDA ratio below
the previous 10-year average. The top 5 FTSE, buy-rated names
here are advertising group WPP, Persimmon and IAG (also
ranking on top of the previous list), as well as builder Taylor
Wimpey, and precious metal miner Polymetal.
Since the Brexit referendum in 2016, UK stocks' multiples
have been under constant pressure. Relative to the STOXX 600
, the FTSE 100 now looks the cheapest in nearly
two decades years on a forward P/E basis, as you see in the
chart.

(Danilo Masoni)
*****


ARE EQUITY MARKETS PRICING IN LOTS OF GOOD NEWS? (0930 GMT)
A solid bounce back on Friday and today's slight move higher
shows that the equity markets are pricing in some really good
news. Are we going to have a warm autumn on earnings and data
front?
Time will tell.
Meanwhile, Deutsche Bank analysts say equity-market pricing
and positioning at current levels represents "a strong view that
macro as well as earnings growth will rebound".
"Overall positioning in equities, encompassing both
discretionary and systematic strategy exposures, is still near
neutral and not high in absolute, but very high relative to
levels seen in prior periods of comparable slow growth."
But, investors, analysts and equity strategists we spoke to
believe there is more pain for Europe Inc in 2020 as earnings
drought is seen spilling over.

(Thyagaraju Adinarayan)
*****

OPENING SNAPSHOT: CAREFULLY OFF THE BACK FOOT (0840 GMT)
European stock markets opened in the red and slightly worse
than what futures or spreabetters indications had initially
suggested. Traders are however gradually and carefully getting
off the backfoot and most bourse and sectors are now trading
positively.
There isn't however much out there in terms of news on the
macro side to fuel the optimism. Defensives are the biggest
drivers with healthcare and food & beverage sectors rising 0.9%.
In terms of individual stocks there are quite a few negative
headlines. Osram Licht took a big hit, now down 4%
with Austria's AMS failing in its takeover attempt.
Building materials supplier SIG collapsed 23% after
it warned that annual profit in its core businesses would be
significantly lower, hit by a deteriorating construction market
as a downturn in Britain and Germany deepened and fears of a
recession loomed.
That also hit peer Travis Perkins which fell 4.1%.
Another spectacular move was in Safilo which is down close
to 5% after rising almost 12% on Friday. There was speculation
that France's Kering could be looking at the Italian company as
a possible takeover target but that’s no longer the case.
HSBC was nearly flat after the FT'S report that the bank
plans to cut 10,000 jobs. Bayer is up 1.7 percent after news
that a pending U.S. lawsuit over claims related to its
glyphosate-based herbicide Roundup has been delayed.
Here's your opening snapshot:





(Julien Ponthus)
*****



OSRAM, SIG AND SAFILO AMONG EXPECTED FALLERS (0753 GMT)
No drama expected at the open for European stock markets
this morning with benchmarks seen hovering at plus or minus 0.2
pct.
Anxiety over the trade war talks in Washington or Brexit
negotiations this week have yet not killed The “Goldilocks” buzz
from the U.S. jobs data on Friday.
There seems to be little reaction so far on DAX futures
about German industrial orders falling more than expected. It
does however add yet more evidence that Europe's largest economy
is getting stuck into a slowdown.
There is some action on the downside for some individual
stocks, notably Osram with Austria's AMS struggling in its
takeover attempt and SIG warning on full-year
profit as construction activity lags. Shares in
Safilo will be closely watched after they rose almost 12% on
Friday. There was speculation that France's Kering could be
looking at the Italian company as a possible takeover target but
that’s no longer the case.
It is still unclear from pre-market data whether reports
that HSBC plans to cut 10,000 jobs will have much of an impact.
Bayer is seen rising after a pending U.S. lawsuit over
claims related to its glyphosate-based herbicide Roundup has
been delayed.
(Julien Ponthus)
*****


NOT MUCH MOVEMENT EXPECTED AT THE OPEN (0524 GMT)
Clearly the U.S. job data's soothing effect can still be
felt and it all seems pretty quiet this morning in Europe after
Asian shares edged higher as concerns of a slowdown in the
world's largest economy eased.
IG Financial spreadbetters expect London's FTSE to open 12
points down, Frankfurt's DAX 4 points higher and Paris' CAC to
lose 3 points while U.S. futures are slightly in the red after
their rally on Friday.
Anxiety is bound to rise as we get closer to the U.S.-China
trade negotiations in Washington planned on Oct 10-11.
This quote from our Wall Street market report on Friday sums
up pretty well market sentiment towards Friday's nonfarm
payrolls:
"It's sort of a Goldilocks report: it's not strong enough to
move the Federal Reserve away from cutting rates at the end of
October, but it's not weak enough to make you concerned about
the labor market or the consumer," said Shawn Snyder, head of
investment strategy at Citi Personal Wealth Management in New
York.
Bets that the Fed will cut interest rates have surged this
week after a dramatic contraction in U.S. manufacturing, cooling
private sector hiring, and a fall in service sector activity
pointed to widening fallout from the U.S.-China trade war.
(Julien Ponthus)
*****


(Reporting by Danilo Masoni, Joice Alves, Josephine Mason,
Julien Ponthus and Thyagaraju Adinarayan)