* European shares extend opening gains
* STOXX 600 +0.9%, DAX +1.2%; FTSE +1%
* Ryanair and Healthineers rise after results
* Asian shares rise to 14-week highs on trade deal hopes
* Wall street futures rise
Welcome to the home for real-time coverage of European equity markets brought to you by Reuters
stocks reporters and anchored today by Joice Alves. Reach her on Messenger to share your
thoughts on market moves: joice.alves.thomsonreuters.com@reuters.net
MELT-UP FEARS MAKE A COMEBACK (1244 GMT)
That's the price of success: the S&P 500 is on all-time high and with Wall Street futures
pointing out to another likely record this session, it's only natural to see people worry about
a melt-up again.
Talks about a possible melt-up were quite frequent at the beginning of 2018 but an inflation
scare triggered a sharp sell-off during which analysts scrambled to reassess equity risk premia
in a volatility spike that was a pretty messy business.
The fixed-income situation at the end of 2019 is of course very different as the latest Fed
cut showed, but benchmarks achieving new milestone while earnings growth remains sluggish at
best can understandably leave a few traders scratching their heads.
An influential voice, Ed Yardeni, president and chief investment strategist at Yardeni
Research, told CNBC last Friday he wasn't comfortable with the pace of the latest rally.
"I just don't want too much of a good thing here, I'd like this bull market to continue at a
leisurely pace not in a melt-up fashion", he said.
This morning, Saxo also raised the danger of seeing stocks rising to quickly.
"We now have to contemplate a potential melt up scenario in US equities striking a
similarity to the 1999-2000 rally", says Peter Garnry, Head of Equity Strategy.
Garnry's note came with an unusual mea culpa: "we have been totally wrong on our general
allocation decision of underweight equities and overweight bonds", he said, adding Saxo was now
"officially positive on equities until the downward dynamics return".
Anyhow, as you can see below, it seems the "melt-up" narrative is starting to buzz on
Twitter:
(Julien Ponthus)
*****
BEATING LOWERED ESTIMATES (1042 GMT)
Halfway through the Q3 season most companies have beaten estimates and, even though the bar
has been lowered significantly, that's helping investors enjoy the rise of European equities to
fresh highs.
Here's an account of how Q3 is progressing, courtesy of UBS.
* Reasonable beats: A net 10% of companies beat, roughly in line with the long run average
of 11%.
Going into the results, there has been a steady stream of downward revisions
* Margin pressure coming through: Top-line beats at 24%. The gap with earnings beats is
close to
10-year highs, suggesting that margin pressure is starting to come through
* Sectors: Semis, Software and Pharma beating, Telcos and some Staples missing. Cyclical
sectors
are driving most of the beats after they bore the brunt of the downgrades YTD
* Beats rewarded most in 8 quarters: Companies that beat are being rewarded more than usual.
The
average net beat is outperforming on the day of results the most in 8 quarters
(Danilo Masoni)
*****
OPENING SNAPSHOT: SPOTLIGHT ON RYANAIR AND HEALTHINEERS (0858 GMT)
Earnings results are driving top movers this morning.
Siemens Healthineers has hit an all-time high and is up more than 6% after it
reported better-than-expected Q4 sales and said it expects strong growth to continue next year.
Ryanair also got a nice boost from its results and hit its highest since September
2018 as investors preferred to focus on the positive results, rather than on the announcement of
a two-month delay to the start of its Boeing MAX 737 deliveries. Ryanair said it may have none
of the jets to fly next summer, which would freeze its growth.
Results were not good news for everyone, Vopak shares were down more than 4% this
morning as company reported earnings before interest and taxes (EBIT) slightly below consensus
for Q3, saying its oil hub terminals in Europe and Singapore partially offset good performance
from new assets.
Here are a snapshot of the top movers this morning:
(Joice Alves)
*****
ON THE RADAR: CARS, PLANES AND OIL (0750 GMT)
European shares are set to edge up as China- U.S. trade deal hopes are back on the table
following some positive talks on Friday and following a surge in Asian shares today.
European futures are all in positive territory this morning, up around 0.5-0.6%.
Euro STOXX 50 futures hit their highest since end-Jan 2018, DAX futures hit
their highest since mid-June 2018 while CAC 40 futures shot to their highest in almost
12 years.
The optimism over trade talks is likely to lift car shares. In the automobile sector, there
are also some M&A updates as Fiat Chrysler and Peugeot expect to sign a binding merger deal as
soon as early December.
Investors also have some new earnings updates to digest. Ryanair is seen opening
higher this morning after its quarterly profit after tax beat expectations. The company also cut
growth plans as it expects to take delivery of its first Boeing 737 MAX in March at the
earliest, two months later than it last forecast, which means the Irish low-cost company now
expects to fly fewer passengers than previously forecast.
Among top movers, Igas Energy shares are seen opening down 15-20% after an UK
moratorium on fracking.
Shares in Siemens Healthineers were down 4.4% in early Frankfurt trade after
results. Shares in Wirecard up 2.3% after it announced details of share buyback
programme.
The largest corporate news today is the long-awaited announcement of what is on track to
become the world's largest listing. Aramco - the world's most profitable company - kick started
yesterday its IPO announcing its plans to float on the domestic bourse.
On the Brexit front, Nigel Farage said yesterday that he will campaign countrywide against
Prime Minister Boris Johnson's Brexit deal. As the futures highs show, European bourses don't
seem much interested in Farage and have barely had any reaction to his announcements, so far.
Here is the main corporate headlines this morning:
?
BRIEF-IAG To Buy Air Europa For 1 Bln Euros
Ryanair cuts growth plans as first MAX deliveries delayed to March
Telefonica Deutschland adds subscribers in Q3, confirms outlook
Healthineers says growth to continue after strong end to 2019
Traton 9M profit boosted 34% by new Scania truck sales
PostNL Q3 operating income misses estimates
Delta might pull out of Alitalia bid consortium -newspaper
Oil storage firm Vopak signs China deal, will expand Belgium, Mexico sites
French firm Axereal seals acquisition of Cargill's malt business
Insurer Hiscox's premiums grow, keeps reserves for hurricane Dorian
(Joice Alves)
*****
CHINA-U.S. TRADE TALKS, NIGEL FARAGE AND ARAMCO (0647 GMT)
European bourses are expected to open higher this morning after Asian shares surged today
following some Friday's optimism over U.S. and China trade talks and upbeat U.S. job data.
Back in Europe, investors will have more UK election news to digest this morning as the
leader of Britain's Brexit Party, Nigel Farage said on Sunday he doesn't plan to stand in the
December election, preferring to campaign countrywide against Prime Minister Boris Johnson's
Brexit deal.
On the corporate front, Aramco is taking the spotlight. The Saudi Arabia's giant finally
kick-started its highly anticipated IPO on Sunday, announcing its intention to float on the
domestic bourse in what could be the world's biggest listing.
Cars are also in focus, as Fiat Chrysler and Peugeot owner PSA aim to sign a final merger
agreement as early as the beginning of next month.
Spreadbetters at IG expect London's FTSE to open 19 points higher at 7,321, Frankfurt's DAX
to open 62 points higher at 12,961 and Paris' CAC to open 25 points higher at 5,787.
(Joice Alves)
*****
(Reporting by Danilo Masoni, Joice Alves, Julien Ponthus and Thyagaraju Adinarayan)
19 Aug 2015 15:09