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.
A V-SHAPED RECOVERY FOR METALS AND MINING (1056 GMT)
While economists are wondering whether the whole economy will stage a V-shaped recovery,
they seem to have a clearer view on some industries, including Europe's metals and mining.
A Morgan Stanley research note lines up a couple of reasons why the sector will quickly go
back to pre-Covid levels, after a sharp but short disruption.
First, China's fiscal measures and accelerated infrastructure spending are boosting steel
production, triggering a broader recovery and supporting demand for base metals, it says.
Low inventories, pandemic-induced supply disruptions and fiscal stimulus will back copper
demand, the price of which is expected to grow by 11% by early 2021, it adds.
In terms of listed shares, the sector index bounced back strongly from its March lows but it
is still "at an 18% discount to its historical price-to-book-value ratio relative to the
market," according to the investment bank.
Glencore, First Quantum, KAZ and Lundin Mining are MS favourite picks.
But risks are building for companies with stretched valuations "as spreads between EU steel
prices and raw material costs continue to contract."
(Stefano Rebaudo)
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BREXIT: NO V-SHAPED CHART FOR YOU! (1016 GMT)
It's been four years since the British people voted to leave the European Union and it's
pretty fair to say that there's yet limited visibility on how Brexit will actually work out.
Deal? No Deal? Who knows?
One thing for sure though, is that while both the EU and the British government are still
locked into "interminably tedious" (to quote UBS' Paul Donovan) divorce talks, getting out of
the bloc has done little for UK stocks for now at least.
Looking for stocks performances in USD terms, British stocks are clear laggards in
comparison to the world's biggest regions:
Specifically against the euro zone, it's also clear that the FTSE 100 and 250 have barely
recovered from the Brexit shock while the STOXX 600 and STOXX 50E are more comfortably above
where they were four years ago.
One very interesting note in today's Politico London Playbook is that "The history books
will show that three-and-a-half years of chaotic Brexit drama finally came to an end on January
31, 2020 (the actual date when the UK left the EU) the very day that the first case of
coronavirus was confirmed on these shores."
(Julien Ponthus and Thyagaraju Adinarayan)
*****
AT LAST, A V-SHAPED CHART! (0852 GMT)
The PMIs this morning sure gave the bulls a boost! Particularly the DAX and the CAC which
are up 2% and 1.4% respectively.
The data was much better than expected and it does help the V-shaped recovery narrative that
so many investors believe is currently priced in the markets.
Because shapes matter, the chart of the France's June PMI is worth a quick look:
Now, of course, while the PMIs from France, Germany, the euro zone and UK have been welcomed
with a burst of enthusiasm across the continent's stock markets, there's also some cold water
being poured on the data.
"Today’s PMIs for June are almost entirely worthless", Panmure Gordon chief economist Simon
French commented on Twitter.
"Not a criticism of the data providers - simply that in such unprecedented circumstances any
calibration across to output levels is impossible," he said, adding that "the data is good for
headlines and pretty charts - little else". Ouch..
Here's a bit of reading on the actual data:
French business activity unexpectedly rebounds into growth in June [nL8N2DZ4MD}
German private sector slowly digging its way out of recession
Euro zone downturn eased in June as economies opened up
Britain's coronavirus slump tapers off in June, PMIs show
(Julien Ponthus and Thyagaraju Adinarayan)
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OPENING SNAPSHOT: FRENCH, GERMAN UPBEAT JUNE PMIS BOOST STOXX (0735 GMT)
News that French business activity rebounded more than expected in June to above the 50
points mark boosted European stock markets 15 minutes after the open.
Paris' CAC 40 quickly doubled its gains to 1.2%, lifting other regional bourses with it.
At 0730 GMT, the German data also came in better than expected (yet below 50) and gave an
additional boost to the DAX which quickly made it to +1.8%.
Five minutes after the German data, the STOXX 600 was trading at 1.1%.
There were signs that traders were switching to risk on with cyclicals having a jolly good
time: autos and banks were up 2.5% and 2.4% respectively.
There were also no shortage of individual movers, notably:
A 17.6% rebound by shares in Wirecard. Hikma shares are down 8.5% as investor Boehringer
Ingelheim is about to sell its stake.
Alberts shares up 6% after a COVID-19 trading update.
(Julien Ponthus)
*****
ON THE RADAR: FRESH PMIS, UK LOCKDOWN EASING AND SANOFI'S VACCINE (0630 GMT)
Nothing like a bit of good news to start the day: French drugmaker Sanofi said it expects to
get approval by the first half of next year - faster than previously anticipated - for the
potential COVID-19 vaccine it is developing with Britain's GlaxoSmithKline.
While second-wave fears are spreading in Asia, Brasil and in some U.S. states notably,
Britain is get ready to ease the lockdown further with cinemas, museums and galleries in England
being expected to be allowed to reopen from July 4. A review of social distancing measures is
also eagerly awaited in the hospitality industry.
So all of that could give a boost to many FTSE 250 companies, particularly in the travel and
leisure segment.
Much of the optimism in the upcoming session will however depend on a fresh batch of PMIs
from the UK, France, Germany and the euro zone. Expectations are for a sizeable rebound.
There are plenty of challenges ahead to bring the economy back to normal, and that can be
seen with Volkswagen's Mexican unit which said about 2% of its workers tested for coronavirus
had contracted the disease at some point.
On the corporate front, a U.S. federal appeals court blocked California from requiring that
Bayer label its glyphosate-based weed killer Roundup with a cancer warning, handing
the company a victory in its ongoing litigation over the product.
Boehringer Ingelheim, a major shareholder in Hikma Pharmaceuticals, is exiting the
drugmaker by selling most of its nearly one billion pound stake to institutional investors.
Wirecard should provide some action still this morning, down about 5% in pre market trading
after the plunge of the stock in the last sessions.
Kloeckner shares up 13.4% in early trade after the company gives Q2 outlook.
Shares in Cosmo Pharmaceuticals are up 1.6% in premarket trade after the company
announced regulatory approval of Gi Genius in Israel.
Closing the Refinitiv deal won't be a walk in the park for LSE: European Union antitrust
regulators warned about the possible anti-competitive effects of $27 billion takeover and
launched a four-month investigation into the deal.
(Julien Ponthus and Stefano Rebaudo)
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MORNING CALL: THE PATH IS CLEAR FROM TRADE DRAMA (0536 GMT)
European investors are waking up to a "fully intact" U.S./China trade deal, having missed in
their sleep the wild swings which followed White House trade adviser Peter Navarro saying it was
over.
Trump later denied the deal collapsed, which triggered a rebound in Asian shares and cleared
the path for an upbeat open in Europe.
Futures for the STOXX50E and the DAX are currently both up 0.9% while it's about 0.4% for
the FTSE100.
While there's relief the two economic superpowers have not entered a full-on trade war,
COVID 19 second wave fears are pretty much intact with infections on the rise in Brasil and
many U.S. states for example.
In Europe, the publication of June PMIs this morning should shed a bit more light on the
shape of the recovery help set a trend for this session.
(Julien Ponthus)
*****
