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* Optimism on Brexit and the trade war drive stocks higher
* STOXX up 1.7%, Irish stocks jump 3.7% outperforming rest of Europe
* Publicis sinks after results, drags WPP down
* Hugo Boss shares slump 11%, pulling down Burberry
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: julien.ponthus.thomsonreuters.com@reuters.net
DIVERGING FORTUNES IN LUXURY (1256 GMT)
Hugo Boss shares dropped more than 13% today hitting their lowest since December
2010 after the company's latest sales warning. Just yesterday, rival company LVMH
shares rallied on the luxury giant's better-than-expected sales.
The two companies highlight the polarisation in the luxury space, with some companies
investing heavily on marketing and product design, while others, which lack the same firepower,
struggling to compete, says Aneta Wynimko, a portfolio manager at Fidelity International, who
leads a $1.3bn global equities consumer fund.
Fidelity owns shares in both companies, according to the latest Refinitv data.
"Today you have to prove to the consumers everyday that you are worth the money they are
paying," she says.
The German company is also suffering from structural changes in the fashion market, as
shoppers seek more casual clothes, a late start to an online sales push and weak sales trend in
the Americas due to few tourists from Asia and the stronger dollar, says Volker Bosse, analyst
at Baader Bank.
Some brands just don't have LVMH's distribution capacity, comprising more than 4,500 shops
across the world. The fact that large wholesalers sell luxury products at a discount in outlets
can hit consumers' willingness to pay full price for brands, Wynimko says.
"Consumers try to get a bargain whenever they can," she says.
The chart below shows the diverging fortunes of LVMH and Hugo Boss shares:
(Joice Alves)
*****
MILESTONES GALORE AS JOHNSON'S BREXIT BUS APPEARS ON COURSE (1244 GMT)
Banks, retailers, housebuilders... oh wait it's easy this way, 85% of the constituents in
the FTSE midcap index are rallying! And in the rest of Europe, DAX is indeed
having its Oktoberfest rising 2%.
And we're not short of milestones, here are your stats of the day:
** UK banks Lloyds, RBS, Barclays, HSBC together have
added $14 billion to their combined market cap. (The FTSE 100's market cap is about $2
trillion).
** The JPM UK domestic plays index is having its best run since it was created
in Jan 2017, +7.3%. To put that into context, the second-best single day gain was just 2.3% in
mid-September.
** Shiny sterling is heading for its best two-day gain since mid-2016 - in fact the gains
were largely in the last 24 hours.
** The FTSE 250 index is poised for its best single-day gain in more than 3 years.
** The Irish stocks are having a party, rallying 4%.
The not-so-sexy ones (these would've been the top stats on a normal day):
** The FTSE 100 index is the worst performer across Europe, rising JUST 0.8% --
isn't that a small move?
** The big-fat German growth stock SAP is rising 7.8% after another blow-out
quarter, but it's not even among the top 20 risers.
(Thyagaraju Adinarayan)
*****
LONG THE TAX CUTS, SHORT THE MONETARY FUDGE (0935 GMT)
When it comes to stock markets, there's really nothing like a massive corporate tax cut to
prop things up, writes Kevin Muir in this week's MacroTourist newsletter.
Granted, if one compares European equities muddled in an environment of negative rates with
their U.S. peers, turbocharged by Trump's fiscal stimulus, the last two years seem to
unequivocally validate his point.
Tax cuts are however no longer on the U.S. agenda and investors will be served Fed cuts
instead. In Europe, the ECB seems entangled in an apparent endless lower-for-longer monetary
cul-de-sac while a German fiscal stimulus remains an investor fantasy for now.
Taking the view that "the world is starved for fiscal stimulus", Muir noted with great
interest Indian shares on Sept 20 notching their best day in more an a decade after the
government announced deep cuts in corporate taxes to revive flagging growth.
The lesson learned from that is quite straightforward Muir believes.
"Buy countries willing to engage in fiscal stimulus, sell those relying on monetary
stimulus".
In practice, he advocates a pretty contrarian and arguably very risky trade: "I think buying
India and shorting either the US or the entire MSCI world index is a great risk reward trade".
(Julien Ponthus)
*****
OPENING SNAPSHOT: STOCKS RALLY DESPITE HUGO BOSS, PUBLICIS SHAMBLES (0827 GMT)
It's as expected a positive start for European stocks but a few stocks are somewhat spoiling
the party such as Hugo Boss which is in free fall, down about 11%, its worst
performance since Feb 2016 and hitting its lowest since 2010.
Kering and LVMH shares, which had a great day yesterday,
are not being hit, but Burberry is feeling the heat, down 3.2%.
Talking about disappointing results, Publicis is sinking 12.6% and dragging WPP
with it. The British advertiser is retreating 3.8%.
Among losers, Euronext is also facing heavy blows, down 4%, after unveiling a new set of
financial targets.
Elsewhere there's no shortage of love for SAP as the stock is rising 7.5% on a
good set of results and lifting the European tech sector (+2.5%).
The only big index in red is the FTSE, and that's due to the pound getting a boost from new
found optimism on a possible Brexit deal.
That meanwhile is boosting the Irish stocks, which is outperforming rest of Europe.
(Julien Ponthus)
*****
ON THE RADAR: BIG MOVES FOR PUBLICIS AND HUGO BOSS (0648 GMT)
Optimism on both the trade war and the Brexit fronts is seen lifting European stock markets
this morning. Futures are currently trading in the green at the exception of the FTSE which is
being dragged down by the rising pound.
There’s also plenty of corporate news likely to trigger sharp moves at the open such as for
France’s Publicis, which had to cut its full-year sales target for a second time and
has seen its rating cut by SocGen. There's a likely read-across for WPP which is also
expected to suffer.
After yesterday's stellar results for luxury, there could be hard landing to investors with
Hugo Boss cutting its 2019 earnings forecast, citing weak demand notably in Hong
Kong, a growing concern for the industry.
Germany’s SAP is on the rise after it published a strong set of third-quarter
results lifted by a major cloud-computing deal with its CEO standing down.
In the financial industry, Jupiter reported net ouflows of 1.3 billion pounds ($1.6
billion) in the third quarter while Man Group’s assets under management fell 1.5%.
In the nordics, Equinor said it would $549 million to build floating turbines to
supply power to several North Sea oil and gas platforms.
In what could be seen as a vote of confidence for London’s financial centre, EG Group is
reported considering an IPO which could value the company at over $12.44 billion.
The Renault/Nissan corporate saga is continuing to unfold with Renault's Thierry
Bollore, denouncing a "coup" against him.
Here are a few headlines:
SAP's McDermott steps down after decade as chief salesman and dealmaker
Hugo Boss cuts outlook again, citing weak U.S., Hong Kong business
EG Group weighs IPO that could value co at over $12.44 bln- Bloomberg
BT launches 5G smartphone plans for consumers and businesses
Thyssenkrupp's top shareholder says never called for special dividend
Renault board to meet, as CEO denounces potential exit as 'coup'
Euronext sets new financial targets, ready for more M&A deals
Italy's Ferretti IPO postponed to Oct. 15 due to weak demand
Dart Group expects to exceed profit view on Thomas Cook liquidation
Ray-Ban Billionaire Leonardo Del Vecchio Plans To Lift His Stake In Mediobanca Above 10%- FT
Publicis CEO under pressure following second sales target cut
(Julien Ponthus and Joice Alves)
*****
RISK APPETITE FOR BREAKFAST (0531 GMT)
There clearly are positives vibes making their way from Asia and the U.S. this morning when
it comes to the U.S./trade war and that should be enough to lift European bourses at the open.
Trump's willingness to meet China's top trade negotiator is fuelling optimism that progress
can be achieved on an issue which has been a constant burden for investors for close to two
years now.
IG financial spreadbetters expect Frankfurt's DAX to open 35 points higher and Paris' CAC to
rise 14 points, adding on yesterday's gains.
While new found optimism on Brexit is participating to the risk-on build-up, the rise in the
pound is however weighing on British blue chips which often have heavy exposures to the dollar.
London's FTSE is seen opening 24 points lower.
(Julien Ponthus)
*****
($1 = 0.8028 pounds)
(Reporting by Danilo Masoni, Joice Alves, Josephine Mason, Julien Ponthus and Thyagaraju
Adinarayan)
3 Aug 2023 12:17
LONDON MARKET MIDDAY: Pound under pressure after BoE hike
(Alliance News) - European equities went into Thursday afternoon on the back foot, extending losses suffered on Wednesday following a US credit rating cut from Fitch, while the pound struggled to make headway after the Bank of England raised rates by 25 basis points, as expected.
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