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* European shares fall from record high, down 0.6%
* Hard Brexit worries resurface, UK domestics pressured
* Unilever slides on sales warning, down 6.5%
* Boeing 737 output halt hit suppliers, Airbus up
* Short seller targets NMC Health, shares tank
* U.S. futures little changed after record close
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
NMC HEALTH: JEFFERIES' MONDAY WARNING NOTE (1356 GMT)
Over 1.5 billion pounds of NMC Health's market cap have already gone up in smoke
since Muddy Waters said it took a short position on the healthcare group.
While the shares are testing new lows and losing over 30%, it's interesting to note that on
Monday, Jefferies had issued research arguing against investing in the United Arab
Emirates-based company.
In a "20 stocks for 2020" note, the broker's analysts put the company in a list of 5 shares
they thought would underperform.
"Our forensic analysis of the accounts at Securitas and NMC Health suggests additional
downside risk to reported numbers", they wrote.
"We have previously published deep dive work into NMC financials and corporate governance
and historical accounting which has resulted in our differentiated thesis; we believe the market
is not focused on these aspects of the investment case".
Other points of concern noted by Jefferies included organic growth in its core healthcare
business as well as governance.
"Complex cross-holdings add conviction to our view that investors do not appreciate the
risks at Renault and NMC Health", they wrote, also mentioning the French carmaker.
Here's a list from last week of shorted UK companies from the shortsell.nl website:
(Julien Ponthus)
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KEEPING THE FAITH IN UK PLC DESPITE THE MOOD SWINGS (1325 GMT)
UK stocks face another year of Brexit mood swings and volatility but that's not discouraging
investors who believe they are worth it in the long term.
If you happen to be a believer in UK Plc, here's a list of reasons - courtesy of Morgan
Stanley strategists - to keep the faith.
1. UK equities remain incredibly cheap
2. The UK is still an excellent income opportunity
3. The FTSE 250 could re-rate by a further 10%
4. FTSE Small Caps are our preferred domestic play
5. Domestic stocks have plenty of room to run
6. UK Banks should benefit from further GBP strength
7. UK Home Construction now looks overbought at current levels
(Danilo Masoni)
****
GUESS WHO'S BACK, BACK AGAIN? (1214 GMT)
Brexit fears! And let's admit, for a session or two, it had felt bizarrely empty without
them.
Post the UK general election, the narrative for UK stocks had swiftly switched from Brexit
fears to fears of missing out (see:) but we're now back to square one.
The Santa rally many were hoping for has been kicked in the face by Johnson's plan to rule
out an extension of the transition period out of the EU.
"Hello hard Brexit risk again?", asked Chris Bailey, European strategist at Raymond James.
"It appears UK Prime Minister Johnson is swearing to make the annoying Brexit saga an
open-ended book affair," Stephen Innes, chief Asia market strategist at AxiTrader, commented.
Bottom line: "all of the big gainers of the past few days are giving back some of their
gains as the reality check of the possibility of a no deal Brexit, while still over a year away,
has tempered some of the enthusiasm from last Thursday’s election result," reckons CMC Markets's
Michael Hewson.
For Neil Wilson at Markets.com, "this sets up another cliff-edge and could create yet more
months of uncertainty for investors just when we thought all was squared away."
So, while investment banks, asset managers and brokers had scrambled to reassess and rerate
UK Plc, they might be forced to do some rewriting.
For instance, Jefferies (and there are other examples) has issued a note prior to the
no-extension shocker that now feels a tad optimistic in hindsight.
Noting that "the UK equity markets are set to benefit from the overwhelming Conservative
victory on 12th December," the broker said "if everything goes according to plan, then the next
stage will be to negotiate a trade deal with the EU."
Good luck with that now!
One analyst who arguable deserves some credit is Paul Donovan, chief economist at UBS Global
Wealth Management.
He warned his readers on Dec. 12 not to hold their breath ahead of the general election.
"The only certainty is that the Brexit process will remain interminably tedious, one way or
another."
Now back to this post's headline, don't you think this verse from Eminem's "Without Me"
applies pretty well to Brexit fears making a come back?
"Now this looks like a job for me
So everybody just follow me
Cause we need a little controversy
Cause it feels so empty without me"
(Julien Ponthus)
*****
DOES M&A ADD VALUE? (1007 GMT)
Even though M&A in sectors such as luxury and autos has helped liven up a few sessions as we
get closer to year-end, 2019 is unlikely to be remembered as a good year for number of deals.
Willis Towers Watson and Cass Business School say the number of deals completed worldwide so
far in 2019 is 699, significantly down compared to 904 in 2018 with the market on track to
seeing the lowest annual volume since 2010.
But fewer deals isn't necessarily a bad thing.
According to their Deal Performance Monitor, 60% of these have failed to add shareholder
value in 2019, with shares North American and Asia-Pacific acquirers continuing to struggle and
European ones managing to marginally outperform their regional index.
Next year could be a bit better.
"As we move into a new decade, global dealmaking is likely to experience a continued
hangover in 2020...," said Jana Mercereau, head of corporate mergers and acquisitions for Great
Britain at Willis Towers Watson.
"A drop in available deals, however, is likely to force buyers - armed with record levels of
capital and access to debt – to be more selective and by applying a clear-cut strategic
rationale and thorough due diligence many will succeed in bucking the global negative trend to
execute quality deals that add real value," she added.
(Danilo Masoni)
*****
OPENING SNAPSHOT: BOURSES OPEN LOWER (0903 GMT)
Most European bourses open lower this morning reversing some of yesterday's impressive
gains.
The UK bluechip index, which surged 2.25% yesterday in its biggest one day gain in a
year, was down 0.1%. The FTSE250 midcap index hit record highs yesterday but it is now
down 1.5%. The pan-European Stoxx 600 index is down 0.5%.
Investors thought the Conservative majority victory last week would help Johnson to achieve
a relatively smooth and quick free trade agreement with the European Union. But overnight,
government officials said they don't plan to extend the Brexit transition period beyond the end
of 2020, raising chances of a 'no deal' Brexit, once again.
No-deal concerns hit the pound and consequently domestic stocks such as homebuilders and UK
banks traded lower. Banks also fell the heat after Bank of England stress
tests.
Aero defence suppliers are down after Boeing announced 737 production stop, while
Boeing rival Airbus was up 0.4%.
Unilever hit its lowest point since August and it is on track for its worst day
since August 2015.
Here is a snapshot of the bourses this morning:
(Joice Alves)
*****
ON OUR RADAR: BANKS, UNILEVER, DRUGS AND AIRBUS (0756 GMT)
Stocks futures point to a slightly lower open this morning as investors face renewed fears
of a hard Brexit.
Investors will closely watch British banks as the Bank of England said yesterday it plans to
tweak the rules on how much capital UK banks must hold, to allow them to keep lending in an
economic crisis.
The BoE also said the unrest in Hong Kong led to as much as $5 billion of capital outflow
from investment funds in the Asian financial hub since April.
The BoE monitors Hong Kong closely because UK banks such as HSBC and
Standard Chartered are leading banks in Hong Kong.
Staying in Asia, traders sees Unilever shares down 3-5% as the company lowered 2020
sales growth forecast on slowdown in south Asia.
An array of aero-defence suppliers such as Safran seen lower today after Boeing
announced 737 production stop, while Boeing rival Airbus was up nearly
2% in early Frankfurt trade.
On n the M&A front, drugmakers will also be closely watched as Roche won U.S.
regulatory approval for the long-delayed deal to complete the $4.3 billion takeover of Spark
Therapeutics.
Some action could come in the auto sector as the board of Fiat Chrysler Automobiles
is expected to meet today to discuss the proposed merger with Peugeot,
Reuters reported.
German broadcaster ProSiebenSat.1 Media's e-commerce arm NuCom Group is exploring
the acquisition of U.S. live streaming app developer Meet Group, Reuters reported.
Eyes also on UK job data, which will be released this morning.
Some other corporate headlines to digest:
Britain's GSK seeks U.S approval for rival to J&J's multiple myeloma drug
Bayer asks U.S. appeals court to reverse $25 mln Roundup verdict
(Joice Alves)
*****
HARD BREXIT FEARS BACK ON THE TABLE (0635 GMT)
After hitting a number of records yesterday, European bourses are expected to open slightly
lower this morning as fears of a hard Brexit is back on the table.
In his boldest move since winning a majority in Thursday's election, Johnson will use his
control of parliament to outlaw any extension of the Brexit transition period beyond 2020.
The prospect of a hard Brexit knocked the pound overnight. But it is hard to say
exactly how Britain's bluechip index, which typically goes opposite direction to the
GBP, will cope this time. Over the past few days the FTSE extended gains as the pound got
stronger after Johnson's victory.
But global sentiment stays high as a "Phase One" trade deal between the U.S. and China is
"absolutely completed," an U.S. official said yesterday.
Overall, financial spreadbetters expect London's FTSE to open 1 point lower at 7,518,
Frankfurt's DAX to open 9 points lower at 13,399 and Paris' CAC to open 4 points lower at 5,987.
(Joice Alves)
*****
(Reporting by Danilo Masoni, Joice Alves, Julien Ponthus and Thyagaraju Adinarayan)
