Marks & Spencer Share News (MKS)

March 29 - Welcome to the home for real-time coverage of European equity markets brought toyou by Reuters stocks reporters and anchored today by Helen Reid. Reach her on Messenger toshare your thoughts on market moves: helen.reid.thomsonreuters.com@reuters.net ONE YEAR COUNTDOWN TILL BREXIT: CRUNCH TIME AHEAD! (1324 GMT) In exactly a year, at 2300 GMT on March 29, 2019, Britain should be out of the EuropeanUnion and while Theresa May is touring the country and promising a bright future,analysts are being much more cautious: it's crunch time ahead. Hopes of a soft Brexit are on the upside but there is still a possibility that thenegotiations towards a free trade agreement will collapse in the coming months. "Since 'nothing is agreed until everything is agreed', a 'Hard Brexit’ still remains apossibility until at least October 2018 when the EU aims to have the withdrawal agreement signedoff", Rabobank wrote in a research note, adding the uncertainty is however likely to drag on andhurt the British economy. "Politicians could use the transition period to extend negotiations on important aspects ofthe future relationship between the EU and the UK beyond March 2019", the bank's analysts warn. But this period could also be seen as a window of opportunities for investors, StevenAndrew, manager of the M&G Episode Income Fund said. "Ongoing uncertainty during the negotiations will cause market volatility, which in turnpresents attractive opportunities for patient investors in the UK market", adding that the "UKmarket looks a lot less gloomy than it is currently priced". While most strategists are still giving a straightforward underweight rating for the UKstock market, a number of investors are quietly looking for the moment to change their stance. Most economists agree that the UK economy has fared much better than expected but that it islikely to structurally grow slower in the future and that it has somewhat missed out on the#Euroboom experienced by Euro zone countries such as Germany, France or Spain. The EU maintains that by leaving its single market and customs union, Britain will be makingtrade more difficult and stresses this trade deal would be the first in the EU's history whichwill loosen economic links rather than strengthening them. Here's a chart showing how the FTSE has underperformed the EURO STOXX since the June 2016referendum for an investor who would have invested in both indexes in dollars: (Julien Ponthus) ***** WHO WOULD WANT TO BUY CONVIVIALITY? (1150 GMT) ShoreCap analysts are mulling this question over after the British drinks wholesaler, ownerof Bargain Booze, said it's likely to collapse into administration within two weeks. "Today's announcement confirmed there is interest," they write. Convivialitysaidthe board is exploring "a number of inbound enquiries" about selling all or parts of thebusiness. But who could be enquiring about acquiring? "Depending on due diligence, we believe private equity could be an acquirer of the entiregroup assuming it sees Conviviality’s issues as operational ones that are fixable and confidencecould be rebuilt in its customer and supplier base." ShoreCap also sees possible interest from the big four UK supermarkets, as well as otherhigh street value retail chains and wholesalers (Costcutter, Spar, Bestway and Landmark). Lastly brewers could be potential suitors, but they're likely to only be interested in theMatthew Clarke and Bibendum segments of the business. "Heineken would be our first choice butalso AB InBev, who we believe used Matthew Clark." Closer to home, they point to Marstons. Conviviality's shares have been suspended from March 14 at 101.2p. They were trading at morethan 4 times that price as recently as November, a chilling reminder of how fast a collapse canhappen. (Helen Reid) ***** ALLOCATIONS TO CYCLICALS NEAR DECADE HIGH (1112 GMT) On a day clearly dominated by cyclical strength in Europe, it's interesting to see thatpositioning on these sectors is at pretty elevated levels. Both global and European funds have increased their exposure to cyclical sectorssignificantly to the end of February, Barclays notes, so much so that relative allocations arenearing their highest in a decade (see below). This rise was driven for the most part by investors adding to holdings in financials, techand industrials. European funds have turned overweight on financials. Tech and industrials remain the twomost overweighted sectors, while investors remain heavily underweight on defensive sectors likeconsumer staples, healthcare and utilities. But there are incipient signs of a rotation, with tech especially seeing selling pressure: In February, European funds increased their positions in energy, staples and industrials,while reducing tech, materials, healthcare and telecoms. (Helen Reid) ***** A SPANISH BULL CHASE? (1054 GMT) Among other rotations going on in the market, Morgan Stanley also see Italy as likely toslip from its dominant position in European stock markets, with Spain playing catch-up. Spanish stocks have underperformed Italian stocks by 16 percent over the last 12 months, arare and sharp rate of decline (see below). Italy's equity market is the best-performing not only in Europe but across the whole ofdeveloped markets, note MS strategists. "While such outperformance may seem at odds with Italy's uncertain election outcome, it doesreflect superior earnings trends, with the country seeing the largest 3-month increase in itsN12M EPS estimates within Europe," they write. Looks like investors really are shrugging offpolitical risk in favour of better fundamentals. MS points to signs this earnings support could be slowing, however, and that Italy's equityoutperformance is at odds with Spain's bond outperformance. A Spanish bull chase may be aroundthe corner. (Helen Reid) ***** DEAL APPEAL (1045 GMT) On a day where deal talk continues to be front and centre of the action on Europeanequities, it's interesting that Goldman Sachs' analysts have revisited their "equal-weighted M&Abasket" of stocks for which their analysts see more than 15 percent likelihood of acquisition. Among stocks most likely to be considered as targets, GS singles out Spain's Banco Sabadell and luxury goods stocks Moncler and Burberry. On Sabadell, their analysts see space for further concentration in Spain's banking sectordue to excess capacity and a tough operating environment. Other names with a high M&A rank and more than 10 percent upside are Infineon,Wirecard and ITV. (Kit Rees) ***** PERMA-BEAR SMELLS SOMETHING ROTTEN IN THE STATE OF MARKETS (1012 GMT) Yesterday we reported a scent of blood from the rise in stress in the U.S. money markets() but today it's a "sickly aroma of recession" that's on the menu. "The markets are now sniffing out a rising stench from decaying debt," SocGen strategistAlbert Edwards writes today, dismissing recent positive macro indicators from the U.S. as mere"illusion of prosperity". Edwards, known as a perma-bear for his permanent long-term pessimistic views on markets,believes the huge stimulus package rolled out by the Fed after the 2008 financial crisis has ledto a credit bubble which is about to burst. Among the worrying signs he highlights in his weekly note are the "rapid flattening of theU.S. yield curve" but also the "surge in charge-offs and delinquency rates on credit card loansmade by smaller US banks". Here's a chart from the financial news website Zero Hedge Edwards refers to: This suggests "the breaking point for the economy may come sooner than the Fed and bullsexpect," he says, adding that mortgage delinquencies are also on the rise. Edwards believes the U.S. economy will not be able to cope with normalized interest ratesand offers his clients a scenario, which is pretty much in line with what you would expect froma permabear: "The risk is now, with the tide going out on the equity market that the SR (saving rate)jumps higher, growth flounders, and the iceberg of debt rips open the hull of this supposedlyunsinkable economic ship". (Julien Ponthus) ***** OPENING SNAPSHOT: EUROPE GETS THAT HOLIDAY FEELING (0717 GMT) European stocks are drifting higher in early trade, lifted by a recovery in cyclical sectorssuch as basic resources which came under pressure yesterday. Deal talk is certainly sparking some moves in the autos sector as Renault jumps ona report that it is in talks with Nissan to merge. One area feeling the heat early on is the travel & leisure sector, down 0.5 percentafter Sodexo cut its guidance. Sodexo's shares haven't opened yet, but peers EliorGroup and Compass Group are both down 2.7 percent. Here's your opening snapshot: (Kit Rees) ***** WHAT'S ON THE RADAR FOR THE EUROPEAN OPEN (0642 GMT) Europe’s stocks are likely to enjoy a stronger open on Thursday, building on Wednesday’sdefensives-led recovery from a sharp tech stock sell-off. But the STOXX 600 benchmark is stillhurtling towards its worst quarter in two years, down 5.1 percent since the start of the year. For the FTSE 100, the wounds inflicted by this quarter’s mix of market stress, trade risksand tech stock concerns are even more severe: the leading UK index is on track for its biggestquarterly fall in 6 ½ years (see below). The strengthening sterling has removed a key crutch forthe exporter-heavy index whose stocks have benefited from a weak exchange rate. Liquidity is likely to be lower as traders and investors trickle out for the long weekend. M&A news hasn’t packed up for the weekend yet, however, and the market will be keenlywatching GKN and Melrose as the deadline for shareholders to accept Melrose’s hostile bidexpires at 1200 GMT. CME Group just confirmed its acquisition of UK brokerage services firm NEX Group for about3.8 billion pounds ($5.4 billion). And a report that SoftBank is eyeing up a 25 percent stake inSwiss Re could also move the Swiss reinsurer’s shares. Traders see French food services firm Sodexo dropping 7 to 10 percent at the open after thefirm cut its sales and profit margin outlook, reporting a weaker Q2 than expected. (Helen Reid) ***** KEY EUROPEAN COMPANY HEADLINES (0638 GMT) Here's a round-up of the key headlines which have caught our eye this morning: Swiss Re weighs SoftBank partnership, shares rise Services group Sodexo cuts guidance after weak Q2 performance Facebook cuts ties to data brokers in blow to targeted ads CME Group to buy Britain's NEX for $5.5 billion Fate of GKN hangs in balance as investors decide on Melrose bid Teva wins reversal of U.S. jury's $235 mln GSK drug patent verdict UK drinks wholesaler Conviviality close to administration UK house price growth unexpectedly slows to 7-month low - Nationwide UK car output falls in February as domestic demand slumps (Kit Rees) ***** EUROPEAN STOCK FUTURES MIXED (0610 GMT) As indicated by spreadbetters' calls, stock futures are mixed with Eurostoxx 50 futures up0.3 percent while FTSE and CAC 40 futures stay flat. More deal news just came through, with CME Group confirming it's reached anagreement with NEX to acquire the brokerage group. (Helen Reid) ***** BID DEADLINE FOR GKN, SOFTBANK EYES 25 PCT STAKE IN SWISS RE (0548 GMT) Lots of M&A news on the slate today. It's crunch time for GKN at 1200 GMT, when the deadlinefor shareholders to accept Melrose's 8 billion pound hostile bid for the engineering firmexpires. The result will decide a three-month battle for the company. Failure of the offer would openthe way for GKN to push ahead with an alternative deal struck with U.S. axles and driveshaftsmaker Dana earlier this month to defend itself. Elsewhere Japan's SoftBank was reported by Bloomberg to be eyeing up a 25 percent stake inSwiss Re, which would be worth around $9.6 billion. Talks between the two firms over a potentialdeal to acquire a minority stake have been advancing since last month and are now centering on100 to 105 Swiss francs a share, according to the report. (Helen Reid) ***** MORNING CALL: EUROPEAN STOCKS TO OPEN SIDEWAYS (0533 GMT) Good morning and welcome to Live Markets. European stocks are likely to drift sideways today into the long weekend as tech pressuresease somewhat and liquidity thins out, despite a weaker session in Asia. Asian shares fell overnight, weighed by tech stocks after the sell-off in U.S. techcontinued into the close. Japan's Nikkei rose, however, as a weaker Yen boosted exporter shares. Spreadbetters call the DAX 3 points higher at 11,944, the CAC 40 up 2 points at 5,133, andthe FTSE 100 20 points lower at 7,025. The UK stock index's relative weakness could be down to astronger pound, boosted overnight by the latest GfK survey showing UK consumers were at theirmost confident in 10 months in March. (Helen Reid) *****