Last checked at 
* European shares recover: STOXX 600 up 1.1%
* Healthcare stocks lead gains in Europe, banks down
* U.S. futures higher, Nasdaq up over 3%
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TRENDS, NO MATTER WHO SITS IN THE WHITE HOUSE (1312 GMT)
Beyond a volatility burst, it's quite hard to get a sense of
what's to come with the U.S. presidential election impossible to
call so far.
Yet, many analysts stress that a lot of on-going structural
trends are here to stay no matter who sits in the White House.
UBS keeps a positive view on stocks over the medium term as
it expects “an interim stimulus bill to be signed into law
regardless of who is ultimately elected and a vaccine to be
rolled out by the second half of 2021.”
UBS also believes in a weak dollar moving forward as,
“regardless of who sits in office, the extent of the U.S.'s
indebtedness is likely to come into focus, and the U.S. has also
lost its interest rate advantage over other major currencies".
Same take on a weak dollar on a positive view on equities
from Rick Lacaille, Global Chief Investment Officer at State
Street Global Advisors:
"The monetary and fiscal stimulus that we’ve seen so far to
counter the pandemic is yet to work its way fully through the
system, and we expect that it will be one of the big influences
on investment conditions in the next 12 months."
Zehrid Osmani, manager of Martin Currie Global Portfolio
Trust also doesn't expect the big ongoing structural themes to
change, whoever wins.
"We believe that no matter which candidate ends up in the
White House, infrastructure spend will be an important policy
initiative to reignite the economic growth post pandemic", he
said adding that the pandemic also means that "healthcare
infrastructure will likely be an important recipient of the
fiscal spending initiative".
"Green initiatives are likely to remain an important
long-term structural opportunity, even if this would be more of
an emphasis for a Biden rather than a Trump administration –
that said, it is ultimately a long-term trend unlikely to be
derailed, no matter who wins the US election".
(Stefano Rebaudo and Julien Ponthus)
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TRUMP CAN ACTUALLY CREATE ESG BUYING OPPORTUNITIES IN EUROPE
(1205 GMT)
As we just said in our previous post, now
investors don't look over the moon for Biden's stocks basket,
AKA the European shares that have potential to do beautifully if
the democrat candidate wins the U.S. election.
Investors expected that a blue sweep would bring wider
regulatory reform in the healthcare space and a strong green
push. But as uncertainty around who is going to get the big job
at the White House is seen lasting a few days, Europe's
healthcare index jumped as much as 3%, while energy
stocks as well as utilities dropped 1.5% and
0.3%, respectively.
As investors start to unwound their Biden bets, Europe's
largest asset manager is in the market for buying opportunities
among some of Europe's top names in the ESG space.
"As we woke up this morning, the probability of the blue
sweep is significantly reduced. The reaction is positive for
healthcare and negative for some of the green renewable
companies," Kasper Elmgreen, Amundi's head of equity platform,
just told us.
"The volatility that we see now is an opportunity for us,
because sometimes we see great companies come out of favour and
it's such an opportunity to pick them up".
"There are many companies in Europe that have the technology
and solutions to deal with the challenges of the ESG," which is
a global long-term problem, Elmgreen adds.
(Joice Alves)
*****
TRUMP'S BASKET IN EUROPE IN BETTER SHAPE THAN BIDEN'S (1116
GMT)
It may not be the end of the world for European equities
after all if Trump doesn't get the full defeat markets were
betting on just yesterday. If you look at price action in Europe
as U.S. vote counting continues, the picture that emerges is
blurred.
After initially selling off as investors started to unwound
their Biden bets like green and infrastructure plays, the STOXX
600 has managed to recover helped by gains in shares
from sectors like healthcare, defence or luxury, which are seen
better off under a Trump win.
And these gains have helped the pan-European benchmark rise
as much as 1% at one point, having lost 1.3% in early trade. The
index was last up 0.3% on the day.
"Markets can live with either candidate," said Francois
Savary, CIO at Prime Partners in Geneva. "The scenario they
don't want are legal problems over the outcome and significant
political unrest".
"In terms of stocks, I would be more worried about tech with
Biden and healthcare with Biden, under a Trump victory investors
should reconsider exposure to oil as there would be no chance of
the U.S. moving to cleaner energy," he added.
Below you can see two sets of stocks to own for the possible
U.S. vote outcomes, courtesy of Jefferies. As you can see the
Trump basket looks to be doing better then the Biden one, even
though both show mixed performances.
(Danilo Masoni)
*****
A DIVIDED U.S. ADMINISTRATION? WE CAN COPE WITH IT (1046
GMT)
Financial markets' volatility is expected to stay high until
the outcome of U.S. elections is clear as investors worry more
about uncertainty than about a divided administration.
"The real outlier may in fact be the unclear, disputed
election, hanging in the courts for multiple weeks," according
to Jefferies.
"The Bush-Gore saga saw markets sell off by 8% until
resolved," a Jefferies research note recalls.
But a divided administration, such as Joe Biden president
with a Republican Senate or Donald Trump with a Democratic
Senate, shouldn’t weigh on financial markets.
The U.S. “has regularly faced this kind of situation,” it
adds.
“Tweets might be dialled up or down, bipartisanship easier
or harder to achieve, and the pace of reform on healthcare,
renewables and taxation accelerated or slowed, but fundamentally
these are outcomes which likely leave the market broadly calm.”
(Stefano Rebaudo)
*****
BRACE FOR A BUMPY RIDE (0938 GMT)
Let’s face it, volatility could stay high at least until the
outcome of U.S. presidential elections is clear and this could
take some time.
Barclays which had already warned about a delayed outcome
announcement, says that “uncertainty could persist for an
extended period of time, similar to 2000, and increases the
possibility the result will be challenged.”
“Recent rotation, which saw bond yields rising and value
outperforming along with emerging markets could be halted for
now,” a Barclays note says.
“Prolonged uncertainty and a legal dispute could be a
short-term negative for risk assets, in our opinion, although
they may not come as a complete surprise,” it adds.
(Stefano Rebaudo)
*****
OPENING SNAPSHOT: BIDEN BETS UNWINDING (0830 GMT)
Growing uncertainty surrounding the U.S. elections' outcome
has resulted in a clear risk-off start in Europe with many Biden
bets unwinding as the prospect of a blue wave evaporated
overnight as Trump did better than expected by the polls.
The STOXX 600 is down 0.4% in early deals, even though
losses are not as pronounced as those recorded earlier by index
futures after Trump claimed that he had won the U.S. election
even though millions of votes were still uncounted.
Banks and autos are the leading sectoral
fallers while stocks such as wind turbine makers Vestas
and Siemens Gamesa or Heidelberg Cement,
seen as winners under a Democrat policy change in the US, are
posting heavy losses.
Healthcare and tech are both outperforming.
(Danilo Masoni)
*****
ON OUR RADAR: NO REFLATION TRADE FOR TODAY (0727 GMT)
The U.S. election is too close to call at the moment and
after yesterday's reflationary binge it now looks markets may
have to deal without that type of trade as investors price out
the chances of a clear cut Biden win over Trump.
As a result banks could come under pressure after a two-day
rally and Europe as a whole could underperform tech-heavy Wall
Street, given its higher gearing towards banks and value stocks.
No surprise then that early indications show European
futures falling whereas Nasdaq futures are up around 2%.
"Well there is some unwinding of yesterday’s quite full-on
pro-reflation trade meaning that bond yields are falling and
tech heavy indices are leading... European and Asian markets are
relatively muted in the wider scheme of things," says Chris
Bailey, European strategist at Raymond James in London.
And Ian Williams, economics & strategy research analyst at
Peel Hunt adds: "The 'Democratic sweep' thesis now appears dead,
so the immediate market impact is likely be lower Treasury
yields, and for equity market leadership to remain with quality
growth rather than cyclical value."
Besides that there are some earnings updates to watch.
France's second-biggest listed bank Credit Agricole
reported an 18.5% drop in Q3 profit, in line with
expectations, as strong results in capital market activities
helped soften a blow from bad loans provisions.
BMW said Q3 profit rose almost 10% thanks to
rebounding Chinese demand for luxury cars and it reiterated its
outlook, even as a wave of coronavirus infections continues to
sweep Europe and the United States. Its shares fell 3.5% in
early trade.
Zalando shares were up over 1% in premarket trade
after the German online fashion retailer said it was well
prepared for a second coronavirus wave after it reported
better-than-expected profitability due to an "exceptionally"
strong spring and summer season.
Phone tower operator Cellnex said it was
considering up to 11 billion euros worth of potential
investments and confirmed it expects its bottom line to remain
negative in the coming quarters even as core earnings rise.
Meantime in the UK, retailer Marks & Spencer on
slumped to a H1 loss, the first in its 94 years as a publicly
listed company, after clothing sales were hammered by the
COVID-19 pandemic.
(Danilo Masoni)
*****
EUROPE WAKES UP WITH U.S. ELECTION DOUBTS (0622 GMT)
European stock futures aren't in great shape this morning as
hopes of a clear-cut Biden victory in the U.S. presidential
elections faded overnight with Trump doing better than expected
by the polls, possibly paving the way for a contested election.
Trump took the lead over Biden in the vital battleground of
Florida and other U.S. swing states, but Biden pinned his White
House hopes on Arizona and a "blue wall" of three Rust Belt
states that could take days to count their votes.
European stock futures underperformed U.S. ones but trading
remained pretty volatile, reflecting growing uncertainty.
EuroSTOXX 50 futures were last down 0.2%, DAX
futures were flat and FTSE futures added 0.2%.
A Biden win is viewed as potentially underpinning European
equities because of expectations of a bigger stimulus package
and better trade relations with Washington.
(Danilo Masoni)
*****
