Last checked at 
* Europe gradually goes into the black
* STOXX now flat
* Wall Street futures up
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.
WHY IS THE FTSE THE "ORPHAN LEFT OUT IN THE COLD"? (1215 GMT)
This is how analysts at Jefferies have defined the British blue chip index.
"With the S&P 500 closing in on its all-time high, the FTSE 100 feels like an orphan left
out in the cold," they say. The index "seems to be trapped in a range despite the huge external
reflation conditions".
Indeed, things for the FTSE hasn't been great, especially if you compare its performance
with the record highs hit in the U.S. but also with the pan- European index.
Since the beginning of the year, the FTSE performance is down about 19%, far more than the
STOXX 600's 11% slide.
Why is that?
There are the usual problems, including the Brexit never ending saga and the UK problematic
response to COVID-19. But dividend cuts are surely one strong reason for investors' decreased
interest in British blue chips.
A ‘perfect storm’ has hit the payout ratios of FTSE 100 companies," Jefferies says. The
magnitude of the cuts has been worse than in other bourses, with around 3/4 of listed UK
companies cancelling or cutting payouts.
Moving forward, there are some good news for the FTSE: A weaker dollar will help reflate
global trade, while China’s partial recovery helps iron ore prices, Jefferies notes, adding that
also Europe's recovery from the pandemic could also help as UK companies have their largest
overseas exposure to continental Europe.
Another point in favour of the British index, analysts say, is the surge in Brent oil and
copper prices, alongside the bounce back in the housing market, which is holding up better than
feared (at least for now, read more here)
(Joice Alves)
*****
UNEMPLOYMENT LOOMS OVER UK HOUSEBUILDERS' RECOVERY (1156 GMT)
Persimmon is clearly the star of the day, topping the STOXX 600 with a 5% rise as investors
cheer the UK housebuilder's ability to resume dividend payments due to an "excellent" start of
H2 2020.
The mood in the sector had already been beefed up yesterday when property website Rightmove
said Britons had bought a record number of homes between mid July and early August amid pent-up
demand from the lockdown and a desire to leave London.
While the stock and the sector are still way below their pre-Covid-19 peak (about -12% and
-15% respectively) their performance year-to-date is quite impressive: +2% for Persimmon and -1%
for the FTSE 350 household goods index.
That's clearly quite good in comparison with the FTSE 100 which is down 18% since the
beginning of the year.
Anyhow, while analysts hail Persimmon's trading update, many of them also note that the
feared incoming rise in UK unemployment poses a real threat.
"The only thing that could possibly derail their progress is if the fallout from Covid-19
results in the unemployment horror scenarios that many predict", wrote Adam Vettese at
investment platform eToro.
Same feeling from David Madden at CMC Markets: "The acid test will be whether demand holds
up in the months ahead, especially seeing as the furlough scheme will end in October and the
unemployment rate is likely to jump".
The last three months of 2020 Autumn are definitely seen as a possible turning point.
"Demand could well be tested in the autumn when the Government’s furlough scheme comes to an
end and the unemployment rate begins to rise. Typically mounting joblessness and a healthy
property market are not good bedfellows", warns Russ Mould at AJ Bell.
As noted in UBS' side note on its analysis of the stock "Persimmon's profits are sensitive
to house prices, which in turn are affected by supply, demand, interest rates and employment".
Here's Persimmon and the UK housebuilding sector since the beginning for the year:
Here's more reading:
Homebuilder Persimmon reinstates dividend after strong start to second-half:
(Julien Ponthus)
*****
ACTUALLY, TALKING ABOUT VALUE...(1029 GMT)
Value is a popular trade indeed and there's really no shortage of buy-side or sell-side
analysts looking into it.
The daily note for Europe from UBS GWM also takes the view that "the next leg up
in the market may be driven by cheaper sectors that have trailed behind in the rebound, such as
cyclical and value stocks".
Taking that into account, the UBS team of strategists believe U.S. mid and small cap stocks
could be a good area to look into as the economic recovery firms up.
"The UK is another of our most preferred equity markets, as it is attractively positioned
for the upside scenario due its skew toward value stocks", they add.
Here's how growth has outperformed value in the U.S. so far:
(Julien Ponthus)
*****
ANOTHER VALUE CALL (0923 GMT)
There's been quite a lot of calls to buy value these days as investors scramble to assess
which area of the market the equity rally is gonna lift next.
Value is traditionally a laggard when the bulls got into a frenzy after a market crash but
usually follows growth and other risk-on stocks upwards as the economic recovery gradually
unfolds.
So far, value stocks have been left behind in the post COVID-19 shock rally so it is a
tempting trade indeed.
"Value nearly always does well in an economic recovery period, especially if that recovery
happens at a time when value is relatively attractively priced, which it most definitely is
today", writes Hugh Sergeant, a fund manager at River and Mercantile.
According to Sergeant, these 10 key points can attest it is the right time to buy value:
(Julien Ponthus)
*****
OPENING SNAPSHOT: PANDORA, BHP AND PERSIMMON (0735 GMT)
Escalating U.S.-China tensions and a batch of lacklustre earnings results pushed European
shares into negative territory.
The pan European index is down 0.6% with financial services and media sectors
leading the losses. British blue chips are down 0.8%.
Danish Jewellery maker Pandora shares tumbled more than 7% as it said the
current level of store traffic is "well below" the level before the lockdowns.
Miner BHP Group was down 2.5% after reporting a 4% drop in annual profit that
missed analysts' estimates, while retailer Marks & Spencer gained 1.6% after saying it
plans to cut a further 7,000 jobs.
After a surprise dividend announcement, shares at UK homebuilder Persimmon jumped
4.5% to the top of the FTSE 100 index.
Meanwhile, Clariant jumped 5.6% on reports of private equity M&A interest, according
to traders.
(Joice Alves)
*****
ON OUR RADAR: PANDORA, PERSIMMON, BHP AND M&S (0635 GMT)
European futures are taking a hit this morning as investors in the region focus on rising
tensions between the world's largest economies.
Some corporate headlines are also weighing on the mood with Danish Jewellery maker Pandora
saying new lockdown measures in August had negatively impacted consumer sentiment.
It expects H2 to be better for business.
British homebuilder Persimmon posted a 42% drop in H1 profit, as it sold fewer homes
because of the lockdown, but the UK's second-largest homebuilder announced an interim dividend.
British retailer Marks & Spencer said on Tuesday it plans to cut 7,000 jobs over the
next three months after reporting a 19.2% slump in sales for the 19 weeks to Aug. 20.
BHP Group's, annual profit dipped 4.3%, as COVID-19 disruptions
overshadowed firm iron ore prices and signs of a rebound in demand from China. The company said
it will put its Australian Bass Strait oil and gas assets up for sale.
More M&A: French utility company Veolia is in talks to buy sanitation networks
maintenance company Suez RV OSIS for around 298 million euros.
On a brighter note, Norwegian alcohol producer and wholesaler Arcus posted a
sharp rise in its Q2 profit, as COVID-19 travel restrictions prevented many consumers from
buying cheaper wine and liquor abroad.
In the health care space, Evotec shares are up 3.2% in early trade after the drug maker
announced an alliance with Novo Nordisk.
(Joice Alves)
*****
MORNING CALL: TRADE TENSIONS OR TECH RALLY? (0536 GMT)
European shares are seen opening lower as U.S.-China tensions weighs on a global optimism
created by the U.S. tech rally.
While in Asia investors opted to focus on Wall Street's tech-driven rally in Europe
investors seem more concerned with the growing tensions between the world's two largest
economies, with European futures pointing to start of the day in the red.
The Nasdaq surged to a record high close and the S&P 500 approached its own record level,
both lifted by tech stocks.
Meantime, Trump said the U.S. will further tighten restrictions on China's Huawei
Technologies Co [RIC:RIC:HWT.UL], aimed at cracking down on its access to commercially available
chips.
Financial spreadbetters at IG expect London's FTSE to open 10 points lower at 6,118,
Frankfurt's DAX to open 3 points lower at 12,918 and Paris' CAC to open 5 point lower at 4,967.
(Joice Alves)
******
