Marks & Spencer Share News (MKS)

* European shares hit record peak at the open, last up 0.4%
* U.S. and Iran signal desire to avoid further conflict
* China to sign U.S. trade deal in Washington next week
* UK retailers in focus: M&S down 9% after Xmas update, Tesco up
* Tech leads broad based rally, oil stocks underperform

Welcome to the home for real-time coverage of European equity markets brought to you by Reuters
stocks reporters and anchored today by Danilo Masoni. Reach him on Messenger to share your
thoughts on market moves: rm://danilo.masoni.thomsonreuters.com@reuters.net

WILL THERE BE A RUDE AWAKENING? (1506 GMT)
The ability of markets to brush off risks is puzzling many who think that with equities back
at their record peaks, the level of optimism is somewhat excessive.
No surprise then that some observers have started to ponder the chance of a harsh
correction.
"It's worth recalling that awakenings from this type of idylls can be quite abrupt, as
happened in late January 2018 for example," says Giuseppe Sersale, fund manager and strategist
at Anthilia in Milan.
For the purpose he dusts off the fourth rule of Wall Street veteran Bob Farrell which goes:
"Exponential rapidly rising or falling markets usually go further than you think, but they do
not correct by going sideways."

Reminder: in January 2018 the S&P 500 fell more than 6% in just two days of trading,
something that has happened only three other time over the last decade -- in August 2018, and
in October and August 2011.
(Danilo Masoni)
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ATTENTION ATTRITION: EURO ZONE STOCK MARKETS SHRINK (1350 GMT)
"For the first time in the 30 years covered by the ECB statistics, the annual net flow of
listed shares in the Euro Area is negative", the chairman of France's financial watchdog told a
press conference yesterday.
Robert Ophele warned that the stellar returns of European benchmarks in 2019 had been
achieved during "an unprecedented disengagement from financing via the issue of listed shares".
"Companies are taking advantage of the low interest rates and taking on more debt" for capex
and buybacks, the head of the AMF said, adding that "IPOs are rare, buyouts are accelerating".
Ironic to think that QE and negative rates may both be responsible for the longest bull
market in history and a possible attrition of the overall stock market.
Actually, that kind of makes sense.
Anyhow, from the ECB's Statistical Data Warehouse, here's the "Annual growth rate of listed
shares issued by euro area residents":


You can find a link here: https://bit.ly/2sPEoPv
You can access the press release of the AMF here: https://bit.ly/2tMpmK8

(Julien Ponthus)
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WHAT IF U.S.-IRAN TENSIONS ESCALATE AGAIN? HERE'S A SHOPPING LIST... (1338 GMT)
When the U.S. killed Iran's top commander last week it did feel like 2020 was off to a rocky
ride and investors should worry about implications from oil price shoot up.
Yes, that would've been the case several years back, now it's far less damaging.
Credit Suisse points out that this could be positive for the U.S., which is a net oil
exporter (thanks to shale production). No wonder S&P 500's record run hardly took a pause
despite those noises.
While the impact is expected to be minimal on global equities, Credit Suisse's tactical
indicators suggest its time for consolidation.
The Swiss bank however suggests buying into these names in case there is an escalation:
* Russian equities: "Russia not only benefits from a higher oil price but its supply could
replace disrupted Middle East supply and, into a rising Middle East conflict, there may be some
rapprochement between Russia and the West."
* European integrated oil companies: Shell and Total
* Defence companies: "Defence spending is well below its historical average, and has to rise
12% in aggregate if all NATO members were to meet the 2% of GDP target." CS sees potential
upside for Northrop Grumman, Raytheon, Dassault Aviation and Safran



(Thyagaraju Adinarayan)
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2019: ANNUS HORRIBILIS FOR STOCK PICKERS (1208 GMT)
Beating the stellar performance of U.S. equity markets in 2019 was close to mission
impossible in 2019, Chris Bennett, Director, Index Investment Strategy at S&P Dow Jones Indices
say in a statement.
"Early indications point to a rough year for stock pickers, with less than 1/3 of active
U.S. equity managers estimated to have finished 2019 ahead of their benchmarks", a close to
impossible task this year, he argues.
The outperformance of certain sectors like tech or the sudden reversal of others like
healthcare made it difficult to beat the overall index.
The fact that other asset classes yielded lower returns than stocks also stung.
"In general, there are three common ways by which an active portfolio can outperform its
benchmark: over or under-weighting benchmark stocks, by tilting towards factors or sectors, or
by venturing beyond the benchmark’s constituents to hold anything from cash to commodities",
Bennet wrote.
"Each of these options was uncommonly disadvantaged last year".
Looking at the total return chart below, it's hard to see indeed how to beat the S&P 500
through anything other than a lucky or wise selection of outperforming stocks.

(Julien Ponthus)
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THINGS TO BUY AND SELL IN THE UK (1055 GMT)
Barclays has come out with a list of UK stocks to buy and sell so let's quickly get down to
it:
BUYS
* 4imprint (52% upside): This small-cap promotional products maker has a strong
track record of earnings growth with 18% 10-year EBIT CAGR, Barclays says
* Ashtead (33% upside): With price-to-earnings ratio at just 12, Barclays likes this
UK blue chip for its "successful strategy, ability to execute in the LT (long-term)"
* BP (29%): Oil giant is "on track to meet and potentially exceed its 2021 targets"
* Vodafone (29%): "the recently declared plan to monetise its European towers is a
clear positive"
* Provident Financial, Glencore, British American Tobacco,
Astrazeneca and Informa are its other favourites with expected upside between
8%-25%.

SELLS
* Hammerson (30% downside): Falling value of UK shopping centres; Issues that drove
shares lower after H1 are likely to have worsened
* Rightmove (-30%): Strong rally last year, UK agents business will not grow rev
more than mid-single digits on an organic basis in 2020
* AG Barr (-15%): "we remain sceptical Irn Bru can drive sustainable top-line
growth"
* Virgin Money (-10%): 80% rally from Oct lows, shares no longer cheap, refocus on
fundamentals to weigh on returns

(Thyagaraju Adinarayan)
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THE ART OF SHORTING THE DEAL (1040 GMT)
Nothing like M&A to spice things up uh? Well think again.
According to data compiled by Willis Towers Watson and Cass Business School, more often than
not, M&A turns out be quite a bad deal.
"Acquirers worldwide underperformed the Global Index by -5% over the past year for deals
valued over $100 million", the advisory firm said in a press release.
It's been three years now that they have failed to add value and the global M&A and there's
no turnaround in sight, the Willis Towers Watson statement adds.
So maybe M&A is more about shorting the art of shorting the deal rather than of making it or
worse, cheering it.
Below you can see their chart and how deals dented value over the last three years.

(Julien Ponthus)
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RAGING BULLS AIN'T GETTING OLD (1019 GMT)
It is getting hard to understand what's driving markets higher as skyrocketing valuations,
World War III like situations, slowing global economy and the longest bull run seem to be
overlooked.
Crisis-hardened markets have learned to look past military flare-ups
U.S. and European stock markets are at record highs and they're scaling fresh peaks day in
and day out after rising more than 20% last year, which led to a sharp jump in price-to-earnings
ratio (valuation score).
What drove P/Es 2019?
"Central bank actions drove up to 10 percentage points of the rally by our estimates, while
pricing out growth fears drove 6pp, with the unexplained portion likely due to pricing out that
overshoot in '18," UBS strategists say.
So do equities typically sell off after a stellar P/E expansion, given how expensive
they're? Not quite.
UBS says historically large P/E expansions have been followed by 15% median annual returns
with just 3 down years.


(Thyagaraju Adinarayan)
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SEMIS BACK IN VOGUE (0848 GMT)
Europe's tech stocks are back in vogue after a subdued start to the year due to geopolitical
tensions with the STOXX tech index hitting its highest level since May 2001.
Semiconductor stocks are having a gala time this morning, mirroring a similar move in the
U.S. as investors chase risky assets as U.S.-Iran tensions abate.
Infineon, Aixtron (also helped by Bankhaus Lampe upgrade), AMS
, STMicro and Dialog are some of the top movers this morning.
"All stocks in the (semis) space have potential for estimate upgrades; hence it is difficult
to be negative on any of them," JPM tech analyst Sandeep Deshpande says.
Deshpande believes the sector will be driven by 5G in the near-term with automotive recovery
driving longer term growth.
Looks like the tech sector is all set to continue its dominance in the 2020s as well.


(Thyagaraju Adinarayan)
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NEW RECORD FOR STOXX, M&S TOP LOSER, TECH SHINES (0834 GMT)
The STOXX 600 quickly managed to climb to a new record peak at the start of trading
this morning with investors pouring money back into risky assets after both Washington and
Tehran reinforced the perception that there will be no immediate escalation in tensions.
There were some weak spots however, especially in UK retail after a number of companies in
reported results that shed light on how they performed during the crucial Christmas period.
Shares in Marks & Spencer, one of the best known names in British retail, was the
biggest loser on the pan-European index, down more than 7% and on track for its worst day since
May 2019 following its Christmas sales update.
Greeting card retailer Card Factory suffered a 20% drop to a new record low after
it warned over its annual core profits, but Tesco, the country's No.1 retailer, rose 2%
after saying it performed well in a subdued Christmas market.
Tech was leading sectoral gainer, up 1.2% to its highest level since May 2001, in a
broad based rebound that saw only energy trading in the red, down 0.3%, as crude prices
retreated as tensions in the Middle East ease.

(Danilo Masoni)
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ON OUR RADAR AT THE OPEN: UK RETAILERS (0752 GMT)
Easing U.S.-Iran tensions are set to give a boost to European shares this morning with
futures on main regional benchmarks up around 0.5-0.9% and with investors' attention gradually
shifting to the start of the Q4 season which should mark the end of a profit recession.
In corporate news, eyes on UK retailers after following results from Marks & Spencer
and Tesco and a warning from smaller Card Factory.
Marks & Spencer reported a slight rise in underlying sales in its Christmas quarter,
indicating its latest attempt at a turnaround is showing some tentative progress. One trader
however says gross margins were at the lower end and sees its shares opening down 2%.
Mixed calls instead for Tesco which ground out a 0.1% rise in underlying sales in its home
market during what it said was a "subdued" Christmas for consumer spending.
Greeting card retailer Card Factory warned over its annual core profits, blaming the general
election and weak consumer confidence over the Christmas period. Its shares look set for a heavy
slump with one trader expecting an opening drop of as much as 20%.
Still in earnings, chemicals maker Sika reports record annual sales of 8.1 billion
Swiss francs, but the 16.3% growth rate fell short of analyst expectations.
Sodexo said Q1 revenue grew 7.1% to 6.08 billion euros, benefiting from its
successful partnership for rugby World Cup, while Norwegian seismic surveyor TGS posted
lower-than-expected Q4 revenue even though it said Q1 2020 was "promising".
According to the latest I/B/E/S Refinitiv data, companies on the STOXX 600 are expected to
report a 2.5% rise in earnings, the best quarterly performance for the region since Q3 2018.

A strategic alliance with Bayer could give a lift to Evotec shares,
which were up nearly 3% in early Frankfurt trade.
Eyes also on Atlantia after Italy's transport minister told a newspaper that the
group must increase cuts in tollway fees proposed as part of a settlement to avoid a revocation
of its Italian operating licence.
Here's a headlines roundup:
Tesco reports 0.1% rise in UK Christmas sales
M&S says turnaround showing progress as Christmas sales edge higher
Card Factory expects subdued Christmas performance to hurt core profit
Sodexo's first-quarter revenue gets a boost from rugby World Cup
Seismic surveyor TGS Q4 revenue misses forecast
Julius Baer contests renewed claim by liquidator of Lithuanian firm
Swaak to succeed Van Dijkhuizen at ABN Amro
Vivendi files request to suspend freeze on Mediaset stake
Italian minister says Autostrade tollway offer "insufficient"
Italy, Autostrade exploring ways to resolve concession stand-off -sources
Fund services group Zedra to buy BNP Paribas Singapore Trust Corporation Ltd
Thailand's PTT says its retail unit not interested in bidding for Tesco's Asian business

Cancom CEO steps down prematurely
(Danilo Masoni)
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MORNING CALL: HIGHER AS MIDEAST TENSIONS EASE (0630 GMT)
European shares are set to extend yesterday's mild closing gains in relief to signs there
will be no further escalation in tensions between Washington and Teheran.
In his speech on Wednesday, Trump tempered days of angry rhetoric and suggested Iran was
"standing down" after it fired missiles at U.S. forces in Iraq, as both sides looked to defuse a
crisis over the U.S. killing of an Iranian general.
Spreadbetters at IG expect London's FTSE to open 16 points higher at 7,591, Frankfurt's DAX
to open 86 points higher at 13,406, and Paris' CAC to open 27 points higher at 6,058.
(Danilo Masoni)
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(Reporting by Danilo Masoni, Joice Alves, Julien Ponthus and Thyagaraju Adinarayan)