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* European shares lower on trade caution
* DAX hits lowest in over 5 weeks, off lows on strong ZEW
* Ted Baker down as much as 35% after outlook cut
* Eyes on Deutsche Bank strategy update, shares turn lower
* Asia shares fall slightly as trade deadline looms
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: danilo.masoni.thomsonreuters.com@reuters.net
UK ELECTION: THE RETAIL GLOOM BEFORE THE STORM (1539 GMT)
With bookies giving a 75% chance of a Tory majority emerging from Thursday's election you
would expect shares in British supermarkets to be looking a bit more forthcoming at the moment.
"In the event of a Conservative majority government, we would expect sterling to rally",
Colm Harney, a UK equity analyst at Sarasin & Partners says, adding that "as a result, large-cap
UK domestically-focused names (like Tesco!) would benefit".
Well the UK supermarket/retail index is down 1.4%, falling about 4 times harder
than the FTSE 100 (-0.3%).
So, why the long face?
Well anyone in the UK counting down the days til they can bid their European neighbours
adieu won't be happy to hear that the big four supermarket groups - Tesco, Sainsbury's
, Asda and Morrisons - lost market share to German-owned discounters
Aldi and Lidl in the 12 weeks to Dec. 1, according to Kantar.
To make matters worse, foreign competitors outperforming British retailers on their home
turf comes at a time when the UK high street is struggling. Debenhams? Mothercare anyone?
British retailers have so far had mixed results in their busiest and most important trading
period of the year.
Josh Mahoney, a senior market analyst at IG, said that grocers will be hoping consumers are
delaying their Christmas purchases, rather than simply cutting back on expenses.
(Elizabeth Howcroft, with Julien Ponthus)
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SPARE A THOUGHT FOR THE UK ECONOMY(13.31 GMT)
Markets barely batted an eyelid at the UK economic data today. It was as expected: bad.
GDP didn't grow in the three months to October, and its year-on-year growth is at its
slowest in nearly seven years. Manufacturing output was slightly better than expected but
construction output was two percentage points worse.
The FTSE 100 didn't react although the midcaps did go up by a miniscule
0.16% in the four minutes after the data came through. The pound's move was imperceptible
.
The reason for the lack of reaction in markets? Data has got to be seriously shocking to
have an impact this close to a general election. Attention's more likely to be focused on the
YouGov MRP poll out at 10.00 GMT tonight.
Ask anyone the reason for the poor data and they'll blame the usual culprits: Brexit and the
global economic slowdown.
"The UK's place in the world remains highly uncertain. It is clear Brexit and seismic shifts
in global policy have had a substantive impact on the economy, and that is before we have even
left yet," said Hinesh Patel, portfolio manager at Quilter Investors.
(Elizabeth Howcroft)
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DEAR SANTA PLEASE BE KIND... (1223 GMT)
... and fulfil these two wishes for investors, so that they could have a happy and high
holiday season.
1. A happy pill to get over the 3-1/2 year long Brexit hangover
2. A painless vaccine shot to protect U.S.-China trade
"I'm so thankful that the Brexit tedium is near its end, now if we can only put the US-China
trade monotony in the rear-view mirror so we can all enjoy a high holiday season," says Stephen
Innes, chief Asia market strategist at AxiTrader.
But volatility is sitting quietly ahead of this eventful week. The calmness does make some
investors nervous.
"Volatility in the markets is low, with investors keeping their powder dry ahead of several
risk events such as central bank meetings in the US and Europe, UK elections and the next tariff
deadline on the 15th," Carlo Alberto De Casa, chief analyst at ActivTrades, says.
Checkout UK's performance in USD terms, it is FLAT!
(Thyagaraju Adinarayan)
*****
AN UNCONTROVERSIAL TRILLION-DOLLAR-PLUS NATIONALISATION? (1128 GMT)
Labour's push to bring nationalisations back into mainstream politics ahead of UK Dec. 12
elections has triggered its fair share of controversies.
In particular, Jeremy Corbyn's surprise plan to take BT's network Openreach into public
ownership to provide free broadband for all, went far beyond the rail, utilities and mail
nationalisations expected by investors.
Among the worries triggered by this electoral promise was obviously its price tag: Labour
said it would cost about 20 billion pounds but the chief executive of BT priced the cost for
taxpayers as much as 100 billion pounds.
If that kind of money gets you worried, then how would a trillion dollar feel? Or two? Or
ten?
Yes, the world's biggest nationalisation (it's a bit of a stretch calling it that) ever is
arguably taking place in the United States and isn't spooking investors.
"Under current projections, the Fed is expected to have supported the repo market to the
tune of over $11.5 trillion by the end of January", writes Joshua Roberts, Associate Director at
JCRA.
"The price of stability has been the effective nationalisation of a large part of the
market, with risk once more passing from the private sector to the taxpayer", he adds.
One tricky issue of the so-called repo nationalisation, is, like with quantitative easing
and negative rates, implementing a credible exit strategy.
"As with QE, though, this 'market maker of last resort' role may prove to be a double-edged
sword that is difficult to put down", Robert believes.
(Julien Ponthus)
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TELECOMS: IT "SUCKS" INDEED (1053 GMT)
At the start of 2018 a trader at a European bank bluntly gave us his view on telecoms,
saying "without M&A, the sector sucks".
Nearly two year later it looks he was right: there's been no meaningful dealmaking in the
sector except for some tower deals and their overall performance remains a rather poor one.
Plagued by the usual problems - competition, sluggish economy and costly network upgrades --
the telecoms index is up a only 1.1% so far this year.
That's a meagre return compared to the +19% made by the STOXX 600 year-to-date.
But how about next year. Will it be any different?
Barclays analysts led by Mathieu Robilliard are downbeat.
"For 2020, we expect trends to be largely similar to 2019... The sector has underperformed
YTD and remains at the low end of its trading range (absolute and relative)," they say.
"With no change in fundamentals expected in 2020 and no structural evolution (consolidation,
regulation), the sector's attractiveness remains very dependent on top-down sentiment (defensive
in case the macro outlook deteriorates)," they add.
(Danilo Masoni)
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OPENING SNAPSHOT: STOXX DOWN, TED BAKER TANKS, DEUTSCHE BANK UP (0828 GMT)
European shares are off to a waker start today with main benchmark indexes falling between
0.2% and 0.6% and most sectors trading in the red. Caution ahead of this week's big events --
FOMC, ECB, UK vote and Dec. 15 trade deadline -- is tangible.
Among individual stocks, UK small cap Ted Baker has fallen as much as 35% to 16-year
lows after the UK fashion retailer cut its outlook once again, suspended its dividend, and
announced the resignation of its CEO and chairman. The stocks is last down 16%.
Elsewhere eyes are on Deutsche Bank, which is rising more than 1.1% as the
troubled German lender is giving a strategy update for investors.
Still on the STOXX 600, Colruyt is getting a nice boost, up 6.7%, after
well-received H1 results, while Tullow Oil is in rebound mode after taking a 70% hit
yesterday after scrapping its dividend and announcing the exit of its CEO.
Here's your opening snapshopt:
(Danilo Masoni)
******
WHAT WE'RE WATCHING AT THE OPEN (0750 GMT)
European shares are expected to open little changed as markets keep moving sideways ahead of
U.S. and euro zone central bank meetings, the UK election and the tariff deadline this week.
Futures on main euro zone benchmarks were led lower by a 0.2% drop in DAX futures, while FTSE
futures edged up 0.1%.
On the corporate news front, Deutsche Bank shares rose 0.9% in early trade after
the German lender reaffirmed its cost targets and said it would report a CET 1 ratio above 13%
for end 2019.
Still in Germany, shares in Deutsche Boerse were seen falling 1% after the
Sueddeutsche Zeitung reported late on Monday that finance minister has drawn up a draft law that
envisages introducing a financial transaction tax in 10 European Union countries.
Eyes also on French car parts maker Valeo which said it planned to double its free
cash flow generation from 2020 to 2022 to reach between 1.3-1.5 billion euros.
Elsewhere there could be some big moves among small and mid caps.
Ted Baker is seen falling 20-25% after its CEO and chairman stepped down and the
fashion retailer cut its full-year outlook again and suspended its dividend.
Computacenter instead could get a 5-10% lift after the company said trading result
will be ahead of market expectations.
(Danilo Masoni)
*****
MORNING CALL: MIXED (0631 GMT)
European shares are expected to open mixed this morning as investors stay on the sidelines
ahead of the Dec. 15 deadline for new U.S. tariffs on China imports to kick in, with the general
election in the UK on Thursday and central banks meeting also making for the cautious mood.
Spreadbetters at IG expect London's FTSE to open 7 points higher at 7,241, Frankfurt's DAX
to open 12 points lower at 13,094 and Paris' CAC to open 4 points lower at 5,833.
Over in Asia, shares eased slightly, while Wall Street pulled back overnight ahead of the
tariff deadline.
(Danilo Masoni)
*****
(Reporting by Danilo Masoni, Joice Alves, Julien Ponthus and Thyagaraju Adinarayan)
