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SELL THE LOCKDOWN, BUY THE PMIS (0955 GMT)
There's an undisputable mood swing across equity markets in
Europe with the STOXX 600 up about 1% and most regional bourses
well into the black despite new lockdowns being introduced,
notably in England.
One possible reason for this is the arguably reassuring
batch of data for October which came after earlier positive
indicators from China.
"The positive session has seen markets in Europe recover
from an early negative start, to push into positive territory,
helped by better than expected manufacturing PMIs which are
helping to offset concerns over the prospect of, at best, a
flat-lining economy as we head into year end", wrote Michael
Hewson at CMC Markets.
Manufacturing growth in the euro zone soared in October
driven by a buoyant Germany: IHS Markit's final Manufacturing
Purchasing Managers' Index climbed to 54.8 in October from
September's 53.7, its highest reading since July 2018 and ahead
of the 54.4 flash estimate.
So, one reading of today's market price action is that
investors are buying the PMI after having already sold the
prospects of new social restrictions.
"The main European market indices gave a relatively muted
reaction to the latest lockdown restrictions in England,
Portugal and Austria as arguably these measures were widely
expected by investors,” wrote Russ Mould at AJ Bell.
One has to note though that a lot of market action is about
the lockdown.
“Drilling down into the UK equities space, it is clear to
see that investors are sifting through the market looking for
lockdown winners and dumping lockdown losers", Mould added.
There is indeed a clear arbitrage between online retailers
like Ocado (up 9%) and say airlines, like BA owner IAG, losing
over 2%.
"The new lockdown in England is a big problem for some and
good news for others", summed up Neil Wilson at Markets.com.
(Julien Ponthus)
*****
OCADO SHINES AS NEW LOCKDOWN TAKES ITS TOLL (0836 GMT)
England's new lockdown seems to be confirming 2020's winners
and losers: lockdown winner Ocado is at the top of the STOXX 600
with a 6.5% rise after raising its EBITDA guidance for the year.
Another popular stock, Just Eat, is up 2.9%.
On the downside, it was also predictable but airlines are
sharply down with IAG losing 5.5%, Easyjet 6% and Ryanair 1%.
The whole Travel and Leisure space is suffering with for
example CineWorld losing over 8%.
Among regional bourses, London's FTSE 100 is losing 0.3% but
the midcap FTSE 250 is seeing its losses climb to 0.9%.
Frankfurt's DAX is one of the only trading centers to in the
black up 0.1%.
(Julien Ponthus)
*****
ON THE RADAR: NO GAME CHANGER (0730 GMT)
Futures are still showing no clear direction at the moment
and sentiment seems as undecided as it was an hour ago.
There's nothing much in the flow of corporate news that
would provide a game changer even if Sunday's announcement that
Britain's health regulator had started an accelerated review of
AstraZeneca's potential coronavirus vaccine is obviously good to
take.
There's quite a lot of activity in the sector which has
outperformed the market during the COVID-19 crisis but is still
down about 9% year-to-date.
French healthcare group Sanofi made a 308 million euros
takeover offer worth for smaller peer Kiadis while Swiss
drugmaker Roche ROG.S won the European Commission's go-ahead for
its immunotherapy Tecentriq in combination with the older drug
Avastin for liver cancer.
German health technology company Siemens Healthineers also
said it expected sales to rise 5 to 8% in the coming year as
efforts to contain the COVID-19 pandemic allow hospitals to
resume routine care testing activities.
M&A in the battered banking sector is also continuing, as
shown by the announcement late on Friday that state-owned
Budapest Bank and MKB Bank and savings group Takarekbank (MTB)
would form Hungary's second-largest banking group.
In Greece, Alpha Bank said on Monday that it received two
binding bids for the sale of a bad loan portfolio worth about
10.6 billion euros ($12.35 billion).
In Italy, the government is working to support Monte dei
Paschi (MPS) after negotiating with the EU a turnaround process
which must include a merger with a strong peer, Italian Economy
Minister Roberto Gualtieri said on Saturday.
In another sector feeling the full heat of the pandemic,
Ryanair said it expects to fly between 50% and 80% of its
pre-pandemic traffic levels in the summer of 2021.
The Dutch government on Saturday also put on hold its plan
to bail out KLM, the Dutch arm of Air France-KLM after pilots
rejected a wage-freeze until 2025, Finance Minister Wopke
Hoekstra said.
On the bright side, Ocado, the British online supermarket
and technology group which has surfed on te lockdown wave,
raised its EBITDA expectations for 2020 and said it would buy
two robotics companies for a total of $287 million.
(Julien Ponthus and Stefano Rebaudo)
*****
EUROPE ENTERS NOVEMBER ON ITS TOES (0631 GMT)
European stock futures are trading just slightly in positive
territory but there's some pressure on the FTSE 100 derivative
which is currently down 0.3% as England gets ready for a new
lockdown this week.
With ongoing Brexit trade talks, investors seem reluctant to
take the lead from Asia where stocks bounced off one-month lows
thanks to upbeat Chinese manufacturing data.
Rather, the mood seems closer to oil markets where prices
were hit by worries that widening coronavirus lockdowns will
weaken fuel demand with traders bracing for turbulence during
the U.S. presidential election.
Anyhow, while the uncertainty remains high at the beginning
of this first session of November, sentiment should quickly get
its gearing after PMIs are published mid-morning for the main
European economies.
(Julien Ponthus)
*****
