* STOXX 600 down 0.1%
* Wall Street closed for MLK day
* Fevertree falls after Xmas trading update
Welcome to the home for real-time coverage of European equity markets brought to you by Reuters
stocks reporters and anchored today by Julien Ponthus. Reach him on Messenger to share your
thoughts on market moves: julien.ponthus.thomsonreuters.com@reuters.net
2020: NO FED ACTION, NO RECESSION, TRUMP RE-ELECTION (1155 GMT)
That's roughly how 2020 will turn out to be, according to a survey by Goldman Sachs with 250
clients.
Here's a quick look at the numbers:
-- A whopping 87% of the survey respondents expect Trump to win a second mandate
-- 67% expect Fed to remain on hold until 2020, 58% see ECB on hold in 2020 and 2021 (no
relief from NIRP)
-- 38% expect recession in 2021 and 35% expect in 2020 as recession fears were pushed out
further
-- 45% expect next bear market in 2021
Investment style? Close call:
-- 54% expect Cyclical and Value stocks to outperform in 2020
-- 46% expect Defensive, Growth and Quality stocks to do better
(Thyagaraju Adinarayan)
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LONG THE LONG SHORT? (1147 GMT)
Who's the contrarian? The investors who short a popular stock or someone who goes long on a
popular short?
Something to meditate on as the ultimate contrarian strategy at the moment seems to be going
long where the shorts have been the most aggressive.
Some kind of twisted reverse psychology hey? Anyhow, look at Tesla, it's has been a huge
short but it's up a whopping 22% year-to-date!
Same goes for Beyond Meat, which at one stage in less than three weeks went way above the
50% gain mark.
"A look at some of the best performers in the tech space already this year shows that the
companies with a high % of short interest are the best performers", writes TMT Mirabaud analyst
Neil Campling.
There's plenty of examples here in Europe where shorted stocks rose faster than their
indexes since the beginning of the year.
Germany's chip equipment maker Aixtron jumped 16.7%, France's Alstom is up 7.5% and the UK's
Premier oil gained 18.5%.
With the STOXX 600 up a reasonable 1.9% so far this year, there's plenty of shorted stocks
outperforming the index like the UK's Ocado or Takeaway.com, up 3.5% and 4.4% respectively.
Here's a mix of U.S. and European shorts outperforming the Nasadaq and the STOXX 600:
(Julien Ponthus)
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DAVOS: WATCH THOSE UTILITIES (1109 GMT)
Once a year, the richest and most powerful people in the world gather together at The World
Economic Forum in Davos, Switzerland, to have a chat about the hot topics shaping the world's
economy.
This time, sustainability is the main theme of the annual summit amid mounting pressure on
companies and governments to combat climate change.
While the attention on sustainability could be great news for the planet, it might not be
that great for European utilities, according to UBS.
European renewable companies, such as Enel and RWE, had a head start
over the oil majors, building a few dozens GW of wind and solar portfolios.
Now, it does make a lot of sense for oil majors to play catch up. If that happens, some
utilities companies could struggle to win new capacity in auctions, UBS' analysts say.
"The impact on today's utility leaders could be severe, at least for those most exposed to
auctions," say UBS in a note. "The biggest risk could be a price war... a period of heavy
pressure on returns."
Meantime, UBS remains neutral or positive on most utilities companies. Here is a list of the
most and least preferred utilities names for the year, according to the Swiss bank.
(Joice Alves)
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DON'T LET EARNINGS DOWNGRADES PUT YOU OFF (1039 GMT)
That earnings expectations are too high at the start of the year is nothing really new and
those familiar with the pattern aren't letting the prospect of possible downgrades put them off.
"If one is to worry about elevated EPS growth projections by consensus of sellside analysts,
then one would end up never buying stocks" says JPMorgan's Mislav Matejka, who has nearly 2
decades of experience as equity strategist at the U.S. bank.
"As time passes, these expectations tend to be reduced, without hurting the performance of
equity markets," he adds, noting double-digit forecasts 12-24 month out are the norm.
This time around, however, many believe that likely EPS downgrades will limit any further
gains for stocks, but Matejka says: "We disagree".
(Danilo Masoni)
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OPENING SNAPSHOT: HOLDING THE LINE (0903 GMT)
Very much like their Asian peers, European stocks are holding close to the highs reached on
Friday rather than moving further while Wall Street is off celebrating MLK day.
There are a few spectacular moves in the UK: Fevertree Drinks is down over 20%,
after the premium tonic water maker warned about subdued Christmas trading.
The stock has lost over 60% since its 2018 highs and is back to where it was at the end of
Q1 2017. It's fair to say that Fevertree, once a 'wonder stock' with four digit increases over
the years, is feeling the consumer gloom like the rest of the UK PLC.
Talking of which, Intu Properties is also down 6% after saying it is seeking to raise equity
as its exposure to UK retail bites into its spreadsheet. A report by the Sunday Times said it
planned to tap 1 billion pounds of emergency cash as soon as next month.
Other interesting moves include shares in genetic testing company Qiagen, which are
the second best performers on the STOXX index after a report about a possible acquisition.
British defence company BAE Systems is also among the top winners after saying it
would spend $2.2 billion to acquire two units being offloaded as a result of the merger of U.S.
rivals Raytheon and United Technologies.
Instead of the usual snapshot of European bourses, most of them hovering between -0.1% and
-0.5%, here's something more entertaining: A little over 5 years of Fevertree on the stock
market.
The stock is up over 2.000 percent from the end of 2014 to September 2018 and down over 60%
from that high till now.
(Julien Ponthus)
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ON THE RADAR: BIG FALLS SHARP MOVES SEEN FOR INTU AND FEVERTREE (0754 GMT)
Yes, we still need to wait a bit for the Q4 season to get into full speed but that doesn't
mean there's nothing going on in the corporate world.
Intu Properties for instance is under the spotlight and could fall heavily after it said it
is targeting an equity raise in its bid to strengthen its balance sheet.
Another sharp move expected at the open could come for premium tonic water maker Fevertree
Drinks – once an investors’ darling – which was hurt by subdued Christmas trading in Britain.
Talking about raising equity France’s Iliad launched a 1.4 billion euros capital increase to
finance a share buyback and French hotels group Accor also said it was launching its 300 million
euros buyback programme.
In the world of M&A, Anglo American announced a deal to buy Sirius Minerals for 404.9
million pounds while China’s Guoxuan confirmed it was in talks with Volkswagen but said there
was any binding deal yet.
Also, Czech businessman Daniel Kretinsky and his junior partner Patrik Tkac said on Monday
that they had raised their stake in debt-laden retailer Casino.
(Julien Ponthus)
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MORNING CALL: A TICK OR TWO HIGHER (0632 GMT)
European shares ended on a new record high on Friday but much of that momentum seems to be
fading out somewhat with Asian shares making their camp on high ground rather than climbing
higher.
Not much in store today regarding the Q4 earnings season or macro indicators.
Financial spreadbetters expect London's FTSE to open 12 points higher, Frankfurt's DAX up
13 points to 13,539 and Paris' CAC to rise 12 points to 6,112.
The last two indexes are in range to reach important milestones if the market switches gear
and accelerates.
6,168.15 points was the CAC 40's highest level prior of the financial crisis on June 1 2007
and the Dax will reach its highest point ever if it goes beyond 13569.89 points.
(Julien Ponthus)
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(Reporting by Danilo Masoni, Joice Alves, Julien Ponthus and Thyagaraju Adinarayan)
