RDSA.L Share News (RDSA)

* European shares tread water
* STOXX 600 up 0.2% after slightly negative start
* Volumes below average
* JPM raises euro-zone stocks to "overweight"
* ECB's Draghi emphasises need for fiscal push
* Wall Street opens higher

Welcome to the home for real-time coverage of European equity markets brought to you by Reuters
stocks reporters and anchored today by Josephine Mason. Reach her on Messenger to share your
thoughts on market moves: rm://josephine.mason.thomsonreuters.com@reuters.net

AN UNEASY FEELING OF DEJA VU (1348 GMT)
The markets are looking eerily similar to this time last year as Q4 approaches and Morgan
Stanley's equity strategist Michael Wilson says he's got a feeling of deju vu.
The S&P 500 is near its all-time high at 3,000, the MSCI emerging market index is 15% below
its highs and the Eurostoxx is 7% - pretty much where they were a year ago.
Anyone thinking that the new highs for the U.S. market are evidence of a resurgent bull
market is amiss as the risk of recession has increased materially, he says.
The other reason to be wary: the recent failure of WeWork to go public is also reminiscent
of past corporate events marking the peaks in powerful secular trends.
Others include United Airlines' failed LBO in 1989, which ended the high yield/LBO craze of
the 1980s; the AOL/Time Warner merger in Jan 200, bringing the Dotcom bubble to a close and
JPMorgan's deal with Bear Stearns in March 2008, signalling the end of the financial excesses of
the 2000s.
Wilson says the switch out of growth stocks which have fuelled the decade-long bull-run and
into more reliable defensive stocks that started in July also shows the market is pricing in a
recession.
"In short, we're moving from the perception that this is late cycle to a belief that it's
end of cycle," he says.
To take advantage of the new trend, which he believes still has legs, Wilson recommends a
long defensive/short secular growth stance.
In previous most recent rotations in late 2015/early 2016 and Q4 2018, the defensive cohort
outperformed secular growth by 25%. So far, the outperformance has been about 12%, about half of
what he expects to see before the rotation is over.
Secular growth stocks represent companies that can grow both profits and revenue materially
above average and that growth is not dependent on robust broader economic growth.
The chart below shows how the MSCI Europe value factor index has outperformed the momentum
factor index by 1.4% since the start of August.


The other major issue that could derail European equities' stellar rally this year is
earnings estimates for the year ahead. Analysts and strategists agree that the consensus for 10%
EPS growth for 2020 is unrealistic and some caution that cuts to forecasts could sour the mood
and kick off another Q4 rout.
After 2018, that will feel very familiar.

(Josephine Mason)
*****

MODEST CLOSE TO EVENTFUL QUARTER (1121 GMT)
For such an eventful quarter and month, markets are closing out on a rather lacklustre note
as investors digest the latest news on the U.S.-China trade spat and generally positive China
data.
Major indices are stuck in a narrow range that's teetering in and out of negative territory
- the pan European STOXX 600 is currently flat, with traders attributing the directionless
activity to low volumes while some investors indulge in some window-dressing ahead of the
quarter end.
Volumes are about a quarter below the average, with Rosh Hashanah, Jewish New Year, limiting
activity levels, says one trader. It may be like this all week with China out for the rest of
the week before the official U.S.-China negotiations start next week.
"It seems every time we take a step forward with the trade war and optimism rises ahead of a
meeting between the two teams, we get some negative headlines," says Craig Erlam, senior market
analyst UK & EMEA at Oanda.
"We are becoming used to threats ahead of these talks, but any follow through here would be
rather dramatic."
Beaten-down banks, rate-proxy real estate stocks and defensive sectors like utilities are
leading the gains, extending this month's trend as investors scoop up the laggards of the year.
One notable outperformer among indices is also one of the region's top underperformers for
the year: Madrid.
The Spanish blue-chip is set for a near 5% rise this month, which is helping offset
the losses earlier in the year and putting it on track for 3% rise year-to-date.
The chart below shows the ranking for the individual bourses year-to-date:


(Josephine Mason)
*****

MAKING THE CASE FOR A GERMAN FISCAL EXPANSION (1045 GMT)
Goldman has weighed in on the debate about fiscal stimulus and while it agrees with a
widespread view that a shock would be needed to convince Germany to open the purse strings, it
argues that the case for Europe's No. 1 economy to do so is compelling.
Their case for a sizeable German fiscal expansion levers on three three key points.
1. Germany has significant fiscal space: "Germany could expand fiscal policy by about 1% of
GDP in
2020 without seeking an exception from its 'debt brake'rule"
2. Sizeable effects on German growth: "ECB is unlikely to respond to a German fiscal
expansion with
tighter policy. Moreover, fiscal 'multipliers' tend to be larger in low-debt economies and
during recessions."
3. Welcome spillover effects: "Germany is a very open economy and trade patterns suggest
that
stronger German demand would provide greatest support to EMU member states that most need it,
notably Italy."

Meanwhile, ECB's Draghi has once again emphasised the need for fiscal policy, saying in an
interview with the Financial Times that that was more urgent than before.
His comments have helped lift euro-zone bond yields to one-week highs, which in turn is
underpinning shares in the battered banking sector, last up 0.8%.

(Danilo Masoni)
*****

EUROPE: BUY OR NOT TO BUY (0859 GMT)
The prospect of central bank stimulus is already having effect.
JPMorgan has upgraded euro zone equities to overweight and back in July
BlackRock did the same - both citing expectations of a dovish ECB.
That's surely positive for stocks in the region but macro data continues its negative run
and many investors look unconvinced, as continued fund outflows indicate.
"Over the past four weeks, we have seen some signs of funds buying U.S. equities at the
expense of European equities," say HSBC strategists.
They add European equity funds have seen over $100 bln outflows YTD with their proprietary
analysis indicating global funds are rotating allocations out from Europe into the US.
"Investors' negative outlook towards Europe can be attributed to slowing economic
growth...," they say. "With Germany in outright recession and high economic policy uncertainty
in the UK, we believe investors' outlook is unlikely to change soon."
This chart shows that the gap between increasingly positive U.S. economic surprises
and increasingly negative euro zone ones has widened to its highest since
May 2018.



(Danilo Masoni)
*****

OPENING SNAPSHOT: TECH DRAGS, SPAIN SHINES (0735 GMT)
European stocks open slightly lower, mainly dragged down by tech and telco stocks, as
reports of Washington's plan to delist Chinese companies from U.S. exchanges raises fresh
worries in U.S.-China trade row.
Chip stocks are top underperformers tracking the sell-off in the U.S. Philadelphia
Semiconductor exchange on Friday. Meanwhile, Spanish stocks are steadily rising this
morning after the blue-chip index's IBEX underperformance this year.
Among major single stock moves, Glaxosmithkline is rising 2% after encouraging trial
results from its cancer therapy, niraparib. KPN is sliding 2% after the Dutch telco
dropped appointment of Dominique Leroy as CEO.

(Thyagaraju Adinarayan)
*****


MIXED PICTURE IN EUROPE (0650 GMT)
European stocks are expected to end the month and quarter on a slightly weak note amid
renewed concerns about the U.S.-China trade spat after a report that Washington is considering
delisting Chinese companies from U.S. stock exchanges. Stock futures are pretty mixed, with
Paris futures down 0.1% and Madrid up 0.2%.
A rise in German retail sales in August has helped ease some worries that a slower pace of
manufacturing would hurt consumer spending in Europe's top economy.
In corporate news, Kloeckner shares are down more than 4% in pre-market trade
after a local newspaper report that talks over a potential steel tie-up with ThyssenKrupp
collapsed.
In other dealmaking, Anglo-Australian miner Rio Tinto, has cancelled plans
for the sale or floatation of its Canadian iron ore business, following unsuccessful attempts to
find buyers, according to a Wall Street Journal report.
KPN shares are seen down 5% after Dominique Leroy, the Belgian telecommunications
executive who was slated to move the Dutch company, has been dropped as candidate to take the
top job due to an investigation into a share sale. Leroy is under investigation for her sale of
shares in Proximus, the company she was leaving.
Shell is seen under pressure after it says it sees negative impact from foreign
exchange in Q3 and a net charge of $700 million to $850 million in Q3, while BP may fall
after a report CEO Bob Dudley is preparing to step down from the oil major.

Here are some early headlines:
Novartis says Kisqali boosts survival in breast cancer patients
Italy investigates wife of Eni's CEO in Congo graft probe
Results of GSK and AstraZeneca trials may widen ovarian cancer drug use
EQT buys German fibre optic firm Inexio; source values deal around $1.1 bln
Roche extends Spark offer again as regulatory review drags on
Sunrise cuts rights issue to 2.8 bln Sfr in push to buy Liberty Global's UPC
Rio Tinto scraps plans for Canadian iron ore unit sale, floatation - WSJ
France blames XL Airways collapse on Oslo aid, appeals to EU
Italy's Atlantia picks KPMG, Ramboll and SGS to conduct audit on units involved in probe

Nestle, P&G say they will miss 2020 deforestation goals
Evotec And Indivumed Reach Milestone In Joint Drug Discovery Collaboration
KPN drops Leroy as CEO candidate amid investigation into share sale

(Josephine Mason)
*****


EUROPE ENDING Q3 ON LACKLUSTRE NOTE (0528 GMT)
European stocks are expected to end the month and quarter largely on a slightly lacklustre
note amid fresh worries about tensions between China and the United States.
IG financial spreadbetters expect London's FTSE to open 4 points lower at 7,423, Frankfurt's
DAX to open 10 points lower at 12,371, and Paris' CAC to open 7 points lower at 5,633.
Chinese markets, which will shut for the rest of the week for national holidays, were
slightly lower overnight after a report on Friday that the U.S. may limit Chinese company
listings on its stock exchanges fueled the U.S.-China trade worries ahead of the critical
October negotiations.
Dust appears to have settled in the United States though, with Wall Street futures
indicating a higher open later.
Closer to home, transatlantic trade ties face renewed disruption this week when global
arbiters are expected to grant the United States a record award allowing it to hit European
imports with billions of dollars of tariffs in a long-running aircraft subsidy dispute.

The pan European index and euro-zone benchmark closed last week at a one-week high,
but notched up their first weekly drop in six as macroeconmic data renewed concerns about the
health of the euro-zone economy and the U.S. impeachment probe of President Trump rattled
investors.
They are on track for a more than 3% rise this month and their third straight quarterly
gain, although the pace of growth has slowed substantially from the double-digit percentage
gains in Q1.

(Josephine Mason)
*****


(Reporting by Danilo Masoni, Joice Alves, Josephine Mason, Julien Ponthus and Thyagaraju
Adinarayan)