* Stoxx 600 up 0.7%
* FTSE 100 and FTSE midcap flat
* NMC Health stock lost over 2 billion pounds of market value
*
Welcome to the home for real-time coverage of European equity markets brought to you by Reuters
stocks reporters and anchored today by Thyagaraju Adinarayan. Reach him on Messenger to share
your thoughts on market moves: thyagaraju.adinarayan.thomsonreuters.com@reuters.net
BRACING FOR 2020 POLITICAL RISK (1518 GMT)
2020, what could go wrong eh?
Well in terms of political risk quite a lot actually.
A full-blown global trade war, a no-deal Brexit and a surprising U.S. presidential election
could very well make 2020 outlooks redundant in a snap.
So what to do?
UBS strategists believe now could be a time to get ready and implement a risk reduction
strategy.
"Aside from diversification in both geography and asset class, investors can consider a
variety of defensive equity strategies, including put-writing strategies and quality and
dividend strategies. Added to this, investors can reduce their vulnerability to the macro
environment by allocating capital to private markets".
(Julien Ponthus)
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THE WALKING DEAD DECADE (1431 GMT)
Among the many things that comes to mind when thinking of the last decade, be it bitcoin,
FAANGs, pot stocks, negative interest rates, ETFs or electrical vehicles, zombies are peculiarly
rarely mentioned.
And yet they have thrived and prospered following the financial crisis. We're not talking of
the movie genre, which has gone from an underground niche to mainstream but companies which
survive thanks to cheap debt but wouldn't make it if the monetary hawks of the world had it
their way.
In its chart of the week, DWS shows how overall profit has risen hand in hand with
companies posting losses in the United States.
"The remarkable thing is that the number of loss-making companies in the two previous crises
only peaked briefly, but has now remained at a fairly high, almost crisis level since 2015", DWS
writes.
(Julien Ponthus)
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EUROPEAN CYCLICALS: BETTER CHANCE NEXT YEAR? (1415 GMT)
After a tough ride for cyclical sectors in Europe this year, things may start to look up.
"We like European cyclicals vs U.S. cyclicals because they are cheap," says Luca Paolini,
chief strategist at Pictet Asset Management. "Every sector with a P/E at a 10 or below, that is
where you want to buy in Europe. But for rest of the world, we're much more cautious."
Here's a graphic showing price-to-earnings ratio for the next 12 months for subsectors on
the STOXX 600:
https://tmsnrt.rs/2Q6fEdd
Indeed, banks, automakers, oil & gas and miners are among the worst performing sectors this
year in Europe, as a global slowdown fears prompted investors to sell these stocks.
Even though growth is expected to slowdown next year, Paolini believes Europe has a
potential to surprise.
"There is much better valuation. Yes, the (growth of) GDP has been declining, but domestic
demand continues to be very strong in Europe. You have a very expansionary monetary policy and
there's also some room for potential fiscal stimulus," adds Paolini.
(Sruthi Shankar)
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2020: SLIGHTLY BULLISH (1335 GMT)
As 2019 is about draw to a close, let's take a look at how investors plan to face 2020 when
it comes to equities.
Barclays gives us some feedback from their latest roadshow:
"Our recent meetings have confirmed that positioning is far from being overly bullish, as
many investors (long only in particular) have been slow to add risk this year. Still, sentiment
is much more constructive than it was at the end of 2018 and the ‘Fear of Missing out’ (FOMO)
seems to be prevailing over the fear of suffering from a repeat of the sharp correction seen
last December," it says in a note.
Investors have cash to deploy as 2019 is on track to be the best year for global equity
returns since 2009 and they may be willing to splash out at the beginning of next year, Barclays
says.
"We see a potential for inflows to drive equities higher at the beginning of next year, as
the key sources of uncertainty – Brexit and trade wars – are reducing, while macro momentum
seems to be bottoming-out," it says.
(Joice Alves)
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FRENCH PENSION STRIKES: LEAVE US OUT OF IT, BLACKROCK PLEADS (1250 GMT)
BlackRock issued a statement yesterday in which it stressed it had absolutely nothing to do
with France's controversial pension reform which has triggered a wave of strikes and protests.
"In no way have we tried to exert influence on the reform of the pension system", the asset
management wrote.
The lengthy press release comes after reports in the French press alleged BlackRock sought
to benefit from the reform of the pay-as-you-go system.
Here's yesterday's story:
UPDATE 2-French PM, unions fail to break pension strike deadlock as Christmas looms
For those of you who read French, here's BlackRock's statement:
(Julien Ponthus)
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THE WEEK NMC LOST ITS HEALTH (1159 GMT)
What a week for NMC Health shareholders! The stock has lost about 50% and over 2 billion
pounds of market value since Muddy Waters declared it was shorting the UAE-based company.
Shares are down close to 20% at the moment after the company denied an FT report it held
talks to raise debt.
NMC Health issued a lengthy statement after the close on Thursday in which it called Muddy
Waters report "false and misleading".
That's clearly not having the effect the company hoped for even if reactions to NMC Health's
counter-attack has not always been negative.
"Investors we have spoken to believe the recent moves in the shares are an overreaction to
little incremental new information", a Barclays research note issued last night read.
The broker, which said it was still reviewing the NMC statement, is overweight on the stock
for which it saw a potential upside of 178%!
Here's the week NMC Health lost half its market value:
(Julien Ponthus)
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TRADING AGAINST THE HERD (1135 GMT)
"The greatest trades in history have been made against the herd," Citi strategists write as
they detail their contrarian calls for 2020: bullish on energy stocks, bearish on U.S. tech.
Below you can see how Citi played it last year to pick stocks: buy the worst performing 10
stocks of the previous year and sell the best performing 10 in the largest 250 stocks from the
MSCI all country world index. Was that a good bet? You decide.
The table below shows how they fared (compared to MSCI World's 23% return):
Citi says the best contrarian call returns were in 2000 during the dot com bubble burst.
WARNING: contrarians rarely outperform for two consecutive years and have poor returns
cumulatively.
(Thyagaraju Adinarayan)
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WHEN VIKINGS DOMINATED EUROPE (1052 GMT)
Last blog post was about Europe's 2019 winners, now it's time to look at this decade's best
performers by countries and sectors.
Once again, it wasn't easy to guess the winner (Denmark), although the worst performer
(Greece) one was quite obvious. The charts below will tell you the story:
** NOTE: All countries represented by the MSCI index and are in dollar terms
(Thyagaraju Adinarayan)
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THE 2019 WINNERS WERE OUTSIDE THE COMFORT ZONE (1010 GMT)
Picking the best regional benchmarks in 2019 was a task for the brave! Russia and Greece
were the best performers but clearly not an obvious choice at the beginning of the year.
"This just goes to show that buying what is comfortable is rarely the route to big profits,"
wrote Russ Mould, investment director at AJ Bell.
Here's his table of 2019 winners and losers:
(Julien Ponthus)
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OPENING SNAPSHOT: PAINFULLY SLOW
(Yawn!) Market have opened and there isn't one move that's significant enough to talk about.
The pan-European STOXX 600 is up 0.1%, driven by the financial services and auto
sector.
Among single stocks, NMC Health is still roiled by the Muddywaters report, falling
another 3% this morning and on track for a 40% loss this week, its worst weekly performance
ever.
Adidas shares are down 0.5% on negative read-across from Nike; Shell off 0.8% on
$2.3 billion impairment charge; Swatch down 2% on Goldman Sachs downgrade
(Thyagaraju Adinarayan)
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ON OUR RADAR: SHELL, CREDIT SUISSE (0753 GMT)
It's yet another quiet day with markets largely expected to open unchanged as we approach (a
much needed) Christmas break. A few corporate updates, such as Shell and Credit Suisse's Q4
update, could keep the day alive.
Traders see Shell shares falling 2% on the oil giant's expectation of lower capex
and a $2.3 billion impairment charge in the fourth quarter.
Credit Suisse's shares are seen 1% higher by one trader after the Swiss bank said
it would book a pre-tax gain of at least 450 million Swiss francs in Q4 from the revised
accounting treatment of its stake in financial infrastructure company SIX Group.
Nike shares, which were close to record highs, fell 2% overnight after it reported
slightly lower-than-expected margins. Nike's margins were mainly hurt by higher product costs
due to incremental tariffs in North America. Dealers believe Nike share fall could have a
negative impact on Adidas and JD Sports.
(Thyagaraju Adinarayan)
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PRE-CHRISTMAS LULL (0633 GMT)
European stocks are poised to open flat to slightly higher as market activity slows down
ahead of Christmas next week.
Financial spreadbetters IG expect London's FTSE to open flat at 7,574, Frankfurt's DAX to
open 9 points higher at 13,221, and Paris' CAC to open 4 points higher at 5,976.
Meanwhile, U.S. stocks crawled up to yet another record high overnight on comments that
Washington is likely to seal a trade deal with Beijing in January.
(Thyagaraju Adinarayan)
*****
(Reporting by Danilo Masoni, Joice Alves, Julien Ponthus and Thyagaraju Adinarayan)
