* European shares rise, +13% so far in November
* Tech stocks recover, despite Prosus' China woes
* Banks take a break after best run since 2008
* Wall Street futures point to higher open
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CAUTIOUS REACTION TO RUSSIA'S SPUTNIK VACCINE RESULTS(1220
GMT)
Russia has just unveiled that its interim trial results show
that its Sputnik V vaccine is 92% effective at protecting people
from COVID-19.
The headline caused a much muted reaction in the European
stock markets compared to earlier this week, when U.S. drugmaker
Pfizer and German partner BioNTech
released data showing that their vaccine proved 90% effective in
trials.
Ok, the first is always the first, but investors are
suggesting they are also more confident faster results will come
from big pharmaceuticals companies.
"Our faith is in Pfizer, AstraZeneca and other big pharma
names to deliver the goods,” says Neil Wilson, chief market
analyst at Markets.com.
Marco Mossetti, equity portfolio manager at Credit Suisse
Asset management says "investors are mostly looking at those
(vaccines) from Pfizer, AstraZeneca and Moderna
, which by the way are expected to announce phase-3
results shortly".
"I think we can have good news from that front and the
rotation in the stock markets which started on Monday will
continue", he added.
Despite the Russian results being "impressive", with Russian
authorities claiming a marginally better rate of protection than
Pfizer, "the lack of market reaction does highlight an element
of mistrust over these findings, with the level of adoption in
Western nations unlikely to be high for a product out of
Russia," Joshua Mahony, senior market analyst at IG, told us.
(Joice Alves and Stefano Rebaudo)
*****
"GOLDEN NOVEMBER": THE BEST MONTH EVER? (1054 GMT)
Believe it or not but November 2020 so far is very, very
close to being the best month ever (well, prior to 1987) for
European equities.
"Many investors have enjoyed the start of November a lot",
DWS CIO Stefan Kreuzkamp writes in a note headlined "Golden
November".
The STOXX 600 is up 13% so far thus month, just
short of the 13.5% GFC rebound which occurred in April 2009.
So any hope of getting above that milestone any time soon?
Well short term sure, as it wouldn't take much of a further
rise to get to that level.
As noted by Connor Campbell at Spreadex, the open on Wall
Street this afternoon could provide just that.
"What could be a game changer for Europe, however, is that
the Dow Jones is currently heading for a 100 point increase when
trading starts", he wrote in a morning note.
That said, we're not even past mid-November and there's
still 13 sessions to go through in the month.
Not to mention, for those who are superstitious, Friday the
13th at the end of the week.
(Julien Ponthus)
*****
BACK TO A MORE FAMILIAR VIEW: IS THE ROTATION OVER? (1006
GMT)
The powerful rotation sparked by the promising vaccine news
from Pfizer that led value stocks to perform their
strongest bounce ever relative to growth is taking a break this
morning.
And here in Europe we're back to seeing a more familiar
view. Bank stocks, a typical value trade that benefits
from higher yields and upswings in the economic cycle, are the
top fallers here, while tech has managed to shake off
early weakness to get a place among the top gainers.
After their best two day rally since 2008 on Tuesday,
Europe's banks are back lower with results from ABN
serving as reminder of the strong headwinds still facing the
sector.
Meantime tech is rising despite a heavy drop in Prosus
on worries over more stringent antimonopoly rules in
China affecting Tencent and other internet platforms.
Nasdaq futures are up 1%.
So the question now is: does today's return to a more
familiar price action mean the value revival is already over and
the highflying tech will continue to challenge gravity rules?
Perhaps the answer is no, but what looks sure is that
excesses in both directions have been tempered somewhat.
Bernstein strategists led by Inigo Fraser-Jenkins believe
investors need "to separate short-term tactical moves from the
medium term prognosis".
"An abrupt macro positive shock such as we saw this week can
lift all value stocks for a time. However, we think that the
outlook for the next year has to be more nuanced," they said.
In the chart you see the MSCI Value index's
powerful bounce from record lows relative to the MSCI Growth
index.
(Danilo Masoni)
*****
EUROPE’S STOXX ABOVE WATER, BANKS DOWN (0854 GMT)
Equities are in positive territory in what it seems to be a
risk-off session, with banks under selling pressure and
healthcare and utility stocks among the best performers.
The heavy rotation triggered on Monday by Pfizer’s
announcement of an effective vaccine is making a probably
temporary u-turn, but the STOXX 600 is managing to keep its head
above water.
The pan European index is up 0.3% with the utility
stock index up 1.3% and healthcare up 1.7%.
Travel and leisure stocks, which jumped this week,
are now slowing down, up 0.6%.
Europe’s banking index is down 1% after an almost 17% rise
in the last few days.
Sampo stocks are up 1.4% after the company sold
its stake in Nordea in a move that could turn the
firm into a pure-play insurance champion and unlock 7 billion
euros in value, according to Elliott Capital Advisor.
Nordea shares are down 5.5%.
(Stefano Rebaudo)
*****
ON THE RADAR: CONTINENTAL, E.ON, BAE SYSTEMS (0733 GMT)
European stocks are set to open slightly higher as markets
have been slowing down after a heavy rotation triggered by a
vaccine announcement on Monday.
More progress on that front, as The European Commission will
approve on Wednesday a contract for the supply of the COVID-19
vaccine being developed by Pfizer and BioNTech.
Meanwhile a batch of strong results came in this morning.
ABN Amro beat analyst expectations despite a 46%
drop in third-quarter net profit.
BAE Systems slightly raised its profit forecast,
saying demand for its capabilities remained high and orders for
military kit this year had exceeded expectations.
Coca Cola HBC AG beat analysts' estimate for
third-quarter revenue, helped by a rebound in demand from public
spaces during summer.
E.ON stocks are up 2.1% in early trade after the
company posted a 10% drop in nine-month profit but added that
markets were recovering faster than expected.
Shares in Continental are down 4.3% after the
company warned of further restructuring expenses.
Shares in Barry Callebaut’s are up 1.2% in
premarket trade after sales volumes of the company recovered in
the quarter to August.
TUI is in talks with the German government on an
extra 1.5-1.8 billion euros in state aid.
Telecom Italia (TIM) confirmed its financial
guidance through 2022 after Q3 profit met forecast.
Elliott Capital Advisors has welcomed a decision by Sampo
to sell down its stake in Nordea, which it
said could turn the firm into a pure-play insurance champion and
unlock 7 billion euros in value.
Royal Dutch Shell will halve crude processing
capacity and cut jobs at its oil refinery in Singapore as part
of an overhaul to reduce its carbon emissions.
(Stefano Rebaudo)
*****
EUROPE’S TENTATIVE CORRECTION (0633 GMT)
European stock futures are in negative territory as equities
seem willing to stage a mild correction after an almost 5% rise
in two days.
Vaccine developments are still in the spotlight as more
manufacturers are expected to start releasing their phase-3
results by year-end.
Risk sentiment has been boosted by Monday’s announcement of
an effective vaccine by Pfizer and BioNTech, while investors are
a bit concerned about possible Trump-induced surprises as Joe
Biden prepares for the White House.
(Stefano Rebaudo)
*****
