* STOXX 600 ends up 0.5%; FTSE 100 flat
* Financial services index gains on LSE, basic resources fall
* Zalando, Convatec, Capita, Altice Europe rally after updates
* Siemens under pressure after results, Shell shocks oil 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: rm://thyagaraju.adinarayan.thomsonreuters.com@reuters.net
EUROPE UP AS AUGUST BRINGS EARNINGS BACK IN FOCUS (1623 GMT)
The Fed disappointment didn't have any negative repercussions today in Europe -- after all stocks over here had already had their own dose of selling pressure on a mix of trade worries and ECB disappointment -- and the STOXX 600 managed to rise for a second day, up 0.5%.
At the single stock level there were some really outstanding moves today, mostly driven by earnings updates and some very welcome deal-making activity.
Here's your index snapshot and below today's top stock movers:
* Shell: -4.9% after the most valued company on the FTSE 100, fell 4.3% as its Q2 profit slumped to a 30-month low due to lower oil and natural gas prices and refining margins.
* BAT: +6.9% after it beat H1 sales forecasts, helped by higher demand for e-cigarettes, and predicted a stronger performance in H2 as it focuses on a smaller number of fast-growing new age brands.
* Siemens: -4% after saying deteriorating demand from automotive and machine building firms hit its Q3 profit, becoming the latest industrial company to warn about a weaker environment hitting its business.
* Convatec +17.8% and Capita +17.3% following well-received results.
* Zalando: +13% after the online fashion retailer raised its profit guidance after a big jump in visits to its website.
* London Stock Exchange: +6.5% after it announced its $27 billion merger with financial information firm Refinitiv, in which Reuters News parent Thomson Reuters holds a 45% stake.
(Danilo Masoni)
****
LUXURY FACES RISING CHINA HEADWINDS (1426 GMT)
We've seen how some pricey luxury stocks have been punished hard this earnings season even for a slight disappointment but turning to more fundamental considerations, Credit Suisse highlights how the sector is now facing rising headwinds, namely from China.
Analysts led by Andrew Garthwaite have just cut the sector to a tactical underweight on a 3- to 6-month basis. Here's their reasoning behind the move:
"Luxury stocks have been supported by the surprising strength of China property prices this year and trade very closely with China property developers, which in turn look vulnerable given the fall in property turnover (which implies a decline in house prices), rising property inventory and stretched affordability," they say.
"Luxury stocks have performed much better than Macau casino stocks YTD. Swiss watch export orders have fallen sharply this year. The sector's PE relative to the market and consumer staples (the other branded sector) is at the top end of its range. Moreover, 'growth' is looking clearly vulnerable vs. value as a style in Europe (but not in the US)," they add.
The analysts however "admit that earnings revisions have been positive, disruption potential is low, as is leverage" and over a 2-year view they remain benchmark.
(Danilo Masoni)
*****
EUROPEAN EARNINGS: STABILISATION IN Q4? (0958 GMT)
We're nearly halfway through the reporting season and even though most companies have beaten expectations, earnings momentum isn't great with the latest estimates pointing to flattish growth after several months of downgrades.
UniCredit equity strategist Christian Stocker says the season so far has been a bit disappointing but expects a possible improvement mostly towards the end of the year.
"The July PMIs particularly for the manufacturing sector were very negative for the euro zone. I think the Q3 earnings will also be under pressure and we have good chances for a stabilisation in Q4 on a stabilisation in global trade and a slightly better development of the leading indicators," he says.
That being said, he expects European equities to rise above current levels by end 2019. His targets for the EuroSTOXX 50 index is of 3,600 points (yellow line in the chart below), an upside from current levels of more than 3%.
Any further gains in 2020 will depend on how the economy improves.
"What we really need is a better than expected fundamental picture," he says.
"Should we see in Q3 and Q4 a better-than-expected growth of the economy then we'll see next year a really good equity market here with the help of central banks and with a turnaround in earnings estimates."
(Danilo Masoni)
*****
ONE AND DONE, OR TWO AND THROUGH? (0850 GMT)
Banks are among the top gainers this morning partly boosted by SocGen's good progress on capital, Barclays' dividend hike and StanChart's profit beat.
Apart from those bits and pieces, Fed's outlook, which poured cold water on hopes of a lengthy rate-cutting cycle, is another factor that's driving almost all the banks higher.
That's providing some relief to investors in the battered sector - one of the worst performers in recent years as banks suffer from lower for longer interest rate environment and tougher regulation.
Fed's "one and done" is driving banks, according to a trader. U.S. banks outperformed and ended nearly flat, while the S&P 500 fell 1% after the Fed.
And it comes just a week after the ECB offered a small glimmer of hope for euro-zone banks with its promise to look at cutting deposit rates to help mitigate the pain of negative rates as it prepares to cut borrowing costs in September.
ING has warned this morning about the perils of central bank money printing on its bottom line. (Its shares are the sector exception this morning).
"I don't expect a turnaround for banks. With negative rates banks in general aren't going to make money and with the economy slowing it's difficult for them to grow their loan book," says Carlo Franchini, head of institutional clients at Banca Ifigest in Milan.
Banks are somewhat happy, but Trump clearly was not (nor were U.S. markets):
The gains in banks might be shortlived if the Fed goes for "two and through" though, embarking on another cut next month. The market is currently pricing in just a 40% chance of a rate cut in September.
"Barring a marked deterioration in the economic outlook, we expect the Fed to implement at most one more 25bps cut and then to remain on hold through the end of 2020," says Mark Haefele, chief investment officer at UBS Global Wealth Management.
(Thyagaraju Adinarayan and Danilo Masoni)
*****
OPENING SNAPSHOT: SHELL SHOCKED; BANKS RALLY ON RESULTS, FED (0745 GMT)
European stocks have managed to reverse opening losses and are now higher as a sharp rise in banking and financial services stocks after an onslaught of earnings and some investors were relieved the Fed signalled its overnight rate cut would not necessarily be the first of many.
That's offsetting big declines in miners and oil companies. Shell is singlehandedly dragging the FTSE 100 in the red.
The financial services index and LSE shares have both hit their highest on record after the London stock exchange agreed to buy financial information business Refinitiv in a $27 billion deal in a move to transform the British company into a market data and analytics giant.
European banks are rallying 1.4%, ending a 6-day losing streak, after SocGen's results and Fed chair Powell's comments about future rate cuts dampened expectations for further cuts. SocGen, Barclays and StanChart all reported better-than-expected numbers.
Oil giant Shell's profits missed expectations by a huge margin, sending its shares are down 4% and wiping off roughly $10 billion in market value.
Europe's basic resources index is down 1.8% and on track for a seven-day losing streak as the dollar rallied overnight following the Fed news, making dollar-denominated metals more expensive for holders of other currencies and weighing on prices.
Among top movers, Altice Europe shares are skyrocketing (+17%) this morning as the company raised its outlook after swinging back to growth in France.
As expected, Siemens is among top fallers in Europe after the German industrial company warned of weaker environment, particularly in automotive markets.
(Thyagaraju Adinarayan)
*****
GERMAN INDUSTRIALS, UK BANKS, SHELL, LSE DEAL IN FOCUS (0657 GMT)
European stock futures are sliding 0.6% after the U.S. Fed dashed hopes of further cuts following its first interest rate cut since 2008. German stock futures are lagging the broader region, after a raft of weak results from the euro zone's No.1 economy.
In the UK, Shell is seen down 3-4% after the oil major reported its lowest profits in over two years and that kind of fall from a market heavyweight is likely to drag on the blue-chip index. Barclays , StanChart, Rio Tinto and British American Tobacco were other big names reporting numbers this morning.
Barclays has boosted its dividend after reporting Q2 results in line with estimates, StanChart profit has beaten estimates. Both banks are seen up 2%.
In the euro zone, ING reported better-than-expected Q2 profit but warned that rock-bottom interest rates will pressure future earnings; profits at France's SocGen fell 14% plagued by restructuring costs at its corporate and investment banking unit.
Siemens shares are down 1.7% in early Frankfurt trade after the German industrial giant warned of weaker environment hitting its business. Mirroring Siemens' view chemicals company Evonik also said it saw "an increasingly gloomy economic environment."
In a further hit to industrials/autos, Siemens says it expects the downturn from customers in the automotive and machine building industries to continue well into 2020.
Meanwhile, ArcelorMittal shares are expected to open down 4% after the world's largest steelmaker cut demand outlook.
In fashion, we've got Zalando lifting profit forecast after a big jump in the number of visits to its site and orders in the second quarter. Its shares are rising 4.7% in early dealings.
In luxury goods, Hugo Boss has lowered outlook on challenging U.S. market, the German fashion house, like its peers, saw strong sales in China. Shares are sliding 2.2% in premarket trade.
Tobacco company BATs is seen slightly higher after reporting a 4.6% rise in revenue.
In other news, Pearson shares are seen falling 2% after data breach in the U.S. and LSE has agreed to buy Refinitiv from Blackstone for an enterprise value of $27 billion.
UK headlines:
Barclays boosts dividend, reports Q2 profits in line with expectations
Shell's profits slump to lowest in over two years on weak oil, gas prices
StanChart warns of trade war, rate risks as profit beats estimates
Schroders H1 pretax profit down 14% as outflows hit revenues
British insurer RSA posts 1% rise in H1 operating profit
Rio Tinto reports 12% higher first-half profit on red hot iron ore
BAT revenue rises 4.6% on higher demand for tobacco heating products
London Stock Exchange agrees to buy Refinitiv in $27 bln deal
(Thyagaraju Adinarayan)
*****
EARNINGS THURSDAY: WHAT'S ON OUR RADAR (0622 GMT)
Earnings Thursday is here! We've got results from every sector in the region ranging from industrials to banks, retail to semiconductors, cars to luxury.
Among industrials, Siemens shares are sliding 2.4% in premarket trade after the trains to turbines maker said it was seeing a weaker environment in many of its key markets. Chemicals group Evonik said it was on track to hit its 2019 targets despite "an increasingly gloomy economic environment."
BMW has stuck to its outlook even as second quarter earnings fell by 20% while diesel engine company Deutz shares are up nearly 5% after its H1 results.
Hugo Boss has lowered outlook on challenging U.S. market, the German fashion house, like its peers, saw strong sales in China. Shares are sliding 2.2% in premarket trade.
Shares in Zalando are up 3.6% after the Europe's biggest online-only fashion retailer raised its full-year profit outlook.
Chipmaker Infineon expects to meet its thrice-lowered guidance for the business year to Sept. 30, this could provide some relief to the stock as the market doubted an H2-led recovery earlier this year.
In France, second quarter net profit at the country's third-largest bank SocGen fell 14% plagued by restructuring costs at its corporate and investment banking unit.
Elsewhere in financial services, Standard Chartered shares in Hong Kong have rallied after the bank's Q2 results beat expectations.
In non-earnings news, Pearson announced a data breach: the British education company has notified customers about unauthorised access to about 13,000 school and university accounts, mainly in the U.S.
LSE has agreed to buy Refinitiv from Blackstone for an enterprise value of $27 billion. The deal talks were announced last weekend, the stock exchange operator has come out with a statement confirming it.
Key headlines:
Siemens says industrial environment has deteriorated
French bank SocGen's Q2 net profits dragged down by restructuring costs
Evonik confirms 2019 outlook despite "gloomy" economy, weaker Q2
Zalando lifts profit forecast as site visits soar
Altice Europe lifts targets after swinging back to growth in France
UK's Pearson notifies thousands of U.S. students of data breach
Infineon confirms thrice-reduced guidance, Cypress deal on track
ING posts second-quarter profit of $1.6 bln, tops estimates
StanChart H1 profit beats forecasts, flags trade tension risks
AXA's H1 profit falls after writing down value of Equitable Holdings
BMW Q2 hit by rising costs of manufacturing, emissions
Generali confirms all targets after H1 results
(Thyagaraju Adinarayan)
*****
FED DISAPPOINTMENT DENTS EUROPE TOO (0613 GMT)
Investors appear to be shunning riskier assets in Europe this morning with stock futures down 0.3-0.4% in early deals following heavy losses overnight in Asia and the U.S. after Federal Reserve Chair Jerome Powell dampened expectations for further cuts following the central bank's first interest rate cut in a decade.
Global share markets recoiled overnight after U.S. Federal Reserve Chairman Jerome Powell said Wednesday's easing was "not the beginning of a long series of rate cuts".
Data has done little to lift the spirits. Pressure on China's factories eased a little in July thanks to growth-boosting steps from the government, but overall manufacturing activity remained in contraction as a trade war with the United States dented export orders, a private survey showed.
Germany's futures are lagging the broader region, after a raft of weak results from BMW, Siemens and Hug Boss sending their shares down in early deals.
(Josephine Mason)
*****
THE QUARTER POINT CUT: EUROPE STABLE AFTER U.S. SELL-OFF (0525 GMT)
European stocks are set to open flat to slightly higher after the U.S. Fed cut interest rates by 25 bps as expected. But, U.S. markets fell sharply overnight as the central bank poured cold water on hopes of further rate cuts.
"Let me be clear – it's not the beginning of a long series of rate cuts," Fed Chair Jerome Powell said.
Financial spreadbetters IG expect London's FTSE to open 9 points higher at 7,596, Frankfurt's DAX to open 2 points higher at 12,191, and Paris' CAC to open 1 point lower at 5,518.
"All of those who were expecting the Fed to do more ended up disappointed, which given how strong some of the recent US data has been recently really shouldn’t have been a surprise to anybody," Michael Hewson at CMC Markets says.
In corporate news, its another busy day of earnings: ArcelorMittal cuts steel demand outlook due to weak automotive markets, Germany's Siemens says it was seeing a weaker environment in many of its key markets, SocGen Q2 net profits dragged down by restructuring costs.
(Thyagaraju Adinarayan)
***** (Reporting by Danilo Masoni, Josephine Mason and Thyagaraju Adinarayan)
