* European shares up 0.1% at end of strong quarter
* FTSE 100 edges lower set for best quarter since financial crisis
* Shell to write down $22 bln in assets, shares slide
Welcome to the home for real-time coverage of European equity markets brought to you by Reuters
stocks reporters. You can share your thoughts Joice Alves (joice.alves@thomsonreuters.com) and
Julien Ponthus (julien.ponthus@thomsonreuters.com) in London and Stefano Rebaudo
(stefano.rebaudo@thomsonreuters.com) in Milan.
ITALY'S BANKS? MOSTLY ABOUT FISCAL AND MONETARY STIMULUS (1159 GMT)
Italian bank shares recently led a brief recovery in the sector, supported by ECB measures
to fight the economic impact of the virus and by the proposal of a EU recovery fund, but the
question now is whether they will be holding up or not.
Last month they outperformed the banking sector by 10%, a Citi research note recalls.
Their valuations remain "undemanding", but a very low profitability is expected in 2020 and
their return on tangible equity (ROTE) will probably come back to 5-6% in 2022, Citi says.
The Italian government guarantee scheme is not as effective as initially hoped, so Citi
expects non performing loans (NPLs) to peak growth in 2021 and NPLs ratio to reach 7% in 2021
from 6% in 2019.
But political developments could be a game changer, as a EU recovery fund approval can
affect positively Italian sovereign spreads, which are highly correlated with bank shares.
ECB measures to support liquidity across the board are probably already priced in and
Italy's banks are expected to benefit from higher TLTRO in 2021.
Citi's preferred are Unicredit and Mediobanca.
(Stefano Rebaudo)
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EARNINGS EXPECTATIONS: V-SHAPED RECOVERY STILL A BET (1125 GMT)
This week's batch of earnings expectations for the STOXX 600 from Refinitiv is
slightly worse than last week's for the second quarter of the year.
Companies listed on the pan-European STOXX 600 are now expected to report an average -53.9%
decline in earnings in the second quarter, worse than the -52.7% drop forecast a week ago,
Refinitiv data showed today.
But investors have turned more optimistic for the recovery in the second quarter of next
year and they now expect earnings in 2Q 2021 to jump 70.4%, versus 66.8% they were forecasting
last week.
Here's the latest data:
And here is last week's expectations:
(Joice Alves)
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WILL PEOPLE AND GOVERNMENTS SPEND IF CORPORATES DON’T? (0950 GMT)
Analysts suggest that, even if the odds of a new wave of selloff is unlikely, if we don't
see the much-hoped V-shaped recovery, corporates can't afford to spend more.
Monetary policy has been very accommodative after the March coronavirus-induced selloff but
if companies remain under pressure, analysts at UBS say households and governments will have the
onus to spend. But how easy is that?
"While the end of government enforced lockdowns will help, we are concerned households
voluntarily locking themselves down due to any increase in future COVID fears may be a larger
inhibitor to spending," UBS says.
"And while furlough schemes and fiscal stimulus have been effective at supporting demand,
there are concerns both will become less generous and more targeted as we head into Q4 and ‘21,"
it adds.
Against this backdrop, UBS sees the spreads between IG (investment grade) and HY (high
yield) debt hitting 170 and 675 bps over the next 3-6 months.
In IG, the Swiss bank prefers As and higher-quality BBBs companies, while it avoids BBB
cyclicals and bank debt with BBB ratings. In HY, it bets on BBs over Bs, and sees industrials as
"reasonably well priced for future defaults, but lower-rated consumer non-cyclicals as too
expensive".
(Joice Alves)
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OPENING SNAPSHOT: CHOPPY (0750 GMT)
European shares are choppy this morning. Here is a snapshot of the first minutes of trading:
The STOXX is set to post its biggest quarterly gain since March 2015 with a 12.5% rise,
thanks to some superfast recovery from the depths in mid-March, when countries implemented
stringent lockdown measures to fight COVID-19. Still, the index is down 13.5% for the year.
Back to today's trade: Britain's blue-chips is down 0.5%, with Royal Dutch Shell
among the biggest drags after it said it would write down the value of its assets by up
to $22 billion on lower outlook for oil and gas prices.
Homebuilder Redrow's shares tumbled 5.9% to the bottom of the STOXX after the
company said it expects its turnover to drop more than a third this year.
Asset manager Standard Life Aberdeen shares rose 3.3% after it appointed former Citi
executive Stephen Bird to replace Keith Skeoch as CEO.
(Joice Alves)
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ON THE RADAR: JOB LOSSES, NEW CEOs (0650 GMT)
Torn between new waves of COVID-19 cases and some encouraging data from China futures are
pointing to mixed to higher open for European bourses.
In corporate news, Shell in spotlight after the oil major said it will take up to $22 bln
writedown after climate review.
On the job front, Ryanair UK pilots to decide by Wednesday on plan to mitigate the loss of
334 pilot jobs, including a 20% pay cut, while Commerzbank considers 7,000 more redundancies,
BoeZ reported.
Standard Life Aberdeen says ex-Citi exec Stephen Bird to replace Keith Skeoch as CEO; Italy
picks former Poste Italiane CEO to head re-nationalised Alitalia.
On the M&A front, Australia's Infigen backs revised Iberdrola takeover offer, Alaskan
officials approve BP's sale of oil leases to Hilcorp, as part of a previously announced $5.6
billion deal, while Intesa Sanpaolo is pushing ahead with a bid for UBI Banca despite resistance
from UBI's board, which will formally express an opinion this week.
And in times of austerity, H&M's online second-hand shop Sellpy launches in Germany.
Roche's combo therapy for advanced breast cancer gets U.S. FDA approval.
Singapore central bank says Wirecard assessing ability to continue offering local services.
(Joice Alves)
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MORNING CALL: EUROPE SET FOR BEST QUARTER SINCE 2015 (0538 GMT)
Boosted by strong data in China and hopes of possible further U.S. stimulus, European stocks
are set to open higher this morning and make it to their best quarterly gains since 2015.
The pan-European STOXX 600 has so far risen 12.4% between April and June, the best
performance since the 16% reached in Q1 2015.
A positive session today would make sure it beats the 12.3% posted in Q1 2019 and offer
investor a reassuring milestone.
European and Wall Street futures are up within a modest 0.2%-0.5% range after MSCI's index
of Asia-Pacific shares outside Japan gained over 1% overnight.
Sentiment seems switched on risk-on with investors focusing on better-than-expected factory
activity in China rather than a surge in COVID19 cases in some U.S. states.
(Julien Ponthus)
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