* European shares trade at new lifetime high
* U.S.-China trade deal, Brexit clarity lift spirits
* STOXX 600 up 1.6%; FTSE 100 gains 2.6%
* Euro zone business growth stayed weak
* Electrolux slumps after profit warning
Welcome to the home for real-time coverage of European equity markets brought to you by Reuters
stocks reporters and anchored today by Julien Ponthus. Reach him on Messenger to share your
thoughts on market moves: julien.ponthus.thomsonreuters.com@reuters.net
AUTOS: IT IS NOT TIME TO CELEBRATE YET (1540 GMT)
The auto and automobile parts European index is up 0.3% today after U.S. Trade
Representative said on Sunday that a "phase one" U.S.-China trade deal is "totally done and
after Britain's Conservative election win.
But Moody's tells investors not to raise their hopes too much as the outlook for European
parts suppliers is negative in 2020.
"Our outlook for European auto parts suppliers is negative based on our forecasts for
declining global light vehicle sales, continued weak aggregate revenue growth and a likely
decline in EBITA margins and free cash flow," it says.
The sector will also have to face "significant uncertainties" regarding whether Fiat
Chrysler and Peugeot will reach a definitive merger pact and Daimler cost cutting plans, Moody's
adds.
The outlook for global auto makers and parts suppliers is also negative with the main
drivers being weak global demand and trade tensions.
(Joice Alves)
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ITALY'S POP BARI RESCUE: "NO CONTAGION RISK" (1346 GMT)
Italian banks are cruising ahead with a comfortable +0.6% as they join the
broader risk on mood stemming from the China-US 'phase one' trade deal and growing Brexit
certainty.
Yet investors woke up to the news that Rome had set aside 900 million euros to rescue ailing
lender Popolare di Bari, and may rightly wonder whether there are broader risks for the whole
Italian banking system.
Today's price move doesn't suggest so and analysts appear to agree.
"We see no contagion risk on public debt spreads or particularly negative impacts on listed
banks", Giovanni Razoli at Italian brokerage Equita says, pointing to three key reasons.
1. the size of the public intervention (900mn) is smaller than for Venetianbanks and BMPS
2. the size of BP Bari is limited both in absolute (340 branches, total assets 14bn, 8bn of
deposits) and relative terms
3. the criticalities of BP Bari were known for a long time (NPE ratio at 25% already in2016)
Meantime, shares in Italy's two largest lenders, Intesa Sanpaolo and UniCredit
, are also positive, both up around 0.7%.
(Danilo Masoni)
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DON'T LET STERLING GET IN THE WAY OF A GOOD RALLY (1150 GMT)
The swift rerating of UK Plc after Johnson's electoral triumph on Friday continues: last
session was all about midcaps but now it's the FTSE 100 under the spotlight.
Rising above 2%, British blue chips are handsomely outperforming their European peers and
set at one point for its best day since the immediate aftermath of the referendum in June 2016.
While back then the surge was triggered by the collapse in the pound, today's gains are made
while sterling is rising.
This usually acts like an accounting drag on dollar earners but it isn't spoiling the fun
today. Why?
"I think it's because of the rerating of UK plc rather than a fundamental breakdown of the
negative correlation (between FTSE and sterling)", an AJ Bell spokesman said.
"Both can rise at the same time in exceptional circumstances, as we are seeing right now,
but we’d expect the link to prevail over the longer term".
Same view from IG's Josh Mahony.
"There's no reason why pound and FTSE can't be both strong together, it's just that a strong
pound would slow down the gains", Mahony argued, noting that investors coming back en masse to a
recently unloved bourse could have a big impact.
"If inflows are big enough there is, I suspect plenty of space for both to drive higher", he
said.
"If investors are that keen to get FTSE exposure, then we should see that outweigh pound
strength".
(Julien Ponthus)
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THERE'S VALUE IN EUROPE (1025 GMT)
It's Europe's turn to climb to new records as investors were waiting for the fog over Brexit
and trade to clear away before turning to a region which is highly exposed to the so-called
value stocks whose fortunes are closely tied to an economic recovery.
True, the PMIs this morning weren't exactly great but still over the last month
or so. There have been further signs of improving macro that have helped Citi's euro zone
economic surprise index return into the black this month.
Hence, some believe European equities may have further to go.
"We maintain our positive tilt to Europe and to European Value," say Bernstein strategists.
"We have seen continued inflows back into global equities and Europe in particular. However,
as they have reversed only a small portion of outflows year to date we expect equity flows to
provide market support in the coming months", they add.
A combination of their macro and micro indicators is now forecasting 1.1% earnings growth
over the next 12 months with more than half of the inputs having improved from last month. That
however is still well below the 2020 consensus for 9.2% growth.
(Danilo Masoni)
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OPENING SNAPSHOT: STOXX 600 AT RECORD HIGH (0854 GMT)
European stocks have surged to new all-time highs and are cruising up at a speed of
about +1.1% as the U.S./China trade deal lifts spirits.
Up 1.6%, the FTSE 100 is clearly outperforming its European crowd despite sterling
rising simultaneously. Johnson's landslide electoral victory is visibly still doing its thing in
attracting investors back into UK Plc.
Top movers include, as was expected, Electrolux following a profit warning. The
Swedish company is down 11%. Still in the country Hexagon is retreating over 4% after
its CEO sold more than half his stake in the company for “private financial reasons”.
Investors also seem to be concerned with Cineworld's latest deal, a $2.1 billion buy of
Canada's Cineplex. The UK's company debt pile has been a concern since its acquistion
of Regal in the U.S..
Tullow Oil has also made its way to the top losers of the STOXX 600, down 13%, after
suffering from rating downgrades which follwed its CEO stepping down and its dividend being
scrapped.
(Julien Ponthus)
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ON OUR RADAR: PMI REALITY CHECK AND ELECTROLUX'S WARNING (0754 GMT)
A series of PMIs this morning, starting with France at 0815 GMT, Germany at 0830, euro zone
at 0900 and UK at 0930, should provide a timely reality check on the state of the European
economy before a possible Santa rally.
In terms of market action, trade war proxies, such as Germany's DAX or carmakers, will be
under the spotlight.
There's quite a lot news in the sector too with Daimler's main China joint
venture partner BAIC Group wanting to double its stake and win a board seat in the German luxury
car maker.
In terms of other individual movers, Sweden’s Electrolux is seen falling after a
profit warning. Still in Sweden, Hexagon could be under pressure after its CEO sold
more than half his stake for “private financial reasons”.
Cineworld, which has been criticised for its debt pile, has announced another big
deal with the acquisition of Canada’s Cineplex.
Sports Direct would also rise at the open after its H1 trading update.
Also, Novartis drops hopes for what it thought would be a billion-dollar-selling
asthma drug.
(Julien Ponthus)
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MORNING CALL: PHASE ONE SANTA RALLY (0632 GMT)
European bourses are set to get a big boost this morning from the China/U.S. "totally done"
"phase one" trade deal.
Friday's optimism on an agreement plus the landslide victory of UK PM Boris Johnson had
already propelled the STOXX 600 to 412 points, in touching distance of its April 15 record of
415.18 points.
So with major uncertainties linked to Brexit and U.S./China trade out of the way, is the
path now clear for a good old fashioned Santa Claus rally?
Stephen Innes, chief Asia market strategist at AxiTrader, said in a note he believes the
trade deal "might be enough for the Santa Claus rally", but not necessarily a lasting one given
the need for a comprehensive "phase 2" trade deal.
Anyhow, short-term this morning, the mood is good: IG financial spreadbetters expect
London's FTSE to open 43 points, DAX up 65 points and the CAC 40 to rise 38 points.
(Julien Ponthus)
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(Reporting by Danilo Masoni, Joice Alves, Julien Ponthus and Thyagaraju Adinarayan)
