TED.L Share News (TED)

* European shares little changed
* DAX flat after hitting new record peak
* Worries over spreading Coronavirus ease
* Italian banks fall on fresh political uncertainty
* S&P 500, Nasdaq aim for record on IBM earnings

Welcome to the home for real-time coverage of European equity markets brought to you by Reuters
stocks reporters and anchored today by Danilo Masoni. Reach him on Messenger to share your
thoughts on market moves: danilo.masoni.thomsonreuters.com@reuters.net

CLOSING SNAPSHOT: CHANGE OF HEART (1653 GMT)
European bourses started the day in positive territory but investors had a change of heart
in the afternoon after Trump threatened to impose high tariffs on imports of cars from the EU if
the bloc doesn't agree to a trade deal.
It goes without saying, things didn't go well for the auto sector, which ended up
bringing the pan European index down 0.17%.
In terms of single stocks, K+S was the worst performer, with its shares dropping
7.2% after BofA Merrill Lynch resumed coverage of the stock at "underperform".
Here is a snapshot of the European bourses at the close:
(Joice Alves)
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AUTOS DECOUPLING FROM DAX: A TRADE WAR PUT OPTION? (1546 GMT)
Global stocks may have celebrated the initial China-U.S. trade deal with new record highs
but auto stocks have quietly suffered.
The truce has removed a big overhang of uncertainty on markets and global business sentiment
but on Europe it has a potentially contrasting impact.
On one side it supports the economies of the euro zone's two largest trading partners but on
the other, it may pave the way for the White House to start a new trade war against Brussels and
autos are seen first in the firing line.
Autos started decoupling from the DAX since early October, when Trump outlined the Phase 1
trade deal with China and the actual signing this year appears to have cemented the gap.
Does that mean autos are being used as a put option to bet on an escalation of transatlantic
trade tensions?
"It's hard to say... it's quite likely that Trump could start from autos," said Carlo
Franchini, head of institutional clients and Banca Ifigest. "It must also be said that the auto
sector has a restructuring problem".
Here you can see the decoupling:



(Danilo Masoni and Julien Ponthus)
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GO FOR FINANCIALS AND CYCLICALS (1525 GMT)
Next week we will have the Q4 season at full speed with a few dozens reporting results
including Deutsche Bank, Royal Dutch Shell and Unilever.
Barclays anticipates better days ahead for earnings in 2020 rather than the actual Q4
numbers and overall, it says you shouldn't expect much of a boost in share prices from the
results as the U-shaped recovery has been largely priced in.
Among sectors, Barclays says cyclicals and financials, which dragged earnings down last
year, is likely to lead the rebound in 2020.
Banks, autos, mining and energy are the bank's top picks at the moment as its equity team
advises looking for opportunities among "value cyclicals" and "short-cycle" companies - those
included in a basket designed to reflect short-term changes in the macro environment.
-- Preview on Q4 earnings season

(Joice Alves)
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PONZI MARKET? (1512 GMT)
The fear of missing out virus is spreading across stock markets with global stocks hitting
record highs day in and day out.
In a note titled, "Global Central Banks Fuelling a Ponzi Market a Ponzi Market", Guggenheim
Investments CIO Scott Minerd says the only reason investors keep adding to risk is the fear that
prices will be higher tomorrow.
Pointing out some disturbing trends in the credit markets, Minerd says "ultimately, we will
reach a tipping point when investors will awaken to the rising tide of defaults and downgrades.
"The timing is hard to predict but this reminds me a lot of the lead-up to the 2001 and 2002
recession."
He says 50% of the investment grade market is rated BBB, and in the last cycle's peak (2007)
it was 35%.
Even more staggering is the size of the BBB- (one above junk) investment grade credit market
standing tall at $3.3 trillion, four times the size in 2007.
Recession predictor:

(Thyagaraju Adinarayan)
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FRENCH PENSION PROTEST: THIS, PERHAPS, EXPLAINS A LOT! (1430 GMT)
The French have a reputation of being very risk-adverse when it comes to investing and
typically shore most of their savings into real estate or guaranteed long-term fixed-income
tax-free financial products.
Gallic reluctance to equity investing and distrust in financial markets in general are often
cited as a factor behind the stiff resistance among the public to reforming the pay-as-you-go
pension system.
A lot of the protest against Macron's plan overall has indeed been directed against what
activists believe in a hidden agenda of shifting the pension system towards capitalization, even
if that is strongly denied by the French government.
According to a survey conducted during the fall and published today by the French financial
watchdog AMF, just about one in five are considering investing in equities and say they feel
confident in direct or indirect equity investments.



Also only 12% believe now is the right time to invest on the stock market.
You can download the results of the survey here: https://bit.ly/2TPfeeO
And just to illustrate the culture clash between the French and the anglo-saxon psyche about
equity investing for pensions, we give you:


(Julien Ponthus)
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TRADE TRUCE: MUCH ADO ABOUT NOTHING (1429 GMT)
How would you react if you were told that the trade truce between U.S. and China would at
best boost global trade for this year by just $20 billion (that's much lesser than how much
Apple grew its revenue last year)?
Apart from an initial jolt that nudged up world markets to record highs, the preliminary
trade deal between the world's top two economies, touted to be a massive event, has fuelled
markets just by 1% in the last week.
Why? ING believes the deal is unlikely to pull the world out of doldrums.
Estimating a paltry 0.1% ($20 billion) world trade growth in 2020 "at best", the bank says
one should realise that China's commitment to import an extra $200 billion of U.S. goods will
come at the expense of some Chinese imports from other countries.
Not to mention the impact from existing tariffs which are still in effect since last year.
Where has the confidence boost gone as there won't be any escalation?
"Well, the ink on the (U.S.-China) deal was barely dry before President Trump had returned
to making trade threats, this time in an attempt to strongarm the European Union into opening
its agricultural markets to the US and to encourage Europe to co-operate with American policy on
Iran."
ING expects world trade will be limited to around half or one percent, plus it believes
"there is little reduction in uncertainty for markets to enjoy".

(Thyagaraju Adinarayan)
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ITALY RISKS ARE BACK BUT DON'T WORRY TOO MUCH (1058 GMT)
Italian political risk is back with the euro zone country's banks falling a
hefty 1.9% and its sovereign bonds seeing some heavy selling pressure at the open.
Still people don't look overly worried.
Risks of an early election handing power to right-wing leader Matteo Salvini look small and
some investors see the drop in Italian assets as a possible buying opportunity.
Here's a thought by Rabobank strategists led by Richard McGuire: "... neither of the two
parties currently in government have a major incentive to call early elections... we would fade
this morning's widening in the Italian bond spread versus Germany".
In Milan, Carlo Franchini, head of institutional clients at Banca Ifigest, says: "Italian
bonds are the only ones with a positive yield and this compensates political volatility. I don't
think we're going to have a government crisis... (and) let's not forget that the ECB is
continuing to buy 20 billion euros worth of government bonds every month".
Finally, Goldman Sachs is somewhat less upbeat.
Strategists at the U.S. bank led by Alessio Rizzi say: "Although our economists don't expect
elections this year as both parties have little incentive to break the coalition, policy
differences persist both between and within the parties. Against this political backdrop, a
meaningful reduction in Italian risk premia seems unlikely and we wouldn't expect significant
spillovers to other European assets".
For more check out our latest update from Rome: Italy's Di Maio seen quitting as 5-Star
leader in blow to govt
(Danilo Masoni)
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TESLA VROOMS PAST VW TO BECOME NO. 2 (1038 GMT)
One hundred billion dollars (purposely spelled out) -- that's what Tesla is expected to be
worth when U.S. markets open later today, dethroning car behemoth Volkswagen to become the
world's second-biggest automaker by market cap.
Those figures dwarf carmakers such as GM, Ford and Volkswagen,
which have been around since well before the World War II.
Tesla shares have skyrocketed in the last few months, rising a whopping 210% since June last
year, despite being one of the most shorted stocks in the world.
"The rise in the value of Tesla tells us little about the health of the car market (modest
in the U.S., weaker in Germany and China), but a lot about investor behaviour and the state of
banking," says Mike O'Sullivan, author and ex-CIO at Credit Suisse IWM.
"Anyone who thinks the sharply rising price is an indicator of Tesla’s future is mistaken."
Tesla's meteoric rise in stock markets comes even as the brain child of Elon Musk is yet to
show a profit on an annual basis. With the Fed flooding markets with liquidity, fundamental
attributes of a good stock such as earnings, corporate strategy and good governance have taken a
back seat.
"By October of last year there was a sizeable community of investors sceptical that Tesla
would ever become a profitable business. This set of investors had established large ‘short’
positions in Tesla stock. However, as markets rose, they were forced to cover or buy back these
short positions, pushing the price ever higher."
By 12-month forward sales estimates, Tesla is not even among the top 20 in the world. Here's
a quick look at where Tesla stands versus the world's top five by market value (source:
Refinitiv):

Company 12-month forward sales
estimate
Toyota $276 billion
Tesla $31 billion
VW $283 billion
Daimler $191 billion
BMW $115 billion
(Thyagaraju Adinarayan and Danilo Masoni)
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DID YOU SPOT THE STEALTH STOXX 600 RECORD HIGH? (0959 GMT)
Did you spot it? The STOXX 600 very briefly crossed its record of 424.90 points in
early trading and reached a new high of... 424.94 points at 0823 GMT.
It lasted less than 5 minutes and was only 0.04 points but hey, it's still a new milestone.
Talking about new record highs, the DAX has just retreated below the 13,597
milestone as the broader market eased back slightly.
Anyhow, have a look:
(Julien Ponthus and Danilo Masoni)
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OPENING SNAPSHOT: NEW PEAK FOR THE DAX - CONFIRMED (0842 GMT)
Spreadbetters and early indications from index futures all pointed in the direction of the
DAX hitting a new record high at the open.
And here you go here's the trade-sensitive index's new all-time peak:
The easing fears over the Chinese virus are indeed helping with all major European
benchmarks trading up around 0.2-0.5%.
Expectations tech could get support from IBM results and the update from ASML didn't
prove fully true however. The index is up just 0.2%, weighed down by a 2% slide in Prosus
after e-commerce group Naspers sold a stake in its subsidiary, while ASML
is also down as its Q1 2020 sales guidance disappointed.
Autos have staged a big turnaround in the first minutes of trading. The export heavy
sector is now up 1.5% to lead sectoral gainers, completely reversing opening losses that took it
to its lowest level since mid-October.
Burberry which was indicated up sharply after it edged up its forecast for
full-year sales is now down 3%, as opening gains quickly fizzled out.
(Danilo Masoni)
*****


ON OUR RADAR: DAX RECORD, EARNINGS, TRADE, ITALY (0750 GMT)
Easing fears over the new Chinese virus are set to lift European shares at the open with DAX
futures pointing to a new record high for the trade-sensitive index as the focus turns towards
the earnings season.
Tech stocks such as DAX-listed Infineon and SAP could find support
after IBM beat expectations and semiconductor equipment maker ASML forecast
double digit sales and earnings growth for 2020.
A conciliatory tone on trade from Trump could also help. The U.S. President said at Davos he
had "very good" talks with the European Union, but added if a deal was not struck, Washington
would strongly consider auto tariffs
Back to earnings, luxury label Burberry edged up its forecast for full-year sales
with traders expecting a jump of as much of 5% at the open while elsewhere updates look more
mixed.
A big slide in store for Ted Baker after the fashion retailer said its inventory on
its balance sheet was overstated by 58 million pounds, more than double its preliminary
estimates. Traders see its shares down 20-25%.
In M&A, Alstom is seen opening up 2% after a report said Bombardier is
in talks to combine rail unit with the French group.
Political turbulence in Italy that has widened the country's government bond yield spread
versus Germany could put pressure on Italian banks, which have large holdings of sovereign
bonds.
(Danilo Masoni)
*****



QUICK RECOVERY (0634 GMT)
Markets have quickly recovered from the scare of possible economic damage from the spreading
Coronavirus.
It looks that China's response has eased some fears about a global pandemic and after gains
in Asian stocks overnight, Europe too is seen on the up this morning.
"Given the similarity of the Wuhan pneumonia and SARS in 2003, China and the rest of the
world have learned a lesson from SARS," notes Stephen Innes chief market strategist at AxiCorp.
"Health agencies are now working much more proactively and transparently to contain the
Wuhan pneumonia than SARS," he adds.
Financial spreadbetters expect London's FTSE to open 19 points higher at 7,630, Frankfurt's
DAX to open 57 points higher at 13,613 and Paris' CAC to open 24 points higher at 6,070.
(Danilo Masoni)
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(Reporting by Danilo Masoni, Joice Alves, Julien Ponthus and Thyagaraju Adinarayan)