Tullow Oil Share News (TLW)

* Europe's STOXX 600 flat in choppy trade
* U.S.-China initial trade deal to be signed later today
* Weaker pound helps FTSE 100 outperform after inflation data
* S&P, Dow notch record highs

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: rm://julien.ponthus.thomsonreuters.com@reuters.net

CLOSING SNAPSHOT: WAITING FOR THE DEAL (1708 GMT)
The pan European index closed flat today as investors spent the day awaiting for
the so called "phase-one" trade deal between the U.S. and China.
Britain blue chip index closed up 0.3% thanks to weaker pound hit by inflation data,
while most of the other bourses, including German Dax and France's CAC, closed
in negative territory with trade sensitive auto stocks such as Daimler and Peugeot
leading the losses.
In terms of single stocks, Tullow Oil slid as much as 15.7% after a $1.5 bln
writedown in operational update.
Here is your closing snapshot of European stock exchanges:
(Joice Alves)
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TRUMP TO COME AFTER EUROPE? TRADE WAR PART 2? (1641 GMT)
The signing of the China-US trade deal is widely seen as a positive for global equities but
their recent record-breaking run means much of that is already in the prices.
It might be wise then to focus on another big risk, namely that of Trump making Europe his
next target, or from a more bottom-up perspective to keep an eye on export-oriented stocks.
"The signing of the trade deal is good because it supports the economies of the euro zone's
two largest trading partners... but we also see that the increased purchases of U.S. goods could
come at the expense of some exporters in the euro zone," says Maximilian Kunkel, Chief
Investment Officer Germany at UBS GWM.
"Now that we have the Phase 1 deal with China and public consultations on EU tariffs are
behind us, Trump turning his sights on Europe with regards to new tariffs is the bigger risk
than the potential diversion of orders from China from euro zone producers to the U.S.," he add.
"Investors need to be vigilant", he concludes.
Michele Pedroni, fund manager at Decalia in Geneva, has similar concerns.
"Trump has already taken or threatened to take action, for example, in the auto sector. Not
all of his threats were just rhetoric," he says.
"Washington could consider rising tariffs on European products to put pressure on Brussels
to further reduce subsidies to Airbus. It is also considering new tariffs on French
goods as retaliation against a French tax on the earnings of U.S. digital companies such as
Amazon and Facebook," he adds.
Brussels' commitment to fight climate change and the prospect of a carbon tax that hits U.S.
exports of coal, natural gas, steel and many manufactured product could just exacerbate the
tension, he adds.
And Trump is "unlikely to turn the other cheek," he says.



(Danilo Masoni)
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STOXX 600: "I FEEL STRESSED" - ANALYST: "YOU'RE NOT" (1415 GMT)
Headlines mentioning WW III are definitely the kind of stuff which would be expected to
pump up some adrenaline into world markets and infuse some long-lasting stress.
Add some trade war tensions, a dash of macro uncertainty, dot-com bubble ghosts haunting the
tech space plus some lingering Brexit angst and you would be excused for some mild anxiety
issues.
But no.
The Euro STOXX 50 volatility index, Europe Inc's gauge of fear, is trading at a cool 12.6, a
historically low level in comparison with its long-term average (23.7 according to LPBAM).
It's also, as you can see below at the lower range of the last two year of trading:
One of the reason for all this coolness, according to LPBAM's analyst Stéphane Déo, is the
very low correlation between stocks.
Looking at the past few years, Déo found that the components of the STOXX 600 are not moving
in a market stampede mode but rather separately and for their own reason.
The chart is in French but if you look at the two red circles, you can see that correlation
is clearly down from the 2015/16 peak.

What this means, Déo argues, is that the trend in low correlation is helping keep the
volatility in European equity markets in check.

(Julien Ponthus)
*****


EUROPE INC: ANYTHING TO LOOSE FROM CHINA-US DEAL? (1302 GMT)
The signing of China-US trade deal is nice way to start the year, not doubt, but there might
also be a dark side to it.
Firstly there's a risk Trump could make Europe his next target but also one could argue that
more China purchases of U.S. goods could mean less for Europe Inc.
Is that a big risk? We spoke to few fund managers and traders and so far they don't seem to
be overly worried. It looks like the positives more than offset the negatives.
"Europe and European companies have a lot to gain as the environment stabilizes. For sure
they might loose some market share in some product groups in short term, but looking at a longer
horizon, the continued growing demand in China (and in Asia) will spill to Europe as well," says
Tomas Hildebrandt, senior portfolio manager at Evli Bank in Helsinki.
"Any pick up in global trade and investments boosts industrial orders in Europe," he adds.
Markus Huber, a trader at City of London Markets, looks equally unperturbed.
"I don't think there will be a major negative backlash from the U.S. trade deal with China
for Europe... China is still expanding and growing strongly, meaning there are still plenty of
opportunities left for countries besides the U.S.," he says.
(Danilo Masoni)
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GERMAN BANKS: "MORE HEADWINDS THAN TAILWINDS" (1214 GMT)
Low interest rates are bad for banks. German lenders think it is particularly bad news for
them.
If interest rates go up, banks in Europe's largest economy expect a 23% profit jump in three
years. If they don't, it’s a 2% fall, UBS's analysts say in a note, citing a survey of more than
1,400 banks in the country conducted between April and June.
Well, at this point we should keep as a base case falling profits by 2023 since rates have
fallen further since the survey, UBS says, adding that German banks "face more headwinds than
tailwinds".
The Swiss investment bank concludes that the sector in Germany will need structural changes
in the medium to long term, driven by depressed ROE levels, which could lead to a consolidation
of the highly fragmented space.
"Digitalisation and pressure on profitability from low rates force German banks into
consolidation and deep cost savings," UBS says.
For now, banks are already taking on more risks in a bet to improve their results, it adds.
Meantime, Deutsche Bank today is the second top faller at the German index
, latest down 1.6%.
And here is the forecast for smaller German banks given various scenarios:
(Joice Alves)
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TRADE PRESSURE: EUROPE AFTER CHINA? (1145 GMT)
The idea that Trump could make Europe target of unwanted attention once he's happy with
China isn't new.
Little surprise then that with the signing of an initial trade deal with Beijing being just
a few hours away, people are taking a fresh look into that risk and what it could mean for
European assets.
"A less volatile situation in the trade relationship with China may shift attention to
Europe," say ING economists, noting that Germany is most likely to be targeted as Washington
seeks to mitigate imbalances and strengthen the euro.
"Pressure from US tariffs pushed the Chinese government to step up fiscal stimulus
and President Trump may hope to replicate such results in Germany through similar means," they
note.
"With the presidential election on the horizon, it may look like a bold move to hit the EU
with protectionist measures, but it must also be noted that the electoral debate has not seen
trade as a particularly central topic so far", they add.
ING doesn't look into what a fiscal boost could mean for the stock market. On that check out
some of our previous posts.
Buy European cyclicals if you believe in...
Stockpicking a German fiscal stimulus
German climate plan: is that fiscal stimulus?
(Danilo Masoni)
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TECH STOCKS: WILL LOVE TURN TOXIC? (1103 GMT)
With ASMI reigning supreme at the top of the STOXX 600 with a stellar 10% rise, this may be
a good time to have a grown-up conversation about dot-com bubble ghosts haunting the tech sector
again.
If ASMI's share price rally of over 200% in the last 12 months looks scary, maybe it's
because it actually is? You decide:
Anyhow, not a day goes by now without analysts issuing warnings about similarities between
the current market and the 2000 bubble.
Stretched valuations, insatiable appetite for trendy but loss-making companies and exuberant
market sentiment are among the red flags which are being waved frantically.
Speaking about the latter, Sentix reports that its sector sentiment for technology stocks
reached its highest point since 2001.
"At the start of 2020, investors are going one step further. One too much?", asks Sentix
managing director Manfred Hübner who notes the presence of risk factors through technical
indicators such as gaps to averages or RSI.
"In the course of up to three months, such a sentiment overstimulation can certainly be a
measurable 'buzzkill' for the bull", he notes.
(Julien Ponthus)
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UK PLC: RACE OFF, BRAKES ON (1033 GMT)
Boris Johnson's resounding victory in the UK election and fading hard Brexit tail-risks were
enough to power FTSE midcaps sharply higher and comfortably beat it's big brother FTSE 100 since
August last year.
Barclays believes the outperformance has been overdone and closes its overweight position on
domestic stocks versus exporters.
"While we see ample room for global investors to keep adding back to the broader UK equity
market, in particular given its still attractive relative valuations, we believe that the
pricing-out of political uncertainty has partly played out already," Barcalys equity strategist
Emmanuel Cau says.
FTSE 250 has outperformed the FTSE 100 by 10% since mid-August with
investors storming back to equities exposed to the domestic economy, as no-deal Brexit risks
faded sharply on the back of Johnson's comfortable majority in December election.
Barclays says UK equity funds had the biggest inflows of the main regions and GBP shorts
were closed, but given upcoming trade negotiations with the EU, sterling is likely to be stuck
in a narrow range.
Cau says the "nascent" recovery in global and emerging markets activity should help selected
UK exporters, commodities in particular.
While the end of the political deadlock did cheer financial markets, activity dataflow is
yet to reflect the reduced uncertainty, Cau adds, pointing to economic surprises having turned
negative again and PMIs rolling over further.
(Thyagaraju Adinarayan)
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GOOD OLD 'POUND DOWN/FTSE UP (1009 GMT)
The FTSE hit a session high of 7642.20 points (+0.25%) following the pound taking a knock
from weak UK inflation data released at 0930 GMT.
With money markets ramping up bets for a BoE rate cut, foreign currency earners listed on
the London benchmark logically got a boost.
The negative correlation between the UK's currency and London's blue chip index had
nevertheless somewhat faded in the last weeks after Boris Johnson's landslide victory in
December seemed to trigger a general rerating of Britain PLC.
So, while it's not as spectacular as it has been in the best and now seems to be fading,
it's been a while since a move between the two asset classes was that clear cut:

Here's some reading:
UK inflation hits more than three-year low, raising pressure on BoE

(Julien Ponthus)
*****


OPENING SNAPSHOT: TOLD YOU SO! (0836 GMT)
As expected, European bourses are trading slightly down and both ASMI (+8%) and Chr. Hansen
(-7%) are the top movers as the session begins, boosted and dragged down respectively by their
trading updates.
One big loser is RBS, also the top faller on the FTSE 100, after a rating downgrade by
Barclays based weaker earnings estimates.
Unsurprisingly, car makers are the worst performers with trade tensions seemingly here to
stay despite the planned signing of the U.S./China phase one deal. Logically, Germany's
export-heavy DAX is one of the local benchmarks getting hit the most with a 0.3% fall.
One stock which rarely takes the spotlight here is Jeronimo Martins, second-best performer
on the STOXX 600 with a 5.6% rise after the Portuguese food retail group's Q4 sales beat
estimates.


(Julien Ponthus)
*****


ON THE RADAR: ASM INTL ON FIRE, CHR. HANSEN TO FALL (0752 GMT)
European stocks are expected to dip in sync with global markets after Mnuchin said tariffs
on Chinese goods would be in place until a second phase agreement.
In terms of individual stock movers, there’s good news for the Tech sector and ASM
International with its Q4 sales set to beat guidance and its share price to jump.
On the contrary, Chr. Hansen is expected to fall up to 5% after its tradings update.
Potentially quite some action in the UK with Tullow Oil and a $1.5 billion write-down.
Balfour could also be under pressure after a raid by U.S. air force into its Oklahoma City
offices as part of an investigation into asbestos contamination.
Homebuilders Persimmon and Vistry’s trading updates will be closely watched as UK
housebuilders are seen as somewhat of a gauge of how the country will do post-Brexit.
In Germany, shares in Fraport are down close to 3% after passenger traffic went down in
December.
On the M&A front, France's Capgemini raised its bid on Altran whose shares were suspended
yesterday.

(Julien Ponthus)
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MORNING CALL: THAT TRADE DOWNER (0619 GMT)
Today's planned signing of the phase-one U.S.-China trade deal was supposed to give markets
a boost but that was before Mnuchin said the Trump administration would keep in place tariffs
until a second phase agreement.
That has clearly dampened the mood of global markets and European bourses will likely be no
exceptions and some profit taking is expected.
Financial spreadbetters at IG expect London's FTSE to open 7 points lower, Frankfurt's DAX
to go down 43 points and Paris' CAC to lose 14 points.
There's nothing in sight in store it seems this morning, be it inflation indicators or
corporate announcement, to potentially shift drastically investors' sentiment.
(Julien Ponthus)
*****


(Reporting by Danilo Masoni, Joice Alves, Julien Ponthus and Thyagaraju Adinarayan)