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* European shares hit highest since end February
* AstraZeneca COVID-19 vaccine can be 90% effective
* Vaccine shots could reach Americans by mid-December
* Eurozone business activity shrink sharply in November
* STOXX off highs, up 0.5%; S&P 500 e-minis up 0.7%
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BANKS: YES, BUT WITH YIELDS (1235 GMT)
The market remains cautious on European banks despite a broad consensus that
cyclicals and value will be in focus into 2021 as the economy is expected to
stage a strong recovery.
Berenberg analysts, who have been bearish on banks in the past decade,
suggest “a positive near-term outlook for the sector, especially for those banks
providing” yields and geared to a consumer recovery.
Besides, M&A activity across the sector and improving capital returns in
2021 offer support to the sector, a Berenberg research note says.
Their top picks are Barclays, which has a too wide discount to
European banks, as well as ING and Unicredit, which are
expected to restart capital returns in 2021.
Below in the chart the Europe’s banking index staged an about 20% recovery
in the last couple of weeks due to vaccine news, but it is still 28% away from
its pre-pandemic highs.
The European Central Bank extended at the end of July a recommendation to
euro zone banks not to pay dividends until the end of the year and allowed them
to eat into their capital and liquidity buffers for even longer, to help them
cope with the economic fallout of the coronavirus pandemic.
The broad Stoxx 600 index is 10% away, while carmakers are back in the black
year-to-date.
(Stefano Rebaudo)
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VROOM! GUESS WHICH CYCLICALS ARE BACK IN THE BLACK? (1110 GMT)
Autos!
Vaccine Monday has lifted European car makers and auto parts by 0.8%, which
is just enough for the index to go back in the black year to date.
Of course, it's just 0.4% for 2020 so far but it's quite significant as
autos were one of the worst hit sectors during the COVID-19 market crash in
June.
If one needed a sign that cyclicals are indeed rotating their way back into
portfolios, that might be it.
Worth noticing the incredible ride for the index: a 50% drop between January
and March and a 100% comeback from there!
(Julien Ponthus)
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2021: UK STOCKS’ TIME... BUT WITH A BREXIT DEAL (1121 GMT)
While there is a broadening consensus on a strong economic rebound in 2021,
some analysts argue that the winners of this process might be the hard-battered
UK stocks; but with a deal on Brexit.
Morgan Stanley says “recent vaccine news flow cements our faith in a strong
recovery next year and helps the Value rotation, while a Brexit deal, if and
when approved, should also provide some support to UK assets.”
The investment bank, which expects the FTSE 100 to rise 17% versus a 10%
gain seen for the MSCI Europe, mentions four reasons why we will see "a rebound
in value which will favour UK performance":
. UK is likely to see stronger EPS growth after a large fall in 2020
. the pound is expected to stage a modest decline, versus a decent
appreciation of the euro
. a Brexit deal will provide a tactical rebound in UK risk assets
. UK stocks are very cheap compared with global peers
In the chart below the MSCI UK index
UK Cyclicals valuations
Here are the five UK cyclicals which offer significant potential upside,
according to Morgan Stanley: ITV, Hays, Marks & Spencer
, NatWest and Taylor Wimpey.
(Stefano Rebaudo)
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POOR PMIS: NO WORRIES IT'S VACCINE MONDAY! (1011 GMT)
A string of poor flash PMIs out of Europe served as a reminder that the
COVID-19 pandemic is biting hard but it looks markets couldn't care much, as
investors got for the third Monday running their dose of vaccine optimism.
"Another Monday morning and another positive vaccine update," says Neil
Wilson, analyst at Markets.com, referring to AstraZeneca saying its vaccine for
the coronavirus could be around 90% effective without any serious side effects.
As a reminder Monday November 9 saw U.S. drugmaker Pfizer's update giving a
powerful boost to markets and the following Monday, November 16, was Moderna's
turn, while on a Wednesday Sputnik update didn't have much of an impact.
The STOXX 600 has risen more than 7% since its first Monday shot
from Pfizer and has reached its highest since end February, recovering all slump
it suffered in March when the first wave of the pandemic hit Europe.
Here are your AstraZeneca's and PMI headlines:
* AstraZeneca COVID-19 vaccine can be 90% effective, results show
* Euro zone business activity shrink sharply in Nov as lockdowns bite
* COVID-19 lockdown hurts Germany's services sector - PMI
* UK economy shrinks as new lockdown shuts services firms - PMI
* French business activity at six-month low after second lockdown - PMI
(Danilo Masoni)
*****
MORE SCEPTICS ON THE EU RECOVERY FUND (0939 GMT)
Though most investors seem pretty sure that at the end of the day a deal on
the EU recovery fund will be reached, some analysts sound more cautious.
“The nice plan of a EUR 1 trillion budget and the EUR ¾ trillion recovery
fund has been put on ice and is at risk,” according to Commerzbank analysts.
Commerzbank points to “the lack of liberal views in Eastern Europe.”
It is true that up to now it “did not really bother anyone in a material
manner,” but “Western European tax-payers do not understand why they should
finance Orban and Kaczynski with their taxes,” it says in a research note.
Warsaw and Budapest have refused to back the EU financial plan, even though
they are beneficiaries, because the money is conditional on respecting the rule
of law.
Both countries are under EU investigation and with the condition in place
they risk losing access to tens of billions of euros. The EU Parliament said it
would not accept any dilution of a rule-of-law condition.
The EU recovery fund supported the euro and made government bond yield
spreads tighten significantly as it has been seen as a game changer towards a
more cooperative Union.
(Stefano Rebaudo)
*****
OPENING SNAPSHOT: STOXX BACK TO FEB HIGHS (0822 GMT)
It's risk on as Monday trading starts here in Europe with upbeat vaccine
news from AstraZeneca and M&A activity fuelling gains in beaten-down
sectors and helping lift the broader STOXX 600 benchmark back to end-February
highs.
Oil and bank stocks are leading sectoral gainers with a surge of more than
1%, while defensive plays are slightly underperforming with utilities and
healthcare posting slight losses.
Here's your opening snapshot:
(Danilo Masoni)
*****
BANK M&A, DEALMAKING, ASTRAZENECA ON OUR RADAR (0745 GMT)
The positive mood seen is Asia is set to spill over to Europe at the open
today with fresh dealmaking activity in banks and other sectors, along with
AstraZeneca's vaccine update, looking set to give investors more reasons
to cheer.
Credit Agricole launched a cash offer to buy small Italian bank
Credito Valtellinese, offering a premium of about 20% to Friday's
closing price.
In the same sector, Reuters reported that Italy's Treasury picked advisers
to secure a merger deal for bailed-out bank Monte dei Paschi, while Bloomberg
said talks with UniCredit on MPS's takeover have intensified.
Meantime, private equity firm Elliott has made a non-binding proposal to
acquire Aryzta but the Swiss frozen baked goods maker said it was
looking at other options.
Still in M&A, UK roadside recovery group AA has received a proposal
regarding a 35 pence a share cash offer, while reports said Private
equity firm CVC has joined the race for Bilfinger, sending its shares
up 5.6%.
Hellofresh shares are down 5.3% after the company said it bought
Factor75, a U.S. provider of fully-prepared meals, for up to $277 million in
cash.
In COVID-19 treatment news, AstraZeneca said its vaccine for the
novel coronavirus, developed along with the University of Oxford, could be
around 90% effective under one dosing regimen.
Elsewhere, French food group Danone has announced new cost-savings
targets and said it planned to become a more "local-first" organization
worldwide, as part of efforts to adapt to a post COVID-19 market.
Prosus has reported core earnings for the six months ended Sept.
30. grew by 29% to $2.2 billion, as proceeds from its lucrative stake in Tencent
offset losses at its other online businesses.
(Danilo Masoni)
*****
VACCINE OPTIMISM SET TO LIFT EUROPEAN SHARES (0641 GMT)
European shares are set to rise at the open today after the weekend brought
fresh optimism over a rapid vaccine deployment in the U.S., while flash PMIs for
November this morning will be eyed for a glimpse over the health of region's
economy.
EuroSTOXX50 and FTSE futures are up 0.4% and 0.3%
respectively following gains overnight in Asia that lifted MSCI's broadest index
of Asia-Pacific shares outside Japan to a new record high.
A top U.S. official said on Sunday that the first vaccines could be given to
U.S. healthcare workers and others recommended by mid-December.
(Danilo Masoni)
*****
