Taylor Wimpey Share News (TW.)

* Johnson victory and trade deal boost sentiment
* UK midcaps hit record high, FTSE up 1.9%
* Retailers, banks, housebuilders and travel & leisure stocks soar

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

OMG: AFTER ALL THAT, IS BREXIT ONLY MID-WAY THROUGH? (1100 GMT)
After three years of bumpy Brexit ride, the Conservative Party sealing their election
victory only got us half-way through?
So seems to believe Oxford Economics.
"Winning the referendum was the initial step. The withdrawal agreement is the half-way
step," says Gaurav Saroliya, director of global macro strategy at Oxford Economics.
"Now comes the harder part because you have to sort the nature of the relationship with the
EU and that's where a lot of disagreements within the Conservative Party will arise," he adds.
Delivering Brexit fully could take considerably longer than the three years that has taken
us to get to this point, Saroliya says.
Goldman Sachs says in a note that Johnson's plans to get a "best-in-class" free-trade
agreement with the EU in eleven months is especially ambitious.

(Sruthi Shankar)
*****


BRICK BY BRICK: UK HOMEBUILDERS STAND TALL
The Conservatives victory gave a boost to the UK homebuilders. Have you guessed why?
Clearly, the higher chances that PM Boris Johnson will manage to lead Britain out of the EU
by Jan. 31 has played a role as investors think people will be keener to buy homes once the
political drama is sorted out.
But there is much more to it. First, homebuilders have suffered massively since the Brexit
referendum, which prompted a massive selloff.
"Remember, markets over-reacted in the aftermath of the EU referendum in 2016," says
Franklin Templeton in a note. Homebuilders valuation continued to suffer because of an
expectation that the UK economy would grind to a halt, it adds.
According to Jefferies, a Boris-led government will help homebuilders and building material
producers selling into residential pushing up valuations.
"A Tory majority should provide a clearer runway for less interference in the sector which
should be reflected in further upside in valuations, particularly of dividends," Jefferies
writes in a note this morning.
Ok these stocks looked cheap, what else?
Here is a list of reasons from Jefferies on why Berkeley, Barratt, Taylor
Wimpey and Persimmon are rallying to the news Johnson is here to stay.

1) Tories target at least 300k new homes per year by 2025
2) Commitment to Help to Buy to 2023, with a proposed new long-term fixed mortgage with
deposits of only 5%
3) In his leadership campaign, Johnson mooted the idea of stamp duty abolition for homes up
to £500K. But even a reduction in stamp duty would drive a pick-up in housing sales, benefiting
mostly estate agents and those homebuilders are more reliant on the second-hand market
4) Increasing infrastructure spending
Meanwhile, Franklin Templeton says it is keen to expand further its homebuilders portfolio.
"Many homebuilders have net cash and pay an attractive dividend, but a boost in UK domestic
stocks could push prices up to a level where we might consider selling at attractive levels," is
says.



(Joice Alves)
*****



UK DOMESTIC STOCKS: BEWARE OF THE HANGOVER (0851 GMT)
A Conservative Party decisive majority is the beginning of the end of uncertainty in the
short term but watch out before being overjoyed.
Okay, the pound rally favours domestic UK stocks and the election priced out the worst case
scenario and this explains why UK midcaps surged this morning, hitting an all-time-high.

But the usual stuff still hangs over the UK economy, a Citi note reminds us this morning.
"Don’t chase the UK domestic stocks too hard," it says.
Citi economists remain concerned about the implications of Brexit for the UK economy and
forecast a mild recession in 2021.
UniCredit then reminds us that there's still a lot to come and the election was only "stage
one".
"Mr Johnson’s Brexit deal only covers the separation issues, it’s just stage one.
Negotiations on the future relationship have not even started and will likely take years," the
Italian bank says in a note.

(Joice Alves)
*****


OPENING SNAPSHOT: UK MIDCAP SUPERSTARS (0838 GMT)
UK midcap index are up 4% and on all time highs as stocks with heavy exposure to the
UK domestic economy surged after Johnson's sweeping majority.
Ireland's main stock index iseq hit its highest since dec 12 2007, up 3.6%.
The UK real estate investment trust index surged 6.4% at highest in more than
four years.
Even the FTSE, which tends to react negativaly to the surge of the pound, is up more than 1%
this morning.

Here is a snapshot of European bourses this morning:
(Joice Alves)
*****


UK ELECTION: WHAT'S HOT, WHAT'S NOT (0732 GMT)
Jefferies just issued a list of stocks that could get a boost from the decisive Conservative
win and some that should probably be avoided.
Stocks on the buy list include among others BT, Royal Bank of Scotland,
Centrica, Persimmon, and Morrison.
They advise investors to stay away from the internationally exposed stocks that tend to get
knocked by a surging pound including BATS, BAE Systems, IHG and
Rentokil will be negatively impacted.
The broker also said it would re-rate UK stocks which are still trading 12.5% cheaper to
Europe.

(Sruthi Shankar)
*****

ALTITUDE SICKNESS? (0723)
It's looking good at the open, so good that it begs the question: time to book your profits
and enjoy Christmas?
"The temptation is to say yes", ING analysts reckon.
MSCI World stocks index hit a record high yesterday and is very, very likely to hit another
fresh record as the European stock futures are pointing to another solid rally with the UK vote
and the trade deal boosting sentiment.
further down the road, it's not looking so good.
"The bears and bulls will spend 2020 wrestling with a combination of altitude sickness,
mixed with ebullience. Directionally, that could still be positive on the whole, but don't
expect it to be a smooth ride. So keep those sick-bags handy", ING also warns.
(Thyagaraju Adinarayan)
******

UK STOCKS: THE DAY AFTER TOMORROW (0714 GMT)
Before we get granular into which UK stocks will gain or miss out the most today, there's an
elephant on the trading floor that needs to be addressed.
Long term, there is a consensus Brexit is a negative for the British economy so after a
natural short-term relief rally, shouldn't one expect a nasty hangover to creep in?
We put the question to Shamik Dhar, chief economist at BNY Mellon IM, who told us he expects
at least a few months of recovery.
"It will certainly hold up", he said, pointing out that UK financial assets are currently
cheap and are expected to recover going into 2020.
Dhar believes fluctuations along the way are inevitable as Boris Johnson starts negotiating
a trade deal with the EU but that the overall picture is a positive one, at least for now.
Short term it looks good reckons Chris Bailey, a strategist at Raymond James.
"I would imagine the UK will see inflows, maybe even corporate transactions, people buying
FTSE 100 or FTSE 250 companies".
For Oanda's Craig Erlam, the impact Brexit is an issue but not for today.
"As the old adage goes, the markets hate uncertainty. As we know, they're not too fond of
Brexit either, but that's a discussion for another day", he argued.
Paul Hollingsworth, an economist at BNP Paribas Markets says "there are still risks, and
some degree of Brexit uncertainty is likely to persist over 2020".
One advice from Rabobank analysts is to try to enjoy the moment.
"Let’s forget that this means the UK is 100% leaving the EU and dreams of turning back the
clock are over, and that we start a new clock ticking on the end-2020 deadline of Hard Brexit
failing a trade deal. Eat, drink, and be merry!"

(Julien Ponthus, Saikat Chatterjee, M Muvija)
*****
SQUEEZY UTILITIES: CORBYN RISK REMOVED (0657 GMT)
As we flagged earlier this week, if Johnson wins with majority, the UK utilities sector will
see a major surge and that's quite likely to happen once markets open in an hour.
"...expect Utilities to be one of the squeeziest sectors as Corbyn risk removed," a
London-based trader tells us, referring to the short squeeze expected in those stocks.
United Utilities, Severn Trent and National Grid are those big names
to watch out for.
In other moves, HK-listed shares of HSBC and Standard Chartered jumped 3%-4%. Those are some
FTSE heavyweights likely to help the blue-chip index stay in the positive territory
while the big dollar earners take a hit from a stronger pound.



(Thyagaraju Adinarayan)
*****

FTSE UP, POUND UP: NO NEGATIVE CORRELATION TODAY? (0620 GMT)
On a typical trading day, a surge in the pound acts like an accounting drag on the FTSE 100.
So today's 2.5% rise in the pound would theoretically give little chance to London's
benchmark index to make it in the black.
But it seems today this is not the case: FTSE futures are up 0.25% at 0558 GMT and in terms
of spreadbetting indications, CMC Markets sees the FTSE 100 opening 20 points higher.
Little after 1am, Neil Wilson from Markets.com wrote that he didn't expect the FTSE to fall
at the open even if sterling was on fire and futures had initially dipped.
"Once traders and more importantly, the big money managers and funds come in for the cash
equity open, the FTSE 100 should be moving higher", he argued.
"The relative economic and political certainty offered by a large Conservative majority will
be vital", he added, pointing to a likely "huge sigh of relief once the cash market opens and
the City awakens to a Tory win".
He also made the point that a phase-1 trade deal between the U.S. and China would boost big
international groups.
"For those big dollar earners like Shell and the rest, the apparent progress on a phase one
US-China trade deal is vitally important to boosting broader risk sentiment and spins a positive
global growth narrative".

(Julien Ponthus)
*****



MORNING CALL: JOHNSON VICTORY + TRADE DEAL = STOCKS UP (0539 GMT)
European stocks are seen opening well into positive territory this morning after investors
got clarity on two major issues looming over markets: the UK general election and the U.S./China
trade war.
A preliminary deal between Washington and Beijing is seen a key step to de-escalating their
bitter row and Johnson's Conservatives winning an outright majority now rules out Labour's
radical economic agenda and provides visibility on Brexit.
Frankfurt's DAX, a good gauge of sentiment towards the trade war, is seen opening up 133
points and Paris' CAC is set to gain 60 points, according to IG.
The surge in the pound since an exit poll indicated a sweeping Tory victory is expected to
weigh on British dollar-earner blue chips but not necessarily push the FTSE 100 in the red.
At the moment London's FTSE is expected to gain 2 points, so it's basically flat.
UK stocks which make most of their revenues in Britain are on the contrary expected to have
a good day.
"It's really going to benefit UK domestic stocks", Dean Turner, an economist at UBS Wealth
Management, just told us.
"What's been going on overnight with the U.S./China trade talks will also give a lift to
stock markets when they open".


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