Last checked at 
* European shares slump on virus fears
* Banks hit by earnings
* EZ industry output suffers record fall in March
Welcome to the home for real-time coverage of European equity markets brought to you by Reuters
stocks reporters. You can share your thoughts Joice Alves (joice.alves@thomsonreuters.com) and
Julien Ponthus (julien.ponthus@thomsonreuters.com) in London and Stefano Rebaudo
(stefano.rebaudo@thomsonreuters.com) in Milan.
EZ INDUSTRIAL PRODUCTION: LONG WAY BACK TO 2017 HIGHS (1115 GMT)
As markets start to see March production numbers, when the world's economy was put on hold,
there's more clarity on the real size of the COVID-19 damage across Europe.
And, as expected, it doesn't look pretty. The pandemic came as a huge blow to EZ
manufacturers, with industry output suffering its deepest monthly fall on record.
Industrial production in the 19 countries sharing the euro fell 11.3% month-on-month in
March, the sharpest decline since records started in 1991.
EZ industrial output will recover only once the world leaves lockdown disruptions in the
past but it will take a while before it gets back to its 2017 highs, ING says.
"Production levels of 2017 will be out of sight for a long time to come".
Those won't even be the worst figures as looking ahead, things will get worse before they
start to get better.
As lockdown measures were in place for the full month of April and roughly two weeks in
March, "the decline of 11.3% on the month is massive, but April will be even worse," ING adds.
(Joice Alves)
*****
WHEN WILL A VACCINE BE READY? HERE'S A GUESS! (1050 GMT)
Assuming that countries in Europe aren't aiming at the so called "herd immunity", which
involves 60 to 90% of the population being infected by coronavirus, a vaccine could be the key
to return to a pre COVID-19 life.
A limited number of vaccine doses could be available before year end, says the European
pharma team at Credit Suisse.
With unlimited potential demand and governments controlling the vaccine distribution, supply
could jump to more than 1 billion doses by mid-2021.
The Swiss bank expects first safety data from human trials in the next few months from
Oxford/Astrazeneca, Sinovac and Novavax.
Once the vaccine is out there, for every 100 million doses CS sees a potential uplift to
2025 EPS of 2.6% for Sanofi, 2.3% for Astrazeneca and 1.1% GlaxoSmithKline.
The pharma team modelled sales/profits based on the current $5-6 billion flu vaccine market
where the average price per dose is $10 and over 200 million doses are produced annually.
(Stefano Rebaudo)
*****
CAUTIOUS AND SELECTIVE STOCKS RECOVERY LOOMING (0845 GMT)
The most likely scenario now is a cautious recovery in stock markets, as fears of a second
wave of infections will weigh at least for a while but huge stimulus programs already under way
will prop up share prices.
The latest rally was all about P/E ratio expansion after the ECB "opened the liquidity tap"
and the "markets internals are not risk-on" yet, Barclays says in a research note.
In this scenario the investment bank suggests "to use dips to add selectively to cyclicals,"
after downgrading Telecoms to underweight, while it is overweight on Tech, Mining, Cap Goods,
Healthcare and Utilities in defensives.
Barring the feared second wave of the virus, the economy will show signs of recovery and we
should not forget that "buying equities when PMIs bottom has been a typically better strategy
than buying when they are peaking."
If PMIs rebound and "history repeats itself, cyclicals should outperform".
(Stefano Rebaudo)
*****
OPENING SNAPSHOT: RISK-OFF MOOD HITS BANKS, VODAFONE UP (0737 GMT)
Risk-off mood gripped the financial markets on fresh fears about a second wave of the
coronavirus outbreak, while the gradual easing in lockdowns is under way.
Banks, and automotive sectors are the worst hit, down almost 3%. While utilities, retail and
telcos are standing their ground even if in negative territory.
ABN Amro is among the top losers in the Stoxx 600 index, down 7.1%, after a 395 million euro
loss, hit by loan provisions of 1.1 billion euros. Commerzbank shares down more than 3% after
posting a loss in Q1.
Arcelormittal under further pressure, after some target price cuts by investment banks. The
company recently announced an issue of shares and convertible notes worth $2 billion.
Agnelli's family holding company Exor is down 4.7% after French insurer Covea walked away
from its planned $9 billion purchase of the Bermuda-based reinsurer PartnerRe.
Vodafone shares in positive territory, as the company posted on Tuesday results in
line with expectations and said it would maintain its dividend.
(Stefano Rebaudo)
*****
NEGATIVE RATES, THE ULTIMATE FED 'PUT'? (0713 GMT)
There's nothing like the smell of negative interest in the morning to spice things up!
Powell's speech this afternoon (1300 GMT) will definitely be a key moment for the session
after Trump pressured the Fed to look into "the gift" of negative rates.
"I am looking at that bounce back in US e-minis, and once again, investors are counting on
Fed Chair Powell to grease the wheels off yet another equity markets recovery rally", writes
AxiCorp strategist Stephen Innes, pointing out to positive Wall Street futures currently
outperforming European bourses in the red.
"All that policy deluge before even thinking about negative rates, which is arguably their
ace in the hole for more rainy days, has got investors lining up for their rally bus tickets
again", he commented.
This could of course very well also end up in a case of 'buy the rumour, sell the news' if
Powell brushes off the idea of going subzero.
"The central banker might use the opportunity to nip the negative rates chatter in the bud",
warned at CMC Markets analyst David Madden.
Anyhow, we still got a few hours to wait so let's take a look at the last 20 years of the 10
year U.S. benchmark and see if we can see a trend about where it's heading:
(Julien Ponthus)
*****
ON THE RADAR: L'OREAL, BANKS, ASTON MARTIN AND VOLVO (0635 GMT)
European bourses are coming under renewed selling pressure as fears of a new wave of
infections are gripping financial markets.
On the corporate front, L'Oreal decided to give up on share buyback programmes in
2020 and on a planned 10.4% dividend increase, but to stick to the same 2019 payout per share of
3.80 euros.
More banks are swinging to the red in the first quarter. Commerzbank posted a worse than
expected net loss of 295 million euros, as the lender undergoes a restructuring due to the
coronavirus outbreak. Commerzbank shares are down 2.3% in early trade.
Ducth bank ABN Amro reported a 395 million euro loss, hit by loan provisions of 1.1 billion
euros. Meantime, Deutsche Bank top managers will waive one month of fixed pay, in an effort to
cut costs; shares are down 2% in early trade.
The travel and leisure industry stays on the radar as TUI said it needed to cut
its fixed cost base by 30% and thousands of jobs as it looks to right-size its business to
survive.
Car makers Aston Martin posted a first-quarter pretax loss of 119 million pound,
after sales dropped by nearly a third, while Volvo ditched dividend payment.
Moller-Maersk first-quarter revenue were in line with expectations, but the company warned
about a drop of as much as 25% in global container volumes in the second quarter.
Alstom is sticking to the terms of its previously agreed deal to buy the rail
division of Canada's Bombardier for up to 6.2 billion euros.
But another acquisition falls through with Exor saying it will retain control of
Bermuda-based reinsurer ParnerRe after Covea walked away from the $9 billion deal acquisition.
Eiffage first-quarter construction revenue slumped 13.0%.
Salvatore Ferragamo, whose core profits plunged by 82.2% to 12 million euros in the three
months to March said it could not provide guidance on expected sales for 2020.
(Stefano Rebaudo)
*****
MORNING CALL: IN THE RED ON RENEWED CORONAVIRUS FEARS (0636)
European futures are in the red amid fears of a fresh spike in coronavirus cases and renewed
U.S.-China tensions.
Wall Street's fall overnight seems set to hit a fragile European market, which has recently
swung between optimism over some easing in lockdowns and anxiety about a second wave of
infections.
U.S. markets sentiment soured after U.S. infectious disease expert Anthony Fauci warned that
a premature lifting of social distancing measures could lead to additional outbreaks.
Fresh trade war fears also emerged when a leading U.S. Republican senator proposed
legislation that would authorize Trump to impose sanctions on China if it fails to give a full
account of events leading to the outbreak.
(Stefano Rebaudo)
*****
(Reporting by Joice Alves, Julien Ponthus and Stefano Rebaudo)
