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LIVE MARKETS-Betting on a vaccine? Here's a shopping list

Mon, 5th Oct 2020 11:35

Welcome to the home for real-time coverage of European equity markets brought to you by Reuters
stocks reporters. You can share your thoughts with Joice Alves (joice.alves@thomsonreuters.com)
and Julien Ponthus (julien.ponthus@thomsonreuters.com) in London and Danilo Masoni
(danilo.masoni@thomsonreuters.com) and Stefano Rebaudo (stefano.rebaudo@thomsonreuters.com) in


Morgan Stanley put together its teams to single out stocks that have been hit hard by
COVID-19 and retain a big catch-up potential to be unleashed once a vaccine becomes broadly

The U.S. house expects that to happen by the start of Q2 next year following positive Phase
III readouts, triggering "a significant pickup in activity".

So here are its picks, which span across different sectors:

* Leisure: cheap stocks include Sodexo, Basic-Fit, SSP, Cineworld and Whitbread

* Airlines: Ryanair and Wizz

* Retail: Kingfisher stands out as being cheap vs history. AB Foods also looks cheap

* Media: Informa and JCDecaux are cheap enough to bounce strongly on a vaccine

You may have just spotted though that MS mentioned Cineworld and the latest grim
developments are a stark reminder that risks out there still abound and that the
road to recovery is by no means going to be plain sailing.

Anyhow in this chart you see how these stocks have performed the market since the first
COVID-19 wave at the start of this year. Most of them have lagged the STOXX 600. One notable
exception is Kingfisher.

(Danilo Masoni)



Cash equity markets in Europe and Wall Street futures are comfortably trading in positive
territory as optimism about Trump's health seems to be proving somewhat resilient.

One interesting thought is that should sentiment deteriorate, there's a broad expectation
that fiscal and/or monetary stimulus would come asap to the rescue.

"In the case that the markets enter a deep period of volatility or a bear market, the odds
of a fiscal stimulus will rise dramatically", reckons Amundi U.S. Portfolio Manager Paresh

"In addition, we would anticipate the Fed to step in with more asset purchases and a more
formalized forward guidance to help anchor long-term interest rates should it need it", he added
in a QnA distributed to clients.

(Julien Ponthus)



News that U.S president Donald Trump was flown to the hospital as he was tested positive for
coronavirus was probably the most read across the world recently.

But taking a contrarian view, is it really affecting financial markets?

According to Barclays it doesn’t, or at least not that much. “In sum, it seems that
investors do not believe that the news of the president’s infection is a hugely market-moving
event,” it says after assessing a recent reaction from equities and forex.

It suggests staying the course because we are in a “risk-supportive macro outlook despite
election uncertainty.”

UBS retains its positive mid-term outlook for the stocks and says that election uncertainty
is a near term issue.

Let’s see in detail the investment banks’ view.

Being away from the campaign could cost the president valuable time in which he could reset
the status quo of the race, as his rival Biden is ahead according to the polls.

It also keeps the national conversation focused on the virus, while Trump would probably
prefer other topics.

But we shouldn’t ignore a possible “sympathy bounce”, as for UK prime minister Boris Johnson
after he was treated for Covid, a Barclays research note says.

Besides the current situation increases the chances of a new stimulus package being
approved, as this situation may be a 'political trigger' that lets both parties close the policy
divide and pass a phase four package, it adds.

Such a move would be supportive for risk-sentiment of course.

Then it is very unlikely that the elections will be postponed.

(Stefano Rebaudo)



There's quite a lot of action for a Monday morning and it's fair to say the week has begun
in earnest.

There's no surprise in the sense that the cash market is going in the same direction as
futures, and the STOXX 600 is rising about 0.7% with oil (+1.6%), banks (+1.4%) and car makers
(+1.5%) doing most of the heavy lifting.

There's a lot of M&A news in the banking sector for sure, some positive rating upgrades in
autos and oil prices have greatly benefited from the optimism around Trump's health.

One move that really grabs the attention this morning is Cineworld falling over 50% after
announcing it would temporally close its U.S. and UK theatres following the delay in the release
of the latest James Bond. That just underlines the stress the whole entertainment industry is in
with new social restrictions being introduced to fight the spread of the new coronavirus.

The best performing stock of the pan-European STOXX 600 is Weir, up 16% after it announced
its intention to sell its oil and gas division.

One of the top losers is Suez, which is calling the approach of rival Veolia "hostile",
which doesn't look promising for shareholders hoping for a deal.

But to be fair, there are really very few companies in the read in what is panning out so
far as a risk-on session.

(Julien Ponthus)



That's a long list which doesn't include Trump's health, which will probably be the key in
the direction of travel today.

Anyhow, one grim news development for the leisure sector today is Cineworld's decision to
temporarily shut its movie theatres in the United States and the UK. The move follows the delay
in the release of the new James Bond movie, "No Time To Die" to next year.

In the meantime, the takeover saga over France's Suez is alive and kicking with the company
calling rival Veolia's approach hostile.

In the hot fintech space, M&A appears more consensual with Italian payment group Nexi saying
it would merge with smaller rival SIA to create a digital payments company with a capitalization
of over 15 billion euros.

Arguably as "hot" as fintech but more literaly perhaps, the baking sector is under the
spotlight too with Italy's Newlat Food presenting a preliminary, non-binding offer to buy Hovis,
the 134-year-old British bread maker.

We've also got Japan's NEC Corp buying Swiss financial software company Avaloq Group AG
for$2.2 billion, a move that will spearhead its entry globally into finance software.

Talking about Switzerland, Alibaba plans to acquire an up to 9.99% stake in Swiss
duty free group Dufry.

M&A is also continuing to brew in the banking sector: El Confidencial reported on Monday
that Sabadell held contacts with rivals BBVA and Kutxabank to evaluate a
potential merger.

A source also reported that Spain's Unicaja and Liberbank LBK.MC are holding informal talks
about a potential tie-up to create the country's fifth-biggest lender with over 100 billion
euros ($117.13 billion) in total assets.

Britain's billionaire Issa brothers and private equity group TDR Capital have bought Asda
from Walmart in a deal which gives the British supermarket chain an enterprise value of $8.8
billion and the buyers a platform to roll out smaller stores.

In Norway, Energy major Equinor shut four of its Norwegian offshore oil and gas fields on as
its workers expanded their strike.

Looking ahead, some reshuffling on the horizon in Frankfurt with Deutsche Boerse proposing
to increase the number of companies included in Germany's blue-chip DAX index to 40 from 30.

Shares in Novartis are up 1.6% in premarket trade after the company said new phase
III analysis demonstrates Bouvu* showed improvement.

(Julien Ponthus and Stefano Rebaudo)



Optimism about Donald Trump's health seems to be behind a rather upbeat start of the week
with broad gains across Asia and futures moving upwards, both for European bourses and Wall

But while his doctors say the president is improving and that he could be sent back to the
White House as soon as today, there's still quite a lot of uncertainty out there.

Other doctors not involved in Trump's treatment said there was evidence his case was severe
given the drugs he's been given.

For more on that, check out our latest update here:

For the moment, there's clearly a risk-on feeling as we move towards the opening bell,
notably with oil prices rising.

(Julien Ponthus)


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