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LIVE MARKETS-Beware of the value traps

Tue, 20th Oct 2020 10:29

* European shares recover after open lower

* UBS up 3% as quarterly profit doubles

* Logitech shines, Reckitt also beats estimates

* Doubts over U.S. politics weigh
Welcome to the home for real-time coverage of markets brought to you by Reuters reporters. You
can share your thoughts with us at markets.research@thomsonreuters.com

BEWARE OF THE VALUE TRAPS (0928 GMT)

A vaccine and big fiscal stimulus in the U.S. could finally unleash the hidden potential of
so-called value stocks, the cheap and neglected part of the stock market that has been left out
of this long secular bull market.

With both of these catalyst forthcoming sooner or later, investors are rightly screening for
good solid companies that are on the cheap, but one shouldn't forget that besides opportunities,
there are also value traps.

"Our fundamental analysts expect the value traps to continue underperforming even if the
broader value complex rallies," BofA Global Research says.

That said here are their top value traps for Europe: ABF, BASF, BP, Lloyds, SocGen and
Tesco.

(Danilo Masoni)

*****

Q3 BEATS HELP EUROPE LIMIT U.S. UNCERTAINTY (0723 GMT)

A string of better-than-expected results is lifting the mood here in Europe, helping offset
uncertainty about U.S. politics and short term stimulus in the world's No.1 economy as next
month's presidential election gets closer.

As a result, losses were rather limited with the STOXX 600 trading down just 0.2% in opening
deals. On top of the regional benchmark Logitech is shining with a 15% jump after the
computer peripherals maker raised its FY forecasts.

The 99% profit jump on the back of heavy turnover in global markets is pushing UBS
shares up more than 2%, while among other companies which posted strong earnings, Reckitt
Benckiser is up 1.3%, Orion is up 6% and Sartorius Stedim up 5%.

A share placement is hitting Teamviewer, down 7%.

Here's your opening snapshot:

(Danilo Masoni)

*****

EARNINGS RECOVERY, UBS'S PROFIT JUMP AND CHIP M&A ON OUR RADAR (0632 GMT)

Worries over U.S. politics and a second COVID-19 wave will likely hurt European shares at
the open after big losses on Wall Street overnight but a solid update from banking heavyweight
UBS and other trading updates underscoring the pace of an earnings recovery in Europe
may give investors a reason to cheer about.

Trading on Euronext is also set to return to normal after technical glitches
yesterday that froze morning transactions in Amsterdam, Brussels, Lisbon and Paris and led to
cancellations of closing trades.

UBS kickstarted the reporting season for big European banks by doubling its Q3 profit,
boosted by heavy turnover in global markets as well as an unexpected rise in earnings for wealth
management. Its shares are expected to rise 3% at the open.

Results from Swedbank echoed those at UBS with strong market conditions
contributing to a bigger-than-expected Q3 profit rise. Increased payment also helped.

Meantime, Logitech benefited from a shift to working from home that led the
computer peripherals maker to raise its FY forecasts, while Reckitt Benckiser
reported a bigger-than-expected rise in Q3 sales that were boosted as the coronavirus
pandemic spurred demand for cleaning products.

Robust U.S. and China demand for its premium cognac helped Remy Cointreau to
improve it H1 core profit fall forecast to a 25-30% drop, while in the car space,
rebounding markets helped BMW to deliver higher-than-expected free cash flow in the
automotive segment in Q3.

BHP posted a 7.2% rise in Q1 iron ore production, slightly above expectations,
supported by stable demand from China, the world's top consumer of the steelmaking ingredient.
Its Australia listed shares however fell nearly 2% at one point.

In the telco world, Tele2 posted Q3 profit in line with forecast

Besides results, dealmaking in the chip space is also grabbing attention. Intel has
agreed to sell its NAND memory chip business to SK Hynix for $9 billion in an deal
that could fuel talk of industry consolidation among memory chipmakers.

(Danilo Masoni)

*****

EUROPE STAYS CAUTIOUS AS STOCK FUTURES FALL (0525 GMT)

European shares looked set to start the day adding to losses from the previous session as
investors stay cautions faced with the usual worries, growing coronavirus infections on the old
continent and doubts over a pre-election fiscal stimulus package in the U.S.

Eurostoxx 50 futures are down 0.7% and FTSE futures fall 0.5%, while over
in Asia stocks slipped with the index of Asia-Pacific shares outside Japan last
down 0.1% on the day.

(Danilo Masoni)

*****

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