* Chinese shares, Nasdaq on a roll
* STOXX 600 slightly up
* Tech outperforms; UK homebuilders up
* U.S. futures mixed
* U.S. Jobless claims expected
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.
BOOHOO'S BOUNCEBACK: DAMAGE CONTROL WORKING? (1128 GMT)
Lots of questions around the stock's massive bounceback.
One of the reason the stock is making such a comeback is that many believe the young clients
of the cloth retailer won't be deterred by the allegations of dire working conditions at some of
Boohoo suppliers.
Here's the take of HSBC's Paul Rossington, co-head European consumer retail research
"We believe any impact on demand will be limited. Boohoo targets younger and less affluent
customers who are influenced by social media. It has proactively reached out to many
'influencers' to reassure them in light of the situation. We believe that negative influencer
commentary has been limited to date and that Boohoo's customers are generally driven more by
price, choice, and newness".
Also, as a Reuters story flagged yesterday, sell-side analysts seem to be sticking to their
"buy" tag on the stocks even if as put by Peel Hunt analyst John Stevenson, "ESG is a journey
for Boohoo".
Here's some reading:
Workers rights allegations fail to deter Boohoo's sell-side backers
Boohoo reviews British supply chain after factory report fallout
Next, Zalando and Amazon drop Boohoo over worker rights allegations
And here's Boohoo shares these last few trading days:
(Julien Ponthus )
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$ IS THE NEW GOLD (1034 GMT)
Seems there's a new pavlovian trade in town: risk-off = dollar up / risk on = dollar down.
"What’s striking is that the dollar and gold seem to have switched roles in this crisis,
with the greenback transforming into a haven that's essentially a mirror reflection of stock
markets, while gold has turned 'risk neutral', having virtually no correlation to equities
lately", writes XM analyst Marios Hadjikyriacos this morning.
That being said, gold supply is by nature limited whereas the Fed's money printers seem to
be heading for infinity and beyond!
Anyhow, Hadjikyriacos notes that so far investors are "sticking to the classic pandemic
playbook: buy mega-cap tech shares that can perform even if the recovery falters and hedge some
risk by piling into havens like gold, since bonds are no longer attractive".
Here's how the world's biggest asset classes have performed so far in 2020 and since April,
when market were starting to recover from the coronavirus crash:
(Julien Ponthus)
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CHINA STOCKS: BUBBLE OR NO BUBBLE? (0933 GMT)
China seems to be leading the way in global stocks, as expectations of a V-shaped recovery
are strong and there are almost no signs of a second wave of infections.
But investors are wondering if Chinese shares are on track for a solid medium-term rally or
in the middle of a bubble which will burst, sooner or later.
The Shanghai Composite index today was up 1.4% extending its rally into an eighth
day, but regulators cracked down on margin financing as state media warned of market risks.
According to a Societe Generale research note, there are concerns of "market bubbling
reminiscent of summer 2015", but this time is different mainly for two reasons.
First "the leverage is better controlled" (than in 2015), second "earnings have been
remarkably resilient and valuations metrics do not signal that share prices are overvalued."
Also interest rates are under control. "We do not believe Chinese bond yields are likely to
rise in a way that might suggest a new trend," SocGen says.
"Any sign of a foreign capitulation in bond investments due to a further selloff could be an
important consideration for Chinese policymakers, given its importance in the
internationalisation of its financial markets," it adds.
Valuations levels are still moderate, according to SocGen
(Stefano Rebaudo)
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OPENING SNAPSHOT: UP WITH TECH AND SOME Q2 OPTIMISM (0729 GMT)
As expected, the STOXX 600 has opened in positive territory (+0.4%), boosted by the strong
performance of Asia and Wall Street overnight where the Nasdaq reached another record high.
Tech is definitely lifting European bourses, up 1.8% in early trading, with SAP jumping 6.5%
to a fresh record high, after hitting an all-time high on July 6, as a well received trading
update has propelled the German company at the top of the STOXX 600.
UK homebuilders are also on the podium with Persimmon up 5% after its results and Barratt up
3% with traders noting the sector has started recovering before finance minister Rishi Sunak
pledged state support yesterday, notably through a cut in stamp duty.
There's also some optimism concerning the incoming Q2 earnings season to thank for some big
rises: Finnish drugmaker Orion is up 5% after raising its forecast and Switzerland VAT Group
posting higher than expected sales and being quite upbeat for the semiconductor sector.
On the disappointment side, France's Biomerieux and the UK's Rolls-royce were down 6.5% and
4.5% respectively after their trading update.
Idorsia fell 10% after Cilag Holding sold a 8.3% stake in the Switzerland-based
biopharmaceutical company.
One has to note that the overall picture of the STOXX 600 isn't clear-cut risk on with or
risk-off with defensive and cyclical stocks both among the winners and losers.
Banks for instance are down, together with utilities, food and beverages and telcos while
healthcare is up with cars.
Also worth noting is that the FTSE 100 has gradually lost some steam and is clearing just
slightly in the red now:
Here are the top movers on the STOXX 600:
(Julien Ponthus)
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ON THE RADAR: SAP, AIRBUS, IDORSIA (0642 GMT)
European stocks are set to open higher, supported by bullish mood in Asia as China is doing
better with the economic recovery and in dealing with the potential of a second wave of
infections.
On the corporate front, SAP confirmed its full-year outlook and said its business
activity gradually improved in the second quarter from the effects of a global lockdown, with
revenues and operating profit edging up.
Airbus first-half deliveries slid to a 16-year low, after rising 50% in June
compared with May and reached their highest level since the coronavirus crisis spread.
Suedzucker said the positive impact of panic-buying at the outset of the
coronavirus pandemic had faded and was increasingly overshadowed by lower demand from the sugar
processing industry amid efforts to contain the virus.
Shares in Vat up 5% in premarket trade after results, Barry Callebaut up
1.8% after data, Idorsia stocks are down 7.1% in premarket trade after Cilag offer to
sell up to 11.8 million of Idorsia shares.
The European Commission has struck deals with drugmakers Roche and Merck
to secure supplies of experimental treatments for COVID-19.
(Stefano Rebaudo)
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Q2 TRADING UPDATE FANTASIES (0608 GMT)
Investors will probably be frantically scanning the incoming trading updates of the Q2
earnings season to find evidence that the V-shaped recovery priced in by the markets can
actually be found in the real world.
Belgiam midcap Recticel just issued a statement this morning which looks exactly like the
textbook V-shaped recovery tale investors dream of for the STOXX 600 with the H2 2020 top line
jumping back to the level of H2 2020.
Here's the statement of Recticel's CEO:
“After the low activity point of April, our sales progressively rebounded in May and further
accelerated in June, which combined with the current strength of our orderbooks, gives me
confidence that we are now emerging from this extraordinary crisis. In the second half of 2020,
the topline of our retained businesses is expected to be back at the level of the second half of
2019, provided that no second wave of coronavirus cases occurs.”
Also interesting to note that the share price also pulled off a textbook recovery with a
roughly 50% fall between January in March and a bounce back of just over 100% reached in July.
(Julien Ponthus)
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MORNING CALL: TAILWIND FROM THE EAST (0534 GMT)
European bourses are set to open way higher this morning, boosted by a positive session in
Asia where Chinese shares extended a winning streak into an eighth day.
Worth noting that Beijing's city government reported no new confirmed coronavirus cases for
the third straight day.
Earlier, and despite the record of new COVID-19 infections, Wall Street also finished higher
with tech stocks lifting the Nasdaq to a new record high.
As often, many analysts are puzzled by the apparent disconnect between the euphoria on stock
markets and the economic damage the resurgence of the epidemic is expected to inflict to the
U.S. economy.
In our Wall Street closing report, Peter Cardillo, chief market economist at Spartan Capital
Securities in New York said he believed investors were "playing with fire" and noted the rise in
safe-haven gold prices. See:
Hard to find any clues of the heightened tensions between Washington and Beijing in their
respective stock markets.
Anyhow, European futures for the STOXX 50 and the DAX are up 1% and 1.2% respectively, while
the same derivative for the FTSE 100 is rising 0.6%.
(Julien Ponthus)
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