LIVE MARKETS-Braving Brexit

* European shares mixed as Brexit drama unfolds
* Tech sector under pressure
* FTSE 100 up 0.2%, UK midcaps lag; DAX flat
* Corporate recession worries escalate
* Caterpillar, Texas Instruments results disappoint

Welcome to the home for real-time coverage of European equity markets brought to you by Reuters
stocks reporters and anchored today by Joice Alves. Reach her on Messenger to share your
thoughts on market moves: joice.alves.thomsonreuters.com@reuters.net


BRAVING BREXIT (1337 GMT)
Wanna be brave in the face of Brexit?
If you're answer is yes, then Barclays has a trading idea: buy European banks.
That may sound a bit hazardous as the space has often turned out to be a value trap but
strategists at the UK bank led by Emmanuel Cau say "banks offer cheap optionality on improving
macro", hence they upgraded the sector to overweight.
"Arguably, Brexit remains a key drag on banks sentiment, not only in the UK but across the
Eurozone too. While uncertainty is not going away, yesterday's approval in principal of the PM's
deal by parliament reduces further the chances of a disruptive no-deal outcome. We would use any
Brexit-related market weakness as an opportunity to add to banks and domestic plays," they add.
Cau and team say that following a recent rebound on short covering, banks aren't oversold
anymore, but they remain "deeply unloved" and are currently priced near their lowest on record
relative to market.

(Danilo Masoni)
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BREXIT: RIGHT, LET'S WAR-GAME A GENERAL ELECTION! (1050 GMT)
How's a fresh general election going to spice up the "interminably tedious" (copyright to
UBS's Paul Donovan) business of getting Britain out of the EU?
Although going to the polls before Christmas isn't a done deal (nothing is in British
politics), there's a case to start pricing in that possibility.
"If an election is called I do think the pound will go lower, because elections lead to
uncertainty and uncertainty leads to a higher premium into UK investments," says Jordan
Rochester, an FX strategist for Nomura, who puts the chances of going to the polls before
Christmas at 50%.
"Even though it's unlikely, you have to price in the risk of a Jeremy Corbyn elected
government or a Brexit Party involvement in the next government", he adds.
A bit further down the line as the campaign gets on its way, it may play out differently if
Boris Johnson is seen winning an outright majority in parliament.
"So my natural instinct is to say: I think on the headline that an election is called the
pound will head lower, but not too much though, maybe $1.27 (...) and then the focus will switch
to the polls and if Boris Johnson continues to campaign well, then better the chances of a deal
and sterling could get to $1.31 as we wait to see final result".
CitiFX believes that even in the event of an election, the two most likely outcomes are:
1) Johnson passes this deal via a majority; or
2) An economically constrained coalition leads the UK to Remain via a People’s Vote without
No Deal on the ballot paper. Both of those outcomes are GBP bullish medium term.
How about for UK equities then?
Michael Bell, global market strategist at JP Morgan believes the chance of a radical left
government "at the moment seems relatively low" but warns that in the absence of a crystal ball,
caution is of the essence.
"We continue to stick with the view that it doesn't make sense to be taking big bets in
either direction on the U.K. assets, certainly not big overweight or underweight on the small
caps in the UK and likewise not taking big bets on the sterling".
(Julien Ponthus and Joyce Alves)
*****


WHAT IF COMPANIES START TO CUT JOBS? (1018 GMT)
What is the biggest threat for European markets right now?
Most would be tempted to say that Brexit and the U.S.-China trade war are posing the biggest
challenges to investors. And it is in part correct as the global struggle and business
uncertainty have pressured companies into a massive corporate recession.
Refinitiv data showed yesterday that Europe's corporate recession, which kicked off in the
second quarter, is expected to accelerate.
And this brings us back to investors' worries, what if companies react to continuous
pressure on earnings by cutting jobs? That would dramatically escalate troubles across the
world, says Michael Bell, Global Market Strategist at JP Morgan.
"Companies facing a slowdown in economic growth, may respond to the pressure on profit by
cutting jobs," he says.
"Now, if you start to see that happen, then it obviously poses a risk to the economic
outlook so that's something we'll be monitoring very carefully," Bell adds.
(Joice Alves)
*****


OPENING SNAPSHOT: BREXIT HIT, TECH HIT, Q3 HIT, YOU NAME IT! (0844 GMT)
European stocks markets are down about 0.5% and are taking hits from multiple fronts this
morning with the renewed Brexit uncertainty dragging UK Plc down.
As said by Makor's Stéphane Barbier de la Serre "being long UK assets at this stage is
synthetically equivalent to being long uncertainty".
There is a price to pay for that and this morning this is being done on UK focused stocks
such as housebuilders, the worst performing sector in London, domestic banks with
Lloyd and RBS both down 1%.
No surprise to see UK midcaps, down 0.3 percent, and specifically UK domestic plays
, down about 1 percent, underperform the FTSE 100, which is flat.
With expectations of a deep corporate recession increasing, there's also no surprise that
misses were harshly punished this morning, for instance with Nokian Tyres taking a
4.7% blow after another warning.
On the contrary, Finland's Neste jumped 9% at the open with better than expected
and best ever quartly profits.
Europe's tech sector is also in poor shape, down 1.6%, after the warning from Texas
Instruments last night.
The U.S. company, whose broad lineup of products makes it a proxy for the global chip
industry, spook the market with a gloomy forecast: Infineon is losing
4%,STMicro is down 3.2%.
Have a look at the sector:



(Julien Ponthus)
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ON THE RADAR: CORPORATE RECESSION (0658 GMT)
Refinitiv data showed yesterday that Europe’s corporate recession is expected to accelerate
with companies listed on the STOXX 600 now expected to report a drop of as much as 5.3%
in Q3 earnings, much worse than the 3.7% fall expected a week ago.
With that in mind, investors have a lot of corporate news to digest today.
There are however some positive news among the flurry of trading updates.
Despite the gloomy auto market, Peugeot maker PSA reported higher revenue for Q3, as the French
company benefited from demand for its pricier SUV models even as its vehicles sales faltered
globally.
Also likely to support the sector is an FT report that talks between the U.S. and the EU
could be alternative to imposing tariffs on automotive imports next month.
Positive figures were disclosed also by Dutch paints and coatings maker Akzo Nobel <NV
AKZO.AS>, which says it announced a 500 million euro share buyback, after reporting a 23% jump
in core profit driven by cost cuts and more expensive product prices.
But of course it is not all roses. France's Getlink reports flat revenue as Brexit
uncertainties weigh.
European banks seem also to continue to struggle. Swedbank Q3 profit squeezed by costs for
money-laundering fall-out and Handelsbanken to slash costs as restructuring charges
dent Q3 profit
Among other possible movers is France’s Casino as it plans to raise 1.5 bln euros to
restructure its debt, Finland's Neste beating market expectations with record Q3 result. SEB
also beat market expectations.
Among other companies reporting are: Norsk Hydro Bic, Barco,
Melexis, Telenor, Gecina, Ingenico, Carrefour,
Aeroports de Paris. Edenred, Eramet
(Joice Alves)
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DEEPER INTO UNCERTAIN TERRAIN(0535 GMT)
European bourses are seen opening lower this morning, after the Brexit saga took another
twist last evening when British lawmakers agreed on Boris Johnson's deal, but refused to hurry
up making it quite unlikely that Britain will be out of the European Union by 31 Oct and adding
to the uncertainty the worries of a potential new election in the country.
Asian shares and U.S. stock futures dipped as investors digested another Brexit setback and
as revenue warnings from Texas Instruments was seen as the latest sign that the global microchip
industry is feeling the heat from the prolonged U.S.-China trade spat.
As a sign that investors lost recent hopes that a disorderly Brexit would be avoided, the
pound dipped below the $1.30 benchmark.
Spreadbetters at IG expect London's FTSE to open 16 points lower at 7,197, Frankfurt's DAX
to open 97 points lower at 12,658 and Paris' CAC to open 49 points lower at 5,608.
In terms of corporate news, investor focus remains on companies' results as the Q3 earnings
season is reaching full speed.
(Joice Alves)
*****


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