* European shares fall but off opening lows
* STOXX 600 down 0.5% after hitting 3-month low
* Tech leads fallers; autos, banks positive
* France tightens virus measures
* U.S. futures extend declines
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CLOSING SNAPSHOT: BAD DAY, BAD WEEK, BAD MONTH, BAD YEAR (1535 GMT)
The STOXX 600 closed down about 1%, which means it just qualifies for another bad day at the
That would be true if this week (-3.5%) wasn't now set to be the worst since June, September
(-2.9%) the worst month since March and 2020 (-14.3%) the worst year since 2008.
The bounce back from the COVID-19 crash March crash is clearly losing momentum and it
becomes hard to see the V-shaped recovery once clearly visible across the macro and earnings big
The narrative seems to be shifting to a more gloomy 'K', where some industries and
individuals will be winners and many more losers.
Looking at the different sectors, tech is the only sector clearly up year-to-date (+5.7%)
followed far away by chemicals (+0.5%).
Among bourses, London is clearly among laggards, with the FTSE 100 down 22.8% against 14.5%
for the European index. The UK government's newest plan to avoid massive job losses didn't do
MIDDAY SNAPSHOT: WILL WALL STREET KILL THE REMONTADA (1222 GMT)
The term 'remontada' is frequently used in football when a team pulls off a unexpected
comeback, say when in 2017 Barcelona won 6 to 1 against the Paris Saint-German in a Champions
League tie, one of the most dramatic comeback in the competition.
Well, it's arguably less spectacular but in early morning trading, European banks were just
0.1 point above their all-time low, trading at 79.02 points.
As the early risk-off mood gradually evaporated, banks managed to rise 3% from that point:
But let's remember this is just half time and while the final whistle is far from being
blown, the STOXX 600 is showing early signs of fatigue.
Only an hour ago it seemed the pan-European would make it back to the black, helped notably
by Germany's DAX, but the trend seems to be going quickly back into negative.
Usual suspects for that trend are falling U.S. futures:
BETTING ON A VACCINE (1109 GMT)
Equities don't look good these days, with more restrictions on their way as a second wave of
infections is hitting Europe, but some analysts prefer to see the glass half full and suggest
not letting go.
Barclays says the economy is back strongly led by the U.S. and it “prefers global equities
over fixed income” as a “vaccine approval is likely by year end.”
"The worst of the global pandemic now seems to be behind us. Economies across the world have
continued to re-open, COVID mortality rates have been dropping in many regions for months", a
Barclays research note says.
Also UBS suggests betting on a vaccine as expectations of quick medical progress were
“reinforced today as another major U.S. healthcare company, Johnson & Johnson, announced that it
has begun Phase 3 clinical trials.”
Johnson & Johnson said it expects to take until year-end or Q1 to be able to get an
endpoint to show efficacy of Covid-19 vaccine.
“We remain constructive that the US will pass an additional fiscal package, although it is
less likely to happen before the election,” a UBS research note says.
The Swiss bank sees choppy markets and suggests taking advantage of the volatility.
ECB: ARE YOU READY FOR DECEMBER ACTION? (1031 GMT)
The poor business surveys across the euro zone yesterday fuelled market bets of more
stimulus from the ECB, helping explain why stocks rallied in the absence of any real good news
and as a second wave of COVID-19 started to show its damages.
But how could policymakers respond in practice to the economy's new downside risks?
Morgan Stanley economists expect the central bank to bring forward an expected easing to
their next forecast meeting December from March.
"Up to now, we had expected the ECB to ease - through a second €400bn PEPP top up and
extending the programme to end-21 - in March 2021, with a risk of earlier action in December if
the outlook deteriorated," they say.
"With the sharp uptick in Covid cases, reflected in weak PMIs, we now expect earlier action
and shift our ECB call to action in December," they add.
CINEWORLD'S GRIM 2023 SCENARIO (1006 GMT)
In a recent survey, Britain's ONS revealed that the proportion of people expecting life to
return to normal in more than a year had risen quite sharply to 37% by late August.
If that sounds bad, wait for the scenario Cineworld has put forward to its shareholders
"In assessing the going concern the directors have assumed the industry will return to
levels of performance similar to those observed prior to the COVID-19 impact by 2023, with a
return to cinema going following the shutdown over the coming months and a further gradual build
up over a period of time".
"A lot of the smaller players won’t last that long and even large players such as Cineworld
will find it tough to stay afloat", commented Adam Vettese, an analyst at eToro.
Of course, the fact that Cineworld unveiled a massive H1 loss and said it might need to
raise more money if it is required to shut its theatres again, were key to send its shares down
All in all, comments regarding the prospects of the cinema operator were quite grim this
For CMC Markets' Michael Hewson, "Cineworld appears to be in a fight for survival" and added
that "if there is another lockdown or people are further put off heading out for an evening of
big screen entertainment, then Cineworld’s days could well be numbered".
AJ Bell investment director Russ Mould wondered aloud whether Cineworld would be able to
secure financial backing given its "up to its eyeballs in debt".
"Shareholders have been supportive to date but at some point, they might have to question
whether they’re simply throwing money away".
Here's a link to our story on Cineworld's results and a link to their press
Here's the ONS chart showing how Britons increasingly believe a return to normal will take
over a year.
M&A AMONG LARGE BANKS? TEMPTING BUT... (0934 GMT)
There's been a lot of talk about bank M&A recently and while some in-country consolidation
may indeed happen in the near future, big cross-border dealmaking, although tempting, faces
The European Central Bank has been consistent in advocating branch closure and mergers to
reverse a bleak outlook for profitability but large transactions are unlikely, according to a
Commerzbank research note by credit analyst for banks Nigel Myer.
"We are not convinced that M&A solves the underlying problems or improves the underlying
returns faced by large banks, and we see substantial hurdles to large scale combinations given
the regulatory and competition constraints," it says.
"Cross border transactions within the euro area remain constrained by an incomplete banking
union," and would be a reversal of the trend seen globally in the last decade, it adds.
"We recognise that 'more of the same' is not a very exciting or compelling strategy and the
temptation is likely growing to look at M&A."
The approach of eliminating overlapping branch networks still makes sense, "especially in
countries where branch density is high or system assets/employee are low.”
Excluding the UK and Luxembourg because for them this measure is significantly affected by
the number of international banks, Germany and Austria have the lowest concentration rate.
MIND THE GAP: BIG MINERS MAY PLAY CATCH UP (0821 GMT)
Citi has spotted a widening disconnect between Europe's big miners and the gains in the
underlying commodities that make the bulk of their earnings.
That means investors may remain bullish on the space despite a material recovery from the
bottom and prepare for some good dividend news later on. Citi sees a 38% upside this year's core
profit consensus estimate if current spot prices hold.
"Despite the share prices clawing their way back to pre-COVID-19 levels in most cases, the
significant increase (not just a recovery) in commodity prices YTD has not been priced into the
equities," analyst at the US bank say.
"The big-4 miners will generate around $41bn of FCF at spot commodity prices vs $31bn on our
house commodity price forecasts. Given the balance sheet position and payout ratio based
dividend policies of these companies, a significant proportion of that FCF is likely to come
back to shareholders as dividends next year as well," they add.
OPENING SNAPSHOT: TRAVEL STOCKS LEAD BROAD SELL-OFF (0725 GMT)
There's not one sector trading in the black at the start of trade with travel stocks
understandably leading the drop after France tightens measures to fight COVID-19, adding to
concerns over a faltering economic recovery.
Europe's Travel & Leisure index is down more than 2.3%, followed by oil and tech
stocks, both down nearly 2%.
In the defensive space, real estate and utilities shares were down less than 1%.
As a result the STOXX 600 was last down 0.9% after hitting its lowest level since
Here's your snapshot:
ON OUR RADAR: EURO FUTURES HIT 14-WEEK LOW, TIGHTER VIRUS MEASURES (0649 GMT)
European shares are set to open down sharply after bid drops in Asia and Wall Street with
traders blaming growing worries over the economic recovery, as COVID-19 cases grow globally and
government impose new restrictive measures to counter a second wave of infections.
France's health minister unveiled a map of coronavirus "danger zones" around the country
late on Wednesday and gave the hardest-hit local authorities, including that of Marseille, days
to tighten restrictions or risk having a state of health emergency declared there.
Meanwhile Germany also issued travel warnings to further French regions.
It also looks that Powell's remark last night that the Fed "had basically done all of the
things it could think of" and fresh Korean tension aren't helping either.
Futures on the Euro STOXX 50 were down 1.4 at their lowest in around 14 weeks.
As a result of the new restrictions, travel and leisure stocks could be under pressure with
eyes on French stocks such as Elior and Accor. A report Delta Air Lines
is in talks with Airbus to delay at least 40 aircraft deliveries further
underscores the pain facing its virus-hit industry. Airbus shares are seen down 1-2%.
Eyes also on Atlantia ahead of a board meeting later today which is set to discuss
the spin-off of its motorway assets amid reports of ongoing disagreements with the government
over details of a deal.
In France, utility Suez took steps to rejig its water business as it fights a
hostile bid from local rival Veolia.
Meantime in Germany SNP Schneider shares were up 2.5% in early trade after news of
a partnership with Fujitsu.
In earnings, lower consumption during the COVID-19 pandemic prompted UK water supplier
United Utilities to warn of lower first-half revenue.
MORNING CALL: DOWN WE GO (0538 GMT)
We're clearly set for a risk-off session in Europe today with stock index futures pointing
to losses of more than 1%. The magnitude of the falls could well drag the STOXX 600
benchmark down to its lowest level since June.
Wall Street closed sharply lower led by a more than 3% drop in the Nasdaq, while Asia isn't
of any inspiration with MSCI's broadest index of Asia-Pacific shares outside Japan
last down 1.9% on worries over the resilience of the economic recovery.