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LIVE MARKETS-Closing snapshot: V-day of records

Fri, 14th Feb 2020 16:47

* STOXX 600 hits fresh record highs
* German GDP disappoints
* EDF tops STOXX 600 after beating forecast
* RBS shares drop after results

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 Thyagaraju Adinarayan
(, Joice Alves (, Julien Ponthus
( in London and Danilo Masoni ( in Milan.

Here it comes a good reason to celebrate this Valentine's Day: the STOXX 600 hit record
highs today, again!
The pan European index climbed to its highest ever around lunch time helped by
utilities, as France's EDF topped the index after results.
GDP data from Germany, the bloc's largest economy, came in below expectations but that
didn't spoil the love vibe across European stock markets.
Here is your closing snapshot:
(Joice Alves)

When Mexico decided to cut rates yesterday little did they know they'd be the 800th to do so
since the global financial crisis (H/T to BofA on the rate cut count).
And that works out to one rate cut every 5.2 days! Staggering, isn't it?
That cheap money has perhaps created a bubble in fact a "twin bubble", Bofa says: One in
bonds and the other in tech stocks. The latter has been a major boost to the S&P 500.
In their latest number crunching of weekly flows, BofA says at current pace, bond funds
could attract as much as $1 trillion this year from investors and equities are likely to pull-in
$450 billion, a new record!
All this, when coronavirus cases continue to rise and economists scramble to mark down
estimates for the global economy.
"There is quite a bit of ink being spilled to say that markets are not taking Covid-19
seriously," Stephen Innes, chief market strategist at AxiCorp, said earlier this week.
"But with 10-year yields falling to sub-1.6% and the Fed hinting that its reaction function
includes Covid-19 and the PBoC already flooding markets awash with cash, papers over that
cautious scenario."

(Thyagaraju Adinarayan)

By definition a bubble occurs when there is a surge in asset prices, not justified by the
fundamentals, and driven by exuberant market behaviour.
With STOXX 600 hitting new record highs even with the bloc's largest economy suffering GDP
numbers today and the region's corporates staring at their fourth straight quarterly earnings
decline, stuck deep in the earnings recession mud, it sounds like a bubble indeed.
On the other side of the pond, markets seem to be in their own league notching record highs
and big gains fuelled by tech euphoria.
Still, NN Investment Partners says "global equity valuations are high but outside bubble
"On more traditional metrics such as price-to-earnings, the market is at the high end of the
historical range, although not at extreme levels and close to 2015-2017 levels," NN adds.

(Joice Alves)

If you look at the top movers today, there is an eye-catching French utility topping the
pan-European index: EDF - the stock gained more than 9% after the company beat
forecasts. If you add to that, it's Valentine's Day we may have a case to turn our attention to
a top honeymoon destination.
BofA's research team has turned "overweight" on French stocks on hopes those shares will
benefit from the expected rise in bond yields given their high cyclical exposure.
France's "large cyclical weighting means it outperforms the Stoxx 600-implied trajectory
when Bund yields rise," BofA says in a note highlighting that the country has the largest share
of cyclicals relative to defensives among the major European markets.
The bank has also upgraded Spanish and Italian stocks to "overweight" for similar reasons,
while downgrading Switzerland and the UK to "underweight" as they both are defensive-heavy

(Joice Alves)

European stocks briefly touched record high levels before dipping a bit, weighed down by a
sharp fall in Astrazeneca and Renault shares.
Astrazeneca's fourth-quarter profit missed estimates and the pharma company said coronavirus
is likely to impact 2020 performance, sending its shares 5% lower and wiping $6.5 billion off
its market capitalisation.
As expected Renault opened lower after the carmaker posted its first loss in 10
years and set a lower operating margin goal for 2020.
EDF and RBS are the other top movers, the French utility is the top
performer on STOXX rising 7% after reporting consensus-beating results and dividend, and the UK
bank slips 3% after its dividend fails to impress investors.
Meanwhile, Germany's Lufthansa said it would suspend all flights to mainland China
until March 28, a month longer than it had initially announced. That news is likely weighing on
sentiment this morning.

Here are the winners & losers on STOXX 600:

(Thyagaraju Adinarayan)

European stock futures point to small gains but that's enough to power the pan-European
STOXX 600 index to yet another record high as investors shrug off virus fears amid
hopes that it is unlikely to leave a long-lasting damage on the global economy.
All this despite warnings from companies that virus is likely to hit their 2020 performance.
"I think there is light at the end of the virus tunnel. The virus impact is probably just a
near term demand shock that has been mitigated by central bank liquidity," Stephen Innes, chief
market strategist at AxiCorp, says.
In corporate news, Renault shares are seen falling sharply after the French
carmaker reported its first loss in a decade and set a lower operating margin goal for 2020.

Astrazeneca and Schindler are also seen falling 2% to 3% after they
reported below-consensus results and warned that coronavirus is likely to dent their 2020
Stock brokers also call European tech stocks higher on the back of solid print from U.S.
chipmaker Nvidia.
In the UK, RBS is seen rising 2%-3% after the bank reported better than expected
results and a strong capital position.
Other potential movers: Wirecard's EBITDA miss; Credit Agricole earnings
beat; EDF's beat

(Thyagaraju Adinarayan)

The pan-European STOXX 600 index is all set to scale fresh peak and end the week on
a high even as rising coronavirus cases pose a potential threat to global economy.
Several companies have already warned on the impact from the fast-spreading virus. Elevator
maker Schindler is the latest to do so, it said "we now have to recognize that the coronavirus
pandemic will have implications on operations and results."
Financial spreadbetters IG expect London's FTSE to open 10 points higher at 7,462,
Frankfurt's DAX to open 31 points higher at 13,777, and Paris' CAC to open 7 points higher at

(Thyagaraju Adinarayan)

($1 = 0.7662 pounds)

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

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