* Coronavirus treatment hopes boost sentiment
* Jackson Hole in focus
* BT rises on takeover approach report
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 Joice Alves (joice.alves@thomsonreuters.com)
and Julien Ponthus (julien.ponthus@thomsonreuters.com) in London and Stefano Rebaudo
(stefano.rebaudo@thomsonreuters.com) in Milan.
CLOSING SNAPSHOT: WHAT A RALLY! (1535 GMT)
European stocks had a nice rally today bouncing back from a two-week lows as investors
cheered up on signs of progress in developing a COVID-19 treatment.
The pan-European index was up 1.6% in its best day in almost two weeks, while Britain's blue
chips gained 1.7% after the U.S. health regulator said on Sunday it authorized the use of blood
plasma from patients who have recovered from COVID-19 as a treatment.
Oil and gas companies led the gains, rising 3.4% helped by a jump in crude prices as
storms closed in on the Gulf of Mexico, shutting more than half its oil production.
In terms of single stocks, British telecoms company BT Group jumped 7.2% after a
media report that its board was preparing to defend it against takeover approaches from rivals
and buyout firms.
Shares in Belgium-based group Ackermans & Van Haaren surged 9.1% after its DEME
Offshore signed a large contract with Dogger Bank Wind Farm.
(Joice Alves)
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FED PLASMA (1252 GMT)
It's really hard to get a sense of how much of today's 1.7% rise on the STOXX 600 is due to
the Fed and how much is thanks to the positive COVID-19 plasma treatment and vaccine report.
According to the UBS House View for Europe this morning, it's clearly both.
"While the effectiveness of the plasma treatment has yet to be proven, and the results from
AstraZeneca’s large-scale efficacy trials have yet to be released, we believe positive medical
developments and the Federal Reserve’s accommodative policies will continue to support
equities", the bank's strategists write.
Anyhow, what's quite limpid is that sure it doesn't seem to be a lot of angst leading up to
Jackson Hole on Thursday.
"There is growing expectation that the Fed will shift to targeting average inflation, which
would provide it with more flexibility to let inflation run above target, so any mention of that
could sink Treasury yields and the dollar", XM analyst Raffi Boyadjian wrote today.
For Josh Mahoney at IG, "such a move to allow inflation to run above target would likely
extend the amount of time the Fed could retain an ultra-easy monetary policy stance without
being hamstrung by rising inflation".
Of course, no one is expecting the Fed to raise rates anytime soon but one could reasonably
expect Powell to switch his tone to dovish to uber-dovish, boosting equities further still.
(Julien Ponthus)
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UTILITIES AND HEALTHCARE BACK IN THE BLACK YTD (1102 GMT)
One thing about today's market upswing is that it has propelled utilities and Healthcare
back in the black year-to-date.
The utilities index is up 0.4% so far in 2020 thanks a 2% rise this session.
One of the factors pushing up utilities is the hope they will be in a position to continue
to pay dividends going forward.
"The good news for dividends comes in sectors where demand has remained robust such as
utilities and the majority of the consumer staples companies", wrote AXA IM portfolio managers
George Luckraft and Simon Young in a note on UK stocks.
Anyhow, that's quite an achievement for utilities as only two other sectors have managed to
churn out yearly gains: Tech and chemicals are up 10% and 3% respectively.
At the time of writing, pharmaceuticals have risen to a yearly gain of 0.1%.
Here's how European sectors have fared year-to-date:
(Julien Ponthus)
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KEEPING UP WITH THE (DOW) JONESES (1013 GMT)
According to Wikipedia, failing to "'keep up with the Joneses' is perceived as demonstrating
socio-economic or cultural inferiority".
The entry doesn't say what failing to keep up with the Dow Jones means but no doubt a lot of
investors are familiar with the feeling!
For betting on euro zone stocks versus U.S. equities was quite a consensus call about a
month ago when EU leaders announced a massive recovery fund after four days and nights of
acrimonious negotiations.
The rationale was easy to grasp: European countries were seemingly handling the pandemic
much better than the U.S. and that big stimulus plan would knock on the head the region's
lingering political risk, while uncertainty would start creeping up on the other side of the
pond come the November presidential election.
"While this is a compelling narrative, it also underplays the political risks around a
region where fiscal responses have been patchy at best, and for all the talk and optimism of the
€750bn European pandemic recovery fund, the delivery of this extra money still remains months
away, which leaves the European Central Bank as the only game in town", writes Michael Hewson of
CMC Markets this morning.
And yes things didn't go to plan to say the least since July with a severe underperformance
of European stocks while the S&P and the Nasdaq cruised on to new records.
Friday's underwhelming European PMIs also rubbed a fair whack of salt in that wound.
Also the fact that European bourses don't have any tech giants to rival with the likes of
Apple or Amazon also poses a structural problem in a market driven by growth stocks.
"With Europe lacking a lot of the high-quality tech and growth names, it may struggle until
there is a vaccine, the pandemic is over, and dividends are reinstated", argues Neil Wilson at
Markets.com.
One thing that really panned out according to expectations was Italian government bond
yields falling and the euro surging against the dollar.
And the latter is actually perceived more as a potential problem than a boost for European
stocks.
"The recent appreciation of the euro has led to fears that Europe's economic and earnings
recovery will stutter", Jefferies analysts write this morning, dismissing however the view that
the rising currency could jeopardize a recovery in European stocks given other positive factors,
such as intra-EU trade.
Jefferies remain bullish for Europe-ex UK and it seems many investors are not ready to give
up on European stocks just yet.
Anyhow, here's the euro stoxx versus the S&P 500 showing how the EU versus U.S. has gone
terribly wrong since the agreement on the recovery fund was announced on July 21:
(Julien Ponthus)
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OPENING SNAPSHOT: BT SHINES IN RISK-ON MONDAY? (0737 GMT)
BT is the unequivocal star this morning, up a whopping 8% after a report from Sky News
saying the British telecom group had hired advisers to fend off a potential unsolicited takeover
bid.
No big drama among losers at the moment with Old Mutual being the worst performing stock
following its trading update, with a limited 2.6% retreat.
For the rest of the market and by the look of the first few minutes of trading, this sure
looks like a risk-on session with many cyclical sectors posting comfortable gains.
Aside from Tech doing its usual heavy lifting, miners, chemicals and autos are among the
sectors helping lift the STOXX 600 up about 1.3%.
That would be the best performance since August 11 for the pan-European which badly lags its
U.S. peers which have sprung to new record highs last week.
Actually since July, that would be the sixth best day for European stocks which says quite a
lot about the tepid mood across the continent's trading floors, which, must be said, are
typically thinly staffed in August.
Here are this morning's movers and shakers on the STOXX 600:
(Julien Ponthus)
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ON THE RADAR: EUROPEAN SUMMER SEASON (0740 GMT)
The news flow this morning looks like your typical Parisian street during the national
August break: close to empty and traffic is very thin.
One interesting piece of news this weekend is that a consortium comprising France's Euronext
and Italian state-lender CDP is among bidders for the bond-trading platform of the
London Stock Exchange's (LSE) Borsa Italiana unit, two sources said on Saturday.
Also interesting, Norway's largest private asset manager Storebrand has divested
from ExxonMobil, Chevron, Rio Tinto and BASF citing
their lobbying practices regarding climate.
Rio Tinto said on Monday it will cut the short-term bonuses of its CEO
Jean-Sébastien Jacques and two other senior executives following a review of the company's
destruction of two ancient caves in Australia.
Meantime, education publisher Pearson has appointed Andy Bird, a media veteran who
ran the international arm of The Walt Disney Company, as its new CEO. While the boss of
wholesale group Metro will leave at end of year and Qiagen chairman has quit after Thermo
Fisher's takeover bid failed.
There is news from Brazil, where prosecutors pressed charges on Friday against two people
for an alleged scheme to obtain confidential market information from Petrobras to
benefit A.P. Moller-Maersk.
In the health care space, Swiss drugmaker Novartis said on Saturday that its immuno-oncology
drug candidate failed skin cancer trial.
(Julien Ponthus and Joice Alves)
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MORNING CALL: CORONAVIRUS TREATMENT NEWS UPLIFT (0535 GMT)
News the FDA has authorised the use of blood plasma from recovered coronavirus patients and
a report that the Trump administration is considering fast-tracking a UK vaccine is lifting
sentiment this morning.
Nothing exuberant though: European futures are up about 0.5% at the moment, which isn't
particularly high given the STOXX 600 closed on a weekly loss of about 1% on Friday evening.
"As such today’s European open looks set to be a modestly positive one, with markets in Asia
trading modestly higher in a week that is relatively light on data, but where investors will be
looking anxiously for further evidence that the rise in virus cases, that is taking place across
the globe, is starting to affect the various recoveries from differing stages of lockdown",
writes CMC Markets analyst Michael Hewson.
(Julien Ponthus)
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Pearson (PSON)
BT (BT.A)
