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LIVE MARKETS-Europe earnings: "momentum is improving"

Wed, 7th Oct 2020 09:33

* European shares little changed

* Doubts over U.S. stimulus weights

* Tesco, Dialog rise on solid updates

* Europe earnings drop seen slowing in Q3
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 Danilo Masoni
(danilo.masoni@thomsonreuters.com) and Stefano Rebaudo
(stefano.rebaudo@thomsonreuters.com) in Milan.

EUROPE EARNINGS: "MOMENTUM IS IMPROVING" (0826 GMT)

The third quarter reporting season is about to start later
this month and although COVID-19 continues to bite, the expected
fall in European profits will slow significantly compared to Q3.

The latest I/B/E/S data from Refinitiv points to a 38% fall
in Q3 earnings from the 50.8% drop in Q2 and the improvement is
set to continue in Q4 before returning into rebound mode in Q1.
What's more significant, perhaps, for short-term market
direction is the trend in current estimates and even there
thinks look to be getting somewhat better.

"Earnings momentum is improving," Barclays strategists say.

"The Q3 reporting season should confirm earnings have
troughed and are in the midst of a cyclical recovery," they add.

Results from Tesco and Dialog Semi this morning
also bode well for the upcoming season.

Last week I/B/E/S data, which track companies on the
pan-regional STOXX 600 benchmark, pointed to a Q3 earnings drop
of 38.8%, up from a low of around -40% expected last month.

(Danilo Masoni)

*****

OPENING SNAPSHOT: UNCERTAIN START, RESULTS LIFT TESCO,
DIALOG (0721 GMT)

European shares were off to an uncertain start today with
main benchmarks moving in and out positive territory.

The STOXX 600 managed to gain some footing and was
last up 0.2% on the day, helped by well-received updates from
UK's biggest supermarket chain Tesco and German
chipmaker Dialog Semiconductor, both up around 4%.

Shares in Italian payments firm Nexi drop 5.7%
after company’s top shareholder Mercury placed a 13.4% stake at
a discount, a day after it announced a merger with rival SIA.

Banks were also a weak spot after a big rally yesterday on
U.S. stimulus expectations.

Here's your opening snapshot:

(Danilo Masoni)

*****

ON OUR RADAR: CHIPS, TESCO AND TECH SPACE (0650 GMT)

The confusion around timing of possible fiscal stimulus in
the U.S. following Trump's remarks overnight will likely
translate into a muted open in Europe with futures last trading
between a fall of 0.2% and a gain of 0.1%.

On the corporate news front, investors will have to digest
some first earnings reports, namely from Britain's biggest
supermarket chain Tesco and German chip maker Dialog
Semiconductor. Both shares are seen rising in early
deals,

Tesco reported a 15.6% fall in core profit, with a jump in
sales due to the COVID-19 pandemic more than outweighed by
higher costs and losses at Tesco Bank. Traders said results
overall look solid and there should be some relief today given
the shares had been weak ahead of their release.

Dialog looked more upbeat after lifted its Q3 revenue
guidance to about $386 million, compared to the previous
$340-380 million range. Its shares are seen rising
3% at the open, possibly providing a positive boost for peers
like sensor specialist AMS.

More generally the tech space will be in focus after a panel
of U.S. lawmakers detailed late yesterday market abuses by
Alphabet's Google, Apple, Amazon.com
and Facebook, urging for strict reform. The panel
recommended structural separations but stopped short of saying a
specific company should be broken up.

Shares in LSE could come under pressure after The
Times reported that UK Finance Minister Rishi Sunak plans to
take on new powers to block companies from listing on the London
Stock Exchange on national security grounds.

Eyes also on aerospace stocks after Boeing cut its
rolling 20-year forecast for airplane demand, sending its shares
lower as the COVID-19 pandemic lays waste to deliveries over the
next few years.

Among other single stock movers, Nexi could
suffer after its top shareholder Mercury said it was selling a
13.4% stake, a day after the Italian payments group announced a
merger with rival SIA.

Management reshuffle at Tour operator TUI
which named Sebastian Ebel as its new finance chief, replacing
Birgit Conix.

In M&A, German car parts maker Continental plans
to sell some of its automotive operations, including parts of
powertrain arm Vitesco Technologies and rubber unit Contitech,
its CEO told daily Frankfurter Allgemeine Zeitung.

(Danilo Masoni)

*****

MORNING CALL: EDGING LOWER ON STIMULUS CONFUSION (0548 GMT)

Trump has called off economic aid package talks with
Democrats until after the election and the decision, which came
on Twitter after European markets closed, is set to weigh.

He later urged aid for airlines, small business and
Americans, adding to the confusion.

Anyhow, euro STOXX 50 are down 0.3%, having lost as
much as 0.9% from yesterday's close, but remain well within
recent trading ranges..

Asian stocks brushed off Wall Street's weaker finish, with
MSCI's broadest index of Asia-Pacific shares outside Japan
last up 0.4%.

(Danilo Masoni)

*****

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