* Eyes on Trump-Biden debate after market close
* Brexit talks resume today
* STOXX 600 -0.5%, banks pull back
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) and Danilo Masoni (danilo.masoni@thomsonreuters.com) in
Milan.
EUROPEAN BANKS: A CROWD IS WAITING TO JUMP BACK IN (1000 GMT)
European banks have been the clear losers of the COVID-19 crisis and with them trading just
a few points from their record lows, it's no wonder so many asset managers won't touch them with
a barge pole.
According to a survey by JP Morgan Cazenove, the number of respondents 'underweight'
European banks has increased to 57% against 42% back in June.
But there's quite a crowd waiting on sidelines to jump back into the banking wagon once it
starts rolling again.
The bank's European Banks Investor Sentiment shows that 45% of investors are likely to
increase their exposure to European banks over the next 12 months and 40% expect to maintain
their asset allocation.
So, what would it take for asset managers to come back?
Two main drivers: the lift of the ECB ban on dividend (which 82% expect by year end) and a
COVID-19 vaccine being made available.
Despite all the M&A action in domestic markets, cross-border deals aren't expected to
materialise anytime soon.
With the return of dividends and pay-outs being identified as the key driver of a future
rebound, JP Morgan believes it's best to bet on lenders with strong balance sheets.
"The conclusion of our analysis lead us to stick with high-quality well capitalised banks
that generate high amounts of organic capital on an annual basis".
Looking beyond the possible dividend and vaccine catalysts though, the long term structural
challenges of the sector remain.
75% of respondents believe return on tangible equity will remain below 8% in 2022.
(Julien Ponthus and Thyagaraju Adinarayan)
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CONTACTLESS AFTER COVID-19 (0811 GMT)
Biometric passports that open airport barriers, credit cards to wave at supermarket tills,
and motion-operated light switches - even before COVID-19 hit, contactless life was becoming
commonplace.
Now though the pandemic is enabling what Citi describes "a paradigm shift to a contactless
economy", speeding up innovations such as parcel deliveries by robots and speech-operated lift
buttons in China. So what's next?
First, growth. The contactless economy, Citi predicts in a recent report, will double in
size by 2024 to $300 billion as "devices will allow seamless interactions" via voice commands or
gesture control.
"Smart devices and smart robots will increasingly be adopted both in the home and the
workplace," according to the report, which notes innovations such as AI Computer Vision (AICV)
-- being trialled by Amazon -- where a shopper scans an app before entering a store and then is
charged for purchases, based on weight sensors and cameras monitoring what's been taken.
Winners in the contactless world should be firms specialising in AI or artificial
intelligence (enabled by computer vision, voice recognition and language processing), sensor
technologies and of course semiconductors, the driver of AI.
Dominant companies could enjoy an annual $50 billion supply chain opportunity, it predicts.
The conglomerates set to capitalise on the touchless theme? Well, a lot of the usual names
-- Apple, Alphabet, JD.com, Logitech, Sony, Chroma, Texas Instruments, TSMC and Samsung.
There will be losers too in this brave new world.
At risk are companies that fail the tech transition test and the millions of jobs stuck in
the old economy. The question is whether tech can also find a way to alleviate their pain.
(Sujata Rao)
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WHERE'S "THE FOMO BUY THE DIP MOB" NOW? (0758 GMT)
There was quite a lot of scepticism yesterday on the rationale behind the rally given there
was so little good news to fuel a surge in optimism. Now that markets are done again this
morning, these doubts have somewhat been vindicated.
For Jeffrey Halley at OANDA, the rise had probably more to do with end-quarter repositioning
"than a sudden 'the world is saved' epiphany".
"That appears to have dragged in the FOMO buy the dip mob on a day when nothing materially
changed in the world to justify the moves", he argued, adding that in the U.S. a "session where
the buy everything mob think airlines look cheap is as good a warning sign for the longevity of
the overnight rally".
For David Madden at CMC Markets, "there wasn’t a whole lot to be bullish about" and "the
bullish sentiment in equities yesterday was a little strange given that there wasn’t any
particular news that triggered the buying".
So it seems yesterday's rally was really nothing else than a buy-the-dip episode after the
losses last Friday.
Writing last evening, Chris Beauchamp at IG said it did, in the grand scheme of things, make
some sense.
"Buying in after a healthy correction is better than trying to chase a market that had
rallied in a straight line for the previous three months".
(Julien Ponthus)
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OPENING SNAPSHOT: PROFIT TAKING KICKS IN (0724 GMT)
Monday's big bounce Monday was short lived and investors are already taking some profits out
of it at the open here in Europe with the STOXX 600 down 0.5% in early trading.
Even U.S. stocks futures have abandoned initial gains to trade marginally in the red.
Sectors that were yesterday's leaders are today's laggards with banks down more than
1%. Defensive plays, energy and tech are slightly outperforming, although there was no
sector trading in the black.
Meantime, earning updates from the UK are driving top gainers with plumbing parts
distributor Ferguson and retailer B&M surging 6.5% and 4.4% respectively to the
top of the STOXX. Among leading fallers are banks Natixis and Santander.
(Danilo Masoni)
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TRUMP-BIDEN DEBATE, BREXIT TALKS, M&A ON OUR RADAR (0650 GMT)
European stock futures are pointing to an unexciting open this morning with markets awaiting
for developments in the U.S. presidential elections and Brexit talks to provide new direction
after yesterday's bank-driven powerful bounce back.
The first Trump-Biden televised debate later on is no doubt the highlight of the day but
that's only going to start after U.S. markets close, while on Brexit investors see scope for a
compromise as trade talks resume today.
EU negotiators have reportedly signalled for the first time that they are willing to begin
work on a joint legal text of a trade agreement with the UK.
Euro STOXX 50 futures are down 0.2%.
On the corporate front it looks pretty quiet so far.
In M&A, sources told Reuters that consumer goods group Reckitt Benckiser Group is
preparing to sell some of its non-core personal care brands which could be worth as much as 1
billion pounds.
A Bloomberg report said Uber is considering a purchase of BMW-Daimler's
ride-hailing joint venture Free Now, while still in automotive, supplier Hella is
selling its front camera software business to Volkswagen for around of 100 million
euros.
Fnac started exclusive talks with Mirage Retail to sell its Dutch unit. [nASN000DR6
Elsewhere there is plenty of news about legal actions. Here are some headlines:
U.S. pension funds sue Allianz after $4 bln in coronavirus losses
LVMH countersues Tiffany in bid to drop $16 bln acquisition
Fiat to pay $9.5 mln U.S. fine for misleading investors on emissions audit -SEC
In earnings, updates from Next Greggs, B&M, and Card Factory
in the UK look good at a first glance.
(Danilo Masoni)
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MORNING CALL: BOUNCE BACK LOSING STEAM (0530 GMT)
European shares are set to open slightly higher this morning, building on yesterday's strong
rally that saw the STOXX 600 regional benchmark score its biggest one-day gain since June, up
2.2%, in a powerful rebound led by the battered banking sector.
Futures show modest gains at the moment, suggesting the bounce back is somewhat losing steam
and that investors may soon be needing new catalysts to provide direction.
And there are several fronts to keep an eye on, from debate over stimulus, the U.S.
presidential elections, Brexit talks and the second wave of COVID-19 infections.
Euro STOXX 50 futures are up just 0.1% and still haven't recovered all the ground they lost
last week.
(Danilo Masoni)
*****
Next (NXT)
Greggs (GRG)
