* European and U.S. stock futures in the black
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EUROPEAN BANKS HIT NEW RECORD LOW (1110 GMT)
The European banking index has never been this low: it hit 78.89 points a few minutes ago,
which breaks its March 16 2020 record of 78.93 points.
There doesn't seem to be a specific trigger, the broader market is down on lockdown/pandemic
fears and banks are not losing that much more, with a -1.3% fall, than the STOXX 600 at minus
But in sharp contrast with the pan-European index, there's been no rebound for lenders from
the March COVID 19 crash.
Banks have suffered much more collectively since the beginning of the year (-44.5%) than
travel and leisure (-38.5%) or oil and gas (-41.8%) stocks.
While the expected loan losses from the pandemic are dragging the sector down, the fact that
it's seen like the ultimate value trap is nothing new.
European banks have been unloved since the 2008 financial crisis and has been crippled along
the way by the euro sovereign debt crisis, lower for longer interest rates,
structurally-challenged profitability in investment banking, dirty money scandals,
digitalisation costs, fintech competition, retail banking restructurings, lack of game-changing
M&A and so on.
Here's how the main banks have been doing against the STOXX 600 since 2008, quite
PEOPLE BACK GOOGLING LUXURY GOODS (1050 GMT)
The pandemic is going to change many things for fashion weeks with an asymmetric impact on
the sector, but the main issue now is consumers’ attention to their favourite brands, which
signals future demand for goods.
On this front we have good news as Credit Suisse Luxury Brand Heat Index based on Instagram,
Wechat, Baidu and Google trends across 18 fashion brands, rebounded by 40% since July compared
to an 8% fall in the first half.
In China it exceeded Q4 2019 levels, supporting “our view that the double-digit sales trends
seen in China go beyond demand repatriation and reflect a strong appetite for luxury,” a CS
research note says.
Western consumers are instead slightly below pre-pandemic levels but returned to a year on
The fashion calendar shake-up with some brands scaling back fashion shows is seen as a good
thing for “more desirable brands” like Louis Vuitton , Dior or Gucci “as
influencers and buyers become more selective when attending fashion shows.”
But companies such as Ferragamo, Tod’s or Celine “are at a competitive
disadvantage as they could lose the ‘halo effect’ created by fashion weeks.”
THERE'S ONLY TECH LEFT (1010 GMT)
Say bye bye to chemicals!
The recent pull back across stock markets has knocked out the sector from the happy few club
and it's no longer breaking even in 2020.
With a daily fall of 0.8%, the sector is now down 0.2% year-to-date, meaning there's only
tech left trading in the black on the STOXX 600.
One would have thought that healthcare would have resisted well during the pandemic but it's
also down 2.2%. One of the good surprises is probably retail, with a limited 4% dip.
No surprises for the laggard even if travel and leisure is actually doing better than banks:
M&A BOOSTS SPAIN’S BANKING SHARES (0937 GMT)
These are not good times for banking stocks due to virus worries and a lower for longer
interest rates scenario, but today Spanish shares are outperforming their European peers.
“M&A could save Spanish banks 2-2.5 billion euros in costs, enough to increase system net
profit by 25-30% and the listed banks’ 2023 ROE by 200-240 bps (from 8% to 10-11%),” a Citi
research note says.
“This could re-rate Spanish bank shares: in our M&A model, the average acquirer’s upside is
c10% and the average target’s is c20%,” it adds.
Caixabank recently agreed to buy Bankia for 4.3 billion euros in an
all-share deal that creates Spain's biggest domestic lender.
“BBVA upgrade of provisioning guidance for Spain earlier this week is a good read across for
all Spanish banks,” James McKenzie, head of research of Fidentiis in Madrid says.
Spain’s Ibex 35 Banks is up 1.2% after hitting a new all-time low yesterday at 238.6, while
Europe’s banking index is down 0.2%.
The Spanish index more than halved its pre-Covid levels of around 535 points underperforming
the European index.
Shares in BBVA today are up 3.3%.
OPENING SNAPSHOT: ON TRACK FOR THE WORST WEEK SINCE MID-JUNE
European shares are slightly higher as Wall Street's late rebound overnight is supporting
sentiment, though they are still on track to post their largest weekly percentage drop since
Coronavirus trajectories continue to concern investors, with France set to take new
The Stoxx 600 is up 0.2% with travel, leisure, tech and healthcare stocks leading losses,
down 0.3 to 0.5%.
Europe's banking index which is within touching distance of its all-time low is among the
best performers up 0.7%.
Shares in Boohoo jump by 14.7% after the company announced a review of its supply
chain in the UK.
Electrolux stocks are up 2% after hitting their 10-month high as the company said
it will propose reinstating dividends following a recovery in earnings and cash flows during the
ON THE RADAR: ASTRAZENECA, LAGARDERE, GERMAN STEEL INDUSTRY (0640 GMT)
European stocks are set to open slighlty higher but the Stoxx 600 index remains on track to
post its largest weekly percentage drop since mid-June.
More worrying news about the virus. Spain’s cumulative tally of confirmed infections
exceeded 700,000 and authorities warned of tougher times ahead, while the number of
people hospitalised in France rose above 6,000 for the first time in two months and the prime
minister warned that the government could be forced to reconfine areas.
On the corporate front, the German steel industry should be in the spotlight after Economy
Minister Peter Altmaier told newspaper Handelsblatt that Germany must help the sector with the
costs of shifting to the production of climate-neutral steel.
France's richest man Bernard Arnault ratcheted up a tug-of-war over Paris Match publisher
Lagardere, revealing he had built up a direct stake in the firm, which is under siege
from several other investors.
European governments will pay claims above an agreed limit against AstraZeneca over
side-effects from its potential COVID-19 vaccine, under different terms to a deal struck with
Sanofi, an EU official told Reuters.
UniCredit is ready to leave the life insurance partnership it has with British
insurer Aviva, two Italian dailies reported.
Airbus is set to reaffirm its aircraft production rates, despite warnings that the
coronavirus crisis will be deeper and longer than expected, industry sources told Reuters on
Danske Bank helped Deutsche Bank facilitate suspicious trades worth
over $600 million through its branch in Lithuania between 2012 and 2015, Danish media outlets
Total's CEO said in an interview that the group aims to become one of the world's
five largest producers of renewable energies.
MORNING CALL: STOCK RESILIENCE (0528 GMT)
European stock futures are in the black along with their U.S. peers after U.S. strong
housing data triggered a late rebound in tech shares on Wall Street overnight.
Rising concerns about the global resurgence of coronavirus infections and their impact on
the economy continue to weigh, though global equities are showing some unexpected resilience.
News that Democrats in the U.S. House of Representatives are working on a $2.2 trillion
coronavirus stimulus package that could be voted on next week helps risk-sentiment.