* STOXX dips in the red as equities take a breather
* Trade war concerns hit DAX, Wall Street off highs
* Euronext considers Madrid bourse bid
* Qiagen surges as it explores sale
Welcome to the home for real-time coverage of European equity markets brought to you by Reuters
stocks reporters and anchored today by Julien Ponthus. Reach him on Messenger to share your
thoughts on market moves: julien.ponthus.thomsonreuters.com@reuters.net
FOMO'S FOMO, BUT THEY CALL IT 'LE FOMO' (1455 GMT)
"Big Mac's a Big Mac, but they call it Le Big Mac", Vincent (John Travolta) famously tells
Jules (Samuel L. Jackson) in Quentin Tarentino's 1994 Cannes Palme d'Or sensation Pulp Fiction.
Well, same thing goes for FOMO.
"Noel avant l'heure, le FOMO bat son plein", is the headline today of the note of Nicolas
Chéron, head of research at France's Binck.fr.
Straightforward translation is: "Early Christmas, FOMO in full swing".
The fact that the term "FOMO" is proving so popular across world markets these days tells
quite a lot about the current narrative.
Looking at the speed at which S&P 500 records have been broken lately and fresh money
flowing in risk assets, many cautious strategists are now upgrading their ratings on at least
some spots of the equity market and a buying another ticket to the 10 year-old highway to bears'
hell.
"What markets have simply powerfully redemonstrated over the last few weeks is the fact
that, all else being equal, FOMO tends to be stronger than the fear of losing", writes Stephane
Barbier de la Serre at Makor.
"Fears of missing out" was also the headlines to Jefferies' Equity Strategy note this
morning in which the broker noted that "inflows into equities have finally reflected the
improving risk appetite".
With suddenly positive equity inflows, the STOXX 600 is in touching distance from a record
high despite the Q3 season showing that Europe Inc is stuck in a corporate recession and still
very vulnerable to a trade war.
"This is in line with the latest fund manager survey insights where the EZ underweight
continued to reduce in magnitude", wrote Chris Bailey, European Strategist at Raymond James.
On Sunday, Stephen Innes, chief Asia market strategist at AxiTrader, wrote that "FOMO, as
equity markets grind higher into year-end, is increasing as investors desperately want that
significant dividend payout that sits at the end of the trade talk rainbow".
On Friday, Goldman Sachs reported that its "Risk Appetite Momentum indicator" which tracks
investor sentiment, had increased sharply and was close to all-time highs.
"So far, early signs of FOMO are coming from the options market, where short-term call
options have been well bid."
Here's "LE FOMO":
(Julien Ponthus)
****
VALUE, A 2020 BET? (1157 GMT)
With European equities firmly back to 2015 levels it's getting harder to see the broader
benchmarks climbing much further -- and indeed the STOXX 600 has been moving in a tight, 1
pct-point range since the start of the month.
Under the surface however bigger moves may be in store as we head into the new year
UBS says Value stocks could be a good bet, as the rotation out of Growth might continue.
"The current Value bounce is roughly ½ the magnitude and ¼ of the length of previous
bounces... And we are starting from a more extreme valuation spread," UBS strategists say.
"Growth appears more expensive than Value appears cheap.. Hence the downside in Growth might
offset the upside in Value leading to a run to Value while the market stands still," they add.
On the other hand, they say Cyclicals might need a break, following their YTD to date
outperformance vs Defensives.
"In 2020 we prefer Value to Cyclicality," they say.
In the snapshots you can see how Value weighs on each sector in Europe. Most are Cyclicals
but there are also Defensives.
(Danilo Masoni)
*****
AIM: BEHEMOTHS RULE (1140 GMT)
Sharp falls in the share prices of fashion group Asos and tonic water maker
Fevertree drinks contributed to dent the average value of trading on London's AIM,
according to data compiled by accountancy group UHY Hacker Young.
"Companies listed on the Alternative Investment Market (AIM) have seen the average value of
the daily trading in their shares fall 18% to £271,120 over the last year (Oct 1 2018-Sept 30
2019) from £328,860", according to UHY Hacker Young.
The finding highlights the massive size and influence of a handful of AIM behemoths on the
market place.
"The Top 10 shares on AIM accounted for 43% of trading by value and ASOS for 10% of all
trading in October", UHY Hacker Young added.
As you can see below, Fevertree, Asos and Burford Capital have had a rough ride in the last
12 months:
(Julien Ponthus)
*****
ARE EUROPEAN BANKS GETTING NAUGHTIER? (1047 GMT)
Well by the way they have been fined lately for misbehaving, one would certainly be tempted
to think so!
"While U.S. banks were particularly hit by misconduct costs in the immediate aftermath of
the global financial crisis, European banks have been more exposed since 2015", a study
published today by the ECB found.
10 years ago, fines were mainly related to the subprime crisis and targeted mainly U.S.
banks. More recently however, European lenders have been hit the most for misbehaviours such as
sanction violations, money laundering and tax evasion.
See below in the chart how UK, EU and Swiss banks have overtaken their U.S. peers in terms
of fines:
"Past misconduct by banks has weighed on global bank profitability and equity positions over
the last decade, with the related costs amounting to over USD 350 billion or 15% of total bank
equity", according to the ECB paper.
In this light, European lenders can blame their own behaviour for a good chunk of their past
and current misfortunes rather than, say, on tighter regulations, capital requirements and
sluggish growth in Europe.
"Euro area banks' net income could have been one-third higher over the same period without
these misconduct costs, potentially helping strengthen capital buffers, if earnings were
retained", the study reckons.
It's not only about fines denting profits, misconducts costs are also about reputational
effects, compliance costs or higher provision.
"As past misconduct cases are uncovered, conduct redress may put further pressure on euro
area bank valuations", the ECB study found.
Here's the link to ECB page: http://bit.ly/2CVfwas
(Julien Ponthus and Marc Jones)
*****
OPENING SNAPSHOT: A QUIET AND FLATISH OPEN (0820 GMT)
European stocks are flat at the open.
We are still waiting for some trade headlines to set a directional trend as automakers wait
for Trump to decide whether he will impose up to 25% tariffs on U.S. car and auto part imports.
A top news item for equity markets this morning are Euronext (-0.5%) and the Spanish bourse
BME holding talks about a tie-up which could yet speed up consolidation in the sector after the
battle for the Oslo exchange.
The main market mover is genetic testing specialist Qiagen which is up around 13%
as it reviews a possible sale.
In the UK small cap world, Consort Medical jumped over 40 percent after receiving an offer
from Sweden's Reciphram.
BT, which is now are on Labour’s so-called ‘nationalisation hit list’, is down 1% and
continues to be closely watched.
On that front, interesting to note that while the privatisation of BT was an iconic moment
of Thatcherism, France’s Macron could be on the verge of pulling out a success with the IPO
French national lottery drawing subscriptions from retail investors worth 1 billion euros.
If this goes smoothly this week, more big asset sales may come such as airports operator ADP
and a stake in power group Engie.
(Julien Ponthus)
*****
EUROPEAN STOCKS IN TOUCHING DISTANCE OF RECORD HIGHS (0632 GMT)
The STOXX 600 is just 9 points shy or 2% from its April 2015 record high as European shares
start the week with a tiny bit of wind from Asia in their sails.
A surprise move by China's central bank to cut a key interest rate triggered speculation
more stimulus was on its the way and lifted markets in the region despite unrest continuing in
Hong Kong.
After securing six weeks of gains in a row despite a challenging Q3 earnings season,
European stocks are expected to start the day slightly higher.
Financial spreadbetters see London's FTSE opening 2 points higher, Frankfurt's DAX up 5
points and Paris' CAC 1 point higher.
(Julien Ponthus)
*****
(Reporting by Danilo Masoni, Joice Alves, Julien Ponthus and Thyagaraju Adinarayan)
ASOS (ASC)