Welcome to the home for real-time coverage of European equity markets brought to you by Reuters
stocks reporters. You can share your thoughts Joice Alves (joice.alves@thomsonreuters.com) and
Julien Ponthus (julien.ponthus@thomsonreuters.com) in London and Stefano Rebaudo
(stefano.rebaudo@thomsonreuters.com) in Milan.
SURPRISE, SURPRISE: GLOBAL FUNDS SLASH EXPOSURE TO EUROPEAN BANKS (1415 GMT)
After struggling with years of negative interest rates, European banks have become even more
unloved by investors in the current crisis.
Data from Copley Fund Research shows that active managers globally are cutting exposure in
European banks to levels not seen before. Already in a declining trend since 2018, managers have
further reduced allocations to 1.12% - the lowest on record, and significantly below the
long-term range of 1.5% and 2.6%.
"Global investors are pulling investment from the European banking sector on concerns over
deteriorating financial conditions for businesses and individuals as the COVID-19 pandemic feeds
through to the underlying economy," said Steven Holden, CEO of Copley Fund Research.
Those that have taken a huge hit include HSBC, with just 9% of the active funds
having any exposure to the UK-based lender, down from 40% in 2013, according to Copley.
ING Groep, BNP Paribas and Banco Santander all have record low
exposure.
European banks have managed to recover about 20% from March lows, they are the among
the worst performers in the continent, down nearly 34% this year.
(Sruthi Shankar)
*****
A QUIET SUMMER? FINGERS CROSSED (1101 GMT)
As beaches and parks in Europe get busy with rising temperatures, a BofA research note lines
up possible upcoming risks -- the pandemic of course is the top one and clusters are already
emerging in Germany ahead of the tourism season and reopening of borders on July 1.
BofA says: "the global environment looks fragile, too. Trade tensions with the US are not
the only concern. In sum: we still hope to get a summer break. Our conviction is rather low."
On the recent strong economic data, BofA says the so-called "mechanical reaction" after the
easing in lockdowns can be tricky because it can create "stimulus fatigue."
BofA's focus will be "on any glimpse of jobless recovery," while "preliminary readings for
June inflation could unveil further downward pressure."
The EU council about the recovery fund is scheduled for 17-18 July. If no deal is reached in
those days, waiting for a few more weeks will not make any difference, if no major contrasts
arise.
Covid-19 in the U.S. will continue to weigh as a way out of the massive coronavirus shock
"will not be successful without a strong rebound in U.S.".
Below are some measures of the uncertainty in relation to the virus and its economic
consequences:
(Stefano Rebaudo)
*****
TOO OLD TO PARTY? (0909 GMT)
We are all very busy trying to assess waves of coronavirus infections and how the post-Covid
era will look like, but another real threat emerging, particularly in the U.S., is the major
demographic change and the related economic hit.
According to a Moody's report, U.S. economic growth expectations for 2030 are well below the
levels seen in second half of 20th century.
There are two key factors involved. First labour productivity that advanced by 3% annualized
on average during 1997-2000, thanks to new communications and computing technology and is not
expected to repeat itself unless a new wave of technological innovation steps in.
Then the demographic outlook changed dramatically.
In the 1997-2000 period Americans aged 20 to 64 years, the working-age population, grew by
2.25 million year on year, while the number of those aged 65 and older by 227,000.
Now demographers project for the ten years ending 2030 an annual increase of 241,000 for the
number of Americans between 20 and 64 and 1.676 million for those older than 64 years.
While we can hope in a new wave of innovation comparable to the computing technologies
revolution in late 1990s, it is a lot more difficult to change demographic trends.
Bottom line, Moody's expects that aging population "will rein U.S. economic growth,
inflation and interest rates into the 2030."
(Stefano Rebaudo)
*****
STOCKS RISE BUT SET FOR WEEKLY LOSS (0725 GMT)
European stocks open higher, but the mood among investors remains cautious as a surge of
coronavirus cases in the U.S. could lead to lockdowns, hurting the global economy. The
pan-European STOXX 600 index is poised for a weekly loss as "second wave" fears dented
optimism this week.
The index opened up 0.6% on Friday, with tech, mining and travel & leisure names leading
gains. Air France shares up 4.5% after the Dutch government backed a support plan worth 3.4
billion euros.
AMS shares up 5.2% after a double-digit loss yesterday as the chipmaker rejected
insider trading allegations.
Shares in Wirecard are by far the worst performer of the STOXX 600 after the company
collapsed owing creditors almost $4 billion.
(Stefano Rebaudo)
*****
ON THE RADAR: AIRLINES, AMS
European stocks are set to open higher with hopes of a quick economic recovery still in
place as easing lockdowns across the continent are going well.
On the corporate front, Austria's financial markets watchdog FMA is investigating AMS'
top management on suspicion of illegal share transactions during the ongoing takeover of
Osram.
Wirecard, which collapsed owing creditors almost $4 billion, is seen down 17.1% in
premarket trade.
Rescue plans for airlines still in the spotlight, with Lufthansa shares up 6% in
premarket trade after investors backed the German plan. The Dutch government has reached a deal
with France to contribute 3.4 billion euros ($3.8 billion) to an Air France-KLM
bailout, sources told Reuters.
Salvatore Ferragamo will release on July 28 only its half-year sales data,
postponing the remaining financial data for the semester and a conference call with analysts to
Sept. 15
Italy's Intesa Sanpaolo says regulator approved document for UBI takeover
bid.
(Stefano Rebaudo)
*****
MORNING CALL: IN POSITIVE TERRITORY, BUT CAUTIOUS (0538 GMT)
European futures are trading in the black, as investors remain cautious about a rise in new
infections mainly in the U.S. but continue to hope that a quick economic recovery is still in
the cards.
A better situation in Europe in terms of coronavirus cases and a gradual easing of lockdown
measures that continue with no problems are also supporting share prices.
Wall Street ended higher a choppy session after a late surge led by banking shares, Asian
stocks were stuck in range with investors wondering whether a possible second wave of infections
can be offset by fiscal and monetary stimulus.
(Stefano Rebaudo)
*****
HSBC Holdings (HSBA)