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LIVE MARKETS-Stock investors prepared for the worst

Fri, 16th Oct 2020 11:21

* European shares bounce from 2-week low

* Thyssenkrupp shares surge to almost one month high

* Automotive sector leads gains up 2.7%

* Rising Vuitton sales boost LVMH, lift other fashion stocks

* Brexit negotiations in focus
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 and Stefano
Rebaudo (stefano.rebaudo@thomsonreuters.com) in Milan.

STOCK INVESTORS PREPARED FOR THE WORST (1021 GMT)

The pan-European index STOXX 600 is gaining 0.6% today but it is still on track to end the
week lower. Yet, all things considered, ending the week at around 365 points doesn't look bad at
all.

European countries are moving to implement new restrictions which will likely dent the much
needed economic recovery, while another decisive deadline for the European Union and the UK to
reach a Brexit deal, turned out to be (again) not that decisive.

From the other side of the world, the news flow was equally blah.

"The U.S. election is now 2.5 weeks away, and ahead of a known outcome, markets are likely
to remain choppy," write Barclays analysts.

A strong Democratic victory would allow Biden to quickly enact a large fiscal COVID relief
package and a nationwide green infrastructure program, but that victory could also upset markets
at some point "if they (dem) were to increase the chances of a more radical policy shift to the
left," Barclays adds.

Where all this leave investors?

"Risks into year-end are high but well known, and investors seem more positioned for bad
news than good news at present. Investors should keep a balance between hedging the downside
risks, without losing sight of the big picture, which remains supportive," Barclays says.

To hedge second wave risks in Europe, the bank downgraded last month consumer discretionary
to underweight and upgraded consumer staples to market weight.

(Joice Alves)

EUROPEAN EQUITIES: TIME TO TAKE LONG-TERM POSITIONS? (0909 GMT)

Worries about virus trajectories, possible new lockdowns and the lack of a deal on a U.S.
rescue package have been weighing on global stocks. But the STOXX 600 has managed to hold its
ground above the 350 threshold since mid June.

Even if you are bullish on equities the big unknown is when to take action.

A UBS global wealth management research note says that now is the time to “start to build
long-term positions.”

Here are the main reasons: Wall Street usually rises two months after the election no matter
what the outcome is. Besides, after the vote a rescue package to fight the economic impact of
the pandemic is likely to be approved.

"The Senate Majority leader has not ruled it out, and President Trump now claims he is in
favour of a large support package,” UBS says.

On the pandemic front, even in the absence of a vaccine being approved this year,
improvements in the treatment and management of the virus, “have contributed to lower mortality
rates in the U.S. and Europe.”

Lower for longer rates and central banks willing to accept a period of moderately higher
inflation “makes it more important to be invested in growth assets.”

(Stefano Rebaudo)

*****

OPENING SNAPSHOT: UP ON AUTOMAKERS, LVMH RESULTS (0737 GMT)

A batch of strong results is helping European equities rise from yesterday’s selloff.

The pan-European index, which had its worst session yesterday since Sept. 21, is up
0.6%, with automakers leading gains after Daimler and Volvo posted
stronger-than-expected results. Their shares are up 4.4% and 1.8%, respectively.

LVMH stocks jumped 6.5% as the company says it contained the fallout from the
coronavirus crisis in Q3.

The luxury stock is driving higher other fashion companies, such as Moncler, whose
shares are up 2.5% and Burberry, up 3.2%.

Shares in Thyssenkrupp gained 16.8% as privately-held Liberty Steel Group is set
to make a bid for the ailing steel unit of the company.

(Stefano Rebaudo)

*****

ON THE RADAR: THYSSENKRUPP, DAIMLER, LVMH (0639 GMT)

European stocks are set to open higher, bouncing back from yesterday’s 2% fall in the STOXX
600 index, but virus concerns and uncertainty on a U.S. stimulus package will keep investors on
their toes.

On the M&A front, shares in Thyssenkrupp are up 13.5% in premarket trade as
privately-held Liberty Steel Group is set to make a bid for the ailing steel unit of the company
as soon as Friday.

Richemont will go ahead with its plan to issue warrants to shareholders which can be
traded or eventually used to acquire new shares and will hold on Nov. 17 a shareholders meeting
to approve the creation of up to 22 million shares.

Meanwhile, there is a batch of mixed earnings results.

Daimler stocks are up 3.4% in premarket trade after the company posts
forecast-beating third-quarter results, citing a faster than expected market recovery.

Rio Tinto warns that a resurgence in coronavirus cases was putting global economic
growth at risk, and that steel production outside China has sharply dropped.

AB Volvo reports third-quarter core earnings well above markets forecasts and a
big jump in order intake as a recovery continues to gain pace.

Recovering sales of Louis Vuitton handbags helps LVMH contain the fallout from the
crisis in the third quarter.

Shares in Erste Group are up 2.1% in premarket trade as the bank plans to pay a
dividend for 2019 in February of next year provided the European Central Bank (ECB) has lifted
its recommendation against such payouts by then.

Getinge reports a big jump in third-quarter core profit on the back of demand for
ventilators and other life support equipment, but order intake edges down.

The United States has offered to settle a long-running aircraft subsidy dispute with the
European Union and remove tariffs on wine, whisky and other products if Airbus repays
billions of dollars in aid to European governments.

(Stefano Rebaudo)

*****

MORNING CALL: IN THE BLACK, BUT VIRUS WORRIES WEIGH (0528 GMT)

European stock futures are in the black after yesterday’s losses, while their U.S. peers are
flat, but gains will probably be capped by virus concerns.

Fears of new restrictive measures to fight the pandemic in Europe coupled with the
uncertainty surrounding a U.S. stimulus package are dampening risk-appetite across the board.

U.S. President Donald Trump’s offer to raise the size of a fiscal stimulus package was
rejected by the top Democrat in Congress Nancy Pelosi who stuck to her demand for a $2.2
trillion deal.

(Stefano Rebaudo)

*****

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