* European stocks down 1% in volatile trading
* STOXX 600 touches session lows at midday
* BOE increases QE, FTSE and FTSE 250 dip
* Wirecard shares collapse, co faces loan crunch
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) in Milan.
STOCKS: EUROPE VERSUS U.S. (1333 GMT)
Is it time for European stocks to steal the show? Despite their historical weakness compared
to their U.S. peers, some analysts argue that it is indeed time for European stocks to shine,
for several reasons, including some coronavirus related.
"Between a potential surge in U.S. COVID-19 cases, and a gradual shift in Trump's
re-election odds, US markets are starting to look over-exposed given the size of their rally
over the course of Q2," says Joshua Mahony, senior market analyst at IG.
While in Europe the worst of the coronavirus crisis seems to be over, the U.S. recently saw
rises in cases in some areas, which put equities under selling pressure.
We shouldn't forget that European stocks lost ground today after BoE update of its stimulus
programme.
Barclays recommends financials, tech, utilities and mining in Europe, while it is still
positive on tech, healthcare and industrials in the U.S., according to its Global Outlook.
Berenberg expects volatile sideway movements in the third quarter in the U.S. and Europe,
while downgrading U.S. stocks to neutral. It also reminds that the Euro Stoxx 50 gained over 18%
on a monthly basis compared with the S&P's 9% rise.
(Stefano Rebaudo)
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U.S. JOB DATA: NO GAME CHANGER FOR THE SESSION (1300 GMT)
Both European indexes and Wall Street futures are struggling to stage some sort of bounce
back after the U.S. job data showed a second wave of layoffs and little hope for a swift
economic recovery.
"People will say claims are coming down, but for an economy that is reopening, that is a
huge number," Steven Blitz, chief U.S. economist at TS Lombard in New York was quoted in our
report
It's been quite a volatile session so far with ups and downs but the mood remains sombre
given the growing fears the pandemic is just not "fading away", as President Trump said on Fox
News on Wednesday.
As you can see below, the STOXX 600 has managed to pull off its lows but is still down 0.9%
while S&P futures are edging down 0.6%:
(Julien Ponthus)
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COVID-19 WORSENS CEE COUNTRIES AUTO CRISIS (1130 GMT)
Some Central and Eastern European (CEE) countries are heavily dependent on the car industry,
and as they export most of its auto production they are struggling as the COVID-19 crisis
affects deeply the sector across the world as both sales and production tumbled during the
lockdown.
Even before the crisis the CEE car space was already under pressure and the wave of car
subsidies will provide limited support for the CEE auto sector, especially the EU/German
scrappage scheme recently announced, which focuses on electric cars subsidies that are only
gradually being produced there.
"The COVID-19 crisis might accelerate challenges for the sector, which were already apparent
before the coronavirus outbreak," ING analysts say in a report.
The support from the European level will not provide a significant positive shock for the
CEE automotive sector as a whole, but a few countries may benefit.
"Slovakia followed by Hungary may benefit the most given its larger
electromobility-production share, while Romania and Russia less so," ING says.
(Joice Alves)
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REVIEW TIME FOR ASSET MANAGERS (1121 GMT)
It might be the time to update valuations on European asset managers as retail flows are on
the rise and equities staged a sharp recovery since their mid-March lows.
UBS did, by raising 2020 EPS estimates by an average 4% and 2021-22 EPS by 8-10%, while the
average target price is up 13%.
Multiples are not too high, according to the investment bank.
"The average 2021 expected P/E multiple" stands at 13.3x "in line with historical averages,"
UBS says, adding there is room for further expansion.
Besides, flows are expected to improve as investor sentiment is supported by a 'whatever it
takes' attitude of governments and central banks.
UBS's preferred stocks are, in order, Ashmore, DWS and Man Group.
(Stefano Rebaudo)
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RETAIL TRADING ON (COVID-19) STEROIDS (1038 GMT)
Quite clearly, steroids are not solely used to cure COVID-19!
A lot of the recent market action, be it on penny stocks or major indexes, has been blamed
on the surge of retail investors and 'Robinhood traders'.
There is a lot of evidence that shows indeed that herds of mom-and-pop investors stranded at
home under lockdown were actually out in cyber space hunting for stocks.
In France, the financial market watchdog had published a study in April showing the
coronavirus market crash had triggered a surge in new retail investors.
Well, the trend has continued further into April and May, the head of the AMF told a press
conference last week.
According to a spokeswoman at the French financial markets authority, new clients (those who
didn't trade in 2019 and 2018) still constituted a good chunk of overall volumes and just like
in April, they're definitely on a buying mode.
That kinda supports those who believe the arguably irrational exuberance of markets in the
face of the pandemic can at least be partially blamed on retail.
There is no shortage of markets participants reporting a flood of retail money into the
markets.
"What I can say, is that most brokers in our spare and online stock brokerages, have seen
record inflows of new customers and volumes explode", Jeffrey Halley, an analyst for Oanda in
Jakarta, told the Reuters Global Markets Forum on Thursday.
"I have no doubt that the rally in stocks around the world is in no small part, powered by
retail investors", he added.
Ever wondered why this rally is hated with so much passion?
Halley seems to have the answer:
"When you see great minds like Mohamed El-Erian, shaking their heads and not engaged, that
tells you that there is a lot of smart and into money on the sidelines, that has missed this
entire rally".
Some reading:
A casino or stock market? Retail buying frenzy goes wild
The April report from France's AMF: https://bit.ly/2SegfeO
And here'a chart from this report showing how retail trading jumped during the financial
crash (it ends at the beginning of April):
(Julien Ponthus and Divya Chowdhury)
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EYES ALSO ON ECB TLTRO (0828 GMT)
How much money banks get from the ECB through the June TLTRO operation is going to be a good
or a bad sign for the economy.
The general idea is that liquidity demand from lenders reveals whether central bank policies
to ensure the flow of credit to households and firms via the banking system are working.
Besides, this is the first long-term refinancing operation that will be carried out at the
improved funding conditions it announced in April, a Unicredit research note reminds, adding it
expects a gross take-up of 900 billion to 1,200 billion euros.
A gross take-up lower than 900 billion is likely to be negative for markets, as it would
indicate reluctance by banks to increase their liquidity and vice-versa a take-up higher than
1,200 billion would be positive, according to Unicredit.
The bank also highlights a "note of caution." A very large take-up will most likely be
related to strong bidding by banks in core countries, which are typically less inclined to buy
periphery bonds, while Italian banks' appetite for BTPs is limited as they have been strong
buyers in the last three months, it says.
The European Central Bank will announce TLTRO results today ay 0930 GMT.
(Stefano Rebaudo)
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OPENING SNAPSHOT: CAUTIOUS MOOD AS ZALANDO LIFTS RETAIL (0730 GMT)
As expected, European shares began trading in quite a cautious mood this morning with the
STOXX 600 down 0.3%.
One notable move was German online retailer Zalando lifting the retail index as its shares
jumped over 5% with better than expected trading update.
Still in Germany, another big expected move was Wirecard, hit by allegations of
accounting irregularities, which is retreating over 5% ahead of the publication of its financial
statement.
Oil and gas is the worst performing sector, not surprising given the fall of oil prices
following fears the spike in new coronavirus cases in China and the United States could dampen a
recovery in fuel demand.
The worst performing stock at the moment is Siemens Gamesa, down over 8% after the
company announced the replacement of its CEO by the head of its offshore activities without
giving an immediate reason for the change.
Another hard-hit stock is British builder Taylor Wimpey, losing over 5% after its share
issue.
Here are the top movers on the STOXX 600:
(Julien Ponthus)
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ON THE RADAR: BOE AMMO AMID ECM/DCM ACTION (0640 GMT)
Eyes on the Bank of England which is widely expected to announce more QE ammo to fight the
COVID-19 impact on the economy.
This comes as British companies are widely using equity and debt capital markets to gear up
their finances. A good example of that is oil major BP raising $12 billion of debt with
equity-like features according to the Financial Times (FT).
On the equity front, builder Taylor Wimpey said it intends to launch a share sale to raise
about 500 million pounds ($626 million) as it looks to take advantage of a fall in land prices
due to the COVID-19 crisis and resume dividend payments in 2021.
Another rights issue of £175 million from Warehouse Reit.
There's already some pre-market action in Germany with Wirecard down 9.1% ahead of the
publication of its financial results. Shares in German online fashion retailer Zalando are up 6%
as it expects better Q2 sales and operating profit. Also Lufthansa is down 3.3% after it warned
it might need to apply for protection from creditors if its bailout plan failed to win
shareholder approval.
Freshly listed lottery operator Francaise des Jeux FDJ unveiled a hit of about 200 million
euros on revenues and 100 million euros on its core earnings from the lockdown.
Some reassuring words from the Swiss National Bank for UBS and Credit Suisse seen favourably
placed to manage the challenges of the COVID-19 pandemic.
Some M&A with British supermarket group Tesco selling its Polish business $206.52 million,
leaving it focused on the Czech Republic, Hungary and Slovakia in the central European region.
According to Il Corriere della Sera the government wants the Benetton family to cut its
stake in Atlantia to 49% while the state, through infrastructure fund F2i and state
lender CDP, would take 51%.
Not price sensitive but yet remarkable, Lloyd's of London apologised for its 'shameful' role
in Atlantic slave trade.
(Julien Ponthus and Stefano Rebaudo)
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MORNING CALL: SECOND WAVE FEARS PROMPT CAUTION (0530 GMT)
A second wave of COVID-19 infections knocking out the recovery is every investor's nightmare
so it's no wonder that European shares are expected to open on the back foot this morning.
A surge in new coronavirus cases in a number of U.S. states and the resurgence of the
disease in China might indeed force a rethink of the V-shaped recovery priced in equity markets.
The retreat for European and U.S. futures is rather limited at the moment but getting close
to 1 percent in the red.
(Julien Ponthus)
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Ashmore (ASHM)
Man (EMG)