LIVE MARKETS-The wise owl is here: Lagarde gets a warm welcome

* European stocks: STOXX 600 up 0.3% after Trump's comment
* FTSE 100 outperforms as UK polls open
* ECB keeps generous stimulus unchanged
* Lagarde begins first ECB presser, banks rise
* Trade war: Dec.15 tariffs deadline looms

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: rm://julien.ponthus.thomsonreuters.com@reuters.net

THE WISE OWL IS HERE: LAGARDE GETS A WARM WELCOME (1442 GMT)
Though Lagarde didn't want to be labelled a hawk or a dove, her first ECB presser was
perceived as slightly hawkish and boy, it wasn't a bad debut with the euro and euro-zone banks
giving a warm welcome.
Euro-zone banks were flat before the press conference but ended up 1.4% higher after
Lagarde's speech.
"Once and for all, I'm neither a dove nor a hawk, my ambition is to be this owl that is
often associated with a little bit of wisdom," Lagarde said.
Here's how euro-zone banks reacted:



(Thyagaraju Adinarayan)
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INVESTORS AGREE: WHAM! RULES AND Q1 LOOKS QUITE GOOD (1401 GMT)
Deutsche Bank conducted a survey among about 700 clients in December which paints a rather
optimistic picture of world markets, at least for the next three months.
Key takeaways include that 40% of investors intend to put on some risk three months from
now, 38% to stay the same and 22% to go underweight.
Looking further ahead, in a year's time, the mood is much more pessimistic with 46%
expecting to take less risk and only 40% going overweight.
Quite logically investors believe the S&P 500 and the STOXX 600 will rise
at least slightly in the next three month but will be both at a lower level in 12 months.
Among other findings, a U.S. recession in 2020 is seen as unlikely and there's a massive
expectation that Trump will be reelected.
More seriously, the survey finds that Last Christmas by Wham! is the best Christmas song:

(Julien Ponthus)
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GREEN BREXIT? (1300 GMT)
Today's election could partially be seen as a second opportunity for voters to have their
say on Brexit.
We have heard about the Brexit impact on all sort of investments: real estate,
manufacturing, service, you name it.
EdenTree Investment Management's fund manager, Chris Hiorns brings another concern to the
table: How much will the UK be ESG-friendly if it leaves the euro bloc?
Globally, the world will likely be investing a lot in ESG strategies over the next 20 years,
according to BofA Merrill Lynch Global Research report.
Precisely, $20 trillion of AuM is expected to go into ESG strategies globally. But how much
of it will come from the UK is to the new government to decide.
The EU's effort to lower carbon emissions meant there has been increasing investments in a
variety of environmental friendly businesses, Hiorns says.
But the question now is how closely will the UK be aligned with European regulations, he
adds.
"I think the EU has been very forwarded coming out with environmental legislation. You can
say it's uncertain, if we do have Brexit, to what extent the UK will continue to adopt all the
environmental type legislation," Hiorns says.

(Joice Alves)
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ECB STATEMENT: SPOT THE DIFFERENCE? (1259 GMT)
There you're! ECB's statement is out, and it looks very silimar to the previous one.
Understandably, there's zero reaction in markets and the focus now shifts to Lagarde's first
ECB press conference at 1330 GMT.
Here's the ECB statement just released which shows changes (if you can spot any) from the
last one:



(Ritvik Carvalho and Thyagaraju Adinarayan)
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ARE YOU HORRIFIED OR JUST BORED BY THE FED? (1136 GMT)
"The Fed is literally telling you that they won't feel the need to hike rates when inflation
rises above target, yet this is greeted by a collective yawn", rants Kevin Muir in his
MacroTourist newsletter after the Fed kept rates on hold yesterday.
"Why the bond market is not more horrified by this progression is beyond me", he adds,
predicting an inflation comeback.
Muir's warning does feel however like a lone voice in the wilderness.
Most analysts seem perfectly fine with the Fed's apparent relaxed attitude towards the 2%
inflation target and agree that the central bank is much more trigger happy when it comes to
cutting rates than to hiking them.
Hugh Gimber, a strategist at JPMorgan Asset Management says the policy does seem
"asymmetric" in that rates are expected to be cut swiftly should growth stumble but "the bar is
higher for the Fed to raise rates", particularly during the U.S. presidential campaign.
Same analysis from Mark Haefele, CIO at UBS GWM who believes that "inflation will need to
rise above the Fed's target to trigger rate hikes".
BNY Mellon also notes "the possibility that the FOMC may be willing to let inflation
run higher than 2% as long as, on average, it hits the target over the cycle".
But that prospect isn't spooking many, quite on the contrary, it seems.
"Has the Fed become boring again?", asked Rick Rieder, BlackRock’s CIO for fixed income,
adding that wouldn't be a bad thing either.
One thing is for sure, if inflation does make the unexpected comeback predicted by Muir,
markets won't be boring one bit.
"Investors have moved further out on the yield curve and take ever more duration in their
portfolios, rendering their bond holdings more vulnerable to even small increases in interest
rates", David Riley, chief investment strategist at BlueBay Asset Management.
Below is an illustration of how a 2% target can be interpreted differently found in the
Macro Musing Blog and mentioned by Muir.

(Julien Ponthus)
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ECB COUNTDOWN: STRATEGY REVIEW IN FOCUS AT LAGARDE'S DEBUT (1116 GMT)
The first ECB meeting chaired by Christine Lagarde today is likely to be a non-event in
terms of near term policy changes but still it will be an interesting one to watch, especially
for any clues about timing and focus of a long overdue strategy revamp.
"The ECB last undertook a review of its monetary policy strategy in 2003. But since then,
the world has changed, presenting central banks with new challenges that make it harder to
boost inflation," say UBS economists.
"In Europe, the ECB is facing additional challenges related to the strict division between
monetary and fiscal policy, tight EU fiscal rules, weaknesses in the institutional framework of
the monetary union and a complicated division of labour between the ECB and national authorities
in the area of financial regulation," they add.
UBS says the review will unlikely touch the bank's governance structure and its ultimate
goal of price stability but sees moderate revisions focusing around three questions:
1) Should the ECB's operational target (HICP inflation 'below, but close to 2%') be changed?
2) Does the ECB have the right tools to achieve its target, also considering negative side
effects?
3) Are there ways to improve the ECB's communication

That being said, it could still be that there won't be that many details on the revamp today
with more to come in 2020.
"The announcement of timeline and content of the review might come early next year, once the
executive board is up and running," says UniCredit.

For more ECB previews, check out these stories:
UPDATE 1-Lagarde in the spotlight at first ECB meeting
GRAPHIC-Bienvenue, Madame Lagarde: Five questions for the ECB
(Danilo Masoni)
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EUROPEAN BANKS: TRAP OR OPPORTUNITY? (0915 GMT)
So-called value stocks are (cautiously) back in fashion and perhaps rightly so because the
economy is showing signs of stabilising and the high growth stocks look quite pricey.
It's natural then that Europe's battered banks are being looked at with some interest but so
far investors are still divided over whether the sector is a trap or an opportunity.
Just look at how differently Oxford Economics and Natixis see banks, is a neat illustration
of the long-standing dilemma.
"We believe that Eurozone banks are still a value trap and would not chase their recent
outperformance," writes Daniel Grosvenor, Director Equity Strategy at Oxford Economics.
He adds net interest margins remain under pressure and loan growth is set to slow in 2020,
resulting in an environment not seen since 2011-2012 and meaning that ROEs are unlikely to rise.
But Patrick Artus, chief economist at Natixis, sees it another way.
"Equity investors should look at euro-zone banks", he argues, adding that one should not
overlook that euro zone banks are diversifying their business, default rates remain very low and
the yield curve is going to slowly steepen on the back of the improvement in cyclical prospects.
Who's right? Maybe history will tell.
(Danilo Masoni)
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OPENING SNAPSHOT: THE CALM BEFORE THE STORM? (0824 GMT)
It's all quiet on the European front: the wildest move at the moment on the STOXX 600 is
Tullow Oil, with a not that spectacular 3.5% rise...
Bourses across the continent are flat or just slightly up with Milan pulling off the best
performance, up 0.3%.
You would think that with the Fed yesterday, the UK election unfolding, Lagarde's ECB
presser and the Dec.15 tariffs deadlines on the U.S./China trade war, things could be a bit more
volatile than that.
Maybe it's the calm before the storm?
(Julien Ponthus)
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ON THE RADAR: UK ELECTIONS, TRADE WAR DEADLINE AND M&A MOVES (0752 GMT)
European stock markets are expected to open just slightly in positive territory as the
week’s two main news items, UK election and the Dec.15 tariff deadline enter their end game.
Of course, Lagarde’s ECB presser will also be closely watch after the Fed said it wouldn’t
change rates anytime soon.
M&A should secure some market price action this otherwise quite quiet morning on the
corporate front.
Shares in Anheuser-Busch InBev will be closely watched after Australia's competition
regulator raised concerns over an $11 billion deal by to sell its local operations to Japan's
Asahi. The latter’s stock lost 1.6% in Tokyo.
Nestle has agreed to sell its U.S. ice cream business to Froneri in a deal valued $4 billion
and Metro said it hopes to secure net proceeds of 1.5 billion euros from the sale of a
majority stake in its China business and its struggling Real hypermarkets unit.
In a move which will interest the shareholders of its merger partner PSA, Fiat Chrysler
avoided a strike after a union voted in favour of a new four-year labour contract.
Among smaller stocks, the jury is still out on Superdry, after the British fashion retailer
gave a much awaited trading update. Balfour Beatty on the other hand seems set to rise at the
moment.
Talking about retail, Ocado’s saw revenue growth slightly slowing in its latest quarter.
(Julien Ponthus and Sruthi Shankar)
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MORNING CALL: "I KNOW NOTHING" (0627 GMT)
On June 8 2017, UK PM Theresa May lost an absolute majority in Parliament after calling an
early general election, which was expected to be a walk in the park for her.
No one saw Jeremy Corbyn's opposition Labour Party rising to frustrate her bid to win enough
seats to quell eurosceptic dissent in her Conservative Party and secure a working Brexit-proof
majority.
On June 9 2017, Channel 4 anchor Jon Snow had these words of contrition to his viewers:
"I know nothing. We the media, the pundits, the experts, know nothing. We simply didn't spot
it".
So, as Britain wakes up to its first December general election in about a century, this
could be seen as a friendly reminder that even if the last polls gave a 10%-plus lead to Boris
Johnson, caution may be in order.
Anyhow, that was kinda for a Morning Call foreword, so let's get to the point:
Financial spreadbetters see London's FTSE opening 7 points higher, Frankfurt's DAX up 6
points and Paris' CAC up 4 points.


(Julien Ponthus)
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(Reporting by Danilo Masoni, Joice Alves, Julien Ponthus and Thyagaraju Adinarayan)