* Fresh lockdown fears sour sentiment
* Insurers, travel stocks dip
* Brexit trade deal deadline looms
* Italy's Atlantia shares surge 7.5%
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TIME TO TAKE ACTION ON GREENTECH (1221 GMT)
'The future is green' is a widely accepted mantra and there is no doubt a
sustainable development is a long term goal for many Western countries.
According to UBS, there are an extra couple of points in favour of
sustainable investments at the moment. This includes a possible victory of Joe
Biden and benefits from green-focused economic recovery packages.
The EU pledged to use its 1.85 trillion euro fiscal stimulus to reach
net-zero emissions by 2050, while U.S. Joe Biden proposed $2 trillion climate
spending plan, UBS recalls.
Green bonds, on an index level, have exhibited the defensive behaviour
expected compared to broad investment grade corporate bond indexes, UBS says.
“We continue to expect green bonds to exhibit lower volatility and smaller
drawdowns compared to non-green bonds during periods of market stress,” it adds
in a research note says.
Investors can direct their capital to companies that support longer-term
themes such as health-tech and smart mobility, according to UBS.
Also worth considering are themes that support biodiversity and the low
carbon energy transition such as renewable energy, food revolution, water
scarcity, and clean air and carbon reduction.
Then UBS cites electrification of vehicles, increased production of green
hydrogen as well as industry 4.0.
BORED IN THE HOUSE: BET ON STOCKS? (1115 GMT)
Furloughed, bored at home, no sports events, more people opted to buy stocks
during the lockdown, according to a survey of 1,000 people commissioned by
More than 15% of people who already had shares said they have started buying
and selling more during the pandemic, while 3% of the sample said they have
bought shares for the first time.
The reasons for the interest in stock vary with one third of people saying
they have bought stocks because they were a good buying opportunity as prices
fell dramatically when countries entered lockdown in the spring.
Some 11% traded more shares "because they could no longer bet on sporting
events during the early stages of the pandemic because these had been
cancelled," GraniteShares says.
Another popular reason was having more time to trade because they were
"Lastly and, perhaps somewhat alarmingly," 11% of those who invested more in
shares did so because they had been made redundant and they sought to make some
TELCOS: SEPARATING THE WHEAT FROM THE CHAFF (1047 GMT)
European telcos have been a disappointment for so many years and with
investors still clearly underweight the sector it's hard for anyone to make a
convincing case for them.
Nevertheless attempts to see some of the positives of buying telcos pop up
every now and then.
The latest of such attempts is from JPMorgan and comes amid a pick up in
newsflow about possible dealmaking that has lifted the sector's index to an over
Specifically, JPM has just released an update to a note last week looking at
the merits of telco investing. They point to a number of catalysts including
private capital buying out cheap targets, reports about M&A and network
monetisation and a potential boost from stimulus earmarked for digital
"Whilst the opportunities seem real... visibility is low and sentiment
fickle. As such, we advocate a selective basket approach to spread the bets
across various potential beneficiaries," they say.
Essentially it's about separating the wheat from the chaff and avoid making
a blind broad sector bet.
JPM's top fundamental picks are Cellnex, Telefonica Deutschland
, Hellenic Telecom, Deutsche Telekom and Bouygues
Among these, Cellnex and Deutsche Telekom has outperformed the STOXX by 60
and 10 percentage points respectively year to date. The others have slightly
WHO MANAGES TLTRO FUNDS BETTER? (1042 GMT)
The liquidity the ECB has unleashed across the bloc's financial system
through its Targeted Longer-Term Refinancing Operation (TLTRO) either goes back
to the ECB, saddling banks with the pain of ECB negative rates, or finances
firms amid a pandemic-induced recession.
It's also true that banks sometimes take up cheap loans and invest in "carry
trades", buying government bonds, where yields are higher.
But who has been better at reducing funding costs in the euro zone?
In aggregate, banks from Italy and Spain “have effectively managed to reduce
their funding costs, with relatively large drawings from TLTRO III, while
minimising the costs of placing any excess back at the ECB by increasing their
holdings of government bonds, especially domestic ones,” according to a
Commerzbank research note.
“The contrast with Germany and France is substantial,” where the growth in
no-financial corporations (NFC) lending is almost entirely net new credit
exposures, it adds.
Banks from France and Germany "were significant takers of TLTRO money, they
have been significantly greater depositors of cash back at the ECB."
Besides the amounts involved "are so large that the negative carry is
likely to exceed the benefits of the tiering and the attractive pricing of TLTRO
CHINA'S NEVER BEEN WORTH SO MUCH (1012 GMT)
The combined dollar value of companies listed in Shanghai and
Shenzhen hit a record $11.3 trillion as of Tuesday's close, exchange
data showed, as China's markets roared back from the mid-Autumn break with big
The last time market capitalisation was at such lofty levels was right
before the equities bubble burst in 2015. But as China's economy makes a robust
rebound from the COVID-19 pandemic, few expect a similar cataclysm is imminent
The price-to-earnings ratio for the Shanghai Composite index is just
shy of 14, well below its peak above 22 five years ago. Imports are surging and
suggest that the one economic soft spot, domestic demand, might be picking up.
Of course, the market cap figure is dwarfed by the almost $30 billion value
of the S&P 500 index firms.
But analysts forecast growth and, for international investors, the yuan is
already climbing again following a drop when policymakers removed deterrents to
shorts -- another trend expected to continue and one which flatters dollar
"Valuations are not bubbling and are still lower than in China in 2015,"
Societe Generale strategists said on Wednesday. "Earnings momentum has been
strong, justifying upbeat consensus estimates for the next two years."
APPLE SUPPLIERS: BUY THE RUMOUR SELL THE FACT (0914 GMT)
Apple shares fell overnight after the much talked-about launch of
the new iPhone 12 but commentary is nearly unanimous in saying the reaction was
the classical buy-the-rumour-sell-the-fact move.
Same pattern is shaping up for suppliers across the globe. Here in Europe
STMicro, Dialog and BE Semiconductor are a tad
lower this morning while ams is managing a decent performance.
Beyond the surface of the market move however the launch of Apple's new
devices with their extra features and attractive pricing looks good news for
suppliers on this side of the pond.
"We believe the pricing strategy is positive for the supply chain as it
could stimulate demand by increasing the number of new units sold compared to
the option to buy a refurbished product," says Equita analyst in a note.
Similar feeling comes from Liberum, who anticipates strong iPhone sales
"We expect these phones to lead to volume growth for Apple in 2021, with
both STMicro and AMS having a strong position in the front-facing structured
light solution," they say.
"We believe that STM also supplies additional features into the phones, such
as part of the embedded SIM solution and a power management chip; we also see
scope for content growth at STM going forward," they add.
And here's Neil Campling, head of TMT research at Mirabaud Securities:
"Many related companies have talked about pent-up demand for Apple and a 5G
iPhone. Some >40% of the iPhone install base hasn’t upgraded in the last three
years and these, together with the tech savvy crowd and the attractive trade-in
options which are available should drive a potential super cycle for the iPhone
"We play this through the supply chain companies leveraged to the volume
potential: Dialog Semi, ams and Sony," he adds.
Q3 SEASON: ROOM FOR POSITIVE SURPRISES? (0843 GMT)
As we brace for a Q3 earnings season surrounded by rising cases of COVID-19
across Europe and uncertainties around the U.S. presidential elections, some
investors may feel in need of positive surprises.
According to Barclays, they might get some.
"We see room for positive surprises, as expectations look low compared to
better-than-expected activity data last quarter," write analysts at the bank.
Following historically low numbers in the last two quarters, IBES expects a
36.7% drop in earnings year-on-year in Europe in the third quarter.
Barclays says that there is clearly no sign of a V-shaped recovery but "Q3
earnings have room to beat conservative estimates" as companies continue to push
to cut costs.
Cyclicals will lead the earnings recovery, with potential for beats in
capital goods, tech, mining, logistics, construction and stock screens, the
British bank says, adding that manufacturing, construction, and digitalisation
should have the biggest earnings tailwinds, and not surprisingly companies
exposed to travel, leisure and hospitality should remain under pressure.
OPENING SNAPSHOT: WELCOME TO LOCKTOBER FEST! (0748 GMT)
As expected, there are no fireworks at the open and the mood is souring with
the resurgence of the pandemic in Europe fuelling fears of additional social
restrictions throughout the continent and even talk of possible new national
Granted, a "Loktober fest" is a grimmer prospect than the Munich beer
festival which usually takes place at this time of year.
Travel and Leisure shares are absolutely not in a party atmosphere and
At the time of writing, the STOXX 600 is flat as a pancake and not planning
to rebound from yesterday's slump.
There's no surprise to see many lockdown winners topping the STOXX this
morning with notably Just Eat rising 4.4% after its trading update which looks
even more promising shall a good chunk of the European population be forced to
stay at home again.
Bunzl, which supplies products ranging from disposable tableware to latex
gloves and cleaning chemicals to private and government sectors, is also on the
top of the chart with a 4.7% jump. There is, needless to say, strong demand for
sanitary products due to the COVID-19 crisis.
Outside COVID-19 related news, Atlantia is the top gainer, up 8% as it seems
a very long corporate saga seems about to end in Italy as the company enters
exclusive talks over the sale of the group's motorway assets.
In the Netherlands, Tomtom is rising over 6% after a better-than-feared Q3
with its automotive division surpassed expectations and as it announced the
extension of its maps and traffic supply contract with Uber.
Emerging markets-focused money manager Ashmore is also having a good
morning, up 5.9% and reported that assets under management rose 2.3% to $85.5
billion during the first quarter.
Among losers from outside the basket of typical big pandemic losers as
airlines, Belgian telco Proximus is down 4.2% after a downgrade by Barclays.
(Julien Ponthus and Danilo Masoni)
Britain's biggest housebuilder Barratt BDEV.L reported a near 17% jump in
forward sales for the past three months on Wednesday and said it had delivered
almost a quarter more homes than in the same period a year ago as Britain's
housing market bounced back from the initial round of coronavirus lockdowns.
ON THE RADAR: Q3 TASTERS FOR BREAKFAST (0629 GMT)
The Q3 earnings season started yesterday in the U.S. with heavyweights JP
Morgan and Citigroup but that's not to say there isn't anything going on this
side of the pound.
On a first glimpse, it looks quite encouraging on the tech front with ASML
Holding, the semiconductor equipment maker, reporting better-than expected
earnings and expecting double digit growth in 2021.
Dutch mapping and navigation company TomTom also beat analysts’
expectations, helped by growth in its automotive business.
While talks about new lockdowns are spreading, European food-ordering firm
Just Eat Takeaway.com said it had received 46% more orders in the third quarter
than a year earlier, as a surge in online orders due to coronavirus social
distancing measures continued.
Talking about the impact of social restrictions, British education group
Pearson said it was on course to hit market expectations after demand for online
learning helped soften the impact from cancelled tests and closed schools due to
In the UK, online fashion retailer ASOS benefited from strong demand during
the COVID-19 pandemic and reported a quadrupling in full-year profit.
Outside the earnings season, there's been also quite of news in terms of
management reshuffles in the banking sector with UniCredit naming economist Pier
Carlo Padoan as director and saying it would appoint the former Treasury chief
as chairman when it renews the board next spring.
The choice of Padoan, 70, a parliamentarian for the ruling centre-left PD
party, comes as consolidation sweeps through Europe's battered banking sector,
piling pressure on CEO Jean Pierre Mustier to drop his "no M&A" mantra.
In Switzerland, Credit Suisse is hiring former head of investment banking at
Bank of America Corp Christian Meissner.
In France, French daily Le Figaro reported that L'Oreal is set to name
deputy Chief Executive Officer Nicolas Hieronimus as its new chief, replacing
long-time boss Jean-Paul Agon.
One very long corporate saga seems about to end in Italy with Atlantia
entering exclusive talks with state lender Cassa Depositi e Prestiti (CDP) over
the sale of the group's motorway assets.
In ECM news, German plastics group Covestro raised 447 million euros in a
capital increase to finance the purchase of Dutch peer DSM's Resins and
Functional Materials business
Also Liberty Global has been successful in its 6.8 billion Swiss franc
attempt to buy Switzerland's Sunrise Communications after the all-cash offer was
accepted by nearly 82% of the target's shareholders.
MORNING CALL: NOT MUCH TO LOOK FORWARD TO (0532 GMT)
European futures are trading just slightly in positive territory but it
clearly doesn't look like a rebound from yesterday's fall is in the making.
Disappointments on the vaccine front, fading hopes of a swift U.S. fiscal
stimulus, a weak reception of JP Morgan and Citigroup's Q3 results combined with
an underwhelming welcome to Apple's next-generation iPhone 12 aren't quite the
ingredients needed for a risk-on breakfast cocktail to say the least.
If you add lingering no-deal Brexit fears with the angst about possible new
regional and even national lockdowns across Europe, there's no wonder the mood