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$32.57 -0.8  -2.4%

Last Trade - 12/05/21

Sector
Industrials
Size
Large Cap
Market Cap £47.50bn
Enterprise Value £48.76bn
Revenue £18.97bn
Position in Universe 189th / 6853

LIVE MARKETS-Beware cyclical traps

Mon 30th November, 2020 11:46am
* European shares slightly down * Retail leads gainers; oil, banks suffer * Britain sees 'very significant' week for Brexit * STOXX 600 at Feb highs, up nearly 15% in November Nov 30 - Welcome to the home for real-time coverage of markets brought to you by Reuters reporters. You can share your thoughts with us at markets.research@thomsonreuters.com BEWARE CYCLICAL TRAPS (1136 GMT) Now that the dust has started to settle on the great rotation triggered by three 'vaccine Mondays' in a row, some analysts are taking a closer look at where value and cyclical stocks now stand. Overall, the equity strategy team at Morgan Stanley believes the prospect of global synchronised growth in 2021 still warrants buying into value but has a more cautious approach towards cyclicals stocks, as some valuations are getting demanding. "While we want to maintain a pro-cyclical bias for the next 12M given prospects of material EPS outperformance vs Defensives, we think investors should be patient in identifying entry points for sectors and stocks", they write. But more crucially, it's not only about being careful in what one's buy, there could even be a case in selling a few cyclical stocks. "Given the stretched tactical backdrop and elevated valuations for Cyclicals in aggregate, we think it is an opportune moment to try to identify some Cyclical names that may offer a reasonable selling opportunity", they write. Here's their list: (Julien Ponthus) **** WHAT THE ECB CAN DO TO SURPRISE MARKETS (1114 GMT) Analysts already have a clear idea about what the European Central Bank will deliver in its Dec. 10 meeting to keep its dovish policy as long as it takes. But what might generate a positive surprise for markets? According t UBS, to exceed expectations the central bank could raise the Pandemic Emergency Purchase Programme (PEPP) envelope by more than 500 billion euros or extend it not just by six months to end 2021 but by 9-12 months. The central bank might also sweeten the terms of the TLTRO, “for example by lowering the ex-post borrowing rate by another 25 basis points.” UBS does not see a cut in interest rates. Commerzbank says the ECB might theoretically decide to fiddle with the interest rates in addition to extending the PEPP and the Targeted Longer-Term Refinancing Operation (TLTRO), “with a potentially EUR-damaging effect.” But “clearly officials are of the view that rate cuts will not work, might even be detrimental,” they add. In the charts below ECB asset purchases since 2015. (Stefano Rebaudo) AMERICA FIRST (S&P500 NOT RUSSELL) (1100 GMT) Remember President Trump's warnings of a stock market crash if Democrat Joe Biden won the Nov 3 election? Well Biden has won and the Dow Jones index has scaled 30,000 points. November is ending with one the best monthly Wall Street performance ever. While much of that is due to vaccine optimism, it does seem as though investors are not as dismayed about Biden as Trump had forecast. In fact, Erik Nielsen at Unicredit points out an interesting anomaly -- despite Trump's America First policies, the domestic oriented Russell 2000 equity index logged annualised gains of just 7% since Trump took office, while the more international S&P500 rose 13% annualised. Gains were led moreover by Big Tech firms, which enjoyed swingeing tax breaks from Trump-- despite saving billions of dollars via various tax loopholes. During Obama's second term, the Russell and S&P500 both rose 12%, Nielsen writes. So overall, a better performance. And even the S&P500's returns under Trump were not extraordinary --- a whisker better than Obama's second term and on par with George Bush Senior but well below the 16% it logged under Clinton. Nielsen, who we gather is not a Trump fan, writes: "I give no credit to Trump for his handling of the economy – and only negative marks for his handling of virtually everything else, including the pandemic and foreign policies." (Sujata Rao) ***** AFTER 'BEST MONTH EVER', SPEED BUMPS ON THE WAY (1027 GMT) November 2020 will be remembered as "the best month ever" across European equity markets but many investors are now growing wary about the risk of a possible pull-back as Christmas approaches. Strategists at Berenberg led by Jonathan Stubbs say speed bumps are appearing on the way ahead and have singled out four key risks for share prices in the near term: 1. Softer macro data (UK and Europe) 2. Investor sentiment 3. Valuation (record P/E highs for US and Europe) 4. U.S. politics That said, they remain dip-buyers, betting on a shift to synchronised global growth in 2021. "We still back our TOWIE (the only way is equity) approach to markets and a hard-coded policy put; this means we are very much in buy the dip mode, should opportunities arise," they say. (Danilo Masoni) ***** NOT GOING SHORT TILL NOON? (0926 GMT) Early losses have rapidly evaporated and while rotation favourites continue to be under pressure, a surge in healthcare and tech is helping the STOXX 600 erase all its losses. The index fell as much as 0.6% in opening trades and European index futures had pointed to declines of 1% before the bell. The STOXX is now up 0.1% to hit fresh February highs. Why is that? Deutsche Bank strategists led by Jim Reid make a good point. They think investors might be reluctant to go short for the first part of the day on the slim chance of a positive vaccine update later on in early U.S. hours. After all it's Vaccine Monday, isn't it? "Everyone will be waiting with baited breath though to see if there is a new vaccine efficacy release before the markets open today. It feels like the next developed world candidates are many weeks behind the three who have reported so far so we’re not expecting anything today but it wouldn’t surprise me if traders were very reluctant to go short, if that was their desire, before noon GMT / 7am NYT," they said. And Stephane Ekolo, strategist at Tradition Securities, said he agreed that investors won't likely go outright short, also because of the positive China data published earlier on today. (Danilo Masoni) ***** EUROPE SEES PROFIT TAKING AT END OF BEST MONTH EVER (0828 GMT) European shares are off to a negative start this morning as profit taking is hitting rotation darlings like oil stocks and banks in a broad based decline that comes at the end of the best month ever for many benchmarks in the region. The STOXX 600 .STOXX is down 0.4% in early trading but still up over 14% so far in November and firmly on course for its strongest monthly performance since records began in 1986, boosted by optimism over COVID-19 vaccine developments. Among top fallers are ABN Amro ABNd.AS shares after the bank said it would cut 15% of staff by 2024, while UniCredit CRDI.MI is also under pressure amid talk the future of its CEO is in question. Energy plays like Lundin LUNE.ST and Galp GALP.LS are also among the leading losers on the STOXX with eyes turning to a two-day OPEC+ meeting on production quotas. JD Sports JD.L is a bright spot, up 5% after a report said the company is backing away from talks to rescue Debenhams. (Danilo Masoni) ***** DEALMAKING AND FINANCIALS ON OUR RADAR (0739 GMT) Turning to the corporate news front the main action looks to be happening out of European equity markets. According to the WSJ, S&P Global SPGI.N is in advanced talks to buy IHS Markit INFO.N for about $44 billion in a transaction DB says would be this year’s second-biggest deal, while Reuters reported that Trump is poised blacklist China's top chipmaker SMIC 0981.HK and oil producer CNOOC 0883.HK , escalating tensions with Beijing. Back to Europe, dealmaking in the chip sector could spice things up. Shares in Siltronic WAFGn.DE rose nearly 14% in early trade after news the German group is in advanced takeover talks with Taiwan's GlobalWafers 6488.TWO in a $4.5 billion deal to create a top player in the wafer industry. urn:newsml:reuters.com:*:nL1N2IG09F Elsewhere in M&A, Vienna Insurance Group VIGR.VI will buy Dutch insurer Aegon's AEGN.AS Central and Eastern European business for 830 million euros. urn:newsml:reuters.com:*:nL1N2IF04X Telefonica TEF.MC has reportedly hired Societe Generale and Greenhill to sell Telxius's submarine cable business, while AXA AXAF.PA has agreed to sell its insurance operations in the Gulf region for $269 million. urn:newsml:reuters.com:*:nL1N2IG095 Banks could also get some attention. UniCredit's CRDI.MI board was holding informal discussions over the Italian bank's governance on Sunday amid doubts over whether its chief executive will stay. urn:newsml:reuters.com:*:nL1N2IF04L ABN Amro ABNd.AS has said it would cut almost 3,000 jobs in the coming years, as it focuses on profitable activities in the Netherlands and northwest Europe. urn:newsml:reuters.com:*:nL1N2IG09O In the UK, LLoyds Banking Group LLOY.L said that Charlie Nunn, currently head of wealth and personal banking at HSBC HSBA.L, is to be its next CEO. urn:newsml:reuters.com:*:nL8N2IG171 We're also going to keep an eye on Unilever ULVR.L shares in London on the day the consumer group completes its unification under a single parent company. (Danilo Masoni) ***** MORNING CALL: EUROPE SEEN OPENING LOWER (0641 GMT) European shares are set to start the week down sharply with investors looking keen to take some profit out of the best month ever for equities in the region, while the immediate focus turns to Brexit talks and a big OPEC meeting. Euro zone stock index futures were last trading down nearly 1% while FTSE 100 futures were falling 0.7%. U.S. stock futures were also heading south while equities in Asia also eased despite strong Chinese factory data for November. urn:newsml:reuters.com:*:nL1N2ID0A9 Over the weekend, British foreign minister Dominic Raab said Britain and the EU were heading into a "very significant" week, as talks over a trade deal enter their final days with serious differences yet to be resolved. urn:newsml:reuters.com:*:nL1N2IF06L Meantime on the oil front, sources said OPEC and allies led by Russia have yet to find a consensus on oil output policy for 2021, ahead of crucial meetings on Monday and Tuesday. urn:newsml:reuters.com:*:nL1N2IF0HY (Danilo Masoni) ***** <^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^ open https://tmsnrt.rs/3lnmk4a PEs https://tmsnrt.rs/3mhgrH8 Russell vs S&P https://tmsnrt.rs/3qdqgZ6 ECB https://tmsnrt.rs/3o3yPUg dsfq https://tmsnrt.rs/3olq2NZ ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>
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