Live Markets: Earnings update: no happy surprises and a whole lot of concerns

Amadeus Fire AG

08/03/2019 12:11

* European stocks slide after weak China, Germany data
    * Autos, miners, banks biggest fallers
    * GVC drops after top bosses sell shares 
    * Oil stocks fall after Norway says sovereign fund should cut energy
    * China exports fall most in three years, Shanghai stocks sink

    March 8 - Welcome to the home for real-time coverage of European equity markets brought to
you by Reuters stocks reporters and anchored today by Helen Reid. Reach her on Messenger to
share your thoughts on market moves: helen.reid.thomsonreuters.com@reuters.net   
    
    
    EARNINGS UPDATE: NO HAPPY SURPRISES AND A WHOLE LOT OF CONCERNS (1211 GMT)
    This earnings season, largely behind us now, has delivered very few positive surprises, and
seen companies signal heightened uncertainty about macroeconomic and political trends.
    This has been the weakest overall season (based on average positive surprise) since Q1 2016,
Goldman Sachs strategists find (see below).
 
 
 
 
    Against that weak backdrop reactions to strong reports were positively skewed, meaning the
market, having already priced in the worst, rewarded better results handsomely. 
    "The outperformance of those reporting above expectations is close to the highs since the
global financial crisis," say the strategists.  
    By sector, it was a strong season for Oil & Gas with an average earnings surprise of 10
percent, while telecoms have been the big losers, posting earnings 4 percent below expectations
on average. They're the only European sector in the red year-to-date.
    So, what to buy? 
    GS recommends stocks that have underperformed their sector but have seen upward earnings
revisions recently. These include Novartis, Amadeus, UBI Banca, Reckitt Benckiser, and Delivery
Hero. 
    Here's the list of worries mentioned by European firms this earnings season - you can see
that across all the main issues, mentions have increased significantly. 
 
 
    (Helen Reid)
    *****
    
    NFPS: WAITING FOR A GAME CHANGER (1142 GMT) 
    Is a sea of red too strong a metaphor to describe European stock markets at the moment? Does
it matter? 
    Absolutely not, as the real worry on investors' mind is whether incoming U.S. jobs data
(1330 GMT)is about to bring about another storm for world markets, or on the contrary a soothing
breeze after the ECB showdown and the dismal Chinese trade data!
    "Today’s NFP release may change the trading landscape once again ahead of the weekend,"
reckons Pierre Veyret from ActivTrades. 
    There's quite a lot of pressure for the U.S. economy to deliver a decent set of data given
the poor state of global growth. 
    "With the EU and China dragging global growth, coupled with Brexit uncertainties, this
leaves the United States as the bright spark in a gloomy global economic landscape," writes     
Jameel Ahmad at FXTM. 
    So will the U.S. economy continue to defy doomsayers, asks City Index's Fiona Cincotta? 
    Goldman Sachs for instance doesn't believe so and estimates nonfarm payrolls at 30k below
consensus and growing at their slowest pace in five months.
    But on the other hand, a super buoyant number could also lead to the Fed reassessing its
dovish stance and freaking investors out all over again. 
    "A really strong number – particularly on wages as it will impact inflation expectations –
could be negative for equities," notes Neil Wilson from Markets.com.   
    Here's the Reuters poll consensus for the figures, in blue below: 
 
 
    (Julien Ponthus)
    *****
    
    
    DRAGHI, NURTURER OF REAL ESTATE STOCKS (1051 GMT)
    ECB chief Mario Draghi is often cast as a nurturer of confidence in the euro zone's fragile
economy, and the central bank's decision yesterday to delay its first post-crisis rate hike
until at least next year has certainly injected some bonhomie into the real estate sector.
    Euro zone real estate stocks  .SX86E  are far outperforming the broader market today, up 2
percent and set for their best day since early January as investors bet ultra-low borrowing
costs will continue to boost demand for residential and commercial property. 
    Solid results from Vonovia, Germany's biggest residential property company, are also helping
boost sentiment, and seven out of the top 10 gainers on the STOXX 600  .STOXX  are real estate
companies today.  urn:newsml:reuters.com:*:nS8N1LG01M  urn:newsml:reuters.com:*:nL3N20V2EU
    As well as Vonovia, these include Tag Immobilien, Leg Immobilien, Deutsche Wohnen,
Aroundtown, and Gecina. 
    Here's a chart showing how the ECB's zero rates have buoyed real estate stocks and
conversely hurt the banking sector:
 
 
    (Josephine Mason)
    *****
    
    "NO ONE LIKES US, WE DON'T CARE", A STOXX ANTHEM? (1011 GMT) 
    The BAML weekly flow show is out and the verdict couldn't be clearer.
    "European stocks ultimate contrarian trade," is the key message of the report which also
says the "Europe = Japan" bet is the most consensual trade in the world.  urn:newsml:reuters.com:*:nL5N20V1PC
    This is pretty grim for European investors. Just look at the dismal chart below showing
capital fleeing European equity funds (with another $3.1 billion outflows this week):
 
 
 
 
    So with the ECB expecting lower growth and less inflation for longer, what are investors
supposed to do? 
    We suggest taking some inspiration from the Millwall Football Club chant and start singing:
"No one likes us, we don't care" https://en.wikipedia.org/wiki/No_one_likes_us,_we_don%27t_care
 on the tune of Rod Stewart's Sailing.  
 
 
 
 
    (Julien Ponthus) 
    *****
     
    
    OPENING SNAPSHOT: THE FUTURE AIN'T WHAT IT USED TO BE  (0819 GMT) 
    European stocks have opened lower, seemingly determined to adjust to the brave new world of
low growth/low inflation depicted by Draghi and the Chinese trade data. 
    While euro zone banks were leading the losers during Thursday's session, they are no longer
at the vanguard with miners and autos now taking the most damage. 
    Losses are also well spread across regional bourses with no particular index or geography
worst hit.
 
 
    (Julien Ponthus) 
    *****
          
       
    WHAT'S ON THE RADAR: AIRBUS, VAT GROUP, RPC, GERMAN BANKS (0749 GMT)
    China trade data tightened bears’ grip on markets overnight after a dovish ECB spooked
investors, and European stocks were expected to fall 0.4 to 0.7 percent on Friday, heading for
their first weekly drop in a month. 
    Chinese stocks dropped 4 percent after trade data showed the biggest drop in exports in
three years and imports sliding for a third straight month. 
    Add German industrial orders unexpectedly falling and that’s a potent cocktail of awful
economic news for the market to digest. 
    With Europe largely out the other side of an underwhelming earnings season, big movers on
Friday could include Germany’s two largest lenders Deutsche Bank and Commerzbank, after Focus
magazine reported, citing sources, that their chief executives have resumed talks over a
potential merger. 
    The prospect of low rates for longer heightens the pressure on banks and highlights the
potential benefits of merging to protect margins.
    In other M&A news, British packager RPC said it had agreed to be acquired by plastics maker
Berry Group, ditching an earlier – and lesser - offer by Apollo Global Management. RPC shares
were seen down 2-3 percent, deflating as an end to bidding war excitement was in sight. 
    News that Sports Direct CEO Mike Ashley is dropping his role at the retailer and stepping
off the board in order to concentrate on running Debenhams could move the ailing department
store – now a penny stock – up as much as 15 percent, traders said, while Sports Direct shares
could fall slightly. 
    Plane maker Airbus could fall 2 percent, traders said, after the company announced
after-hours on Thursday that it won 4 aircraft orders in January-February.
    Swiss industrial machinery firm VAT Group was indicated down 3 to 3.5 percent after its 2018
EBITDA missed estimates and it struck a cautious tone about this year. 
    (Helen Reid)
    *****
    
    FUTURES SLIDE AS CHINA DATA CONFIRMS BEARS' FEARS (0719 GMT)
    The STOXX is set for its first weekly drop in a month, and with good reason: what one
analyst calls the "horror" of China trade data has added insult to injury after euro zone stocks
tanked on the ECB's pushing out of rate hikes and cut to growth forecasts. 
    No doubt bearish talk of a China hard landing will be plentiful today.
    "As a gauge of the drama, in the first 11 minutes of trading, the combined value of trading
on the Shanghai Stock Exchange and Shenzhen Stock Exchange surpassed RMB 200 billion (USD 29
billion)," writes John Browning, managing director at broker BANDS Financial.
    That would mean traders pushed through, in just 11 minutes, nearly four times the amount
that's traded across Euronext bourses in an average day in February.
    Futures are down 0.5 to 0.7 percent - here's your snapshot:
 
 
    (Helen Reid)
    *****
    
    BACK TO "JAPANIFICATION"? AND COMPANY NEWS ROUNDUP (0655 GMT)
    Yesterday's decidedly dovish ECB meeting has triggered talk once again of Europe going down
the same path as Japan, keeping rates negative or low for longer. 
    Back in November, the EMEA CIO of German asset manager DWS predicted one surprise of 2019
could be the ECB not tapering and instead following the BoJ handbook.  urn:newsml:reuters.com:*:nL8N1XO6KY
    This morning Societe Generale economists say: "Permanently sticky core inflation and a
slowing global economy strengthen the idea that the ECB is trapped with low rates for even
longer.
    "This removes the volatility from EUR rates and brings back into force the “Japanification”
theme that was fashionable in late 2014, going into the ECB's QE," they add.
    On the company news front German lenders Deutsche Bank and Commerzbank could see some
movement after Focus magazine said chief executives at the banks have resumed talks over a
potential merger. 
    In the UK meanwhile, Mike Ashley announced after hours that he's dropping his current role
as Sports Direct chief executive and leaving its board to focus on running Debenhams.
    Here's your roundup:
    Mike Ashley plans to drop Sports Direct roles to run Debenhams  urn:newsml:reuters.com:*:nL3N20U46O
    Rio Tinto says Amrun bauxite mine set for full production  urn:newsml:reuters.com:*:nL3N20V112
    Deutsche Bank, Commerzbank CEOs resume talks over potential merger -Focus  urn:newsml:reuters.com:*:nL5N20U82B
    Roche gets European approval for Tecentriq combo vs lung cancer  urn:newsml:reuters.com:*:nFWN20U0WH
    Air France KLM's Feb passenger figures rise 4.1 pct y/y  urn:newsml:reuters.com:*:nP6N20102M
    (Helen Reid)
    *****
    
    CHINA EXPORT DATA DRAGS STOCKS DOWN (0622 GMT)   
    Spreadbetters see European stocks falling further today as the blows from a global economic
slowdown keep coming: barely 12 hours after the ECB cut its euro area growth forecast and pushed
out a rate hike, China deftly stole the spotlight, reporting exports fell the most in three
years and reigniting investors' fears substantial government stimulus would not be sufficient to
turn a Chinese slowdown around.
    Asian stocks shuddered lower on Friday after the shockingly weak export data.  urn:newsml:reuters.com:*:nL3N20V11E
    China's exports tumbled the most in three years in February while imports fell for a third
straight month, pointing to a further slowdown in the economy despite a spate of support
measures.  urn:newsml:reuters.com:*:nL3N20V1A4
    Financial spreadbetters expect London's FTSE to open 39 points lower at 7,118, Frankfurt's
DAX to open 49 points lower at 11,469 and Paris' CAC to open 23 points lower at 5,245.
    (Helen Reid)
    *****

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BLOG HEADSHOT    http://reut.rs/2y3Bc4f
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STOXX earnings surprises GS March 8    https://tmsnrt.rs/2EVyHCD
Uncertainty list in results March 8 GS    https://tmsnrt.rs/2EWAPKs
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 (Reporting by Helen Reid, Julien Ponthus, Danilo Masoni, Josephine Mason)
 ((Helen.reid@tr.com; +442075420402))