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Last Trade - 09/04/21

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Large Cap
Market Cap £22.96bn
Enterprise Value £29.29bn
Revenue £38.86bn
Position in Universe 14th / 730

LIVE MARKETS-Short of shorts: Europe's trading frenzy vaccine

Fri 29th January, 2021 1:59pm
* STOXX 600 down 1.5% * Wall Street futures in the red * Vaccine shortage weighs on Europe * Retail vs hedge fund battle carries on Welcome to the home for real-time coverage of markets brought to you by Reuters reporters. You can share your thoughts with us at SHORT OF SHORTS: EUROPE'S TRADING FRENZY VACCINE (1359 GMT) CD Projekt CDR.WA , Cineworld CINE.L , Pearson PSON.L and Evotec EVTG.DE are among the names flashing on screens for European traders as the retail trading fever spreads globally. While CD Projekt - Europe's poster child for the past week's trading frenzy - has surged 33% just this week, the moves are no match to what is seen on Wall Street with GameStop rising at one point over 2,000% year-to-date! According to Societe Generale analysts, such extreme moves are very unlikely on the old continent: the level of short interest in the 5% most shorted names in Europe is at 11%, significantly lower than the 30% seen in the United States. "If such (shorting levels) activity was happening to this extent in these European indices it would be of significant concern," SocGen analysts wrote in a recent note. (Sruthi Shankar) ***** VALUE STOCKS TO BET ON (1254 GMT) The growth-versus-value debate is going on while the latter continues to be overlooked by investors as virus worries dampen risk-sentiment. “We have argued that a combination of a strong economic recovery, rising inflation and higher bond yields should provide a supportive backdrop for reflationary trades -- e.g Financials, Value and Cyclicals over Defensives, Quality and Growth,” Morgan Stanley says. The reflation trade paused in 2021 on pandemic worries, but “we think this is temporary,” it adds. Relative valuations of value versus growth are close to all-time lows (see charts below). The investment bank flags names “with interesting entry points where the weight of Cyclicals vs Defensives in Multiple Appearances is at the lowest ever level.” Overweight-rated stocks that are cheap versus history and are viewed as disruption beneficiaries include Sanofi SASY.PA , Amundi AMUN.PA , Evonik EVKn.DE , Johnson Matthey JMAT.L , Bouygues BOUY , Norsk Hydro NHY.OL , ArcelorMittal MT.AS , Anglo American AAL.L , SSE SSE.L and EDF EDF.PA . Besides, “it is notable that relative earnings revisions of Value vs Growth are at their highest level in over three years.” So MS screens for cheap stocks with the best EPS momentum, with Tesco TSCO.L , Total TOTF.PA , LafargeHolcim LHN.S , HeidelbergCement HEIG.DE , Faurecia EPED.PA , Johnson Matthey, OMV OMV.VI and Santander SAN.MC cheapest amongst that list. (Stefano Rebaudo) ***** LOCKDOWN RESILIENCE (1216 GMT) You wouldn't think so looking at euro zone blue chips (STOXX 50E) losing 0.9% but there was some really good news earlier on for the bloc. Germany, France and Spain all reported better than expected economic outputs in Q4 despite the pandemic.*:nL1N2K40XU We spoke to S&P economists shortly after the data was released and it's fair to say that they were quite upbeat for Europe's prospects in H2 2021, provided the "race between mutation and vaccination" is won by the latter. Among the growth drivers are the EU's recovery fund and the ECB's massive monetary stimulus, but also the fact that the new round of social restrictions are proving less of a drag than once feared. "Lockdown 2 and 3 are not as damaging to the European economy than Lockdown 1.0", Sylvain Broyer, chief economist for EMEA tolds us, referring to today's GDP figures. He later on added that the timing of the recovery was bad news for populist parties in Germany and in France which have general elections in September 2021 and in the spring of 2022 respectively. (Julien Ponthus) ***** BE AWARE OF BUBBLE SIGNS (1128 GMT) The perfect mix for a financial bubble - cheap credit, easy money and excessive enthusiasm - is making investors wonder whether financial markets have entered one. Last week, amid a retail trading frenzy, shares in GameStop GME.N soar 2500% year-to-date at one point, BofA's weekly flow data shows. "Retail exuberance raises warnings around the emergence of a risk bubble," Barclays strategists say. There is a number of red flags in the market, with "visible signs of excess in financial markets as loose monetary policy and record-low bond yields push market participants to take on more risk," writes Frédérique Carrier, head of investment strategy at RBC Wealth Management. There are concerning similarities with previous market bubbles, notes RBC, recalling that the Nasdaq went up more than fourfold from the beginning of 1995 to early 2000, before the bubble burst in 2002, with the index losing more than 70%. However, even if the FOMO, fear of missing out, is driving investment choices rather than a rational assessment of the value of an investment, looking at the overall indexes, there is little evidence of a systemic bubble yet, Carrier says. "It would be remiss to ignore these warnings and we repeat our call for vigilance. But we see less evidence of bubble territory when we look at stock market valuations." Ipek Ozkardeskaya, senior analyst at Swissquote Bank, reminds us of a very true point on speculative bubbles: "Normally, we need to be very carefully with the use of ‘speculative bubble’. A bubble is not a bubble until it bursts, as investors give the market moves the benefit of doubt." Some say that the vaccine-induced revival of the economy and generous stimulus from the U.S. are expected to provide support. "If the sharp price rise is explained by fundamentals," BofA strategists argue, you can't say there is a bubble about to burst. So if until the burst it is premature to talk about a stock market bubble, it is perhaps not too soon to spot clear evidences in single companies. "There is little doubt that the short squeeze in GameStop shares is now a speculative bubble," Ozkardeskaya adds. "Fundamentally, there is little that justify the rise in its stock price other than a group of retail traders willing to go against Wall Street wolves". (Joice Alves) ***** VACCINE: THE BUMPS ALONG THE WAY (1033 GMT) Vaccine rollout timeline is back in the spotlight after recent delays weigh on risk sentiment in financial markets. Credit Suisse reduced its forecast for 2021 vaccine capacity to 5.7 from 6 billion doses, but it points out that the actual vaccination will not be able to reach the output level. "Our COVID-19 Vaccine Model implies that by mid-2021 the U.S. will have capacity to give just under half of its population 2 doses of vaccine, and a similar proportion for Europe/developed markets could receive on average 1.5 doses of vaccine per person," it says in a research note. Actual vaccinations may be lower due to potentially inefficient distribution systems, vaccine wastage, vaccine hesitancy of individuals, it adds. Besides, "due to clear challenges to scale up the supply chain" it sees around 70% of total annual capacity coming online in the second half. CS also flags some “critical catalysts” for the prospective vaccine rollout. Efficacy data for Johnson & Johnson’s JNJ.N vaccine is expected to be published next week and would add 1 billion doses of capacity in 2021. Approval of AstraZeneca/Oxford vaccine in Europe will also be crucial, but the challenges of manufacturing scale up mean that supply is likely to be limited until later in Q1 and accelerating from Q2. (Stefano Rebaudo) ***** OPENER SNAPSHOT: "WHAT A WEEK" (0840 GMT) European shares kick off Friday broadly in negative territory with the pan European index on track for its worst week since late October. As Deutsche Bank's strategist Jim Reid puts it, "what a week we’ve had. I’ve seen some crazy things in my 25 year plus career in financial markets but I think this week will end up being right up there with when I hang up my banking boots," he said about the r/wallstreetbets trading movement, which saw home traders ganging up in the online forum to force hedge-funds to reverse short positions.*:nL4N2K33F3 Not surprisingly, this morning stock markets in Europe are on the back foot after the retail trading frenzy gripped Wall Street this week. Concerns for a new strain of the coronavirus in Europe is also denting sentiment. In a busy morning for corporate news with a slew of earnings reports including Ericsson ERICb.ST (up 7%) and Swedish fashion retailer H&M HMb.ST , it was the IPO of classic boot brand Dr. Martens that caught traders fingers, attracting bumper demand in a sale valuing the company at more than $5 billion. Shares at the shoe maker are up 23% in the London Stock exchange debut. The STOXX 600 is down about 1%, with the banking sector leading the losses down 1.8%. (Joice Alves) ****** MORNING CALL: EUROPE SET FOR WORST WEEK SINCE OCTOBER (0646 GMT) European stock futures are pointing to a Friday in the red, setting the STOXX 600 .STOXX index for its worst week since late October. A Wall Street retail-trading frenzy this week and a liquidity squeeze in China has unnerved investors and is weighing on frothy markets. Both European and U.S. futures are falling more than 1%.*:nL4N2K42A5 Wall Street has been gripped by a coordinated assault by small traders organising over online forums to force hedge-funds to reverse short positions.*:nL4N2K33F3 (Joice Alves) ***** <^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^ chart stoxx value eps ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>
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