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ASC - ASOS News Story

4665p -8.0  -0.2%

Last Trade - 23/10/20

Consumer Cyclicals
Large Cap
Market Cap £4.65bn
Enterprise Value £4.56bn
Revenue £3.26bn
Position in Universe 167th / 1805

LIVE MARKETS-Dunelm's spooky "severe but plausible downside" scenario

Thu 10th September, 2020 11:50am
Welcome to the home for real-time coverage of European equity markets brought to you by Reuters stocks reporters. You can share your thoughts with Joice Alves ( and Julien Ponthus ( in London and Danilo Masoni and Stefano Rebaudo ( in Milan. DUNELM'S SPOOKY "SEVERE BUT PLAUSIBLE DOWNSIDE" SCENARIO (1039 GMT) There's been quite a bit of disappointment to see the shares in British home furnishing retailer Dunelm DNLM.L retreat this morning despite the encouraging sales achieved in the face of the coronavirus pandemic. Much of today's negative price action seems to be blamed on profit taking and on the decision of Dunelm, a clear lockdown winner, to play it safe and to keep some cash for the possible rainy days ahead. "Despite strong current trading, a still uncertain outlook and 'prudent financial approach' means the Board has chosen not to declare a final dividend for FY20 and management has not issued FY21 PBT guidance", UBS analysts noted. But another important part of Dunelm's earnings which might have spooked investors is the retailer's assessment of what could go wrong. "There is a fear stalking some companies", commented Neil Wilson at, noting the group's warning of a "severe but plausible" downside scenario which involves lockdowns over Christmas. Here's how Dunelm describes in its press release what could happen in a few months to its business, but by extension to most European retailers: "The 'severe but plausible downside' scenario is very conservative in assuming a further national lockdown for ten weeks where our stores are no longer in the 'permitted' status and where we are unable to offer our Click & Collect service. We have also assumed that this national lockdown occurs in our peak Christmas and Winter Sale trading period, with all of the Group's stores being required to shut for ten weeks in the event of a second Covid-19 outbreak, on top of the downturn in the economy that is already included in the central case, including potential Brexit-related disruption." Yikes and merry Xmas everybody! On a more positive note for Dunelm shareholders, the company "has been a clear relative winner in the sector through the crisis, with possibly some lasting benefits from strong customer acquisition," JP Morgan analysts believe. Anyhow, here's how Dunelm has outperformed the FTSE 250 and how it's comparing with other top retailers so far in 2020: (Julien Ponthus) ***** WHAT ABOUT A PE RATIO OF 100? (0955 GMT) These days more than ever stock valuations seem to be a matter of how much cash is lying on the sidelines as central banks are in a "whatever it takes" mood to pour liquidity in order to avoid the adverse impact of the virus. Jeroen Blokland, portfolio manager at Robeco, crunched some numbers to measure the relationship between excess liquidity -- as the difference between money supply and nominal GDP growth -- and the PE of the S&P 500 stocks. He concludes that the PE ratio should be at a whooping 100, from around 28 these days. "Obviously, this is not going to happen, also because nominal GDP growth is expected to bounce back sharply," he says in a research note. "But it does point out that from a liquidity perspective, valuation looks far from stretched". The idea behind this is that if there is more money than needed for economic growth, excess liquidity will find its way into the stock market. (Stefano Rebaudo) ***** BREXIT TURBO-CHARGES UK RISK PREMIA (0850 GMT) Risk premia on UK assets are rising and will continue to do so as investors fear a messy divorce with the European Union when Britain finally disentangles at the end of the year. The European Union could take legal action under its divorce treaty with Britain if today’s emergency talks do not reassure Brussels sufficiently that a proposed new British law will not break previously agreed commitments.*:nL8N2G71P2 An ABN Amro research note recalls that, inside the bond bank index, NatWest Group NWG.L over the last seven days staged "the largest underperformance, with their bail-in senior bonds moving over 30bps wider." Other names, such as Lloyds LLOY.L and Barclays BARC.L have only performed a few basis points better while HSBC HSBA.L , Santander UK and Standard Chartered STAN.L have suffered a 20 basis points hit. ABN Amro analysts anticipate that the Brexit negotiations will continue to produce negative headlines with little achieved in the forthcoming weeks. "UK risks premiums are likely to stay elevated for the remainder of this year," they say. The bank index is at 79 basis points (bps) above the swap, roughly 29 bps wider than before the coronavirus crisis and 158 bps tighter than the pandemic highs experienced in March. (Stefano Rebaudo) ***** OPENING SNAPSHOT: EUROPE WAVERS BEFORE THE ECB (0725 GMT) We're off to an uncertain start in Europe this morning with investors awaiting for the ECB to provide fresh direction with hints of more stimulus to soften the strength of the euro against the dollar. Major regional benchmarks were down slightly, following mild initial gains. The STOXX 600 is last down 0.15%. Pandemic-hit travel and leisure stocks are up 0.7% with British Airways owner IAG ICAG.L up over 2% after launching a fully underwritten 2.7 billion euros capital increase to beef up its balance sheet. Games Workshop GAW.L is up an outstanding 18% after saying trading in the three months to end August topped its expectations. UK listed housebuilders are doing well after an upbeat RICS survey showed that the post-lockdown surge in the housing market intensified in August with prices hitting a 4-year high. Taylor Wimpey TW.L and Barratt BDEV.L are both up more than 2%. Italy's Nexi NEXII.MI is up 5% after a report said the payment firms and SIA are close to clearing a major hurdle to a potential merger. Weaker oil and basic material stocks weighed. Tech was lower too. (Danilo Masoni) ***** ON OUR RADAR: EURO, IAG CAP RISE AND DEALMAKING (0644 GMT) As we said the European Central Bank's policy meeting and any signals from the central bank about future easing measures will be the key highlight for investors today. The euro EUR= and bond markets are likely to be most sensitive to ECB news, but we'll be keeping an eye on stocks too, especially on rate-sensitive sectors like banks .SX7E . Besides that, on the corporate front, it doesn't look there is any earth shattering news out there so far. This will be the first full session for investors to digest LVMH's LVMH.PA decision to walk away from its planned $16 billion takeover of Tiffany TIF.N . LVMH was little changed on the news yesterday. Airlines, which have been heavily hit by travel restrictions adopted to fight the COVID pandemic, continue to be under pressure. British Airways owner IAG ICAG.L launched a heavily discounted 2.7 billion euros capital increase to beef up its finances. The good news here is that it's fully underwritten. GlaxoSmithKline GSK.L said the U.S health regulator approved its lung disease drug Trelegy Ellipta for expanded use, making it the first inhaler delivering three drugs at once to be prescribed for uncontrolled asthma in the country. In M&A, Equinor EQNR.OL raised $1.1 billion by selling stakes in offshore wind power development projects to BP BP.L , while in Italy, the government said it's ready to use its vetting "golden" powers to ensure the Milan exchange is not sold to an unacceptable bidder. Meanwhile in France, utility Suez SEVI.PA reiterated its opposition to Veolia’s VIE.PA offer for Engie's ENGIE.PA stake in Suez, saying it undervalued Suez. Among smaller companies, share placement are expected to put under pressure Ferroamp FERRO.ST , Carasent CRAT.OL , and Kojamo KOJAMO.HE . In earnings news, an upbeat outlook from Akzo Nobel could lift its shares, while Dixons DC.L reported a 56% drop mobile phone in the 17 weeks to end-August. (Danilo Masoni) ***** MORNING CALL: IT'S ECB DAY (0530 GMT) Regardless of whether it's going to have any big impact on markets today the focus is squarely on the European Central Bank's policy meeting. The consensus is that rates will remain unchanged although investors expect signals from the central bank which could possibly weaken the euro. On the background are still worries over rising Brexit risks and possible further turbulence in tech stocks, and it may be little surprise that following yesterday's rebound in Europe and the U.S., futures are giving mixed signals at the moment. The Euro STOXX 500 futures are up 0.3%, FTSE 100 futures are down 0.3% and Wall Street futures are moving flat to slightly higher. (Danilo Masoni) ***** <^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^ PE qsdf ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>
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