Live Markets: Weak markets + "reasonably" solid macro data = opportunities
10/01/2019 09:56
* European shares open lower
Jan 10 - 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: rm://helen.reid.thomsonreuters.com@reuters.net
WEAK MARKETS + "REASONABLY" SOLID MACRO DATA = OPPORTUNITIES (0954 GMT)
Next Tuesday we'll know whether Germany has avoided a technical recession and while concerns
over a global slowdown were indeed corroborated by a string of poor data, markets may have gone
a bit ahead of themselves.
HSBC in fact says it is still constructive on Europe's growth prospects despite forecasting
eurozone GDP to slow to 1.4 pct growth in 2019 and 1.3 pct in 2020 from 1.9 pct in 2018.
"The divergence between reasonably solid economic data and weak capital markets suggests
there could be opportunities," says Joerg-Andre Finke, head of equity research Germany at HSBC.
"Supporting factors include rising wage growth and employment as well as a lower oil price.
The global picture too does not look too bad, with strong U.S. data (eg U.S. consumer confidence
at an 18-year high in October) and stimulus likely in China," he adds.
Finke notes that the DAX and the MDAX indexes are both trading at a discount to their
ten-year PE average for the first time in several years, indicating some valuation upside.
That being said, he has taken a look at German mid-caps scanning for firms with ongoing
strength in sales and earnings, along with attractive valuations and visible catalysts.
Here are his 6 top picks which he says offer an implied upside of 35 pct: Adler Real Estate
ADLG.DE , Fuchs Petrolub FPEG_p.DE , Grenke GLJn.DE , KION KGX.DE , Krones KRNG.DE and
Puma PUMG.DE .
(Danilo Masoni)
*****
OPENING SNAPSHOT: EUROPE IN THE RED ON AUTOS, LUXURY GOODS (0831 GMT)
A lack of concrete news from the U.S.-China trade talks have stalled the European stock
rally this morning, hitting the autos and luxury goods stocks, which are exposed to health of
the world's second-largest economy, hardest.
Frankfurt, whose auto and industrial giants are also vulnerable to China trade frictions,
and Paris are falling the most, down 0.8 percent and 1 percent respectively. Germany's Osram
Licht has fallen sharply after its CEO cautioned that slowing autos demand would lead to
weaker-than-expected Q4 results, dragging Valeo, Faurecia and other car suppliers with it.
The retail sector continues to capture the headlines with the UK high street staples -
Halford, DFS Furniture, M&S and Tesco - issuing Christmas trading statements. Tesco's been
crowned king of holidays, up 2.3 percent and top FTSE 100 gainer while Halfords has plunged to
multi-year lows after its downbeat assessment.
French electronics and household appliance chain Fnac Darty gave a glimpse into impact of
the 'yellow vest' protests with a warning it will take a 45 million euro hit on revenue.
(Josephine Mason)
*****
FTSE 100 AND STOXX NEAR OVERBOUGHT TERRITORY (0753 GMT)
Some European bourses may be on shaky ground technically after their impressive run higher
since the start of the year.
Hard to believe given the FTSE 100 hit its lowest since July 2016 just two weeks ago, but
the UK blue chip index closed yesterday with a relative strength index (RSI) reading of 55.5,
its highest since end-September.
That's just shy of 60, which would push the index into oversold territory on a technical
basis for the first time since last May when the bourse hit all-time highs.
It's similar with the STOXX 600 whose RSI is just under 54, its highest since November.
(Josephine Mason)
*****
WHAT'S ON THE RADAR: UK RETAILERS AND ASSET MANAGER WOES (0741 GMT)
A two-day rally taking European stocks to three-week highs was set to fizzle out on Thursday
with futures pointing to a weaker open after U.S. and Chinese statements following trade talks
in Beijing failed to deliver sufficient practical details.
Results took centre stage with UK retailers in focus after Christmas trading figures from
Marks & Spencer, Tesco, and Debenhams, while on the continent disappointments from Germany’s
Suedzucker and France’s Sodexo and Fnac Darty were likely to weigh on those shares.
Marks & Spencer’s Christmas trading figures were weaker than expected with falling
underlying sales in both clothing and food. Its shares were indicated down 2 percent. Tesco
outperformed with a 2.2 percent rise in Christmas sales – driving its shares up 2 percent in
pre-market – while B&M saw sales rise 12.1 percent in its third quarter. Debenhams, meanwhile,
said Christmas trading was weak and it was in talks with lenders, looking to bring new sources
of funding into the business.
Reports of outflows and falling assets under management from asset managers Jupiter and
Rathbone Brothers underlined the challenging market environment money managers are having to
navigate.
While it's owned by Tata Motors and not listed in the UK, Britain's biggest carmaker Jaguar
Land Rover offered a concerning insight into the environment for auto companies: a source tells
Reuters it's set to announced "substantial" job cuts in the thousands as it faces double-digit
drops in demand in China and a slump in sales for diesel in Europe.
Premier Oil cuts more debt than forecast urn:newsml:reuters.com:*:nFWN1ZA05P
Jaguar Land Rover to make "substantial" job cuts after China, diesel slump- source
urn:newsml:reuters.com:*:nL8N1Z935S
M&S's clothing and food sales fall in Christmas quarter urn:newsml:reuters.com:*:nFWN1Z915J
Debenhams looking for fresh funding, Christmas trading weak urn:newsml:reuters.com:*:nL8N1ZA18J
UK retailer B&M's quarterly sales rise urn:newsml:reuters.com:*:nL3N1ZA2L8
Jupiter reports $1.9 billion Q4 outflows, tough markets trim AUM urn:newsml:reuters.com:*:nL8N1ZA19G
Rathbone Brothers Q4 investment management assets down 6.8 pct urn:newsml:reuters.com:*:nFWN1Z915F
Pub firm Mitchells & Butlers holiday sales rise 9.8 pct urn:newsml:reuters.com:*:nL3N1ZA2K3
Tesco outperforms market with 2.2 pct rise in Christmas sales urn:newsml:reuters.com:*:nL8N1ZA18G
Bank of Georgia names Archil Gachechiladze CEO urn:newsml:reuters.com:*:nL3N1ZA2KW
Recruiter Robert Walters reports 13 pct rise in quarterly fee income urn:newsml:reuters.com:*:nL3N1ZA2J8
Delivery service firm Takeaway says quarterly orders rise 55 pct urn:newsml:reuters.com:*:nL8N1ZA0UB
(Helen Reid)
*****
FUTURES FALL AS TRADE TALK PROGRESS UNCLEAR (0721 GMT)
European futures are down 0.5 to 0.6 percent across the major benchmarks after Asian shares
checked their rally overnight too. The statement from China after trade talks in Beijing left
something to be desired in terms of practical details.
"Overnight the Chinese Commerce Ministry said talks were 'extensive...deep...detailed' but
other reports suggest the talks got bogged down when issues cut across Chinese national security
and/or Chinese subsidies to state companies," writes Chris Bailey, analyst at Raymond James.
(Helen Reid)
*****
RESULTS FLOWING IN: EYES ON SUEDZUCKER, SODEXO, M&S, TESCO (0656 GMT)
There's more results coming in today ahead of the fourth-quarter earnings season kicking off
in earnest. Suedzucker's shares are down 3.8 percent in pre-market trade after it reported a
quarterly operating loss due to low sugar prices. Catering group Sodexo is also not looking so
good after warning investments will eat into its first half margin.
To come in the flurry of UK results at 0700 will be the all-important Christmas trading
figures from retailers Marks & Spencer and Tesco.
Outside results news, Fiat Chrysler could be hurt by our sources-based report that the
carmaker will pay more than $700 million to resolve lawsuits from the U.S. Justice Department
and diesel owners over claims it used illegal software to allow 104,000 of its vehicles to emit
excess emissions.
Suedzucker posts quarterly operating loss on low sugar prices urn:newsml:reuters.com:*:nL8N1ZA0QA
Catering group Sodexo cautions investments will weigh on H1 margin urn:newsml:reuters.com:*:nL8N1ZA0OP
Fiat Chrysler to pay more than $700 mln over U.S. diesel emissions claims -sources
urn:newsml:reuters.com:*:nL1N1Z923S
Telenor's Thailand unit to pay nearly $300 mln in legal disputes urn:newsml:reuters.com:*:nL8N1ZA0N7
MEDIA-Mondelez sues insurer Zurich over $100 mln cyber attack claim - FT urn:newsml:reuters.com:*:nL3N1ZA1ZA
(Helen Reid)
*****
EUROPEAN SHARES EXPECTED TO FLAG (0632 GMT)
After a strong two-day rally taking the market to three-week highs, European shares are seen
faltering at the open with spreadbetters indicating the main indices down 5 to 12 points. A
notable lack of detail in the U.S. and China's statements after this week's trade talks could be
to blame.
Trade talks between China and the United States this week were extensive, and helped
establish a foundation for the resolution of each others' concerns, China's commerce ministry
said on Thursday, but gave no details on the issues at stake. urn:newsml:reuters.com:*:nL3N1ZA03L
Asian shares edged up overnight as stimulus expectations and a rise in the yuan helped
Chinese equities erase early losses, while markets awaited more news on U.S.-China trade talks
amid hopes that an all-out trade war can be averted. urn:newsml:reuters.com:*:nL3N1ZA24B
Financial spreadbetters at IG expect London's FTSE to open 12 points lower at 6,895,
Frankfurt's DAX to open 5 points lower at 10,889 and Paris' CAC to open 6 points lower at 4,807.
(Helen Reid)
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BLOG HEADSHOT http://reut.rs/2y3Bc4f
FUTURES JAN 10 https://tmsnrt.rs/2SMT75c
Oversold on RSI? https://tmsnrt.rs/2STACMs
Indices https://tmsnrt.rs/2AAu6mH
MDAX PE https://tmsnrt.rs/2RJfgEc
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(Reporting by Helen Reid, Danilo Masoni, Julien Ponthus)
((+442075420402; mailto:helen.reid@thomsonreuters.com; Twitter: @helenmariareid))