Live Markets: How much is the German court ruling on ECB a headache for the Bundesbank?

Instone Real Estate SE

08/05/2020 11:22

* European stocks in positive territory
    * Shares get boost from U.S.-China trade talks
    * Industrial goods and services stocks up 1.8%

    May 8 - 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 Thyagaraju Adinarayan
(thyagaraju.adinarayan@thomsonreuters.com), Joice Alves (joice.alves@thomsonreuters.com) and
Julien Ponthus (julien.ponthus@thomsonreuters.com) in London and Stefano Rebaudo
(stefano.rebaudo@thomsonreuters.com) in Milan.
    
    GERMAN COURT RULING ON ECB AND THE BUNDESBANK (1001 GMT)
    A ruling seen to curb European Central Bank power to buy government bonds, but the German
top court ruling earlier this week might paradoxically create issues for the Bundesbank while
the European Central Bank is free to go on with its plans.
    The Constitutional Court said the ECB had overstepped its mandate and ruled that the German
central bank must quit its bond purchase scheme within three months unless the ECB can prove its
necessity.
    BofA argues in a research note that the ECB could decide to stay "entirely out of the German
constitutional debate and let the Bundesbank cope with" the Court considerations.
    In a "'benign' interpretation, we could even argue that with the problem now really put in a
'Germany box', the ECB could act more freely than before," it adds.
    Because how the country will deal with constitutional issues between the government,
Parliament and central bank will be a "German problem and potentially a big one."
    BofA sticks to its previous forecast on PSPP (Public Sector Purchase Programme) and PEPP
(Pandemic Emergency Purchase Programme), which it expects to double by year end.
    President Christine Lagarde said on Thursday the ECB was "undeterred" by the ruling and
would do whatever was necessary to achieve its mandated goal, which is to bring inflation back
to a target of just under 2%.  urn:newsml:reuters.com:*:nL8N2CP39S

    (Stefano Rebaudo)
    
    OPENING SNAPSHOT: ING GROEP AND SIEMENS ON THE RISE
    European bourses are trading in positive territory after U.S. and Chinese trade negotiators
agreed to strengthen cooperation, but investors are cautious ahead of U.S. monthly unemployment
data.
    The pan-European Stoxx 600 index is up 0.5%.
    Siemens and ING Groep are among the winners of the session. Despite their results showing
they were badly hit by the coronavirus crisis, they were better than analysts' expectations.
    The whole industrial goods and services sector is bouncing back, up 1.8%.
    Rheinmetall is up more than 2%, as it sees significantly lower sales and profits this year,
but confirms the outlook for its defence division.
    There is a modest 1% rise for Cellnex after a 64% increase in first-quarter core earnings
and the confirmation of its 2020 outlook.
    
    (Stefano Rebaudo)

    
    ON THE RADAR: SIEMENS, ING GROEP, SAFRAN, CELLNEX
    A cautiously positive session is expected today amid signs of easing tensions between the
U.S. and China and ahead of April U.S. unemployment numbers, which are forecast to show a rate
at 16% due to the lockdown.
    On the corporate front, Siemens  SIEGn.DE  ditched its 2020 guidance, posted an 18% drop in
industrial profit and said it expected a stronger impact from the coronavirus pandemic in the
weeks ahead, but shares are up 1.8% in early trade.
    ING Groep  INGA.AS  first-quarter pretax earnings fell by 35.7% due to higher bad loan
provisions and lower valuations.
    Safran  SAF.PA  laid off 3,000 employees in Mexico as the aerospace industry faces an
unprecedented crisis.
    Rheinmetall expects significantly lower sales and profits this year but upheld the outlook
for its defence division.
    Lufthansa  LHAG.DE  confirmed it was negotiating with Germany's government a 9 billion euro
($9.71 billion) bailout.
    Instone Real Estate  INS2.DE  is down 2.2% in early trade after it suspended its guidance.
Leonardo braces for higher virus impact in Q2, after posting a loss in Q1.
    On a brighter note, Europe's largest mobile phone towers operator, Cellnex, posted a 64%
rise in first-quarter core earnings and kept its positive 2020 outlook.
    (Stefano Rebaudo)
    
    
    MORNING CALL: POSITIVE MOOD ON U.S.-CHINA TALKS
    European futures are comfortably in the black as fears of a new spat between U.S. and China
faded, while stronger than expected export data from China continued to fuel hopes that an
economic recovery has already started.
    U.S. numbers to be released later on Friday are expected to show that the April unemployment
rate jumped to 16%, due to the lockdown.
    Chinese state media reports said U.S. and China trade representatives held a phone call and
pledged to cooperate in carrying out the countries' Phase 1 trade deal.
    The London stock exchange today is closed for a public holiday while continental Europe is
open.
    
    (Stefano Rebaudo)

    

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 (Reporting by Joice Alves, Stefano Rebaudo, Julien Ponthus and Thyagaraju Adinarayan)