Live Markets: Banks' dividend yields at risk?

Van Lanschot Kempen NV

03/04/2019 10:10

* European shares open higher
    * FTSE lags behind as sterling ticks up
    * UK PM May seeking another Brexit delay
    * Asia shares scale new 7-month highs
    * Dealmaking on the radar in Europe

    April 3 - 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    
    
    BANKS' DIVIDEND YIELDS AT RISK? (0910 GMT) 
    Banks are among the best-performing today, behind only autos and miners as a rally fuelled
by China optimism gathers momentum. Value-minded investors may be tempted into the sector that's
burned many over the past couple of years - but analysts at UBS think investors should be wary
of buying banks as a dividend play - as some may not be able to honour their payouts. 
    The average yield from European banks is high at 6 percent, they note, and this suggests
weak market sentiment. 
    Weaker than expected revenues are seen as the biggest risk to dividends.
    They see "little margin for error" for the French banks, but are buyers of BNP Paribas,
Societe Generale and Credit Agricole for other reasons. 
    Brexit and anti-money laundering issues are pushing dividend yields for UK and
Nordic/Benelux banks up.  But UBS has high conviction on UK domestic bank Lloyds' ability to pay
out, as well as Intesa Sanpaolo's. 
    "There are few banks that not only screen well on our heatmap but also offer high dividend
yields," they note, pointing to Spain's Caixabank and the Netherlands' Van Lanschot and KBC, "We
would expect those shares to re-rate over time."
 
 
    (Helen Reid)
    *****
    
    SOFTER BREXIT AND TRADE HOPES LIFT STOXX TO 8-MONTH HIGHS (0800 GMT)
    European shares have opened up sharply with several indexes hitting new highs boosted by
optimism over US-China trade talks and after Theresa May announced talks with the opposition
Labour party in a bid to break the Brexit deadlock, adding that if they could not agree a
unified approach the government would let Parliament decide on a number of options.
    "This is huge news. She is seemingly now prepared to back down on her prior red lines and
also prepared to let parliament decide on the outcome if she and Mr Corbyn can't," says Deutsche
Bank strategist Jim Reid in his morning note.
    "Recall that the customs union option came within 3 votes of passage on Monday. If
parliament could muster the votes to pass that plan or an even softer outcome, PM May has now,
for the first time, implied that she would negotiate that with the EU without calling for
elections," he adds.
    Of course such developments have pushed the pound up and that's weighing on the FTSE 100,
which is flat.
    In the snapshot you can see the STOXX 600 at its highest since August 2018, up 0.8 percent. 
  
 
    (Danilo Masoni)
    *****

        
    
    WHAT YOU NEED TO KNOW BEFORE EUROPE OPENS (0653 GMT)
    European shares are expected to open at fresh six-month highs today with signs of progress
in US-China trade talks lifting euro zone futures up as much as 0.8 percent. Prospects of a
Brexit delay  urn:newsml:reuters.com:*:nL8N21K1E3 have lifted the pound and that’s keeping FTSE 100 futures lagging
behind their euro zone peers, up just 0.1 percent.
    In corporate news dealmaking is taking centre stage with shares in Germany's Metro  B4B.DE 
seen supported after the wholesaler said it is still in talks with several investors interested
in buying its Real hypermarkets chain in a deal that could be worth $1 bln.
    Still in M&A, Mediaset  MS.MI  said it is still studying a possible cross-border deal with
traders citing an ANSA report that Prosiebensat.1  PSMGn.DE  is among possible candidates, while
Roche  ROG.S  said it had extended until May 2 its $4.3 billion offer for US gene therapy
specialist Spark Therapeutics after getting only 29.4 percent of its shares in a tender
originally due to end today. A recommended cash offer for Lighthouse Group  LGHT.L  is set to
send shares in the financial advisor up as much as 20 percent.
    In the battered banking sector, squeezed by ultra-low interest rates and a tough investment
bank environment in Q1, Societe Generale  SOGN.PA  could feel some pressure after BAML set an
underperform rating on the stock. In earnings, CMC Markets  CMCX.L  could fall as much as 5
percent after the online trading firm forecast a plunge in net operating income, hurt by lower
client trading activity due to regulatory curbs in Europe.
    Other stock movers: Britain's Babcock names Rolls-Royce exec Ruth Cairnie as chair; Pernod
Ricard betting on growth from green agenda; Carlos Ghosn on Twitter: Ready to 'tell the truth'
about events; U.S. March and Q1 auto sales drop in weak start to 2019; China's huge Airbus order
padded by old or incomplete deals -sources; EU has no major concerns in Germany over
Vodafone-Liberty deal - sources; Bayer board says pursuit of Monsanto was done diligently
    (Danilo Masoni)
    *****
    

    
    U.S.-CHINA TRADE "HEADWAY" BOOSTS EUROPE, FTSE LAGS (0709 GMT)
    Futures are up 0.7 to 0.8 percent in early deals as U.S.-China trade bulls are given a boost
by the White House saying it sees "headway" in trade talks this week. 
    FTSE 100 futures are up just 0.1 percent as a stronger pound shaves off gains from the
multinational exporter-heavy index. 
    The European rally, if it continues, helping the STOXX consolidate at six-month highs, will
likely be painful for the large share of investors underweight the region. 
    As Ian Williams, strategist at Peel Hunt, puts it: "Another good session for the contrarian
bulls of European equities yesterday; they continue to shrug off concerns about global growth
and politics to rack up further gains, led by the economically sensitive groups."
    (Helen Reid)
    *****
    
    COMPANY NEWS: DEALS, CAR SALES, CASINO RATING CUT (0550 GMT)
    With no big results from European companies today, focus turns to deal news. German retailer
Metro says it's still in talks with investors on a sale of its hypermarkets business, Mediaset
says it is still studying a cross-border deal, and Deutsche Telekom could be hurt by an analyst
saying they see less likelihood of a Sprint/T-Mobile deal. Take your pick!
    Car stocks could also be hit by U.S. March auto sales data showing a feeble start to 2019.
Planemaker Airbus meanwhile may fall after sources told Reuters China's huge Airbus order, which
boosted the shares last week, was bolstered by repeat announcements of existing deals and
advance approval for deals yet to be struck.
    Swedbank, which rallied yesterday after having sunk on ongoing investigations into
money-laundering allegations, could tumble after Fitch put the lender on rating watch negative.
 urn:newsml:reuters.com:*:nFit957sPV
    And Casino shares could be hit by Moody's downgrading its rating to Ba3 with a negative
outlook.  urn:newsml:reuters.com:*:nL8N21K5GX
    Here are your headlines to watch:
    China's huge Airbus order padded by old or incomplete deals -sources  urn:newsml:reuters.com:*:nL8N21K490
    Telecom analyst says approval for Sprint/T-Mobile deal less likely  urn:newsml:reuters.com:*:nL1N21K1GX
    U.S. March and Q1 auto sales drop in weak start to 2019  urn:newsml:reuters.com:*:nL3N21K36D
    Metro still in talks with several investors on hypermarkets sale  urn:newsml:reuters.com:*:nL8N21K5QJ
    MEDIA-Deutsche Bank's U.S. unit kept Danske's shady billions flowing - Bloomberg
 urn:newsml:reuters.com:*:nL3N21L19W
    Julius Baer shares to drop out of Swiss blue-chip index  urn:newsml:reuters.com:*:nFWN21K0UO
    France's Total signs 10-yr LNG deal with China's Guanghui  urn:newsml:reuters.com:*:nS7N21I00W
    Pernod Ricard betting on growth from green agenda  urn:newsml:reuters.com:*:nL8N21K2V7
    Carlos Ghosn on Twitter: Ready to 'tell the truth' about events  urn:newsml:reuters.com:*:nT9N1ZT05E
    Mediaset still studying cross-border deal, "not just up to us" - chairman  urn:newsml:reuters.com:*:nS8N21801B
    Citing climate differences, Shell walks away from U.S. refining lobby  urn:newsml:reuters.com:*:nL8N21K2C6
    Roche extends Spark offer after getting only 29 pct  urn:newsml:reuters.com:*:nL8N21L0KH
    (Helen Reid)
    *****
    
    ONWARDS AND UPWARDS (0520 GMT)   
    European stocks are set to stretch further today and the STOXX could regain the 6-month high
touched yesterday, after a rally in Asia on hopes a trade deal could be imminent.
    Asian shares rose to seven-month highs as investors lapped up signs of progress in
U.S.-China trade talks and brisk economic data, while oil approached the key $70 per barrel
mark.  urn:newsml:reuters.com:*:nL3N21L0WM
    Hopes for a deal to end the trade war between the world's two largest economies were fanned
by fresh comments from White House economic adviser Larry Kudlow that Washington expects "to
make more headway" in talks this week.  urn:newsml:reuters.com:*:nL1N21K0Z8
    London's FTSE 100 meanwhile will be weighed down by a stronger sterling after PRime Minister
Theresa May said Britain needed a further extension of Article 50 to ensure it leaves the EU
with a deal.  urn:newsml:reuters.com:*:nL8N21K1OY
    Financial spreadbetters expect London's FTSE to open 5 points higher at 7,396, Frankfurt's
DAX to open 89 points higher at 11,844 and Paris' CAC to open 34 points higher at 5,358.
    (Helen Reid)
    *****



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 (Reporting by Helen Reid, Danilo Masoni, Josephine Mason, and Thyagaraju Adinarayan)
 ((+442075420402; helen.reid@tr.com))