LIVE MARKETS-NFP: 15 minutes to go
* European shares fall after new US tariff threat
* STOXX 600 still set for small weekly gain
* Trump threatens $100 bln more in China tariffs
* Eyes on U.S. jobs report later in the session
* Wall St stocks futures fall
April 6 - Welcome to the home for real-time coverage of European equity
markets brought to you by Reuters stocks reporters and anchored today by Danilo
Masoni. Reach him on Messenger to share your thoughts on market moves:
danilo.masoni.thomsonreuters.com@reuters.net
NFP: 15 minutes to go (1215 GMT)
There are less than 15 minutes left before the release of this week's most
awaited data which could give more clues on the speed at which the Federal
Reserve will raise interest rates. That could affect the outlook for the dollar,
whose weakness has pushed up the euro, clouding prospects for European earnings.
According to a Reuters survey of economists, the U.S. jobs report is
expected to show an increase in nonfarm payrolls of 193,000 jobs last month,
although estimates vary between 140k to 225k.
In this tweet from City Of Investment you can see how the dollar could react
based on the different NFP outcomes. Meanwhile the STOXX is down 0.4 percent,
little moved from this morning.
(Danilo Masoni)
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TECH TAKES A BACKSEAT (1142 GMT)
It's funny how fickle markets can be. Europe's tech sector has gone from
being 2017's star performer to dipping into negative territory year-to-date for
the first time in six years.
Sure, we could point to the sector's steady grind to the highest levels
since the early 2000s and high valuations, but many of the underlying themes
(AI, automation, electric vehicles etc.) remain intact, so for now at least it
seems to be a combination of U.S. tech-led jitters over regulations hitting the
sector and some profit-taking.
BAML had a nice illustration of this in their chart showing that private
clients have been unwinding their positions in tech over the past four weeks:
(Kit Rees)
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EURONEXT (Euronext: ENX.LS - news) 'S MYSTERIOUS VOLUME RECORD OF MARCH 16 (1120 GMT)
One would expect that with so much drama (inflation/rates fears, trade war
worries, volatility products going berserk), equity trading volumes would be
sharply on the rise this year, and yes, Euronext's are indeed.
The bourse operator reported today that "for the first three months of 2018,
the average daily transaction value on the Euronext cash order book stood at
€8,507 million, up +21.9% compared to the same period last year".
What catches the eye is the fact that Friday March 16 not only broke a
record in traded volumes for this year but was "the second most active day since
2010" with a value of 19.684 billion euros.
There are a few possible explanations for this, such as the fact that March
16 is an options expiry date and that there were big names coming in and out of
indexes such as Belgium's Bel 20, Amsterdam's AEX and France's SBF
120.
Another lead may be the new MiFID II regulations: they have increased
volumes traded on exchanges, with the caps on dark pool trading (implemented on
March 12) forcing investors to execute more of their trades on transparent
venues.
Other than that, March 16 was a busy news days as you can see below with
trade war worries and the Russian ex-spy poisoning but, really, nothing like the
June 2016 Brexit vote and markets were relatively calm in Europe, nowhere near
the drama that occurred during the February correction.
(Julien Ponthus and Helen Reid)
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ITALIANS CAN DO BETTER (1106 GMT)
Some investors and brokers may have taken a cautious view on Italian assets
due to political uncertainty, but stocks and bonds continue to outperform their
peers and the country's economic recovery is progressing well. Over the longer
term there could be potential for more.
That's at least the view of UniCredit (EUREX: DE000A163206.EX - news) economist Loredana Federico who says
Italy's potential growth is on the rise and could be boosted further following
two decades of low growth, mostly caused by low investment intensity and low
productivity.
"In light of demographics and based on the investment trend and the reform
effort of the last few years (assuming no substantial unwinding of reforms by
the new government), Italian potential output growth will probably average 1.0%
per year over the next decade," she says, adding: "While the new wave of
political uncertainty hampers any prediction, Italy has the resources available
to do even better".
Whether the new government (if any) will seize on this untapped potential or
on the contrary seek to break EU budget restrictions remains to be seen. For now
talks to form a government have been postponed to next week.
P.S. a 1.0% per year potential output growth would be high enough to secure
a gradual declining trend in public debt/GDP - which remains the main macro
imbalance Italy still faces, Federico reminds us.
(Danilo Masoni)
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WHAT'S ON THE RISK RADAR? (1046 GMT)
Nomura's made a handy chart of the main global market risks to look out for.
In a crowded field, a possible meeting between Trump and Kim Jong-Un stands
out, as well as a potential expiry of U.S. steel tariff exemptions.
"The good news is that come mid-April the NAFTA negotiations may be close to
complete. But the bad news is that steel tariff exemptions for many are just
temporary and the Section 301 investigation is likely to bring more to bear,"
writes Nomura's Jordan Rochester.
Take a look at the main risk events ahead, if you dare:
(Helen Reid)
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A FUTURE OF AUTOMATION BECKONS (0957 GMT)
Despite the recent negativity around tech stocks, the trends towards
automation and the rise of AI aren't going anywhere. Berenberg's analysts
explore what this could mean for the IT services industry.
Berenberg believes automation will diminish the "relevance" of off-shoring,
and undermine IT vendors which have relied on cheap labour. This is because work
will increasingly be carried out by bots - Berenberg sees the industry business
model moving away from being labour-centric and towards "labour plus IA
(intelligent automation)".
Berenberg also says the reason the rise of automation hasn't led to a
decoupling of revenue and headcount growth in the IT services industry is
because it instead allows workers to be retrained to perform tasks which boost
productivity.
They pick out Accenture (NYSE: ACN - news) , Cognizant and Capgemini as stocks which are set to
benefit, especially as they rely less on the offshore model.
See below a graphic cited by Berenberg, based on a study by Hfs Research and
KPMG showing that companies are planning significant investments in robotic
process automation (RPA) in particular:
(Kit Rees)
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EURO ZONE VERSUS UK TRADE IS BECOMING SO 2017 (0850 GMT)
It's still a popular trade but there's a chance it may not survive 2018 as
there seems to be a growing trend of big players ditching their overweight Euro
zone versus UK equities bets.
"While the outlook for Eurozone economic and earnings growth remains
positive, the period of peak acceleration appears to have passed," UBS Wealth
Management's Chief Investment Office says in a note, joining the list of market
watchers who believe the bloc has gone from "Euroboom" to "peak growth".
The Euro zone versus UK trade was a successful one, UBS CIO Mark Haefele
says, explaining that they now "no longer see the catalysts for further
outperformance".
Citi made a similar move yesterday (see our Farewell #Euroboom post
) upgrading the UK to "overweight" and downgrading Euro zone
equities to 'neutral', taking the view that "Europe's macro data is shifting
away from 'boom' territory and growth is no longer accelerating".
On the chart below you can see the difference in returns that an investor
would have enjoyed if he put the same amount of money in dollars in the EURO
STOXX and in the FTSE on June 1 2016, about three weeks before the Brexit vote:
(Julien Ponthus and Helen Reid)
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CITI DOWNBEAT ON UK RETAIL (0726 GMT)
Weighing on Marks & Spencer (Frankfurt: 534418 - news) and Next (Frankfurt: 779551 - news) shares today is a Citi note downgrading
both stocks, among other retailers.
Contrasting with the positive tone Deutsche Bank (IOB: 0H7D.IL - news) struck on general retail,
Citi says "we are not yet ready to turn more positive on the UK cyclical names".
In general retail they say "investors should buy online over offline, Europe
over UK and brands over retailers".
Their "most preferred" are Zalando (Swiss: OXZALG.SW - news) , adidas and Inditex (Amsterdam: IT6.AS - news) , and least preferred
are H&M, Kingfisher (Frankfurt: 812861 - news) and Next (EUREX: NXTJ.EX - news) (downgraded to sell).
Citi also downgrades M&S, ASOS (LSE: ASC.L - news) , Pets at Home (Frankfurt: A1XFE7 - news) and B&M to "neutral", while
Halfords gets an upgrade to "buy".
(Helen Reid)
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OPENING SNAPSHOT: CYCLICALS TAKE A DIP AGAIN (0717 GMT)
Stocks' sharp swings this week are enough to give you whiplash.
European stocks are trading down 0.5 percent, with the usual cyclical
suspects autos, basic resources and tech stocks the worst-performing after the
latest salvo in an ongoing exchange of tariff threats between the U.S. and
China.
Dufry (IOB: 0QK3.IL - news) meanwhile is leading gains with a 3.6 percent rise as
investors cheer its share buyback programme and dividend.
With (Other OTC: WWTH - news) corporate news very thin on the ground, broker notes are moving some
stocks. Next is down 2.7 percent after a downgrade from Citi to "sell",
while M&S is also suffering, down 2.9 percent after Citi downgraded it
to "neutral".
A few Nordic ex-divs in the mix too: Gjensidige Forsikring (LSE: 0OJC.L - news) , Upm (Taiwan OTC: 4752.TWO - news) -Kymmene, and
Volvo.
(Helen Reid)
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WHAT YOU NEED TO KNOW BEFORE EUROPE OPENS (0647 GMT)
European stock futures are trading down 0.3-0.7 percent, giving up only part
of the strong gains seen in the previous session as Trump's new China import
tariff threat does not appear to have changed the prevailing view that a
full-blown trade war is unlikely.
The pan-European STOXX 600 could still end the week with a small gain,
having risen 1.4 percent so far this week.
The focus later in the day will turn to the US jobs report for more clues on
the speed of policy normalisation in the U.S., while on the corporate front
there is no big market-moving news.
Traders said possible stock movers include Dufry, seen rising 1
percent after its dividend proposal topped expectations, while cable maker
Prysmian (EUREX: 3056144.EX - news) predicted higher core profit this year despite the negative
impact expected from currency swings.
In tech, concerns that the semiconductor boom is about to end, which hit
Samsung Electronics shares overnight in spite of a surprise Q1 record profit,
could weigh on European peers like Infineon (Xetra: 623100 - news) . Traders also said
Rheinmetall (IOB: 0NI1.IL - news) could be supported by the improving outlook for German
domestic weapons purchases.
(Danilo Masoni)
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DB UPGRADES EUROPEAN GENERAL RETAIL STOCKS (0636 GMT)
Strategists at Deutsche Bank have upgraded general retail to overweight and
downgraded food retail to benchmark, citing the positive momentum in sterling.
Europe's general and food retail sectors have more than 25% of sales coming
from the UK, DB says, making them very sensitive to the pound.
"While food retail has been Europe's strongest sector since November,
outperforming the market by 9%, general retail has been the weakest,
underperforming by 11% over the same period," the strategists note.
General retail stocks have thus not yet reflected the strong gains sterling
has been making. Though DB's FX strategists see the pound weakening over the
next six months, they say general retail could still outperform by about 10%
even under this bearish scenario.
(Helen Reid)
*****
EUROPEAN STOCK FUTURES DOWN LESS THAN 1 PERCENT (0618 GMT)
Trump's fresh tariff threat against China is surely going to weigh on
sentiment and European stocks futures are all heading south this morning.
However declines are all less than 1 percent and follow gains of more than 2
percent in the previous session, as investors still see a full-blown trade war
as unlikely.
"US President Trump threatened trade disputes with the rest of the world by
offering to subsidize US farmers. That may prompt talk of retaliation. However,
this is not a trade war. These are threats for the future, not real policies
now," says UBS WM Global Chief Economist Paul Donovan.
Here's your snapshot:
(Danilo Masoni)
*****
EARLY MORNING HEADLINE ROUNDUP (0556 GMT)
It looks there is no big corporate news out of Europe early this morning
that could have impact on single stocks. Anyhow here are the main headlines:
Vivendi (LSE: 0IIF.L - news) presents board candidates for Telecom Italia (Amsterdam: TI6.AS - news) in bid to please
investors
Italy's CDP says will build stake of up to 5 pct in Telecom Italia
Prysmian CFO sees higher 2018 core profit despite forex hit
Dufry proposes dividend, launches share buyback
France expects combat jet announcement at Berlin Air show - report
U.S. State Dept OKs possible $2.5 bln sale of military drones to Germany
Former JPM exec Zames among candidates to replace Deutsche Bank CEO -
Bloomberg
Norsk Hydro (LSE: NHY.L - news) 's Brazil unit sues local prosecutors over spill analysis
Saipem (LSE: 0NWY.L - news) main investors to ask shareholders to reappoint Stefano Cao CEO
Eni (LSE: 0N9S.L - news) , Qatar Petroleum are said to hold talks for deal on giant Mexico field-
Bloomberg
Saudi Aramco, Total (LSE: 524773.L - news) to sign refinery expansion deal next week - sources
Miners insist on rewrite of Congo mining code to protect exemptions
Enbridge (Dusseldorf: EN3.DU - news) said to seek partial sale of German wind farm stake - Bloomberg
Moody's places UBS (LSE: 0QNR.L - news) ratings on review for upgrade, maintains stable outlook
on Credit Suisse (IOB: 0QP5.IL - news)
(Danilo Masoni)
*****
EUROPE SEEN LOWER BUT NO SHOCK AFTER NEW TRUMP TARIFFS (0527 GMT)
After Wall Street closed yesterday, U.S. President Donald Trump threatened
tariffs on $100 billion more of Chinese imports.
The news, which sent U.S. stock futures back in the red, is going to weigh
on the European open this morning, although it looks investors are getting
somewhat used to the rhetoric.
"Trump has consistently taken a harder line than his advisers, so this might
not entirely shock the markets but it will certainly weigh on sentiment. Markets
will now watch both the rhetoric from Trump’s cabinet members and China’s
response to assess whether risk of a trade war is materially higher," said
Credit Suisse in its investment daily.
"We continue to see a trade war as unlikely," it added.
Financial spreadbetters expect London's FTSE to open 38 points lower at
7,161 (-0.5%), Frankfurt's DAX to open 99 points lower at 12,206 (-0.8%) and
Paris' CAC to open 35 points lower at 5,242 (-0.7%).
Later in the session the focus will turn to the U.S. non-farm payrolls
report, which could give more clues on the speed at which the Federal Reserve
will raise interest rates.
The U.S. March employment report is expected to show non-farm payroll growth
of 193,000 jobs versus 313,000 in the prior month, according to the latest
Thomson Reuters (Dusseldorf: TOC.DU - news) poll of economists.
(Danilo Masoni)
*****