January 25, 2018 / 10:08 AM / a month ago

LIVE MARKETS-European economy shows further strength but euro a concern

    * European shares steady
    * Draghi in focus as euro hits 3-year high
    * FTSE inches up

    Jan 25 (Reuters) - Welcome to the home for real time coverage of European equity markets
brought to you by Reuters stocks reporters and anchored today by Julien Ponthus. Reach him on
Messenger to share your thoughts on market moves: julien.ponthus.thomsonreuters.com@reuters.net 
 
    
    EUROPEAN ECONOMY SHOWS FURTHER STRENGTH BUT EURO A CONCERN (0958 GMT)
    We've just had the Ifo survey showing that German business morale improved in January,
despite the lack of a new government.
    So far the macro is pointing to strength in the Euro zone economy, but investors are still
concerned about a rising euro which will likely be a focus of the ECB meeting later on.
    "The ECB does not want a strong Euro as it hurts exports, but more importantly, makes it
difficult for them to achieve the near term inflation targets," Jordan Hiscott, chief trader at
Ayondo Markets, said.
    "In addition, events out of their control, including a notably a weaker US dollar across the
board, means the ECB board face an uphill task.”
    (Kit Rees)
    ***** 
    
    OPENING SNAPSHOT: EARNINGS DOMINATE QUIET START (0812 GMT)
    Ahead of the ECB meeting, European shares have opened slightly lower, while earnings are the
main driver behind early moves. 
    Software AG is down sharply after its results. Swiss chemicals maker Clariant
 is taking a hit after activist White Tale sold its stake of almost 25 percent. White
Tale managed to scupper Clariant's planned merger but failed more recently to secure an
independent strategic review and board seats. 
    Elekta, Elior Group, and STMicro are all gaining ground
following updates. Shares in Diageo have advanced a meagre 0.8 percent after its sales
growth was curbed by forex - is this a taste of things to come on the currency side for big
international firms? Incidentally, Next is up after RBC turned bullish on the stock,
citing a strong pound and improved sales outlook. 
    Here's your opening snapshot:
 
    (Kit Rees)
    *****
    
    WHAT YOU NEED TO KNOW BEFORE EUROPE OPENS (0735 GMT) 
    Futures point to a lower European opening after a surging euro and a faltering dollar
rattled European bourses yesterday. The monthly ECB meeting and comments from U.S. officials in
Davos will be under intense scrutiny. 
    There is enough corporate news to animate the market outside of macroeconomic issues - in
tech we had trading updates for SAP and STMicro. Investors are continuously assessing whether
the sector is too expensive given its hefty multiples. 
    Germany's Siemens said it is preparing for an eventual consolidation of platforms competing
to provide businesses with factory software, which might trigger some speculative M&A
positioning. 
    Swedish banking group Nordea raised its dividend marginally more than expected for 2017 even
though profits for the fourth quarter fell short of analyst expectations. Northern European
banks with their strong capital ratios have been investors’ sweethearts for a while but with
confidence rising for southern lenders, it’s interesting to see whether a change of heart could
progressively occur.
    In the realm of “special sits”, activist White Tale is selling its nearly 25 percent stake
in speciality chemicals group Clariant to Saudi Basic Industries. Merger arbs, which are already
quite busy looking into the bids for the likes of Ablynx, GKN, or Sky, will also focus on
Cineworld's attempt to buy U.S. rival Regal Entertainment, dealt a blow after advisory group
Institutional Shareholder Services told investors to oppose the $3.6 billion deal. 
    
    Here's a round-up of headlines:
    Activist White Tale sells Clariant stake to Saudi's SABIC
    Diageo sales growth curbed by forex
    Anglo American reports 5 pct rise in 2017 output
    European pilot group demands Ryanair meet unions collectively
    Siemens prepares for industrial software consolidation
    Nordea Q4 profit lags estimate, raises dividend 
    UK's Asos beats forecasts for Christmas sales​ 
    STMicro posts surge in year-end results but eyes seasonal Q1 dip 
    Poland's PKN Q4 net profit falls 11 pct, misses forecast 
    Software AG Q4 margins hit record; IoT business may double in 2018 
    ISS advises Cineworld shareholders to oppose Regal deal 
    Block of Steinhoff loans successfully auctioned as lenders sell out
    Engie buys majority in hydrogen-based storage specialist EPS  
    Italy's Tod's sees benefits from new management starting in H2 
    UK's Restaurant Group's 2017 comparable sales down 3 percent
    UK estate agents Foxtons foresees challenging 2018
    BRIEF-Daily Mail group confirms outlook, Q1 ad revenue up 2 pct
    More oil and gas firms expect to hike capital spending in 2018 - survey
    Seadrill postpones restructuring plan hearing until Feb. 7
    Wealth manager St. James's Place Q4 assets up on inflows, market gains 
    Fingerprint Cards says to cut staff after warning of Q4 loss 
    Aryzta's problems deepen as Europe, U.S. weakness leads to profit warning 
    (Julien Ponthus and Tom Pfeiffer) 
    *****      
   
    IS THE RISK OF A STOCK MARKET CORRECTION RISING? (0715 GMT)
    On the theme of if/when we see a market pullback, economists at Oxford Economics say that
short-term risks are broadly balanced between a downward correction and a further 'melt-up'
rally, according to their analysis.
    But a continued 'melt-up' could risk an equity correction of "well over 10%".
    Oxford Economics reckons a stock market correction of 25 percent could cut U.S. growth to
around 1 percent by 2019. 
 
    (Kit Rees)
    *****

    EUROPEAN STOCK FUTURES POINT TO A START IN THE RED (0703 GMT)
    Earlier financial spreadbetters' indications made it hard to call in what direction European
markets would open but futures now seem to point downward.     
 
    (Julien Ponthus) 
    *****
    
    WANTED: "HEALTHY PULLBACK" (0630 GMT) 
    Just spotted an interesting quote in Chuck Mikolajczak's Wall Street report
which highlights the fact that the continuous rise of markets is actually making some investors
so nervous that a slight correction would be greeted with relief. 
    "The trend is higher and it is so universally, and with such conviction believed that any
meaningful pullback is going to be aborted because investors simply don’t want to miss out,"
said Peter Kenny, senior market strategist at Global Markets Advisory Group in New York.
    "So we are not seeing that healthy pullback that most investors would actually welcome."
    (Julien Ponthus) 
    *****           
    
    MORNING CALL: NO DIRECTION TREND YET FOR EUROPEAN SHARES (0621 GMT)   
    Good morning and welcome to Live Markets. No clear direction is emerging yet for European
shares ahead of the ECB's governing council meeting later today, which will be under intense
scrutiny after a rapidly strengthening euro versus a faltering dollar rattled the continent's
bourses during the previous session. 
     Financial spreadbetters expect London's FTSE to open 2 points lower at 7641.6 points,
Frankfurt's DAX to open 16 points higher at 13430.5 point and Paris' CAC to open 1 point higher
at 5496 points.
    (Julien Ponthus)
    *****

    
 (Reporting by Danilo Masoni, Helen Reid, Kit Rees and Julien Ponthus)
  
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