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
BITCOIN: GOOD NEWS SINKING IN (1227 GMT)
As pointed out this morning by ThinkMarkets' Naeem Aslam, bitcoin seems set to post a monthly gain in February, the first since July.
Is this the light at the end of the tunnel some traders were hoping for after a chastening year, or just some temporary respite
"The selling pressure lost its momentum with no substantial backing of volume," Aslam writes, adding that "all that negativity which we have been facing in the industry for the past five months may be coming to an end".
Traders in London say news seen as positive to the wider growth of cryptocurrencies, like JP Morgan's launch of a digital token for use on its private blockchain network, was supporting sentiment.
"Even if they are using the lowest rung of crypto, just the token, they are building up blockchain infrastructure," says Ben Sebley, head of brokerage at NKB Group, about the U.S. investment bank.
Looking at bitcoin's monthly performance over the last year, there does seem to be something going on:
But during the same period in absolute terms, it's not clear if a big burst of optimism is warranted.
(Julien Ponthus and Tom Wilson)
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"WE ARE CLOSE TO THE END OF THE TACTICAL RALLY" (1132 GMT)
That's what Credit Suisse strategists led by Andrew Garthwaite say, and that's why they believe investors should now cut their global stocks exposure to benchmark.
Despite such caution they don't think an underweight position is desirable. Why not
"The ERP is still high (5.9% versus warranted of 4.8%); bear markets almost always require recessions within a year of a market peak and we don't expect a recession until 2021. We think earnings can stay above trend (because of tax, tech and improving asset turns) and FCF is still just enough to cover dividends and buybacks," they say in a note.
(Danilo Masoni)
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BUY "CYCLICAL CYCLICALS" OVER "DEFENSIVE CYCLICALS" (1055 GMT)
With markets pretty flat today as investors cash in gains after the STOXX 600 hit a four-month high, many are looking for the next boost to their portfolios.
According to Morgan Stanley, that may come from "cyclical" cyclicals - rather than those on the more defensive side, whose valuations have expanded recently.
Valuation dispersion between cyclical sectors is already at recessionary levels and looks "much too low", Morgan Stanley strategists say, making the "cyclical cyclicals" attractive.
They're overweight mining, construction, autos, and transport sectors, saying free cash flow yields look high, while tech hardware, consumer services and software don't screen well on this metric.
One criticism of cyclical stocks is their high leverage or close correlation with credit markets, Graham Secker and team write, but the most cyclical stocks look very cheap even using metrics capturing balance sheet strength.
Autos is among the most negatively correlated sectors with credit spreads but valuations are very low - while some of the defensive cyclicals (capital goods, chemicals, and luxury) look vulnerable as they're also negatively correlated to credit spreads but have relatively high valuations.
Lastly, on earnings, EPS downgrades appear the most priced in for autos, media, and transport stocks, and the least priced in for tech hardware, luxury, and software.
(Helen Reid)
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OPENING SNAPSHOT: STOXX STEADIES AT 4-MONTH HIGHS (0828 GMT)
European shares are off to a rather muted start this morning with the STOXX 600 up a tiny 0.1 percent following Friday's rally and steadying at its highest level in more than 4 months.
Investors will be watching for any progress in the trade Sino-US talks between as negotiations continue in Washington this week, while overall activity could remain thing as Wall Street is closed today for Washington's Birthday.
Here's your opening snapshot:
Among single stocks Wirecard is shooting up nearly 9 percent after Germany's financial watchdog issued a ban against establishing or increasing short positions, while AMS AMS.VI was also up sharply with traders citing a positive article from Barrons.
A Deutsche Bank downgrade is hurting Casino CASP.PA , while Metro is going ex dividend. Meanwhile, Reckitt Benckiser RB.L were up nearly 2 percent after the British consumer goods group L reported higher-than-expected fourth-quarter sales growth.
(Danilo Masoni)
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WHAT'S ON THE RADAR: RECKITT BENCKISER AND GERMAN CARMAKERS (0745 GMT)
With Presidents' Day in the U.S. taking Wall Street out of the picture, trading in Europe was likely to be more muted on Monday though the deluge of company results continued.
Fresh from touching their highest level in four months on Friday, European stocks were set to gain further ground as investors bet more progress would be made in U.S.-China trade talks continuing in Washington this week.
Futures for the main benchmarks were up 0.1 to 0.2 percent as company results also looked, on the whole, good.
UK-listed consumer goods firm Reckitt Benckiser was expected to rise 2 percent after reporting higher than expected Q4 sales growth, helped by improvements in both its health and home and hygiene businesses.
Results from French car parts maker Faurecia would likely boost the stock by around 2 percent, traders said, after the firm said it hoped to outperform the market this year, though it warned of negative auto production growth.
German carmakers Daimler, Porsche, and BMW were seen falling 2 percent after data from China showed car sales fell for a seventh straight month in January. Investors in the auto sector are on tenterhooks after the U.S. Commerce Department sent its report on national security and car imports to President Trump, setting the stage for possible tariffs.
Dealmaking continued apace with valve maker Spirax-Sarco saying it’s in talks to buy France’s Thermocoax, and bottling company Coca-Cola HBC buying Serbian confectionary business Bambi.
British education company Pearson also said it agreed to sell its U.S. K12 courseware business for $250 million as it shifts focus from textbooks to digital.
Shares in UK defence firm BAE Systems could be hurt by a Financial Times report that Germany’s arms ban to Riyadh would prevent it supplying some parts for the Saudis’ Eurofighter planes. The stock was indicated down 1-2 percent by traders.
Wirecard shares were climbing 4-5 percent in pre-market after German market regulator BaFin banned the establishment or increase of short positions in the shares.
(Helen Reid)
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EUROPEAN STOCK FUTURES RISE AS WASHINGTON TALKS EYED (0719 GMT)
Futures are up this morning with a less busy trading day ahead: Wall Street will be shut for President's Day, and there are no big data releases on the horizon either.
Societe Generale economists reckon the key market-moving data this week will be euro area business sentiment surveys.
"After pronounced weakening, we expect generally slightly improved readings, crucial to supporting our view that growth will improve," they write.
Minutes from the Fed and the ECB will also be an important focus, while on trade "markets will also keep an eye on the intensified U.S.-China trade negotiations for any signs of a breakthrough."
(Helen Reid)
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COMPANY NEWS TO WATCH: FAURECIA, DEUTSCHE BANK, WIRECARD (0658 GMT)
In early morning results and company news, there's no shortage of interesting tidbits. In a boost to Wirecard shares, German regulator BaFin banned investors from establishing or increasing net short positions on the stock.
Auto parts maker Faurecia struck an upbeat tone, saying it hopes to outperform the market in 2019 while cautioning it sees auto production in general to be slightly negative this year.
The headline harvest so far:
Chinese conglomerate HNA cut its stake in Deutsche Bank to 6.3 percent.
(Helen Reid)
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EUROPE'S RALLY SET TO CONTINUE AHEAD OF WASHINGTON TRADE TALKS (0625 GMT)
The impressive rally which pushed European shares to touch their highest in four months on Friday is set to continue with new trade talks between the U.S. and China this week in Washington helping investors' risk appetite.
Meanwhile, trouble could be looming for autos: the U.S. Commerce Department sent a report on Sunday to President Trump on car imports and national security which could unleash steep tariffs on imported cars and car parts. The department would not disclose any details of the report, but Trump has 90 days to decide whether to act upon the recommendations.
Financial spreadbetters expect London's FTSE to open 2 points higher at 7,239, Frankfurt's DAX to open 22 points higher at 11,322 and Paris' CAC to open 8 points higher at 5,162.
Asian share markets bounced broadly on Monday as investors dared to hope for both progress at Sino-U.S. trade talks in Washington this week and more policy stimulus from major central banks.
(Helen Reid)
(Reporting by Helen Reid, Danilo Masoni, Julien Ponthus) ((+442075420402; mailto:helen.reid@thomsonreuters.com; Twitter: @helenmariareid))
