Closing snapshot: Trump spreading the love
* Trump says trade deal could come after 2020 election
* STOXX 600 reverses gains, now down 0.7%
* Wall Street futures plunge
* Luxury stocks hit by US tariff threats
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: email@example.com
CLOSING SNAPSHOT: TRUMP SPREADING THE LOVE (1710 GMT)
Today was all about Trump, who is visiting the UK for a NATO summit and the European bourses
felt the proximity.
The London bluechip index had its worst day in a month and was down 1.75% and the
pan European index was down 0.6% after the U.S. President said he could wait after the
November 2020 election to reach a trade deal with China.
Speaking this afternoon, Trump also said the U.S. has an unfair trade situation with the
European Union casting doubt he may be willing to extend trade tariffs.
European luxury stocks were hit by threaten to impose U.S. tariffs on French goods if the
two countries failed to find an agreement in a dispute over France's plans for a digital tax.
"We've taxed wine and we have other taxes scheduled. We'd rather not do that, but that's the
way it would work. So it's either going to work out, or we'll work out some mutually beneficial
tax," Trump told reporters today, sitting alongside French President Emmanuel Macron.
Here a snapshot of European bourses at the closing:
HOW DOES GOLDILOCKS END AGAIN? (1527 GMT)
Well, according to the Wikipedia page on the fairy tale, it depends.
"Goldilocks's fate varies in the many retellings: in some versions, she runs into the
forest, in some she is almost eaten by the bears but her mother rescues her, in some she vows to
be a good child, and in some she returns home".
Now, what happens to the markets' Goldilocks narrative is still anyone's guess and a hot
topic in the flow of 2020 outlooks published these last few days.
While a U.S. recession and a very dire slowdown in the euro zone were quite common
expectations at the end of the summer, things have cleared up a bit and the consensual view
seems to have shifted back to a 'not too hot, not too cold' mix of growth and inflation
In that light, BNP Paribas Asset Management believes that Goldilocks is "fragile" but that
she will hold in the end.
"Looking ahead to 2020, we continue to see less rapid - closer to trend - global growth with
risks to the downside, but at the same time dovish monetary policy counteracting this", the bank
wrote in its asset allocation outlook.
While BNP is "cautiously optimistic" about 2020, it sees risks however of things moving
towards a "synchronised slowdown" or at the opposite, "reflation".
Here's where Goldilocks stands according to them:
EZ BANKS: TFW EVEN AN "OUTRAGEOUS PREDICTION" WON'T HELP MUCH (1429 GMT)
The Eurostoxx bank index recovering 30%, to mid-2018 levels, is among Saxo Bank's "10
Outrageous Predictions for 2020".
The possibility of Christine Lagarde turning hawkish and reversing monetary policy in
January is about as likely as Johnson embracing MMT and spending so much money that the UK grows
faster than China.
In other words, pigs will fly.
Saxo Bank publishes its annual "outrageous predictions" as an imaginative PR exercise,
justified on the hard-to-argue-with grounds that the most disruptive events are those which no
one sees coming.
Christopher Dembik, head of macro analysis, made the tongue-in-cheek prediction that EU
banks will be among the best performing sectors in 2020, with the Eurostoxx index boosted by 30%
thanks to Lagarde bringing rates back into positive territory before the end of the next year.
But the fact that such a share price boost would be considered "outrageous" only highlights
what dire straits shares in the banking sector are in.
The index is currently at about 91 points. To put things into context, it was at flirting
with 500 points before the financial crisis hit and hovering around 160 for the most part of
Whether or not the other predictions are outrageous is for you to decide.
In politics, the status quo would be disrupted by "the sudden failure of populism, replaced
by commitments to 'heal' instead of 'divide'," according to Saxo Bank's chief economist, Steen
It's perhaps noteworthy that Saxo Bank sees the possibility of oil and gas industries
winning in 2020 - to the detriment of clean energy investments and indeed the planet - as a
prediction unlikely enough to be listed alongside UK growth doubling to 8%, the ECB admitting
monetary policy has reached its limits, or Hungary leaving the EU.
Other unusual suggestions for the year ahead include Trump introducing an "America First
Tax" of 25% on all U.S. revenues sourced from foreign production - if he does, you'll have to
blame John Hardy, head of FX strategy, for giving him the idea.
Kay Van-Petersen, Saxo's global macro strategist, meanwhile suggested that the Asian
Infrastructure Investment Bank could create a new reserve asset - worth $2 - thus challenging
the dollar's status as the world's reserve currency.
UK STOCKS STILL UNLOVED? (1201 GMT)
UK stocks stand out pretty much as cheap and unloved, but since the risk of a no deal Brexit
is now reduced after Boris Johnson secured a deal in Brussels and the general election is
scheduled, is it time for investors to show some love to UK-listed companies?
Fidelity thinks so.
As we head into 2020, the "unloved status of the UK market provides a plentiful opportunity
set," Alex Wright, portfolio manager at Fidelity Special Situations and Fidelity Special Values
says in a today's note.
"It is true that fundamentals are not great in the UK, but neither are they in many other
parts of the world. Importantly, what the UK has which other markets do not, is a low starting
He offers a few tips on how to navigate the UK stocks:
- Dig into selective opportunities in financials and consumer businesses
- Tread cautiously among domestic shares as some business have structural issues and they
could be "value traps"
- Watch out for retailers, which are particularly exposed to sterling weakness as they buy
their goods overseas to sell in the U.K.
- Stay defensive: "The portfolio today has a more defensive tilt than at any time over my
tenure," Wright adds.
TARIFFS TIT-FOR-TAT: LUXURY BRANDS ARE THE FRENCH FAANGS (1114 GMT)
Is Washington's threat to slap hefty tariffs on French luxury goods a perfect tit-for-tat?
Looks like it is.
Luxury stocks such as LVMH, Kering and Hermes are all down
1.3% to 2% this morning after the U.S. govt threatened 100% tariffs on $2.4 billion of imports
from France in reply to Paris' digital services tax that would hit the likes of Google or
The French luxury groups are to local investors what the Amazon or Apple are to Wall Street.
In a word, they are the FAANGs of European equities as they are the key drivers of growth in
their respective indexes (see chart below). In fact, some of them have done better than the
FAANGs in the last five years.
Jonathan Bell, Chief Investment Officer at Stanhope Capital, has LVMH on his "buy list"
because of its success in managing and growing expensive brands, which makes it an equivalent to
the FAANG stocks and unlikely to be damaged by tariffs.
"In the short term it could easily be hit by these sorts of concerns but these things can
turn around very quickly and in the long run I think most of the owners of LVMH are people that
– a bit like Warren Buffet in Coca Cola – they buy it and own it for the long term."
Bell said for LVMH the threat of tariffs "is likely to be a short-term issue which may dent
them for a quarter’s earnings but probably not longer than that"
"The bigger trends would be if consumers in China suddenly decided that they didn’t want to
buy goods that they consider to be French, that sort of thing would have a much bigger impact
than this," he said.
Clairinvest fund manager Ion-Marc Valahu on the other hand struck a more cautious note:
"It's too risky to go into the luxury sector. The sector was hit first of all by the Hong Kong
protests, and now this will hit it even more."
CINEWORLD: BAD PREVIEWS BUT A HIT AMONG TRADERS (1052 GMT)
If there's a silverlining to be found in this morning price action on Cineworld is that you
should never let bad previews prevent you from going to see a movie you fancy.
Pre market indications (we saw 6 of them) for the stock were pointing out to a fall of
between 1 and 5% at the open after the company warned its full year earnings would be below
"We would expect focus on the box office underperformance and weaker FY expectations, which
may see the shares lower today", UBS analysts wrote before the bell.
So at first it did look like the expected flop, but then this happened, a 10% comeback
within 40 minutes:
Why? That's obviously the question on everybody's mind, particularly those who got burnt on
the basis of the pre market indications.
"A rise in Cineworld’s share price on today’s news is probably down to short sellers closing
out their positions now we’ve had confirmation of weaker trading", wrote Russ Mould, investment
director at AJ Bell.
Another view from CMC Market's Michael Hewson is that Frozen 2 - a Thanksgiving hit - and
the imminent release of the latest Star Wars "could well pick up the slack in the next few
Writing after the dust had settled, The Share Centre took the view that the company's
fundamentals don't actually look bad even if its debt pile could be seen as spooky for cautious
"With more potential benefits from Regal (their multi-billion U.S. acquisition) to come and
a good dividend yield in place, we retain our ‘Buy’ recommendation for investors willing to
accept a higher level of risk".
ANOTHER 12 MONTHS OF TRADE PAIN? (1037 GMT)
Once again, a bright morning for markets gets clouded by Trump's comments on global trade
and this time it's on the U.S.-China trade.
What were the odds of a no trade deal for another twelve months, until this morning? Very
low. But that's changed after this comment from Trump: "I have no deadline, no. In some ways I
think I think it's better to wait until after the election with China".
The bounce back we saw this morning quickly disappeared after Trump's comment and December
turns out to be a disaster so far for stock markets.
NO SANTA CLAUS RALLY, AGAIN? (0918 GMT)
It took just a couple of tweets to bring the pre-Christmas rally down to a screeching halt!
Trump's tweet on reinstating tariffs on steel and aluminium imports from Argentina and
Brazil triggered the downfall.
"In the last 24 hours we’ve gone from a potential Santa Claus rally to a more Scrooge-like
environment as the ghost of trade wars past came back to haunt the market," Deutsche Bank's Jim
To make things worse Washington threatened to slap 100% duties on French goods such as
Champagne or handbags. That clearly is visible in CAC 40's underperformance today.
Speaking of a Santa Claus rally, in the last 5 years, we've had only two positive Decembers
(see seasonality chart below). Last year was one of the
OPENING SNAPSHOT: KEEP CALM AND CARRY ON (0832 GMT)
One thing is for sure, there is no hysteria on European trading floors over the trade war's
latest developments: the DAX, the typical barometer on the issue, is up 0.7%.
In a nutshell, the bulk of the trade war losses were made yesterday.
Traders aren't taking positions indiscriminately: selling is clearly targeted at those
companies who could suffer from the Trump's administration desire to punish France for its new
digital services tax aimed at U.S. tech companies.
So logically on Paris' CAC 40, Hermes, LVMH and Kering are leading the losers.
Funny to note that France's luxury groups - the likely target of U.S. tariffs - are a bit to
the French stock market what the FANGs are to Wall Street. Both sectors are key to local
investors and are used as proxies in the trade war.
The only other sectors feeling the heat this morning from the trade war are basic materials,
with the sector down 0.8%. This, in turn, is weighing on the FTSE 100 and its big mining groups.
ON THE RADAR: CHAMPAGNE, HANDBAGS AND SPOILS OF TRADE WAR (0747 GMT)
With new fronts in Brazil, Argentina, Europe and France, the trade war is likely to be the
key driver for this session, especially with Trump in the UK for the NATO summit.
After the U.S. threatened to slap punitive duties of up to 100% on $2.4 billion of imports
from France on products such as champagne or handbags, French companies such as LVMH, Kering and
Laurent-Perrier will be closely watched.
Not to say that the war or words could weigh generally on the CAC 40 with junior economy
minister Agnes Pannier-Runacher promising France will be “pugnacious”.
European stocks could also suffer as a whole after the U.S. said it may set retaliatory
tariffs on a wide range of European goods after the WTO rejected EU Airbus subsidies claims.
In terms of individual stocks, Italy's biggest bank UniCredit will be under the spotlight
after it said it would shed 8,000 jobs to reduce costs by 1 billion euros in Western Europe
under a new plan to 2023.
Still in Italy, Enel joined a race with at least five other bidders to buy the Renvico wind
farm portfolio in Italy and France being sold by a Macquarie-run infrastructure fund.
Pre market indications also point out to losses for Cineworld after it issued a warning on
full year results.
Another one will be Spanish media group Atresmedia which is seen falling at the open after a
MORNING CALL: TENTATIVE (TECHNICAL?) REBOUND (0630 GMT)
There are not many reasons out there for European shares to rise at the open after Wall
Street and Asian stock market fell due to Trump's surprise tariffs announcements.
One reason though is that after falling 1.6% on Monday, the worst single-day drop in two
months, there's probably room for the STOXX 600 to enjoy some kind of technical
According to CMC Markets, London's FTSE 100 is expected to open 14 points higher,
DAX up 60 points and Paris' CAC40 to rise 13 points.
(Reporting by Danilo Masoni, Joice Alves, Julien Ponthus and Thyagaraju Adinarayan)
First Published: 2019-12-03 10:32:06
Updated 2019-12-03 19:22:38
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