LIVE MARKETS-Closing snapshot: STOXX 600 in striking distance of all time high
* European stocks extend rally * Swiss blue-chips, FTSE 100 hit records * UK motor insurers, dealers hit by weak sales data * U.S. non-farm payrolls miss Jan 5 (Reuters) - Welcome to the home for real time coverage of European equity markets brought to you by Reuters stocks reporters and anchored today by Kit Rees. Reach her on Messenger to share your thoughts on market moves: kit.rees.thomsonreuters.com@reuters.net CLOSING SNAPSHOT: STOXX 600 IN STRIKING DISTANCE OF ALL TIME HIGH (1715 GMT) If it continues at this pace, the STOXX 600 is bound to hit its all time high in the next couple of weeks. At 397.35 points, it needs about 4.5% to beat the 415.18 points it reached on April 15 2015.
Here's your closing snapshot and see you on Monday: (Julien Ponthus) ***** MIFID II TAKEAWAYS: INBOX DECLOGGING (1615 GMT) Among the takeaways of the brave new MIFID II world, here's what a fund manager told us today: "The main consequence is that my inbox is no longer saturated" by research, he said, adding that he had stuck with his main brokers and was happy to no longer receive a flurry of notes that he would read "twice a year".
(Julien Ponthus) ***** EUROPEAN STOCKS EXTEND GAINS AS WALL ST SCORES A HAT TRICK (1505 GMT) Three indexes, three new records. That's Wall St for you this afternoon.
And it's all being driven by our good friend tech.
European stocks have also extended gains, with the STOXX 600 up 0.7 percent.
Here's your U.S. snapshot: (Kit Rees) ***** BAYER SET FOR BEST DAY IN A YEAR AS INVESTORS EYE MONSANTO DEAL CLOSURE (1438 GMT) Bayer is working up to be one of the star performers of the day, with gains of 4.5 percent setting it up for its strongest day in more than a year as some analysts see its mammoth deal with Monsanto nearing closure.
The move up in Bayer took some traders by surprise following pre-market calls for the stock to fall after India's regulator started a public consultation on the deal.
Rising optimism that the acquisition of the U.S. grains giant will close soon likely buoyed it higher.
"The probability of deal closure in Q1 has risen in our view following press reports Bayer is exploring the sale of additional assets to satisfy EU/US regulators," Citi analysts say. "We continue to see the risk-reward as compelling." That's despite Monsanto's profit missing estimates yesterday.
(Helen Reid) ***** MORGAN STANLEY RECKONS EUROPEAN EQUITIES ARE DUE A CATCH-UP (1434 GMT) Interesting. Morgan Stanley's European equity strategists say they had expected European stocks to outperform their global counterparts in recent months due to the region's more cyclical makeup.
But even though bond yields have been higher and inflation expectations have risen, Europe hasn't outperformed, even when comparing markets in USD (see MS' chart below).
"While European yields haven't risen as much as those in the US, they are still rising, and investors have been seeing negative total returns in the shorter end of the bund curve since last February," MS' European strategy team says in a note.
"We think European equities are due a catch up." (Kit Rees) ***** ARE H&M'S DAYS AS A GROWTH STORY NUMBERED? (1404 GMT) The Swedish fashion giant hit by a price target cut from Morgan Stanley is trading down 1.5 percent with the market abuzz over the bank's remarkably pessimistic note.
"H&M remains our key, and highest conviction, Underweight," MS analysts say.
They reckon H&M's full-year profits reported later this month will be little higher than those a decade ago, and with fewer future store openings too "the days of consensus assuming that a 'return to growth' is just around the corner are coming to an end".
H&M shares are now sagging far behind rival Inditex.
The Zara owner has also slipped somewhat over the past 12 months, but Northern Trust Capital Markets' head of global equities Gary Paulin reckons it still has a competitive advantage over H&M.
"Inditex's somewhat unique and hitherto unchallenged model (based on speed to market and lean inventories) remains intact, we think," he writes.
(Helen Reid) ***** U.S. NON-FARM PAYROLLS DISAPPOINT, EUROPEAN STOCKS REACTION LIMITED (1344 GMT) It's the moment we've all been waiting for today: U.S. non-farm payrolls. They missed, coming in at 148K for December while expectations had them down for 190K.
There was the briefest of moves on the STOXX 600, with the index trimming gains slightly but back up at +0.6 percent so nothing major.
Here are some thoughts from Twitter: (Kit Rees) ***** LEAD US NOT INTO TEMPTATION-A CASE FOR RESISTING THE BULLS (1307 GMT) Amundi, one of the world's top asset managers, is sounding a warning as the bulls of 2017 stampede their way into the new year.
"Moving into 2018, the temptation for risk assets is still high", Amundi's top investment officers said in a note, urging investors to "resist the temptation to aggressively increase risk" as the "Goldilocks” era may come to an end.
"The economic sweet spot will likely end up in higher interest rates, therefore reducing windows of opportunities in the most crowded areas of the market", it said.
Last quote: "Expensive valuations across the board, areas of complacency, liquidity conditions, the challenges ahead in terms of interest rate normalization, and geopolitical risks could result in a very uneven market performance".
Here's temptation (albeit old school): (Julien Ponthus) ***** UBS FINDS IMPROVEMENT IN IPHONE X DEMAND (1140 GMT) Given the concerns around demand for Apple's iPhone X, which hit European chipmakers at the end of last year, analysts at UBS have taken a look at the issue in their survey.
In short, UBS found an improvement in demand.
"Despite supply chain volatility, fundamental iPhone demand appears to have improved post the iPhone X launch," UBS analysts said in a note.
"This provides confidence in our iPhone estimates and could even mean upside to ASPs (average selling price) for Apple given the higher implied mix towards the iPhone X." While UBS analysts are positive on Apple and Samsung, they're "more balanced" on the supply chain.
(Kit Rees) ***** "HAPPY BULLISH YEAR EU (27 THAT IS, NOT THE OTHER ONE)" (1113 GMT) A cheeky putdown to the UK there from BAML whose European econ note highlights the UK's lag compared to the euro zone's stellar performance with manufacturing PMIs at an all time high and Q4 GDP growth tracking 0.7 percent quarter-on-quarter.
"The UK's relative underperformance makes the Brexit shock clear and this week's PMIs don't suggest much change to that position," BAML strategists say.
On whether progress in Brexit talks could help alleviate the shock to the economy, they reckon the answer so far is no.
The lag in economic growth is reflected in stocks, with the FTSE still behind its estranged EU family despite the recent commodities boost: (Helen Reid) ***** WHAT IS NOT A CRYPTO AND IS UP OVER 80 PERCENT in 2018? (1043 GMT) It's Steinhoff! One has to admit however that yesterday evening's headline is not exactly the kind that usually fuels exuberance across trading floors, but there you go: Steinhoff CFO steps down as crisis-hit retailer shuffles top team Here's the chart: (Julien Ponthus) ***** MINING SECTOR "AT A CROSSROADS" (1022 GMT) Could 2018 finally be the "year of redemption" for miners after the 2015 meltdown ? Bernstein analysts reckon it's all in the hands of mining companies who will need to display capex discipline and continue generating strong free cash flow in order for stocks to keep rising and investors to regain confidence in the sector.
"The question from here is whether we start a fresh wave of the typical boom-bust cycle we have seen in the industry historically, or whether we change tack," write Bernstein's Paul Gait and his team.
The way forward for corporate strategy is relatively simple, they reckon: avoid "stupid" M&A and increase shareholder returns.
There are some early signs of optimism: analysts have been revising earnings forecasts higher as the sector hits a 5-year high.
(Helen Reid) ***** VOLATILITY TO THE RESCUE: AN END TO "ACTIVE HUMILIATION" IN 2018? (0948 GMT) "Passive hubris, active humiliation": that's how BAML described in December the huge flows into equity ETFs, which seemed to seal the victory of passive versus active fund management.
But in a research note published today, UBS sees some light at the end of the tunnel with a pick-up in volatility, which could provide active fund managers an opportunity to shine in 2018.
"We believe the outlook for active management is positive as return dispersion is likely to increase, and correlations are at all-time lows," the research reads.
In the meantime, have a look at the VIX over the last two years: (Julien Ponthus and Kit Rees) ***** UK AUTOS STOCKS HIT A SPEED BUMP (0851 GMT) Helen mentioned before the open the disappointing cars sales data for the UK. Well, an analyst is pointing to this and a downgrade from JPMorgan as weighing on shares in UK car insurer Admiral Group.
“Admiral’s had a double whammy,” Chris Beauchamp, chief market analyst at IG, said.
Admiral is down 3.9 percent, set for its worst day since last August. Shares in automotive retailer Pendragon are also down 3.9 percent, while dealership chain Lookers has fallen 3.5 percent.
European autos are the biggest gaining STOXX sector though. One trader said that the UK is "small potatoes", and didn't expect the UK car sales data to impact European autos.
(Kit Rees) ***** SWISS BLUE-CHIPS HIT RECORD HIGH AS RALLY CONTINUES (0822 GMT) As a strong rally continues into the end of the week across European stocks, Switzerland's blue-chip index has just hit a record high, rising to 9,549.54 points and exceeding its previous peak of 9,548.09 points in June 2007. The FTSE 100 has also hit a new record in early deals.
In interesting stock movers, chipmaker Dialog Semiconductor is falling more than 3 percent. BAML downgraded the stock to "underperform" from "buy", citing the potential loss of Apple as its main client - and Apple's admission that all its Mac and iOS devices were exposed to chip flaws can't be helping sentiment either.
(Helen Reid) ***** WHAT WE'RE WATCHING: EUROPEAN STOCKS PRE-OPEN ROUNDUP (0746 GMT) European futures are suggesting that we’re going to see another session of gains for stocks today, albeit not quite as strong as on Thursday as oil and metals prices are lagging (alas probably no new records for the FTSE).
Of note is the fact that the Euro Stoxx index, comprised of Euro zone stocks, is on track for its best week in 8 months, shrugging off a rising euro. While a stronger euro was a source of concern for analysts last year, it looks like economic strength is trumping currency moves at least for now.
Data points from the UK are not painting a particularly rosy picture of the UK consumer, as a survey showed that British retailers’ sales fell for a fifth year in a row, while car sales saw their biggest drop since 2009. Next’s upbeat update earlier in the week is looking more and more like an outlier in a tough post-Brexit vote environment.
Elsewhere the focus will be on U.S. NFPs due 1330 GMT.
Key headlines: Monsanto profit misses estimates as farmers face squeeze (NB. Monsanto is being acquired by Bayer ); Steinhoff CFO steps down as crisis-hit retailer shuffles top team; Britain's Keller Group in talks to acquire U.S. firm Moretrench; UK meat retailer Crawshaw says softer consumer environment to drag on profitability in high street shops; British retailers' December sales fall for fifth year running; UK new car sales record biggest drop since 2009; UK small business confidence wanes in late 2017; German retail sales rise more sharply than forecast in November; London was top destination for tech funding in 2017.
(Kit Rees) *** BIGGEST DROP SINCE 2009 FOR UK CAR SALES (0734 GMT) This sharp fall in new car sales is causing a buzz among traders before the open.
Weakening consumer confidence due to Brexit, and uncertainty over potential new diesel charges were cited as causing the more than 5 percent drop in sales last year - carmakers could fall from yesterday's peak as a result, and UK motor insurers will also be stocks to watch after this data.
A Mediobanca analyst reckons the most exposed insurer to the UK car market is Admiral , with almost 100 percent of profits concentrated domestically, while Direct Line is also exposed with 47 percent of 2016 group premiums from personal motor insurance.
(Helen Reid) ***** EUROPEAN STOCKS FUTURES NUDGE HIGHER (0712 GMT) So it looks like we may see further gains today after all, as European stocks futures are edging higher.
FTSE 100 futures are lagging, however. This is probably down to the fact that oil and copper prices are a bit off so will probably weigh on British blue chips.
Here's your futures snapshot: (Kit Rees) ***** EURO ZONE STOCKS EYE BEST WEEK IN 8 MONTHS (0707 GMT) It's not even been a full week of trading, but Euro zone stocks are already set for their best week since May last year as weekly gains stand at 2 percent.
This is interesting as the euro has been rising since mid-December and hit a four-month high yesterday, so the stronger currency doesn't look to be weighing on the region's equity markets.
(Kit Rees) ***** EUROPEAN SHARES SEEN OPENING MIXED (0632 GMT) Good morning! Following yesterday's robust session which saw Europe's STOXX 600 close at a two-month high, spreadbetters are expecting a mixed open today and a cooler end to the week.
The FTSE 100 is seen falling 0.1 percent, Germany's DAX is expected to gain 0.2 percent while France's CAC is seen flat.
Equities globally have been spurred higher on the back of some encouraging economic readings, with the Dow closing above 25,000 on Thursday and China stocks also continuing to advance.
Today's focus will be U.S. non-farm payrolls data, due 1330 GMT. A Reuters poll sees the figure coming in at 190K.
"Investors will focus on the US labour market report, which should show continuing solid employment," analysts at Credit Suisse Wealth Management said in a note, adding that they also expected non-farm payrolls to have added 190K in December.
(Kit Rees) ***** (Reporting by Danilo Masoni, Helen Reid, Kit Rees and Julien Ponthus)
