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* UK banks scrap dividends on regulators' call
* European shares tumble: STOXX -3%
* Euro zone factory activity crashes in March
Welcome to the home for real-time coverage of European equity markets brought to you by Reuters
stocks reporters. You can share your thoughts with Thyagaraju Adinarayan
(thyagaraju.adinarayan@thomsonreuters.com), Joice Alves (joice.alves@thomsonreuters.com) and
Julien Ponthus (julien.ponthus@thomsonreuters.com) in London.
EUROPEAN SHARES KICK OFF QUARTER IN NEGATIVE TERRITORY (1600 GMT)
Europe's bourses have started the second quarter in negative territory as investors get more
evidence the global economy is heading to a deep recession.
Plunging factory activity underlined the severe economic damage from the coronavirus
pandemic. The pan European index sank 3.2% with the travel and the banking
sectors leading the losses.
Britain's blue chips were down 3.8% with cruise ship operator Carnival shedding more
than 20%.
UK banking shares also dived after some banks suspended dividend payments, bowing to
pressure from the regulator. Barclays, HSBC and Lloyds Banking Group
were down around 9-11% each.
(Joice Alves)
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HOW ARE CONSTRUCTION EXPOSED SHARES COPING WITH COVID-19? (1315 GMT)
It seems quite clear now that Covid-19 may hit construction stocks harder than the 2008
global financial crisis did, as companies move to shut down construction sites on request of
regulators or/and because demand has plummeted.
Things seems quite dire to defensive stocks exposed to the construction sector as well,
Morgan Stanley analysts wrote in a research note.
These companies are not getting business due to shutdowns of construction sites.
Additionally, as many governments have enforced some form of lockdown, commercial and
industrial building closures means businesses such as elevator or power switch makers are not
getting demand for renovation, modernisation and maintenance service, "which is unprecedented
and could lead such sales, typically rock solid, to turn negative in 2020," MS analysts say.
The bank updated its forecasts for defensive construction exposed stocks, cutting underlying
numbers by 7-14% across Assa Abloy, Kone, Legrand and Schindler
.
(Joice Alves)
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VISA WORTH AS MUCH AS ALL LISTED EZ BANKS COMBINED (1158 GMT)
It's getting quite hard to describe the extent of the bloodbath for European banks today.
While UK lenders are under the spotlight and topping the losses after cutting their
dividends, the pain is spread throughout a sector which has become the second worst performer in
the coronavirus crisis behind travel and leisure (-44%) with a whopping 41% fall year-to-date.
The decision by most banks to comply with their regulator and keep dividend cash for a rainy
day isn't going well among investors.
In absolute numbers, the pan-European is worth just above 500 billion euros with its current
4.8% fall. That's half the value of Apple.
All listed euro zone banks combined are worth $357 billion -- that's almost as much as
Visa's market cap. As you can see below euro zone banks are actually trading below their 2008
lows:
(Julien Ponthus and Thyagaraju Adinarayan)
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UK BANKS: IS SCRAPPING DIVIDENDS COUNTERPRODUCTIVE? (1005 GMT)
Britain's regulators have followed the ECB in asking banks to scrap dividend payments in a
bid to preserve cash. But some argue the move could backfire.
"Cancelling dividends is counterproductive for most stakeholders, we think," say analysts at
BofA.
The risk is that cost of capital will soar as investors will wait longer for lower returns,
the U.S. bank says in a note.
"This may play well in the media but we worry that the move undermines confidence in the
regulatory framework and raises cost of capital".
The picture below shows how the capital return profile could change for UK banks RBS
, Barclays and Lloyds, according to BofA.
(Joice Alves)
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OPENING SNAPSHOT: UK BANKS SHARE TAKE DIVIDEND HIT (0725 GMT)
It's the main headline of the day: UK banks, just like most of their European peers have cut
their dividend payouts and are taking a hit for it this morning.
Shares in HSBC, Lloyds, RBS and Standard Chartered are down, 7.7%, 4.5%, 4.3% and 5.7%
respectively.
Quite logically, the European banking sector is the biggest loser, down an
impressive 4.3% as investors come to grip with the fact that returns are on their way down for
the quarters (to be optimistic) to come.
The fall in oil prices is also weighing on stocks. The pan-European STOXX 600 is down over
3% for the first day of Q2 2020 with quite a shortage of good news.
(Julien Ponthus)
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MORNING CALL: NOT LOOKING GOOD (0537 GMT)
European futures are currently trading deep in negative territory (-3% for the STOXX 50E)
and the same goes for their U.S. peers.
Trump's warning that a "painful" two weeks are ahead in fighting the coronavirus and factory
activity contracting across most of Asia in March clearly weigh on sentiment.
The session wasn't that encouraging in Asia after the losses on Wall Street overnight:
MSCI's broadest index of Asia-Pacific shares outside Japan lost 0.3% while Japanese shares fell
over 2% as a rapid increase in coronavirus infections in Tokyo fuelled speculation the
government will place the capital on lockdown.
(Julien Ponthus)
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(Reporting by Danilo Masoni, Joice Alves, Julien Ponthus and Thyagaraju Adinarayan)
