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* STOXX pares early losses
* Experian, M&S shine
* Cyclicals suffer, defensives lead
Welcome to the home for real-time coverage of European equity markets brought to you by Reuters
stocks reporters. You can share your thoughts Joice Alves (joice.alves@thomsonreuters.com) and
Julien Ponthus (julien.ponthus@thomsonreuters.com) in London and Stefano Rebaudo
(stefano.rebaudo@thomsonreuters.com) in Milan.
ZERO REBOUND FOR EURO ZONE BANKS... YET! (1050 GMT)
There's been absolutely no rebound for euro zone banks, which are currently trading at the
same level as they were during the coronavirus-induced deepest crash on March 16.
One ray of hope however for investors who didn't give up on European lenders is that
momentum may be building for cyclicals shares, Barclays analysts argue in their weekly strategy
note.
"Once activity starts to rebound, it is likely that most cyclical sectors should perform
better as they are highly positively correlated to the PMIs", which are probably close to their
bottom, the Barclays team believes.
As you can see from their chart, banking stocks have the biggest correlation to PMIs:
The question is though, will banks catch the cyclical boat when and if it finally gets ready
to sail away?
(Julien Ponthus)
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UK DEPARTURE MIGHT DEPRESS EUROPEAN STOCK RETURNS (1005 GMT)
Analysts do not challenge the idea that U.S stocks offer historically better returns than
European ones, but some argue that Euro zone shares are so depressed that now they are a good
bargain.
Bernstein does not think so and lines up several good reasons to go for Wall Street instead.
"On a sector-adjusted basis (accounting for the lack of a tech sector) Europe trades at a
slight discount to the U.S., but not outside the bounds of historical experience," a research
note says.
Lack of mega-cap tech stocks in Europe, something that has been a feature for U.S. versus EU
equity performance for 50 years, is not something that can change, not even in the medium term.
The expected departure of the UK could weigh on European equity returns as "it removes a key
support for Anglo-Saxon views of shareholder primacy," it adds. It means that there will be less
dividends and buybacks.
The eurozone split between North and South and fears of possible break-up are probably
overstated, according to Bernstein.
"We do think that there are good reasons that mean Germany will eventually acquiesce to some
form of a fiscal union. Such an outcome would be bullish for European risk assets and remove a
strategic hurdle. But this would require a great deal of patience by investors," it argues.
(Stefano Rebaudo)
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OPENING SNAPSHOT: STOXX DOWN, EXPERIAN AND M&S SHINE (0740 GMT)
Stocks are edging lower as investors continue to worry about the economic impact of the
pandemic and digest another batch of earnings reports.
The pan European index is down 0.6% with banks leading the losses, down more than
2%. The healthcare sector is the best performer, up 0.8%.
Shares in Marks & Spencer jumped 3.8%, after the company said it would accelerate its
turnaround programme.
Experian shares are up 5.4% to the top of the STOXX, after it forecast Q1 organic
revenue to decline just by 5% to 10%.
AstraZeneca shares are also in positive territory after the U.S. Food and Drug
Administration approved its Merck’s Lynparza as a treatment for a form of prostate cancer.
(Stefano Rebaudo)
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ON THE RADAR: ROLLS ROYCE, RABOBANK, TOTAL, EXPERIAN (0646 GMT)
European stocks are expected to open lower as investors are still uncertain about how deep
the impact of the coronavirus outbreak on the economy will be in the medium term.
On the corporate front we have the second large oil and gas deal to be revised in the wake
oil price slump after BP delayed some payments to, and received vendor financing from, Hilcorp
last month.
Total revised a previously agreed deal to sell its British North Sea oilfields,
which would result in Oman's Petrogas pulling out of the transaction.
Rolls-Royce will need to lay-off at least 9,000 of its 52,000 staff to make annual cost
savings of 1.3 billion pounds.
Dutch lender Rabobank foresees around 2 billion euros ($2.2 billion) in additional loan
provisions in 2020. HSBC Holdings expects to achieve double-digit asset growth in its newly
combined wealth business in Asia Pacific in the next three years.
World's biggest credit data company Experian expects first-quarter organic revenue
to decline by 5% to 10% if coronavirus-related restrictions continue.
The U.S. Food and Drug Administration approved AstraZeneca and Merck's Lynparza as a
treatment for a form of prostate cancer.
Marks & Spencer said it would accelerate its latest turnaround program, after reporting a
21% fall in annual profit.
Lufthansa is bracing for hundreds of aircraft to remain grounded due to the coronavirus
pandemic well into 2022 and that further job cuts.
Renault has sealed a deal with banks on a 5 billion-euro ($5.47 billion)
state-guaranteed loan to help the company to cope with the coronavirus outbreak.
Shares in Aareal Bank up 4.2% in premarket after it invited bids for minority stake in its
Aareon unit.
(Stefano Rebaudo)
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MORNING CALL: STILL WORRIED ABOUT THE IMPACT OF THE VIRUS (0635)
European futures are pointing to an open slightly in the red, but with no clear direction as
investors continue to swing between optimism over some easing in lockdowns and anxiety about a
worse than expected impact over the economy.
Wall Street lost ground overnight after a report said the Moderna experimental
COVID-19 vaccine did not provide the critical data needed to assess its effectiveness.
Asian stocks were mostly flat but a soft yen supported the Japan blue chip index Nikkei
which closed up 1.2%.
Crude futures are in positive territory, amid signs of improving demand.
(Stefano Rebaudo)
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(Reporting by Joice Alves, Julien Ponthus, Stefano Rebaudo and Thyagaraju Adinarayan)
