Robert Walters Share News (RWA)

* European stocks up on fresh Brexit deal hopes
* STOXX 600 comes off highs, +0.4%, FTSE 100 lags as sterling rises
* UK midcaps, Irish banks lead gains
* Wirecard sinks after FT report

Welcome to the home for real-time coverage of European equity markets brought to you by Reuters
stocks reporters and anchored today by Thyagaraju Adinarayan. Reach him on Messenger to share
your thoughts on market moves: rm://thyagaraju.adinarayan.thomsonreuters.com@reuters.net


EUROPEAN BANKS: A (REALLY TINY) RAY OF LIGHT (1211 GMT)
European banks have just made their way back to yearly gains with the sector's index up 0.3%
so far in 2019 but there's actually very little to celebrate today despite JP Morgan's profit
beat.
Firstly, banks are still the worse sectoral performers in 2019, which is set to be the third
best year of the decade for stock markets.
Secondly, the research on the sector is sooooo gloomy.
Lower for longer rates, poor macro and though regulation mean that their current juicy
dividend yields and super low valuation are to investors what mermaids are to sailors: value
traps.
Keeping that context in mind, UBS analysts just published an in-depth review of the sector
and looked at the impact the new banking rules out of Basel would have on their balance sheet.
No spoiler here: it's not good.
"In short, with capital generation generally under pressure, the application of increased
capital requirements under Basel IV (the reform of Basel III) from 1 January 2022 has greater
importance today than might be assumed given the still fairly distant implementation date".
Key takeaway: the new rules threaten dividends, buybacks and loan growth.
One tiny little ray of light could be found in a DB note which says that banks could benefit
strongly by charging the cash their clients hold above the deposit guarantee limits by a few
basis points.
"Banks could propose that clients move the extra deposits into money market funds with
low/no fees and a small positive targeted return", DB analysts believe, noting that this would
allow banks to retain liquidity off-balance.
A small percentage would be enough to invigorate profits and give a shot in the arm to
banks' asset management businesses.
With yield curve pointing out to what could be another decade of negative rates it's
probably worth looking into.
(Julien Ponthus)
*****



THE RULE OF CASH: DAYS NUMBERED? (1123 GMT)
Even though the latest BAML fund manager survey has shown that investors continue to sit on
high levels of cash, the mini trade deal between Washington and Beijing and the prospect of a
Brexit accord could tempt some to put their parked money at work.
"We're substantially positive and ready to invest our substantial cash reserve as soon as
there's a strong signal. That could an easing of trade tensions, mainly between the United
States and China," says Federico Polese, founder of Simplify Partners in London.
Simplify's flagship 02 fund has nearly one third allocated to cash, he adds.
Back to the BAML, strategists at the U.S. bank have proposed "long stocks-short cash" as a
contrarian trade, highlighting how their FMS cash rule has been in "buy" territory for 20
months, as cash levels rose 0.3 percentage points to 5.0%.
The rule works like this: "when average cash balance rises above 4.5%, a contrarian buy
signal is generated for equities. When the cash balance falls below 3.5%, a contrarian sell
signal is generated."

(Danilo Masoni)
*****


IS SOMETHING GOING ON IN TELCO WORLD? (0930 GMT)
Spanish phone towers firm Cellnex has scored yet another record high today after
its recent cash call to fund acquisitions, African mobile networks operator Helios Towers
is having a decent IPO debut in London and the sector index has quietly reached
highest since Dec 2018.
It looks like investors are starting to warm up somewhat to the battered telco sector, even
though the industry still faces costly infrastructure upgrades and has seen growth slowed down
by years of strong competition and adverse regulation.
A key aspect of this tentative revival is dealmaking in mobile towers, a business that
commands high multiples and is seen expanding as demand for 5G services grows, offering
traditional phone groups a way to deleverage and cut costs.
"Investor interest in telcos has picked up a bit. This is driven by broader macro concerns
(relative defensiveness) plus scope for improvement in mobile growth and infra monetization
(towers, not fibre yet)," says Credit Suisse's Jakob Bluestone.
"Cellnex remains the stock where there is by far the most investor enthusiasm. Interest in
the stock is wide particularly with the recent cap raise, and the consensus is there is scope
for strong growth/further deals," he adds.
In this 2-year chart you can see how telecoms have been underperforming the broader market,
while Cellnex - a conviction buy for Goldman Sachs, clearly tells a different story.

(Danilo Masoni)
*****


OPENING SNAPSHOT: THAT FRIDAY FEELING (0730 GMT)
A promising start for European stocks this morning with the pan-European STOXX 600
rising 0.7%, mainly driven by mid-cap UK stocks and Irish banks.
It looks like a repeat of last Friday with domestically-exposed UK banks, retailers,
airlines and housebuilders rising on fresh Brexit deal hopes as EU's Barnier says a deal is
still possible this week.
"Even if an agreement has been difficult, more and more difficult, it's still possible this
week," Barnier says.
Among single stocks, Wirecard is sinking 20% set for its worst day since February
after the FT published documents on Wirecard's accounting practices which it alleges an effort
to inflate sales and profits.
Earnings check: Indivior up 10% after it raises outlook; Hays +6.5% in a relief rally after
its results weren't as bad as its peers, who issued profit warnings last week; Bellway
is sliding 4.6% after it reported FY results, which Jefferies says "contain little to surprise"
and they believe consensus numbers for the company will come down.

(Thyagaraju Adinarayan)
*****


BREXIT DEAL HOPS FUEL GAINS, BUT EARNINGS TEST KEY (0659 GMT)
Brexit deal hopes again take centre stage as futures trading at European bourses point to a
strong open, but the real litmus test will be in the afternoon, when some big Wall Street banks
kick off the earnings season.
Germany's DAX futures are up 0.6% at their highest since July 27 and the Eurostoxx
futures are just shy of a two-week high.
A BBC report overnight that the European Union is considering a new emergency summit to get
a Brexit deal brought back optimism in markets, although London FTSE stock futures are
rising just 0.3%, lagging the broader market as sterling's rally limits gains.
In corporate news, Kloeckner & Co's shares are sliding 8% in pre-market Frankfurt
trade after the steel company warned on profits in a latest European industrials are still
suffering blows from trade tensions and faltering demand.
It's a different picture at consumer-facing companies with shares in German meal-kit company
Hellofresh seen up 6% after it raised its profit outlook.
In the UK, dealers call British housebuilder Bellway's shares 2% higher citing
positive tone in statement and the Street is divided on Hays after the recruiter
reported no growth in net fees. Rivals Britain's PageGroup and Robert Walters
warned on profits last week.
Hard day for UK industrials: dealers call Renishaw shares down 20% after the British
engineering group's profits tanked 85%, while they see Vesuvius shares dropping 10%
after its profit warning.
European companies with exposure to Turkey in focus after U.S. President Trump slapped
sanctions. BBVA, UniCredit, BNP Paribas, Telia and
Lufthansa are among the top companies with exposure to Turkey.
Later today, we have JP Morgan, Citi, Goldman Sachs, Wells Fargo
and Blackrock kicking-off the third-quarter earnings season.

Key headlines:
BRIEF-Kloeckner & Co SE outlook for full year EBITDA burdened
Schroders assets under management up to 450.8 bln stg at end-Sept
Italy's Ferretti cuts IPO price range to 2.0-2.5 euros per share - source
Indivior raises full-year revenue forecast on Suboxone strength
Hays reports flat quarterly net fees
African masts operator Helios Towers prices IPO at low end of range
Neil Woodford's flagship Equity Income Fund to be shut down
Bellway reports higher annual profit on strong demand for homes
Steel trader Kloeckner cuts guidance again, shares tank
Engineering firm Renishaw first-quarter profit tanks 85%

(Thyagaraju Adinarayan)
*****

TENTATIVE GAINS (0532 GMT)
European stocks are seen opening slightly higher on renewed hopes that Britain had a chance
to leave the European Union with a deal later this week as UK-EU go into negotiations later this
week.
Fresh optimism was underpinned by a BBC report overnight that the European Union is
considering a new emergency summit to get a Brexit deal.
Citi strategists however were sceptical on a Brexit deal, saying there was "little landing
space for a deal before 19th October".
Financial spreadbetters IG expect London's FTSE to open 7 points higher at 7,220,
Frankfurt's DAX to open 8 points higher at 12,495, and Paris' CAC to open 8 points higher at
5,651.

(Thyagaraju Adinarayan)
*****



(Reporting by Danilo Masoni, Joice Alves, Josephine Mason, Julien Ponthus and Thyagaraju
Adinarayan)