February 12, 2018 / 7:28 AM / a year ago

LIVE MARKETS-A "technical" correction, or more fundamental weakness?

    Feb 12 (Reuters) - Welcome to the home for real time coverage of European equity markets
brought to you by Reuters stocks reporters and anchored today by Helen Reid. Reach her on
Messenger to share your thoughts on market moves: helen.reid.thomsonreuters.com@reuters.net
    That's the question on everyone's lips after a weekend of mulling over the most serious
sell-off to hit markets in years.
    UniCredit global chief economist Erik Nielsen says while most market commentators have
labelled this correction as mainly "technical", it's worth digging into the reasons why more
fundamental drivers could be at play, especially in the US.
    "My fear of more fundamental weakness relates only to the US, which really is at the centre
of the present markets chaos," writes Nielsen, arguing the US economy may be in more trouble
than widely thought.
    "If US balance sheet issues are causing trouble, then we may be in for a more complicated -
and volatile - ride during 2018 that'll see US equities slide through must of the year, as US
yields climb higher."
    Nielsen sees non-US equities as likely to de-couple therefore, as Europe and Asia benefit
from more moderate valuations, better relative growth and 'much stronger' balance sheets.
    "In contrast to European firms, US companies are much more exposed to rising financing costs
because of recent years' strong increase in net debt," he notes, adding most of this money was
used to inflate shareholder payouts rather than for investment.
    Nielsen adds a word of warning on thinking it's all over too soon: "Corrections are rarely
done within 10 working days. On average these types of disruptions normally rumble on for 30-40
    Fasten your seatbelts...
    (Helen Reid)
    Stock index futures are pointing to a strong rebound in Europe this morning after the
region's equity market lost 5 percent, or around 1 trillion euros in market cap, during
last week's sell-off.
    DAX futures are leading the advance, up 2 percent, as you can see below. Meanwhile,
S&P 500 e-mini futures are up 0.6 percent.
    (Danilo Masoni)
Heineken guides for lower margin growth in 2018
Renault board member quits ahead of CEO succession meeting
Credit Suisse hit by U.S. lawsuit over writedowns, says case "without merit"
Standard Life Aberdeen takes on Mexican airport developer in rare move
Airbus ordered to pay $99 mln fine in Eurofighter case
Intesa chairman says sale of bad loan unit won't take long
Maersk profit miss, outlook put shipping shift in spotlight
Switzerland's Clariant halts strategic update pending talks with SABIC
Ladbrokes Coral reports 4 pct rise in full year revenue
UK's Tesco is plans a chain of discount stores -Sunday Times
Cardiff University defends joint venture with Apple supplier IQE
Italy's Carige bank pledges to act more quickly to cut bad debts
MEDIA-French insurer CNP could be merged with La Banque Postale -report
BRIEF-CGG Raises About 112.2 Million Euros In Rights Issue
Switzerland's Clariant halts strategic update pending talks with SABIC   
Vontobel must pay 13.3 mln euros over untaxed German assets    
Nestle buys majority stake in organic food company Terrafertil   
EU says Bayer Monsanto must not hurt competition in digital farming-paper
BMW close to 10-year supply deal for battery minerals - FAZ   
Porsche, Audi to develop joint electric car platform to save costs   
South Africa's Wiese slashes stake in Steinhoff to 6.2 pct   
Suedzucker sees 2 yr transition after deregulation - Boersen-Zeitung
BRIEF-Carl Zeiss Meditec Sees FY Adj EBIT Margin At 14-16 Pct
    (Danilo Masoni)
    Stats from last week's sell-off reveal exchange-traded funds saw massive trading volumes on
the London Stock Exchange, while the exchange's dark pool cleared record amounts of trades as
investors sought to put through large block trades incognito.
    Last Tuesday was the strongest day of ETF trading activity ever on the LSE, a spokeswoman
said, with some 1.3 billion pounds traded in ETFs. 
    Dark pool Turquoise saw a record amount processed in its large block platform Plato Block
Discovery, with 2.46 billion euros in trading over the week as investors sought to put through
big trades without moving the market. 
    Turquoise overall beat its previous weekly record by 18 percent, with 7.43 billion euros
worth of trades executed in the dark.
    (Helen Reid)
    Good morning and welcome to Live Markets. 
    European investors will be returning to their desks this morning having had time to digest
the past week's events, and a tentative bounce in European stocks could give them hope, while
volatility is set to stay elevated. 
    Asian stock markets recovered overnight with S&P futures also trading higher, but investors
were looking ahead to U.S. consumer prices data due out on Wednesday for the next potential sign
of inflation rising at a concerning pace.
    Spreadbetters call the DAX 175 points higher at 12,281.8, the CAC 40 up 56 points at
5,135.1, and the FTSE 100 83 points higher at 7,175.5. 
    (Helen Reid)

 (Reporting by Danilo Masoni, Helen Reid, Kit Rees and Julien Ponthus)
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