January 26, 2018 / 11:49 AM / a month ago

LIVE MARKETS-Another bumper year seen for Italian small caps

    * European shares edge up
    * STOXX hit 1-week low in previous session
    * Trump says wants a strong dollar

    Jan 26 (Reuters) - Welcome to the home for real time coverage of European equity markets
brought to you by Reuters stocks reporters and anchored today by Danilo Masoni. Reach him on
Messenger to share your thoughts on market moves: danilo.masoni.thomsonreuters.com@reuters.net 
    
    ANOTHER BUMPER YEAR SEEN FOR ITALIAN SMALL CAPS (1133 GMT)
    Italian stocks have shown resilience to uncertainty surrounding the outcome of a national
election in March and one of the reasons cited for that is a wave of inflows generated by tax
breaks granted to investments into small and mid caps.
    Even though the so-called PIR scheme, which is running into its second year has raised
worries of a possible bubble forming, it looks that the bonanza is set to continue.
    In a reserch note today, Equita estimates PIR inflows at 9.1 billion euros this year after
attracting 11 billion in 2017 in a market dominated by Banca Mediolaum and Intesa
Sanpaolo. They note that Italian small caps trade at 18.3 times 2018 estimated
earnings, a 29 percent premium to the Italian market and above the 5-year average of 20 percent.
    Here some past Reuters stories on the PIR effect and below a chart showing how Italian
small/mid caps have outperformed their peers in Europe over the last 12 months:
    BUZZ-Italian real estate stocks rise on PIR inclusion rumours
    BUZZ-Equita drops expectation of Italy small-caps correction
    BRIEF-Banca Mediolanum confirms target of 3 bln euro PIR inflows in 2017
    Bubble risks loom for Italy's small caps as new fund scheme sparks rally    
 
    (Danilo Masoni)
    *****
    
    TIME TO RE-ENGAGE WITH DEFENSIVES? (1030 GMT)
    According to Deutsche Bank strategists, it is.
    In their latest update they affirm their overweight stance on defensives versus cyclicals
and upgrade utilities from benchmark to overweight: "Defensives have sold off by more than would
have been suggested by the rise in bond yields".
    That being said they point to property firms Vonovia and Deutsche Wohnen,
tobacco group Imperial Brands and beer company Heineken as buy-rating stocks
that are beneficiaries of a renewed fall in bond yields. 
    For those who instead believe yields should continue to rise, they highlight BNP Paribas
, Credit Suisse, Saint Gobain and AXA.    
 
    (Danilo Masoni)
    *****    
    
    OPENING SNAPSHOT: EUROPE BOUNCES BACK (0835)
    European shares have opened higher this morning, bouncing back from a one-week low hit in
the previous session, as the euro pulled back from a 3-year high. In corporate news, a
well-received update from LVMH a dividend increase at Telia and upbeat broker notes for Michelin
and Thales are helping the STOXX 600 index rise 0.3 percent.
    Here's your opening snapshot:    
 
    (Danilo Masoni)
    *****    
        
    WHAT YOU NEED TO KNOW BEFORE EUROPE OPENS (0744 GMT)
    European shares are expected to bounce back on Friday with main stock index futures pointing
to gains of around 0.3 percent. Such gains however would not be enough to prevent the STOXX 600
from scoring its first weekly loss this year. 
    Luxury goods makers will be in focus after LVMH said it had made a favourable
start to 2018 after a revival in Chinese demand boosted sales last year and spurred on some of
its major brands like Louis Vuitton. Its Q4 like-for-like sales were higher than forecast.
    There were strong results and a bullish forecast from Intel, which could help ease market
jitters about semiconductor demand, while Commerzbank could be supported after
Handelsblatt reported that Goldman, Barclays and SocGen are interested in buying its EMC
division. 
    Eyes also on Zalando and Ocado after big price target increases by RBC. 
    
    Other stock movers:
Telecom Italia deputy chairman gives up operational powers - sources 
Nestle to cut 400 jobs in France 
CFM says LEAP engine output 4-5 weeks behind schedule
Telia Q4 core profit matches forecasts  
SSAB Q4 operating profit lags forecast, proposes first dividend since 2012

Givaudan confirms targets after double-digit profit rise
BRIEF-Autoliv announces goodwill impairment in Autoliv Nissin Brake
    (Danilo Masoni and Tom Pfeiffer)
    *****
    
    EUROPE STOCK FUTURES EDGE UP (0715 GMT)
    The euro is rising again this morning but remains below the fresh three-year peak of
$1.25 hit yesterday, with the dollar recovering following U.S. President Donald Trump's Davos
forex "coup de theatre". 
    Just one day after his Treasury Secretary Steve Mnuchin sent the dollar plunging, Trump
surprised markets by saying in a CNBC interview he "ultimately" wanted a strong dollar. You can
watch the interview here: goo.gl/iyNhLt
    The euro pull-back is set to help European shares this morning, with futures on main
regional benchmarks all rising around 0.3 percent.    
 
    (Danilo Masoni)
    *****
        
    
    LUXURY GOODS MAKERS IN FOCUS AS LVMH SOUNDS UPBEAT (0643 GMT)
    Luxury goods makers could be among the stocks to watch today after LVMH said it
had made a favourable start to 2018 after a revival in Chinese demand boosted sales last year
and spurred on some of its major brands like Louis Vuitton.
    Here in bullets the key highlights from results at the world's biggest luxury goods maker.  
 
    * Operating profit up 18 pct in 2017, as expected
    * Q4 like-for-like sales higher than forecast
    * Chinese demand continues to boost luxury goods market   

 
    (Danilo Masoni)
    *****    
    
    
    MORNING CALL: EUROPEAN SHARES SEEN STEADYING (0621 GMT)   
    Good morning and welcome to Live Markets. Following losses in the previous session, European
shares are expected to open little changed today as the battered dollar won back some ground
after President Donald Trump surprised markets by saying he wanted a strong U.S. currency. 
  
     Financial spreadbetters expect London's FTSE to open 2 points lower at 7641.6 points,
Frankfurt's DAX to open 16 points higher at 13430.5 point and Paris' CAC to open 1 point higher
at 5496 points.
    (Danilo Masoni)
    *****

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