January 31, 2018 / 10:21 AM / a year ago

LIVE MARKETS-European equity funds enjoy highest inflows in 2018 so far

    * STOXX 600 edges up
    * Earnings dominate trading
    * Ericsson falls 9 pct after loss wider than expected
    * Capita plummets after profit warning, rights issue

    Jan 31 (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
    European equities remain the favourite among global investors, according to fresh flows data
from HSBC and EPFR. Weekly fund inflows over the last three weeks are among the top ten weekly
inflows since the beginning of the data series, HSBC finds. 
    "In our last note on investor allocation we highlighted muted equity fund flows in Europe in
Q4 2017 and advised investors to watch this space over coming weeks," write HSBC strategists.
    "Year-to-date in 2018, European fund flows have seen a big turnaround, clocking inflows in
excess of $22 billion, which are also the highest across all major regions."
    Last year Europe recorded the highest equity inflows across all major regions, accounting
for over one-third of global equity fund inflows. This year could be shaping up to deliver
similarly impressive figures.
    On the country level there are some interesting developments: global funds are raising their
allocation in the UK from the lowest level in over ten years. In December 2017 global funds
increased UK holdings by 52 basis points, causing the 5-year z-score of global funds holdings in
the UK to hit its highest level since July 2016.
    And uncertainty over Italy's upcoming election has caused global funds to trim their
exposure to the country. They've reduced their weightings in Italy by over one standard
deviation compared to its long-term average value.
 (Helen Reid)
    After spirits maker Diageo last week, now big German industrial names are pointing
to dollar weakness as a significant headwind. 
    Siemens <    SIEGn.DE> says its medical equipment business Healthineers and its industrial
businesses were hit by negative currency effects, which took 5 percentage points off order
growth. And industrial chipmaker Infineon has slashed its revenue guidance blaming
the weakening U.S. currency. 
    We found last week that shares of European exporters have slightly outperformed their
domestically exposed peers despite a slowly strengthening euro.. Can that last? 
    "Until recently we were still getting upgrades on dollar strength against the pound, now
we're getting to this halfway house where the historic numbers look pretty good and prospective
numbers look much more challenging because of the currency and we think that will start to feed
through," says Simon Gergel, Chief Investment Officer for UK Equities at Allianz Global
    Raymond James has worked out some European winners and losers from a 10 percent drop in all
currencies vs the euro. It finds "a stronger euro should not hurt companies, as long as the
synchronized GDP growth across developed economies continues". 
    Winners include Vodafone, Total, GKN, losers include Yara
, Symrise, Lanxess, Suez, Fortum, Clariant
, Pernod Ricard, Adidas, LVMH, E.ON and
    (Tom Pfeiffer and Kit Rees)
    It's been a terrible month for UK outsourcers. After Carillion collapsed, now
Capita is going into brace mode following a profit warning, scrapping its dividend and
announcing it will go to shareholders for fresh funds.
    The new CEO Jonathan Lewis also wants to raise cash from asset sales as he sets out a vision
for a simpler business focused on fewer markets. But he expects the company to bleed cash this
year and the business outlook appears to have got even worse since the company's last market
update, with Lewis pointing to delays in decision making, weakness in new sales and a higher
level of attrition than expected.
    An index of support services companies is down 0.6 percent this morning in a rising market.
Babcock is down 3 percent, Serco 1.5 pct, Kier 2 percent. 
    (Tom Pfeiffer)
    European shares have opened slightly higher this morning with a broad-based move higher, but
it's earnings which are driving moves. 
    Individual gains and losses on the STOXX 600 are ranging between a gain of 6.2 pct and a
loss of 31.8 percent, the latter thanks to Capita's plunge. More on that in a bit.
    Here's your opening snapshot:
    (Kit Rees)    
    It looks like we could see some hefty moves today thanks to earnings.
    Among those standing out for us (based on indications from trading desks):
    Capita - called as much as 40 percent lower after a big profit warning and dividend
    Infineon - seen down 3 to 4 percent, traders saying sales came were in line but the firm cut
its sales guidance
    Ericsson - seen down 2 to 3 percent on the back of a sales miss
    H&M - called up as much as 2 percent thanks to better than expected results, though outlook
and sales weak
    (Kit Rees)
    A hesitant recovery seems to be in store for European stocks after a global risk-averse turn
dented benchmarks yesterday. Euro zone blue chips were still on track for their best month since
September, though, as a month of eye-watering gains across equities drew to a close.
    Results take centre stage today, with a slew of companies reporting across industrials,
banking and retail. 
    Banks had mixed results as ING’s profit disappoints while SEB beats expectations. The sector
is under extra pressure to deliver strong results as it’s become a favourite since the end of
last year as investors rotated away from tech and into financials. Even after Tuesday’s losses,
the STOXX banks index is set for its best month since March last year.
    It'll be a dark day for Capita (and pay day for short-sellers) as the outsourcer's
shares are indicated down as much as 40 percent after the company announced an unholy trinity of
a profit warning, rights issue and dividend suspension. 
    Autos stocks could be under pressure after data showed British car production fell last year
for the first time since 2009 and investment slumped by a third as uncertainty over Brexit hit
    Pharmaceuticals could also be a focus after President Trump again took aim at the sector,
lambasting high drug prices in his State of the Union speech.
    And in an early sign of the weak dollar hurting some exporting European companies, chipmaker
Infineon slashed its revenue guidance, blaming the greenback.
    Here are some extra headlines which could move the market this morning:
    UK car output drops for first time since 2009, investment slumps 
    U.S. agencies probe Apple over slowing iPhones -Bloomberg
    Italy's Safilo sees 2017 adj EBITDA halving
    JCDecaux beats fourth-quarter revenue target 
    (Helen Reid)
    It's a busy day of earnings today, so here's a summary of the headlines we're looking at.
    H&M Q4 pretax profit falls less than expected
    Siemens Q1 profit dips on Power and Gas business declines
    ArcelorMittal upbeat about 2018, slowly resumes dividend
    Ericsson posts bigger than expected Q4 loss
    Santander Q4 profit falls 4 pct on U.S. impairments
    Truck maker Volvo raises market outlook after Q4 order boom
    Lonza's full-year core profit soars 82 pct on acquisitions
    Electrolux Q4 operating profit tops forecast
    Infineon slashes revenue guidance on weak U.S. dollar
    SEB raises dividend as Q4 profit beats expectations
    Energy group Total announces major deepwater oil discovery in Gulf of Mexico

    ING quarterly profit misses on costs, weaker financial markets
    Dutch telco KPN's Q4 results slip as roaming rules hurt
    Sanofi and partner seek European Medicines Agency review for sleep sickness
    Wartsila Proposes Share Split
    Britain's Capita plans rights issue after profit warning
    Britain's SSE raises FY profit outlook
    Centamin posts fall in 2017 core profit on lower output, higher costs
    Wizz Air posts record passenger numbers and profit in third quarter 
    UK's Britvic Q1 revenue up 3.3 pct
    Dairy Crest says 9-month revenue well ahead of last year
    Shell says to sell its stake in Thai Bongkot fields to PTTEP for $750 mln

    German retail sales fall unexpectedly in December
    (Kit Rees)
    Stock futures have opened up 0.1 percent across the major European benchmarks, suggesting a
rather hesitant recovery from yesterday's sharp falls. 
    While the STOXX, DAX and CAC40 are set to rise, ending January on a positive note, the FTSE
100 is on track to fall further with futures down 0.2 percent. A rising pound could be piling
extra pressure onto the British index.
 (Helen Reid)
    In an early sign the weak dollar could be a strain on some European companies, particularly
those reliant on exports, chipmaker Infineon just cut its 2017/18 revenue guidance,
blaming the greenback's weakness.
    The stock is indicated down 1.9 percent in pre-market trade.
    (Helen Reid)
    Results are rolling in thick and fast today from industrials as well as several banks.
    German engineering group Siemens reports a fall in quarterly industrial profit
due to continued weak demand from the power and gas sector. Profit was in line with analysts'
forecasts, but profit margin shrank.
    Interestingly the group says it got a net 437 million euro benefit from U.S. tax reforms in
the first quarter. 
    The world's largest producer of steel, ArcelorMittal, was more upbeat, with profit
ahead of expectations and resuming dividend payments after skipping them for 2015 and 2016. The
$0.10 payout undershoots analysts' expectations of $0.30, though.
    A slew of banks reporting today as well, with ING's Q4 profit missing expectations
while Sweden's SEB raises its dividend after strong results. Meanwhile impairments in
its U.S. unit dented Santander's numbers. 
    The pressure's on for European banks, a leading sector in this year's rally, to deliver
convincing results, so it'll be interesting to see how banking shares react today.
    Also in results to watch today, especially considering the tech rally after AMS results
earlier this week, will be chipmaker Infineon. More on that soon.
    (Helen Reid)
    Good morning and welcome to Live Markets. 
    Looks like European stocks could recover slightly today after suffering their biggest daily
loss since November yesterday in a global risk-averse turn. Only the FTSE is seen edging
slightly further down, having sunk to five-week lows yesterday as miners and banks tumbled.
    Overnight Asian stocks lost further ground, falling from their record highs as the global
rise in bond yields weighed on equities. The dollar found some support, however, ahead of the
Federal Reserve's policy decision.
    Spreadbetters call the DAX 25 points higher at 13,222.1, the CAC 40 up 8 points at 5,481.7,
and the FTSE down 4 points at 7,584.3.
    (Helen Reid)

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