January 16, 2018 / 11:31 AM / 4 months ago

LIVE MARKETS-Some biotech "feel-good" from San Francisco

    * European stocks open higher
    * Cyclicals under pressure
    * UK inflation down from November peak

    Jan 16 (Reuters) - Welcome to the home for real time coverage of European equity markets
brought to you by Reuters stocks reporters and anchored today by Julien Ponthus. Reach him on
Messenger to share your thoughts on market moves: julien.ponthus.thomsonreuters.com@reuters.net
    
    SOME BIOTECH "FEEL-GOOD" FROM SAN FRANCISCO (1110 GMT)
    While the European Healthcare index has been quite an underperformer since the
beginning of the year, analysts from Jefferies posted an upbeat note after meeting the
management of over 30 European biotechs during a conference in San Franciso. 
    "Overall the tone was notably upbeat", they said noting exciting clinical results in the
pipeline, satisfactory funding and, cherry on the cake, M&A activity such as Novo's
bid for Ablynx .
    So far however, as you can see from the snapshot below, few sectors (travel and leisure
, personnal and household goods, food and beverages and real estate
) have fared worst:  
 
    (Julien Ponthus) 
    *****   
    
    EURO PARITY? WRONG PREDICTION! (1043 GMT)
    A number of investors had predicted the euro to remain weak throughout 2017 only to
be wrong footed by its rapid and seemingly unstoppable surge that started last summer. While the
jury is still out on whether this could stop gains in euro zone equities, predictions
on the single currency are being revisited.
    Natixis, which had forecast the euro heading towards parity against the dollar by end-2017,
admits it got it wrong and in a note today it formulates a new forecast for 2018:
    "No question of parity, but rather of just when the EUR/USD's ascent will peter out. The
euro has been under the spotlight since the start of the year. It could be the factor that
scuppers the mood of optimism that has carried out over from 2017... a strong euro would end up
affecting the economic recovery in the eurozone".
    They conclude however: "we do not see the EUR/USD as having much more upside potential."  
    In this two-year chart you can see how euro zone stocks have risen despite the stronger
currency.    
 
    (Danilo Masoni)
    *****    
    
    UK STOCKS TICK HIGHER AFTER INFLATION SLOWS (1014 GMT)
    UK inflation has dipped slightly after six months of gains, suggesting the effects of the
pound's slide after the 2016 Brexit vote may be starting to fade.
    The FTSE has had a little rally on the numbers but some economists are wondering how to read
the data, with retail prices jumping sharply last month but consumer prices down. With household
incomes still failing to keep pace with rising prices, there appears little relief in sight for
embattled retailers.
    Right now, it's hard to interpret the equity market response. The FTSE is now up 0.24
percent, driven mostly by rate-sensitive consumer staples and banks.
    (Tom Pfeiffer)
    *****
    
    EUROPEAN STOCKS: TOP MOVERS AND SHAKERS (0914 GMT)
    While the price action is fairly muted early on in the session, Steinhoff is the
top riser, up 2.8 percent though this is a relatively small move for such a volatile stock.
    Hugo Boss is also a top gainer, up 2.1 percent, thanks to its Q4 sales update.
    On the downside, shares in RPC Group have touched their lowest level since last July
following a downgrade from Berenberg, who have cut the plastic packaging maker to "hold" from
"buy".
     "The combination of low growth and an uncertain return to acquisitions leads us to
downgrade (RPC) to Hold and move our price target to 920p (from 1,120p)," Berenberg analysts
say.
    Here are the biggest STOXX movers while we await the UK inflation data:
 
    (Kit Rees)
    *****
    
    OPENING SNAPSHOT: EUROPE HEADS HIGHER (0838 GMT)
    In the first half hour of trading, European shares are climbing higher. While it's a
broad-based move into positive territory, shares in banks and commodity stocks are notably being
left behind this morning on the back of a weaker oil price and a slide in copper prices.
    Here's your early snapshot:    
 
    (Kit Rees)
    *****
    
    WHAT WE ARE WATCHING (0750 GMT) 
    Major European bourses are expected to open slightly higher this morning, with a heavier
news flow and the U.S. markets reopening after MLK day.
    In the UK, all eyes will be on inflation, which is expected to have gone down from a 3.1
percent peak in November, giving a bit of room for manoeuvre to the BoE. 
    M&A and special situations are making the headlines with GKN facing pressure from activist
fund Elliott to engage with Melrose, Continental (according to sources) hiring JP Morgan for a
potential break-up and HSH Nordbank suitors J.C. Flowers and Cerberus beginning exclusive talks.
     The aftermath of Carillon’s collapse is also a period where its former rivals are under
intense scrutiny. 
    In terms of earnings, a number of blue chips have published trading updates such as
Peugeot, Hugo Boss, Lindt & Spruengli and Rio Tinto. French utility Engie said it hopes to boost
earnings growth in its core businesses of renewable energy, grids and energy services this year,
after an estimated five percent gain in core earnings in 2017. 
    While a number of strategists are advising their clients to start investing in banks in a
new world of rising yields, a headline today may look all too familiar with the last ten years. 
    Deutsche Bank, which is trying hard to convince investors that the bulk of financial
scandals it suffered this last decade is behind it, has been accused in a lawsuit of conspiring
to rig a Canadian rate benchmark.
    Still in the financial sector, ABN Amro said Q4 results would include several incidentals
regarding its operating income and expenses​.
    (Julien Ponthus) 
    *****
        
    A BUSY DAY FOR EUROPEAN FOOD AND RETAIL (0734 GMT)
    We're getting a flurry of updates in the food and retail sectors today.
    Hugo Boss reported quarterly sales growth driven by footfall in its own store
network. Swiss chocolate maker Lindt & Spruengli also posted higher sales. 
    In the UK, bakery chain Greggs reported a rise in Christmas sales and expects to
meet profit expectations in 2017. One trader sees Greggs' shares rising slightly. 
    JD Sports also had a strong Christmas and expects annual profit to be ahead of
expectations. JD shares only saw a moderate gain in 2017 after four years of stronger growth,
but perhaps today's update can push them higher.
    (Kit Rees)
    *****
    
    FUTURES POINT UP (0705) 
    European stocks futures have opened slightly higher, and while London, Paris and Frankfurt
seem set to open in positive territory, the picture is less clear with the pan-European market
and the Euro STOXX 50.  
    Here's the snapshot:  
 
    (Julien Ponthus)
    *****
    
    MISPLACED OPTIMISM ON UK INFLATION? (0645) 
    Consensus is that headline inflation in the UK edged down from the 3.1 percent peak it
reached in November and therefore back within 3 percent. The answer is due at 0930 GMT but some
analysts have voiced a few "what-ifs?". 
    "One can't help feeling that this optimism might well be misplaced", wrote CMC Markets
analyst Michael Hewson, noting that airfaires and fuel prices might have misbehaved in December.
    On the other hand and looking a bit further ahead, ING argues that slower than expected wage
growth could give the BoE room for manoeuvre. 
    "We caution that a 2018 rate hike still isn't a given - although admittedly it will be a
close call", the Dutch bank's analysts wrote.    
    (Julien Ponthus) 
    *****       
    
    MORNING CALL: EUROPE SEEN OPENING SLIGHTLY HIGHER (0615 GMT)
    Good morning. Financial spreadbetters see European shares rising slightly, with Germany's
DAX and Britain's FTSE 100 expected both to climb 8 points and France's CAC
 1 point.
    Asian shares closed higher, erasing early modest losses while the euro stood near a 3-year
peak on rising expectations that the European Central Bank could pare its monetary stimulus.
U.S. markets will reopen later today after being closed for a public holiday.
    (Julien Ponthus)

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