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European shares wobble as Brexit angst lingers

European shares wobbled and closed just in the red after a choppy session on Friday as traders waited to see if Britain's Prime Minister Theresa May would face a no-confidence vote over her draft European Union divorce deal.

European shares wobble as Brexit angst lingers

European shares wobbled and closed just in the red after a choppy session on Friday as traders waited to see if Britain's Prime Minister Theresa May would face a no-confidence vote over her draft European Union divorce deal.

LIVE MARKETS-Brexit sea of red Beaujolais nouveau style

Nov 15 - Welcome to the home for real time coverage of European equity markets brought to you by Reuters stocks reporters and anchored today by Josephine Mason. Reach her on Messenger to share your thoughts on market moves: rm://josephine.mason.thomsonreuters.com@reuters.net BREXIT SEA OF RED: BEAUJOLAIS NOUVEAU STYLE (1736 GMT) Quite a spill-over that was with a London-engineered Brexit drama contaminating continental bourses. This just had to happen during the release of 2018 Beaujolais Nouveau wine across France. Funny that the FTSE ended the day unscratched at 0.06 percent thanks to its sterling hedge while its European peers got a good hangover particularly, Dublin which experienced its worst trading day since the referendum. As Theresa May spoke after a torrid day, here's something to look forward to tonight: Here's a closing snapshot which could be entitled "happy like the FTSE during a bad brexit day (Julien Ponthus) ***** FTSE 100: A TALE OF FOUR HEDGES, AND A QUESTIONABLY TIMED "BUY" CALL (1606 GMT) UK stocks are deepening their slide in afternoon trading with mid-caps now down 1.8 percent and set for their worst fall in three weeks. The international FTSE 100, meanwhile, is down just 0.6 percent as the weaker sterling is still supporting its multinational exporters. Citi strategists point out the FTSE 100 benefits from several "hedges" limiting the damage. It has four levels of protection, they say: * the GBP 'hedge' * record outflows * a sharp de-rating * a higher equity risk premium "Equity investors have already been aggressive net sellers of UK equities in the last three years with record net ouflows," the strategists led by Jonathan Stubbs say. The FTSE 100 could also be attractive to income investors - they note the only time UK equities have traded on a higher dividend yield than now, over the last 25 years, is during the global financial crisis. The UK's equity risk premium is also now significantly above Europe's, after having tracked it very closely over the past 20 years (see below). On domestic UK stocks however Stubbs and team advise investors to focus on "both Brexit and Corbyn hedges" amid increased uncertainty over a potential government change. In the same vein, Credit Suisse made a daring move, in hindsight, yesterday at 4pm: they upgraded UK equities to overweight. "Political uncertainty is extreme currently, but we would argue this is fully reflected in investor positioning in sterling and UK equities," Andrew Garthwaite and his global equity strategy team wrote. And that was yesterday... (Helen Reid) ***** BREXIT: FACE IT, YOU HAVE NO EDGE (1537 GMT) We happened to have UBS Wealth Management's Brexit specialist at our Reuters Global Investment Outlook Summit this morning just a few minutes after Raab's resignation. One of Dean Turner's key conviction is that there is no way investors can have "an edge" to trade on the drama unfolding given the unpredictable nature of this crisis. "It’s very difficult to believe you’ve got an edge over anyone else in this situation. Who has got insight into how the Tory Party is going to react? We have views, and I’m sure other people in the market have views. But no one has that edge. So taking active positions is risky." As an economist, it's possible to try to anticipate how an economic agent will respond to a financial incentive. But in the case of Brexit "it's an emotive issue," Turner said. There's also a case to remember how many investors got burnt by the referendum. Fool me once... Thinking about it, there's probably a case to draw a parallel between Brexit speculation and calling the weather in three months. More about the chaos theory here: https://reut.rs/2Q1pRcX (Edward Lorenz, father of chaos theory, dead at 90) Butterfly effect: (Julien Ponthus, Jamie McGeever and Karin Strohecker) ***** BREXIT SCENARIOS FOR BUSY PEOPLE (1442 GMT) If you haven't had time to go through the plethora of views on what the multiple resignations from UK PM Theresa May's cabinet mean, here's a recap from two top brokers of possible scenarios, courtesy of a forex trader. *** Deutsche Bank's Oliver Harvey: * Fail and try again, ultimately goes through on second attempt but GBP lower in the meantime (40 percent) * May resigns/is toppled - highly negative as Tory leadership contest. Market to price no deal (20 percent) * The EEA pivot - joint Labor/Tory deal (20 percent) * May calls new referendum (20 percent) *** Nomura's Jordan Rochester: "I would put it in this order of likelihood. I am not even going to try and put percentages on it yet – maybe when the dust has settled. But the order of likelihood I see is: * This deal somehow trudges on through parliament * Second referendum * General election * Hard Brexit" (Danilo Masoni) ***** DOOM AND GLOOM FOR FUND MANAGERS (1432 GMT) It's exactly what fund managers and many European banks don't want to hear but the rise of ETFs and passive management is not going away, quite on the contrary. Moody's says that in Europe, it expects "the wider passive fund sector, including tracker funds, to grow to 22% of total assets under management (AUM) from 14% at year end-2017 in our base case scenario, and to 27% in our fast case scenario". "In these scenarios, ETFs share of total fund AUM would rise to close to 11% and 14% respectively, from 6.2% at the end of 2017", the rating agency adds. Moody's notes that traditional European banks, which control a big chunk of the retail market will be less successful in selling their own costly funds and prevent the rise of ETFs on the old continent. "Asset managers with passive capabilities, such as BlackRock, DWS and Lyxor, will benefit from this growth phase and continue to grow their market share", Moody's believes. It's true that the last few years were not exactly a showcase for stock pickers who struggled to keep up with benchmarks, particularly in the U.S. where just a handful of stocks such as the FAANGS drove indexes higher. That said, some stock pickers probably needn't worry. Here's a link to Moody's press release: https://bit.ly/2Pz6WqI (Julien Ponthus) ***** INTRODUCING OUR VERY OWN INTERACTIVE "ROLLING BEAR MARKET" (1234 GMT) Our graphics team has just put online an interactive "Rolling bear market" chart, which shows you both how many stocks are in bear territory within the world's main benchmarks and whether these indexes are themselves down 20% from their peak. As you can see, on the surface, the performance of global stocks overall does not appear that troubling, but a closer look at the share of constituents in bear markets is a totally different story. Here's the link to the "Rolling bear market": https://tmsnrt.rs/2QCzyvm Here's another link to our Oct. 24 analysis on how bears are taking over world stock markets (Lea Desrayaud, Ritvik Carvalho and Julien Ponthus) ***** DON'T FORGET THE BREXIT RESILIENT STOCKS! (1223 GMT) Volumes and sell orders are on the rise as the Brexit drama unfolds but there are a handful of UK stocks that are surviving quite decently, mostly because they are exporters and benefit from a weaker pound or because their business could benefit from a disorderly Brexit. Here is Goldman Sachs' so-called "UK8" basket of big international stocks that get a boost when the sterling falls. And here is the Societe Generale's "Brexit+" plus basket of Brexit resilient companies: "People are dumping stocks geared to the UK's domestic economy like homebuilders, banks like RBS and LLoyds and real estate and of course they're buying UK exporters," said Stephane Ekolo, equity strategist at TFS Derivatives. Our latest update from the British capital: British PM May battles to save Brexit deal as ministers quit (Danilo Masoni) ***** BREXIT: "WE ARE EXPERIENCING HUGE SELL ORDERS" (1136 GMT) "We are experiencing huge sell orders and the sterling-dollar pair is in free fall for now", Think Market analyst Naeem Aslam said a bit more than an hour ago after the resignation of Brexit minister Raab gave cable a kick in the face. Aslam took the view that "The Brexit deal is dead in the water" and that "this could be the end of the road for May" while other analysts witnessed their clients' rush for answers. Nomura's Brexit specialist said "huge numbers of questions from clients this morning show most are in scenario planning mode". So what were investors doing apart from witnessing sterling make a spectacular fall in what Oanda's Craig Erlam called a "crazy start to trading" which is likely to last all day? "Short term traders looking to jump on the big moves and ride them for smaller short term gains have been busy, and will be the ones who take the big risks but could ultimately be the only ones willing to trade the currency", said James Hughes from AxiTrader. For IG's Chris Beauchamp, who said it was just "one of those morning" there is a case to say that how this crisis unfolds is anybody's guess. "There are, at present, too many moving parts to guess whether the deal can still get through". (Julien Ponthus) ***** MARKET GYRATES ON BREXIT DRAMA, STOXX AT 2-WEEK LOW (1029 GMT) The positive open we've seen here in Europe has been short-lived and now all regional benchmarks are trading in the red after the resignation of Brexit Minister Raab has clearly made even more difficult an orderly exit of the country from the European Union. The STOXX 600 has just hit a two-week low with UK domestic stocks feeling most of the pain, as sterling comes under fresh pressure. Here are a couple of takes: "This departure could put at risk the Brexit deal and traders are selling the British currency due to growing uncertainty about the future of the UK," says Carlo Alberto De Casa, chief analyst at ActivTrades in London. "Raab resigning just now changes the ballgame. Hard to be optimistic on GBP in the short term. But equally Theresa May has survived much worse. It’s whether we get a flood of resignations to follow," Nomura analysts tell clients in an email. The STOXX 600 is now down 0.6 percent while political uncertainty is penalising stocks in UK companies with high domestic exposure, offsetting losses in exporters and weighing even on the FTSE 100, struggling to remain in positive territory. And here's a snapshot: (Danilo Masoni) ***** OPENING SNAPSHOT: MINERS LEAD, AUTOS LAG (0831 GMT) A strong rebound in mining stocks is helping drive European stocks up this morning with the STOXX up 0.4 percent and DAX up 0.7 percent. Hopes that a trade war between China and the U.S. could be nearing endgame after China sent a written response to U.S. trade reform demands are likely helping boost the mining sector up 1.8 percent after a sharp fall yesterday on growth worries. A weaker dollar is likely also supporting the sector. Autos stocks meanwhile are the worst-performing, down 0.4 percent after China poured cold water on hopes for auto tax cuts there. AMS fell as much as 8 percent at the open after it cut its revenue guidance, reigniting fears around the semiconductor sector. On the UK front, newly-listed carmaker Aston Martin reported strong Q3 profit and said it expected full-year sales to come in at the top end of expectations. Its shares opened up 2.7 percent but quickly turned negative, now down 7.6 percent and set for their worst ever daily fall. Here are the top movers: (Helen Reid) ***** EUROPEAN FUTURES UP, BUT BEWARE BAD NEWS FROM AUTOS, CHIPMAKERS AND PERSIL MAKER (0719 GMT) European futures are higher, defying earlier calls for another drop by financial spreadbetters as renewed optimism over a possible end to the prolonged trade spat between the United States and China appeared to offset worries over Rome's showdown with Brussels and May's Brexit drama. Some negative headlines may curb the gains though: China has poured cold water on industry hopes for a cut in auto purchase taxes, in Austria AMS cut its sales forecast, the latest chip supplier hurt by Apple's weak sales forecast for the upcoming holiday season, and Henkel shares are indicated lower after the maker of Persil detergent and Loctite adhesives reported a slowdown in sales. AMS shares are seen down 10 percent at the open. They have already lost almost a third of their market cap this month, on track for their worst month in a decade. Here are this morning's headlines to watch: Austria's AMS becomes latest Apple supplier to slash forecast China state planner douses hopes for auto tax cuts, tells sector to buckle up Henkel sales growth slows as adhesives cool Hugo Boss seeks sales boost from speed, online, Asia French group Bouygues maintains toned-down outlook as 9-month profits fall NN Group's Q3 profit rises on improving Dutch market European passenger car sales slump 7.4 pct in October Global regulators hold off designating 'too big to fail' insurers Linde AG expects revenue and earnings to be at top end of forecast Antofagasta approves $1.3 bln Los Pelambres copper mine expansion K+S cuts outlook after dry weather weighs on production SKF to increase cost focus against an uncertain macro backdrop Dutch insurer NN Group's Q3 core profit beats estimates with 7 pct rise UK forced to accelerate planned reform to gambling regulations Ericsson doesn't see sales lift after security concerns hit Chinese rivals Vodafone may replicate elements of UK tower sharing venture elsewhere Britain's Lloyds agrees settlement with HBOS whistleblower BMW, Vodafone, Ericsson urge EU to consider 5G car standard (Josephine Mason) ***** MORNING CALL: POLITICS CONTINUE TO DOMINATE Good morning and welcome to Live Markets. European stocks are called to open lower today even after Asian equities rose overnight on news that China has delivered a written response to U.S. trade demands. Politics and falling oil prices continue to overshadow, with Brexit drama dominating the UK market and Italy's deepening budget crisis and showdown with the EU Commission driving bond yields up and bank stocks down. "While (Theresa May was able to achieve what she called collective approval from her cabinet to accept the deal, the gritted teeth consensus could well be tested in the coming days," says Michael Hewson, chief market analyst at CMC Markets UK. Financial spreadbetters call the DAX 30-35 points lower, the CAC40 is expected to open 11-15 points lower and the FTSE 100 will be flat to down 28 points, according to IG and CMC Markets UK. (Josephine Mason) *****

European bourses sink as Brexit crisis unfolds

European shares reversed early morning gains and fell to two-week lows on Thursday in a broad-based selloff as British Prime Minister Theresa May's government was plunged into crisis over Brexit.

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