* STOXX closes 1.1% higher
* Experian, the best M&S risers after the results
* Real estate stocks under pressure Welcome home for real-time coverage of European equity markets presented by Reuters journalists. You can share your thoughts Joice Alves ([email protected]) and Julien Ponthus ([email protected]) in London and Stefano Rebaudo ([email protected]) in Milan.
CLOSING SNAPSHOT: RALLY OF HOPE (1542 GMT)
The rally of hope is back.
Hopes for vaccines, hopes for a full reopening of the economy, hopes for an absence of a second wave and hopes for recovery have all spurred a recovery in risky assets, while the USD safe haven has slipped May 1 low.
European equities started off with moderate risk in the morning, but ended well thanks to a cross-reading of a strong rebound in American equities.
“The prudence of this morning is a distant memory, while the rise in the indices resumes. Data from various countries and parts of the United States still does not suggest a second wave of infections, a theme that is essential for further market gains, “said Chris Beauchamp, chief market analyst at IG.
The pan-European STOXX 600 closed just before a three-week high, with the tech, chemicals and oil and gas sectors outperforming the broader market.
TRICELLE DATA: ONLY JOB SEEKERS DEFINED AS UNEMPLOYMENT (1220 GMT)
You must be looking for a job to be considered unemployed by EZ investigators, so it’s no surprise that unemployment data in the block fails to capture the magnitude of the losses jobs in March.
Anyone who has lost their job and cannot create a new job as soon as possible because of restrictions or because they take care of the kids at school, well… they are not unemployed !
“The unemployed are defined as those who are unemployed but actively looking for work and are available to start work in the next two weeks,” notes UBS.
Then the statistical offices also had the problem of how to contact people for the unemployment survey. For example, the Istat of Italy states that the COVID-19 restrictions meant that the number of households surveyed to calculate the unemployment rate in March was 20% below normal, recalls UBS.
As in April, parts of Europe remained under severe restrictions, people will have to wait for the May figures to get a real picture.
“The first reading of the unemployment rate in the euro area, which will provide a more precise measure of the negative impact of COVID-19 on the labor market, should take place in May,” said UBS.
EUROPEAN LUXURY: LESS IS MORE (1147 GMT)
During an economic downturn, even the wealthiest do not want to show themselves, past financial crises tend to show themselves.
This does not mean that people will stop buying luxury handbags and nice clothes, but they will most likely opt for “understated” styles, which basically means that they will opt for fewer products with strong logos. , explains BofA.
“We think that affluent consumers will want to express their taste in a more discreet manner during and immediately after the crisis, as was the case during previous downturns,” said the American bank.
After analyzing search queries, social media and website traffic, BofA says Cucinelli, Prada and Hermès are best placed to take advantage of this trend.
On the other hand, Kering could underperform due to the “stronger aesthetics” of its Gucci brand. But also Versace, “a brand with a relatively ostentatious look”, could be under pressure.
ZERO REBOUND FOR EURO ZONE BANKS … YET! (1050 GMT)
There have been absolutely no rebounds for eurozone banks, which are currently trading at the same level as they were in the deepest crash caused by the coronavirus on March 16.
A glimmer of hope, however, for investors who have not given up on European lenders is that momentum may develop for cyclical stocks, Barclays analysts said in their weekly strategy note.
“Once activity starts to rebound, it is likely that most cyclical sectors should perform better because they are highly positively correlated with PMIs”, which are probably close to their lowest, believes the Barclays team.
As you can see from their graph, bank stocks have the greatest correlation with PMI:
The question, however, is whether the banks will catch the cyclical boat when and when it is finally ready to go.
UK DEPARTURE COULD SUPPRESS EUROPEAN STOCK RETURNS (1005 GMT)
Analysts do not dispute the idea that US stocks offer historically better returns than European stocks, but some argue that eurozone stocks are so depressed that they are now a good deal.
Bernstein doesn’t think so and lines up several good reasons to go to Wall Street instead.
“On an adjusted basis by sector (which explains the absence of a technological sector), Europe is negotiated with a slight discount compared to the United States, but not outside the limits of historical experience”, indicates a research note.
The lack of mega-cap tech stocks in Europe, something that has characterized the US performance against EU stocks for 50 years, is not something that can change, not even in the medium term.
The planned departure from the UK could weigh on European equity returns because “it removes key support for Anglo-Saxon views on shareholder primacy,” he adds. This means there will be fewer dividends and redemptions.
The division of the eurozone between the North and the South and the fears of a possible rupture are probably overestimated, according to Bernstein.
“We think there are good reasons that mean that Germany will eventually accept some form of fiscal union. Such a result would be bullish for European risk assets and remove a strategic obstacle. But that would require a lot of patience on the part of investors, ”he argues.
OPENING SNAPSHOT: STOXX DOWN, EXPERIAN AND M&S SHINE (0740 GMT)
Stocks are falling slightly as investors continue to worry about the economic impact of the pandemic and digest another batch of earnings reports.
The pan-European index is down 0.6%, with banks leading the losses, down more than 2%. The health sector performed best, up 0.8%.
Marks & Spencer shares rose 3.8% after the company announced that it would accelerate its turnaround program.
Experian shares are up 5.4% from the STOXX high, after predicting that organic sales for the first quarter will only decrease by 5% to 10%.
AstraZeneca’s actions are also in positive territory after the United States Food and Drug Administration approved its Merck’s Lynparza as a treatment for a form of prostate cancer.
ON RADAR: ROLLS ROYCE, RABOBANK, TOTAL, EXPERIAN (0646 GMT)
European stocks should open lower, as investors still don’t know how deep the impact of the coronavirus epidemic will be in the medium term.
On the corporate side, we have the second oil and gas deal to be revised in the wake of falling oil prices after BP delayed payments to Hilcorp and received funding from Hilcorp last month.
Total has revised a previously agreed agreement to sell its oil fields in the British North Sea, which would cause Petrogas of Oman to withdraw from the transaction.
Rolls-Royce will have to lay off at least 9,000 of its 52,000 employees to achieve annual savings of £ 1.3 billion.
Dutch lender Rabobank expects around 2 billion euros ($ 2.2 billion) in additional loan provisions in 2020. HSBC Holdings plans to achieve double-digit asset growth in its newly combined wealth management businesses in Asia – Peaceful over the next three years.
Experian, the world’s largest credit data company, expects organic sales to drop 5% to 10% in the first quarter if restrictions related to coronaviruses continue.
The United States Food and Drug Administration has approved AstraZeneca and Lynk of Merck as treatment for a form of prostate cancer.
Marks & Spencer said it would speed up its latest turnaround program after reporting a 21% drop in annual profit.
Lufthansa is preparing for hundreds of planes to remain immobilized due to the coronavirus pandemic until 2022 and for further job cuts.
Renault has reached an agreement with banks on a state guaranteed loan of 5 billion euros (5.47 billion dollars) to help the company to cope with the coronavirus epidemic.
Aareal Bank shares up 4.2% in premarketing following the call for tenders for a minority stake in its Aareon unit.
MORNING CALL: ALWAYS CONCERNED ABOUT THE IMPACT OF THE VIRUS (0635)
European futures point to opening slightly in the red, but without clear direction, as investors continue to switch between optimism about some easing of blockages and anxiety about a worse-than-expected impact on the economy .
Wall Street lost ground overnight after a report indicated that the experimental Moderna COVID-19 vaccine did not provide the critical data necessary to assess its effectiveness.
Asian stocks were broadly stable, but a soft yen supported the Japanese Nikkei blue chip index, which closed up 1.2%.
Crude oil futures are in positive territory amid signs of improving demand.
Report by Joice Alves, Julien Ponthus, Stefano Rebaudo and Thyagaraju Adinarayan