European shares bounces with nudge from financial and tech stocks

European Stock Markets

A bounce across financials and tech stocks helped European stocks nudge higher on Thursday, though carmakers’ shares came under pressure after the United States launched a probe into auto imports.

The pan-European STOXX 600 index was up 0.3 percent by 0857 GMT, after falling more than 1 percent from a 3 1/2-month peak in the previous session as worries over spending plans from Italy’s new coalition and global trade weighed on risky assets.

Concerns over a U.S.-China trade deal continued after U.S. President Donald Trump said that any deal would need “a different structure”.

German carmakers BMW (BMWG.DE), Daimler (DAIGn.DE) and Volkswagen (VOWG_p.DE) dropped 1.8 to 2.8 percent after the United States launched a national security investigation into car and truck imports that could lead to new U.S. tariffs.

Germany's benchmark DAX index .GDAXI inched 0.1 percent higher and Europe's autos sector .SXAP was the worst-performing, losing 1.4 percent.

But a bounce among financials and tech stocks helped European markets rise. Minutes from the U.S. Federal Reserve’s last meeting indicated that the central bank would maintain a gradual approach to rate hikes, something seen as supportive of risky assets.

Italy's FTSE MIB .FTMIB was up 0.9 percent after Italy's president invited political novice Giuseppe Conte to be prime minister.

Aryzta (ARYN.S) was a standout faller among individual stocks. Shares in the Swiss food company slumped 28 percent after the firm cut its full year earnings outlook once more.

Elsewhere shares in Deutsche Bank (DBKGn.DE) reversed slight gains from earlier on to trade 0.1 percent lower after the bank said it would cut thousands of staff in a revamp of its investment bank.

Deutsche Bank’s shares are down around 31 percent so far this year.

UK stocks were among the top gainers on the STOXX 600.

Industrial distribution firm Electrocomponents (ECM.L) jumped 9.7 percent after reporting double-digit growth in annual revenue and profit, while food ingredients firm Tate & Lyle (TATE.L) rose nearly 7 percent after posting higher annual profits.

European shares choppy as first-quarter earnings fail to set clear trend

European Stock Markets

European shares had a choppy opening on Tuesday as a batch of first-quarter corporate results failed to set a clear upward trend and chipmakers were weighed down by AMS’ warning of a downturn in orders.

The pan-European STOXX 600 was up 0.2 percent by 0840 GMT after spending some time in negative territory as it moved towards a heavy week of earnings.

Falls in business morale in Germany and Italy had little impact on trading but rising oil prices buoyed shares in the energy sector and offered some support to European indexes.

Consumer staples stocks, which investors have held as proxies to bonds for their stable revenues and income stream, rebounded after a session of losses on Monday when U.S. 10-year treasury yields threatened to cross the 3 percent benchmark and make their returns less attractive.

Austria-based chipmaker and Apple AAPLO supplier AMS (AMS.S) tumbled 13 percent after reporting lower orders from one of its main customers which it did not name, sending shares in other companies in the sector down.
 
“It is reasonable to assume that this will have a negative impact on STM’s Q2 guidance as well”, Liberum analysts said as shares in STMicro (STM.MI) fell 2.3 percent and peer Dialog Semi (DLGS.DE) tumbled 4.1 percent.

These results come as a strong growth in ad sales for Google despite a surge in costs at its parent Alphabet (GOOGL.O) brought some relief to the sector after a ropey few months for leading U.S. tech companies.

Germany’s SAP (SAPG.DE) rose 3.5 percent after saying it was gaining ground on competitors Salesforce (CRM.N) and Oracle (ORCL.N) in the cloud and that its margin recovery was firmly on track.

The banking sector .SX7P, down 0.37 percent, got little support from the results of Santander (SAN.MC), the euro zone’s biggest bank by market value, whose shares fell 2.2 pct after profits in the UK disappointed.

Deutsche Bank AG (DBKGn.DE) however added 1.6 percent. It may spell out strategy changes for its investment bank on Thursday along with first-quarter earnings.

Swiss bank UBS (UBSG.S) had failed to cheer up investors on Monday after its flagship wealth management business missed forecasts.

The automobile sector .SXAP, which has been a clear outperformer since the beginning of the year, edged down 0.5 percent, dragged down by AB Volvo (VOLVb.ST).

The truck maker cautioned that its supply chain was coming under pressure and saw its shares fall about 4 percent.

Results from French tyre maker Michelin (MICP.PA) and automaker PSA Group (PEUP.PA) also disappointed with shares down 1.6 percent and 1 percent respectively.

Dutch paints and coatings maker Akzo Nobel (AKZO.AS) lost 4.5 percent after reporting a larger-than-expected 28 percent drop in first-quarter core profit.

Deutsche Bank joins growing swell of optimism for UK stocks

Global Stock markets

Deutsche Bank joined a growing chorus of brokers becoming more positive on British stocks on Monday, upgrading its recommendation on UK equities to “overweight”, citing cheap valuations and a predicted boost from a weaker pound. 

“The UK is the cheapest country on our sector valuation scorecard,” said Deutsche Bank’s European equity strategy team in a note.

Concerns that Brexit would undermine the UK economy and the pound had discouraged a number of foreign investors from buying shares in British companies after the June 2016 vote.

The UK’s defensive characteristics - with a heavy weighting in high dividend-yielding sectors - mean it tends to outperform in times when euro zone Purchasing Managers’ Index (PMI) momentum, a gauge of economic health, is negative, the strategists said.

The German bank’s move followed Citi which went overweight on UK stocks on April 5, while UBS Wealth Management closed its underweight recommendation on the market, moving it up to “neutral”.

Britain's blue chip FTSE .FTSE index is down 4.2 percent since the beginning of the year while the Euro zone STOXXE .STOXXE is up 0.5 percent.

Deutsche Bank strategists in the same note downgraded Spanish equities from overweight to benchmark, saying the market would suffer from the Euro zone’s negative economic growth momentum.

The German bank remained underweight Italian, German and French equities, while it kept an overweight recommendation on Switzerland.

The ASX has fallen below

The ASX has fallen below the 5,800 level today, with the move taking the index back to a level it last traded at in October, as investors continue to fret about the prospect of a trade war between the US and China.

"The first thing to note is that 5,800 is a great support level," said Romano Sala Tenna, portfolio manager at Katana Asset Management.

The ASX has bounced off this level quite a few times, he noted, adding that the pullback in the ASX to this strong support level "should provide some confidence."

He noted that the Dow is also near a strong support level and that the American index has now fallen back to a level where it trades around 16 times earnings.

"The market was really looking for a reason to sell off and take profits," he said, speaking about the past few days of sharp losses. He added "in the short term the fear seems to have passed."

He believes the market will now start to focus on fundamentals such as earnings again, noting that US earnings season starts in two weeks.

Deutsche Bank has taken a look at the potential impact of higher BBSW rates on the Australian banking sector.

The analysts noted that between 28 per cent and 36 per cent of of the majors' total funding is raised through the wholesale market.

Stock futures dip with Fed caution & Facebook data leak

Global Stock Markets

U.S. stock index futures dropped on Monday, with reports of Facebook’s user data being misused weighing on social media stocks and investors bracing for signals from the Federal Reserve for the future path of interest rate hikes.

While it is near certain that the Fed will raise rates by a quarter basis point on Wednesday, investors are more focused on whether policymakers think economic conditions are strong enough for four hikes this year, one more than the markets expect. 

Concerns about faster rate hikes were at the heart of the stock market’s sell off in early February, which saw the main U.S. indexes fall into correction territory. 

While the market has pulled back since, healthy economic data has done little to ease jitters of a fourth rate hike this year. 

The Fed will raise rates this week, all 104 economists polled by Reuters during March 5-13 said, with three more hikes to follow this year, driven by a solid labor market underpinning optimism. 

That is more than the three hikes, including one in March, that economists had expected, according to an earlier poll. 

By 6:47 a.m. ET, Dow e-minis 1YMc1 were down 133 points and S&P 500 e-minis ESc1 fell 15 points, while Nasdaq 100 e-minis NQc1 declined 99 points. 

Shares of Facebook (FB.O) fell 3.7 percent in premarket trading in the wake of reports that the personal data of 50 million users were misused by a political consultant, prompting a review by the company and expressions of concern by several U.S. lawmakers. 

Twitter (TWTR.N) dropped 1.6 percent, while Snapchat-owner Snap (SNAP.N) was off 0.7 percent.

Apple (AAPL.O) slipped more than 1 percent after brokerage Nomura Instinet said its checks showed there was little improvement in demand for iPhones this year and lowered estimate for the smartphone’s sales. 

The main U.S. indexes posted losses last week due to fears that President Donald Trump’s tariff plans would spark retaliation from its trading partners, especially China, and on political uncertainties after high-profile White House exits. 

The tariff issues are likely to dominate a gathering of finance leaders at a two-day meeting of the Group of 20 finance ministers this week.

Chinese startup company Nio hires eight banks for up to $2 billion U.S. IPO

Asian Stock Markets

Chinese electric vehicle startup Nio has hired eight banks including Morgan Stanley (MS.N) and Goldman Sachs (GS.N) to work on a planned U.S. stock market listing this year worth up to $2 billion.

Other banks are Bank of America Merrill Lynch (BAC.N), Credit Suisse (CSGN.S), Citigroup (C.N), Deutsche Bank (DBKGn.DE), JPMorgan (JPM.N) and UBS (UBSG.S), said the people, declining to be identified as the deal details are not public.

Nio’s proposed IPO of $1 billion-$2 billion comes as the firm, founded by Chinese internet entrepreneur William Li in 2014, seeks fresh capital to finance its expansion and investments in areas including autonomous driving and battery technologies, one of them said.

At the top end of the potential offering size, Nio’s IPO would become the biggest Chinese listing in America since the $25 billion public float of e-commerce giant Alibaba Group Holding Ltd (BABA.N) in 2014.

In October 2016, Chinese logistics company ZTO Express raised $1.41 billion from an IPO in New York.

Nio declined to comment on its IPO plans. UBS, Citigroup and Goldman declined comment while the other banks did not immediately respond to Reuters emailed request for comment.

Shanghai-based Nio, formerly known as NextEV, is among the first of a raft of Chinese electric vehicle firms to launch a production vehicle, with many so far only showing concept cars.

It launched sales of its first mass production car - the ES8 pure-electric, seven-seat sport-utility vehicle in December, at about half the price of American peer Tesla’s Model X.

It has also vowed to bring an autonomous electric car to the U.S. market by 2020.

Nio counts Asian tech behemoth Tencent Holdings Ltd (0700.HK) as its main backer alongside investment firms Hillhouse Capital Group and Sequoia Capital.

Last November, the firm raised more than $1 billion in its latest fundraising round, led by existing investor Tencent, valuing the firm at about $5 billion.

Goldman's rotten trading quarter is a familiar smell on Wall Street

Big Wall Street banks have spent billions of dollars and untold man-hours in recent years transforming their trading desks from hedge-fund like operations trading on their own account into market-making businesses offering a price based on what customers want to buy or sell. 

But the shift in business model, prompted by reforms following the 2008 financial crisis, has done little to shield banks from suffering big losses when markets move against them, traders and risk managers told Reuters this week. 

Goldman Sachs Group Inc’s (GS.N) second-quarter results, which saw earnings rise to $3.95 per share from $3.72 in the same quarter last year, also included the worst commodities trading quarter in its history as a public company, prompting a 2.8 percent fall in the bank's stock in the last two days. 

Bad inventory positions based on wrong expectations of customer demand were partly to blame, Chief Financial Officer Marty Chavez said.

Goldman is not alone. In recent years, banks including JPMorgan Chase & Co (JPM.N), Citigroup Inc (C.N), Barclays PLC (BARC.L) and Deutsche Bank AG (DBKGn.DE) have all suffered losses from currency moves, interest rate positions, or misguided bond market bets. 

Under the so-called the Volcker rule, which was intended to limit proprietary trading, banks are now required to prove they are only holding enough inventory to meet "reasonably expected near-term demand." 

The rule was implemented in response to the 2008 financial crisis, when Wall Street banks fueled problems in the mortgage market by making speculative bets with their own money. 

But one of the Volcker rule's unintended consequences has been to drain liquidity in certain markets, which has made it more expensive and difficult for banks to source inventory for clients or manage their own risks. 

New rules defining the amounts of capital banks must hold have made it more expensive for them to hold certain types of assets, while a long period of low volatility in some markets has made it trickier to gauge when trading activity will suddenly rise.

Italy lags sluggish European shares as political worries weigh

European shares inched lower in quiet trading on Monday with Italian stocks left behind as worries over possible early elections weighed, hitting banks.

The index of the top 50 euro zone stocks .STOXX50E slipped 0.1 percent, while Italian blue chips .FTMIB fell 1.1 percent, on track to end at their lowest close in over three weeks, while Germany's DAX .GDAXI added 0.1 percent.

Weekend reports that Italy's main parties could converge on a proportional electoral law pointed to growing chances of an election in the autumn, possibly leading to no clear majority.

In an interview on Sunday, former Prime Minister Matteo Renzi said an accord on a proportional voting system was possible though it could result in a coalition government that may have trouble holding together.

Italian banks .FTIT8300, already hit by worries surrounding the rescue of two ailing regional lenders Popolare di Vicenza [BPVS.UL] and Veneto Banca [VBANC.UL] lenders, fell 1.8 percent, dragging euro zone banks .SX7E down 0.4 percent.

Among Europe's heavyweight lenders, Italy's Intesa Sanpaolo (ISP.MI) and UniCredit (CRDI.MI) both fell more than 1.7 percent, while Deutsche Bank (DBKGn.DE) slipped 0.2 percent and Banco Santander (SAN.MC) added 0.1 percent.

Lanxess (LXSG.DE) rose more than 3 percent, leading gainers on the STOXX after news that billionaire Warren Buffett had acquired a 3 percent stake in the German chemicals maker.

Unilever, Man Group strength boosts European stocks

European shares edged higher on Thursday as strong results from Unilever lifted bluechip consumers staples stocks and helped offset weakness in the energy sector.

The pan-European STOXX 600 index was up 0.3 percent by 0730GMT. The UK's FTSE 100 was down 0.1 percent.

Banks were the top sectoral gainers for a second consecutive session, up 0.6 percent. UBS on Wednesday upgraded European banks to 'neutral' from 'underweight', citing rising reflation expectations and a seemingly more benign regulatory environment.

Unilever helped drive UK and European benchmarks, after the consumer sector bellwether posted a first-quarter sales beat, helped by price increases.

The gains by Unilever, which earlier this year rejected a hostile takeover bid by U.S. firm Kraft Heinz, supported the personal and household goods sector which rose up 0.4 percent.

"Margins are where it really counts for Unilever as it tries to shore up its defences against another bidder who can promise higher margins and better return on equity," said ETX Capital analyst Neil Wilson.

"Unilever is aiming at an underlying operating margin of 20 percent by 2020, underpinned by growth in emerging markets. The first quarter update suggests it's on track but risks remain."

Nestle shares rose 0.7 percent after it maintained a modest 2-4 percent growth target for underlying sales, slightly less than Unilever's.

Shares in Spanish infrastructure company Abertis rose 3.3 percent, among top European gainers, as the market weighed Italian peer Atlantia's plan to take over the company.

Deutsche Bank downgraded both stocks from buy to hold. "We believe the market could apply a risk discount to Atlantia on the possibility of a take-over bid premium," said analysts at the bank.

Banks, earnings, German data keep European stocks in the red

European stocks fell for a third consecutive day on Tuesday, once again dragged down by financials as shares in Deutsche Bank slid on deepening concern about its health after its $8.5 billion cash call.

A batch of weak corporate earnings reports and the biggest fall in German industrial orders since the depths of the global financial crisis also disappointed investors, setting the tone for a lacklustre session in Europe.

Europe's leading index of the top 300 shares fell as much as 0.5 percent .FTEU3, with the region's banking index down as much as 0.7 percent. By 0945 GMT the FTSEuroFirst had clawed back ground to trade only slightly lower on the day, and financials were down 0.3 percent.

Deutsche (DBKGn.DE) shares fell almost 3 percent to a fresh 2017 low. They have lost more than 10 percent in the last few days since the bank said it would tap investors for $8.5 billion.

British temporary power provider Aggreko (AGGK.L) slumped almost 11 percent and French retailer Casino Guichard (CASP.PA) fell 5 percent after publishing their results.

German industrial orders slumped 7.4 percent in January, the biggest fall since January 2009 and nearly three times as steep as the 2.5 percent fall expected by economists.

U.S. futures pointed to a slightly lower open on Wall Street ESc1 DJc1, cooling from last week's record highs as investors prepare for an all-but-certain interest rate hike next week.

MSCI's broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS rose 0.4 percent, and Japan's Nikkei .N225 closed down 0.2 percent.