European shares climb higher as investors eye U.S. inflation data

European Stock Markets

European shares edged higher on Tuesday, with trading muted as investors awaited the latest inflation figures from the United States, while results drove big moves in Iliad and E.ON. 

French telecoms company Iliad fell 6.7 percent even as it reported higher annual sales and profits for 2017, with traders pointing to flat fixed-line revenues in the final quarter. 

It comes as dominant French telecoms company Orange returned to growth last year for the first time since 2009 after spending heavily to roll out high-speed broadband. 

The STOXX 600 gained 0.1 percent, while Italian and Spanish stocks rose 0.3 to 0.4 percent. Britain’s FTSE was a laggard, down 0.1 percent. 

Utilities were the best-performing sector for a second day on plans by German utilities RWE and E.ON to divide up the assets of power utility Innogy. 

E.ON got a further boost to the top of the STOXX 600 on Tuesday, its shares gaining 4.4 percent after its results. The company said it would raise its dividends for 2018 and 2019. 

Struggling South African retailer Steinhoff saw its Germany-listed shares rise 5.5 percent after it cut its stake in KAP Industrial as it tries to plug a liquidity gap. 

Wacker Chemie fell 4.3 percent, with traders citing a weaker full-year outlook from the chemicals maker which said sales would slow due to currency pressures. 

Veolia fell 2.8 percent, the top faller on France’s CAC 40, after the Qatari government sold its 4.6 percent stake in the utility group.

Exclusive: U.S. lawmakers urge AT&T to cut commercial ties with Huawei - sources

U.S. lawmakers are urging AT&T Inc, the No. 2 wireless carrier, to cut commercial ties to Chinese phone maker Huawei Technologies Co Ltd and oppose plans by telecom operator China Mobile Ltd to enter the U.S. market because of national security concerns, two congressional aides said. 

The warning comes after the administration of U.S. President Donald Trump took a harder line on policies initiated by his predecessor Barack Obama on issues ranging from Beijing’s role in restraining North Korea to Chinese efforts to acquire U.S. strategic industries.

Earlier this month, AT&T was forced to scrap a plan to offer its customers Huawei [HWT.UL] handsets after some members of Congress lobbied against the idea with federal regulators, sources told Reuters.

The U.S. government has also blocked a string of Chinese acquisitions over national security concerns, including Ant Financial’s proposed purchase of U.S. money transfer company MoneyGram International Inc.

The lawmakers are also advising U.S. firms that if they have ties to Huawei or China Mobile, it could hamper their ability to do business with the U.S. government, one aide said, requesting anonymity because they were not authorized to speak publicly.

Why these 4 ASX shares have posted strong gains & these 4 ASX shares sank

Australian Stock Markets

In afternoon trade the S&P/ASX 200 is down almost 0.1% to 5,983 points due largely to declines in the telco sector.

Four shares which haven’t let that stop them from climbing higher are listed below. Here’s why they have posted solid gains today:

The Carsales.Com Ltd (ASX: CAR) share price is up 2.5% to $14.77 despite there being no news out of the car listings company. Last week brokers responded positively to the company’s decision to take full control of its Korean affiliate SK Encar. This led Morgans to increase the price target on its shares to $14.99.

The Impedimed Limited (ASX: IPD) share price has climbed almost 4% to 93.5 cents after Morgans spoke positively about its future prospects. The broker believes there are a number of positive announcements in the pipeline that could be the catalyst to taking the medical device company’s shares higher. It is, however, classed as a high risk investment.

The National Storage REIT (ASX: NSR) share price is up 4.5% to $1.63 following the release of the storage company’s annual general meeting presentation. According to the release, National Storage expects underlying earnings growth of between 8.3% and 13.8% in FY 2018.

The Origin Energy Ltd (ASX: ORG) share price has climbed 2.5% to $8.80 after one leading economist stated his belief that oil prices could be above US$80 a barrel by the end of 2018. According to Barron’s, Jim O’Neill believes that robust global economic growth and geopolitical risk emanating from Saudi Arabia could be the catalyst to take oil prices significantly higher.

In afternoon trade the S&P/ASX 200 (Index: ^AXJO) (ASX: XJO) has given back its early gains and is down slightly at 5,986 points.

Four shares which have fallen more than most today are listed below. Here’s why they have sunk lower:

The Creso Pharma Ltd (ASX: CPH) share price has fallen 6% to $1.26. This morning Creso Pharma announced that it has raised $15.5 million through a share placement at $1.10 per share. A further $2 million is expected be raised via a share purchase plan. The company also announced a partnership with Aeschbach Chocolatier to create an exciting range of unique, terpene infused premium Swiss chocolates.

The Big Un Ltd (ASX: BIG) share price has continued its decline and is down 11% to $3.41. A number of popular growth shares have come under pressure in recent days, possibly indicating that some investors are rotating out of them to other areas of the market.

The Fortescue Metals Group Limited (ASX: FMG) share price is down almost 3% to $4.57 after iron ore prices dropped lower overnight. Furthermore, the AFR has reported that Fortescue Metals has been forced to offer even bigger iron ore discount in China in order to shift product.

The Telstra Corporation Ltd (ASX: TLS) share price has fallen almost 2.5% to $3.38 following the NBN Company’s decision to cease sales of hybrid fibre co-axial technology for the next six to nine months. This has some investors concerned that its proposed 22 cents per share dividend may need to be cut.

Indonesia's top telecom acquires Malaysian satellite company

Asian Stock Markets

Telekomunikasi Indonesia, the country's largest telecommunications company, announced on Friday it has agreed to acquire a maximum stake of 70% in Malaysian satellite company TS Global Network for 108.5 million ringgit ($26 million).

TSGN is the largest provider for VSAT -- very small aperture terminal -- services, a satellite communications system for home and business users in Malaysia.

The company's corporate customers are found in the plantation, mining, government and banking sectors. It has affiliates in Brunei and Myanmar, Telekomunikasi, or better known as Telkom, said in a press release.

The agreement was signed by TSGN and Telkom's subsidiary, Telekomunikasi Indonesia

International, or Telin. The acquisition is subject to regulatory approval.

State-owned Telkom leads Indonesia's mobile telecommunications market with some 190 million subscribers, and is aiming to become a regional data hub. In 2016, Telin finished a 20,000-sq.-meter data center in Singapore.

Telkom's director for wholesale and international service, Abdus Somad Arief, said the synergy with

TSGN is part of Telkom's strategy to expand its satellite business.

Telkom currently has three satellites in orbit and is planning to send a fourth next year. Apart from supporting its own networks, Telkom has been renting transponders on its satellites to corporate customers in Indonesia, including banks and television networks.

Telin's president, Faizal R. Djoemadi, said that to support the cross-border satellite business, it needs an experienced partner that already has a presence in the regional market, hence the decision to acquire the Malaysian company, with which it has been partnering since 2010.

FORK IN THE ROAD, STOCK HEADWINDS

The dividend yield on the telecom sector .SPLRCL is 5.2 percent while the utilities sector .SPLRCU holds a 3.4 percent yield compared with a 2.4 percent yield for the broad S&P 500 index. 

Those sectors have had divergent fortunes this year, however, with utilities up more than 12 percent while telecoms have dropped more than 14 percent, the worst among the major S&P sectors. 

Telecoms also show a forward price to earnings ratio (PE) of 12.9, well below the 17.6 of the S&P 500. Utilities, however, are slightly more expensive with an 18.4 ratio, which could make them less attractive to investors even with the dividend premium.

The utilities sector has a strong 50-day negative correlation to the 10-year yield of 0.87, indicating the opposite directions they have traveled in. Telecoms, while still a negative 0.24, have a looser bond. 

As investors weigh increasing risks for equities, including stretched valuations in what is typically a difficult period for stocks, the high dividend payers may be a safer play in a market that could be primed for a pullback. 

Tension with North Korea, economic disruption from major hurricanes and political wrangling in Washington are also among the issues investors have to contend with. 

“September and October are historically trying months for equities and add on to that geopolitical risk, it is somewhat prudent to be taking a little bit off the table here,” said Anthony Conroy, president at Abel Noser in New York. 

Markets one year after Brexit vote: it all comes down to the pound

UK-based investors who bought shares on the country's main stock index the day after the Brexit vote one year ago could be forgiven for wondering what the fuss is all about. Foreign investors could tell them.

While the main FTSE 100 index .FTSE has risen 17 percent over the 12 months since Britain voted to leave the European Union, this has been driven almost exclusively by a fall in sterling. In dollar terms, British stocks have underperformed every developed index in the world.

Even at the level of British equity sectors, the picture is similar: companies earning sterling - down 14.3 percent against the dollar GBP=D3 and 13.2 percent against the euro since the June 23, 2016 vote - have underperformed dollar earners.

The worst performers are telecoms .MIGB0TC00PGB and utilities <.MIGB0UT00PGB >, both focused on the British economy. Top of the pile are materials companies .MIGB0MT00PGB, which include dollar-earning miners. They have outperformed the MSCI UK index .MIGB00000PUS.

Data from Bats Europe, an index compiler, shows that FTSE-listed companies that generate a large portion of their revenues from the UK are actually flat, whereas those with a high percentage of revenues from abroad are up 26 percent.

In dollar terms, the 4.2 percent returns on gilts is still better than those on both U.S. Treasuries and German Bunds.

Brexit negotiations began this week, against the backdrop of political uncertainty, with British Prime Minister Theresa May trying to forge a deal with a small Northern Ireland party to prop up her minority government after the June 8 snap election delivered a hung parliament.

The picture is further clouded by an apparent split in opinion at the Bank of England on the future path for rates.

Three British rate-setters said earlier this month that rates should start to rise for the first time in a decade, but BoE Governor Mark Carney doused speculation this week that he might soon back this view.