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LIVE MARKETS- Closing snapshot: STOXX retreats as ECB minutes push euro higher

Welcome to the home for real time coverage of European equity markets brought to you by Reuters stocks reporters and anchored today by Helen Reid. Reach her on Messenger to share your thoughts on market moves: helen.reid.thomsonreutersoe.com@reuters.net CLOSING SNAPSHOT: STOXX RETREATS AS ECB MINUTES PUSH EURO HIGHER (1635 GMT) The STOXX closed down 0.3 percent and never recovered from the rise in the euro following the publication of the ECB's minutes, which bolstered expectations of a shift in monetary policy. Note also that despite the slump of Marks and Spencer and Tesco shares, the FTSE hit a new high. Good evening from us, here's your closing snapshot: (Julien Ponthus) ***** MACQUARIE FAVOURS U.S. BANKS OVER EUROPE (1547 GMT) The sector has come into focus with the Q4 results season just round the corner and bond yields on the rise. "We believe U.S. banks will push their advantage and continue to gain share due to stronger capital position and a lower tax rate improving internal returns," Macquarie analysts said in a note. "As a result, we prefer US to European banks," Macquarie adds, singling out Bank of America , Goldman and Morgan Stanley. Their 'top shorts' are Deutsche Bank and UBS, while they like BNP's more diversified model. (Kit Rees) ***** O BREXIT CONSENSUS, WHERE ART THOU? (1515 GMT) With Brexit hardliner Nigel Farage now warming to the idea of a second UK referendum on EU membership, it seems no one -- be it the public, markets or politicians -- can make up their mind on when, how or even whether Britain will exit the EU. Nomura just updated its tick list of signs that could lead to "No Brexit", such as a second referendum, after Farage's comments. "Rarely has the UK’s economic and political outlook seemed so uncertain", said Kallum Pickering, senior UK economist at Berenberg. Consider this: Didier Saint-Georges, managing director at Carmignac says that given the economic pain expected in 2018 in the UK, he is "starting the year with a short position on sterling which should pay off if a downward spiral gets going". Taking the opposite view, Guy Stephens, technical investment director at Rowan Dartington, said Prime Minister Theresa May's recent cabinet reshuffle is "further evidence of her strengthening position which must be good for sterling". Also, while being underweight UK equities is a common call for most international investment banks, Credit Suisse just went back to "neutral" and Raymond James made the case that "ever more conciliatory" commentary around Brexit could support equities. Here below is Nomura's chart showing the shift in public opinion in favour of the view that Britain was, with hindsight, wrong to vote 'Leave'. (Julien Ponthus and Helen Reid) ***** NEW YEAR PARTY CONTINUES IN ITALY (1426 GMT) Italy's top FTSE MIB index is bucking today's weakness, has hit a fresh 29-month high and is rising for the seventh session in a row, its longest winning streak since October 2016. The index is also the biggest gainer among the European bourses year-to-date. Why such buoyancy? After all, Italy is set to hold a general election on March 4 and its outcome is all but certain. We've asked Alessandro Balsotti, head of asset management at JCI Capital. "It's been a strong start of the year for global stocks and Italy has a high beta that can explain why it's outperforming. Italy is a proxy of European markets and it's gearing towards financial stocks which are doing particularly well because of the yield curve steepening. I don't think there is an immediate political reason," he says. (Danilo Masoni) ***** UK EQUITY ALLOCATIONS TO RISE? (1338 GMT) While allocations to UK equities have been at rock bottom "for many months", Raymond James European strategist Chris Bailey reckons a recent recovery in the pound and UK domestic stocks (see chart below) could continue, driving money back into the market some investors have shunned as Brexit looms. "Our call is that the UK doesn't end 2018 so out of favour," he says, adding "ever more conciliatory" commentary around Brexit will support equities. "The longer the transition, the better for the UK." Meanwhile Credit Suisse is also sounding more optimistic on British stocks. It just upgraded MSCI UK to 'neutral' from 'underperform', saying "UK equities are very cheap on a relative basis, but the fundamentals and technicals are challenging". CS had moved UK equities to underweight back in September last year. (Dhara Ranasinghe and Helen Reid) ***** "JUST ONE WORD: PLASTICS" (1312 GMT) In "The Graduate", a young Dustin Hoffman (a.k.a. Benjamin Braddock), fresh out of university, is famously given a piece of advice for his future career: "just one word, plastics". Fifty years later, the future isn't what it used to be: Theresa May just pledged to eliminate avoidable plastic waste within 25 years. Here's the story : According to Paul Moran, head of research for Northern Trust Capital Markets, this could be a game changer (a 'diesel' moment) for the industry which investors, particularly shareholders in UK packaging group RPC, should not overlook. "If we look at plastic packaging stocks in Europe, RPC stands out given it's basically all plastic. As plastic is viewed as the structural grower in the packaging industry, this ought to be a big concern for long term investors." RPC shares are currently down 1.2 percent. Bonus: the "plastics" scene : http://www.reutersoe.com/1t8d96b (Julien Ponthus) ***** EUROPEAN SHARES GIVE UP GAINS AS MARKETS EYE ECB POLICY SHIFT (1247 GMT) The STOXX 600 gave up its gains and is now down 0.1 percent as investors eye a policy shift it the ECB's decision to revisit its communication stance in early 2018. Here's the link to our story on the minutes from the central bank's December policy meeting: And here's the market reaction after the minutes were released: (Julien Ponthus) ***** BUBBLE CONCERNS FOR U.S. EQUITIES "OVERDONE", AMUNDI RECKONS (1203 GMT) While a growing number of investors are increasingly nervous about the gap in valuations between U.S. and European equities and accordingly shifting investments towards the Euro zone or Japan, it's interesting to note that Amundi is keeping quite a positive view on U.S shares. "Looking into 2018, we believe that the concerns about a bubble for US equities are overdone", writes Kenneth J. Taubes, CIO of Amundi's US Investment Management, who believes there is room for corporate profits to rise. "We expect that the combined impact of an improving US economy, a stronger global economy and lower taxes will support EPS growth", Taubes said, adding that stock picking will however be more important than ever. "As certain stocks are over-valued, a rigorous bottom-up security selection will be key", he said. Here's a SocGen chart showing the gap between valuations in the U.S., Japan and the Euro zone : (Julien Ponthus) ***** MULTI-ASSET MANAGERS REASSESS BOND-EQUITY RELATIONSHIP (1135 GMT) The prospect of monetary policy normalization this year has got multi-asset managers thinking about how best to keep their portfolios well-diversified. Tommaso Mancuso, head of multi asset at Hermes Investment Management, says in a note that investors should not assume that bonds will keep on acting as a good hedge to their equity exposure. "In a market regime in which bonds generate lower expected risk-adjusted returns and potentially reduced diversification benefits, a balanced portfolio could very well be better off without bonds," Mancuso concludes. (Kit Rees) ****** EYES ON THE PRICE: VALUATIONS BACK IN FOCUS FOR 2018 (1006 GMT) One trend that could materialise this year as the beginning of the end of QE starts to jeopardise the relative attractions of stock market investing over bonds, is a newfound scrutiny of equity valuations. "You've had quite a long period where investors haven't had to worry about valuation risks much, it's been all about growth - but maybe after a strong 2017 people will look at valuation a bit more and question whether certain stocks still look good value," says Nick Davis, European income fund manager at Polar Capital. His fund favours domestic European stocks over the region's global exporters on valuation grounds. "There are some out of favour areas of the market that don't look as expensive, so there are still pockets of value," he adds. On sector picks "a lot of what you might describe as boring stocks look quite attractive... pharma, infrastructure, telecoms for example." Didier Saint-Georges, managing director at Carmignac, echoes this renewed focus on specific stocks in a note. "With the business cycle soon likely to peak, we are entering 2018 with a particular attention to stock-picking." European stock valuations have actually remained steady over the past few months as strong earnings kept P/E ratios from rising - but they're still above their five-year average. (Helen Reid) ***** BITCOIN AND THE FRENCH TV REALITY STAR - PART TWO (0946 GMT) Not only did the French financial watchdog (AMF) bark when a French reality TV star praised the virtues of bitcoin investing (see yesterday's post), but the head of the French central bank - no less - has also jumped in. "Those who invest in bitcoins do so at their own peril," Banque de France governor Fran?ois Villeroy de Galhau, told French news channel LCI when asked to comment on Nabilla Benattia's advice to put money in the crypto currency. He also added a piece of advice: "In a general manner, if one day a so-called financial expert promises you a product which has both a high yield and low risk: run!" Here's Villeroy de Galhau speaking to LCI. (Julien Ponthus) ***** OPENING SNAPSHOT: EUROPE STEADIES (0822 GMT) European shares have opened little changed as some calm returns to markets after China's regulator said a report about Beijing slowing its U.S. bond buying was possibly wrong. The STOXX 600 regional benchmark was just flat and sectoral moves were also small, masking bigger price swings for stocks such as Pandora and Tesco, both down following results, or Hexagon, which soared after its CEO was found not guilty of insider trading. William Hill and STMicro were boosted by broker upgrades. (Danilo Masoni) ***** SOFTWARE MAKERS IN FOCUS AS EARNINGS ROLL IN (0746 GMT) The tech rally has slowed somewhat, prompting some investors to say the golden era of technology stocks is coming to its end, while other say the future direction of the richly valued sector depends more and more on its ability to deliver earnings growth. On this front, we'll keep an eye today on software makers like SAP and Software AG following a strong earnings beat from U.S. peer Progress Software that sent its shares rallying on Wall Street. SAP however could be hit by a Morgan Stanley downgrade to equal weight with a reduced price target of 105 euros, while Software saw its price target lifted to 39 euros from 35 euros at Barclays. Earlier this month chipmaker Dialog Semiconductor, recently hit by investor fears it could lose top customer Apple, reported sales above its own outlook but its shares fell following an initial positive reaction. (Danilo Masoni) ***** WHAT'S ON THE RADAR FOR THE EUROPEAN OPEN (0740 GMT) European futures are pointing to a slight recovery for the region’s stock markets on Thursday after a bond market sell-off in the previous session brought an end to the breakneck New Year rally in equities. All eyes on UK retailers again as Marks & Spencer and Tesco became the latest in the squeezed sector to report on Christmas trading, with diverging results. Tesco’s Christmas sales fell short of market forecasts, continuing a trend of general merchandise being much weaker than food growth, while M&S beat forecasts with a smaller than expected fall in clothing and homeware. Pre-market indications see Tesco dipping while M&S could make a slight gain. A trader says "If Tesco is the miss it seems on first glance, would be surprised if it doesn’t take a decent knock here." Online still seems to be winning with Boohoo raising its sales forecast again, and shares called up 3 to 5 percent. Unlisted companies which could also provide a read on the health of Britain’s high street include department store John Lewis, which said margin pressure was rising and volatile trading would continue over the next 12 months, and House of Fraser, whose Christmas sales fell. And a source-based report that Nestle could pick a buyer for its U.S. chocolate business by the end of the week, a deal expected to top $2.5 billion, could move the Swiss food giant’s shares. In other company news and potential stock movers: Swiss exchange probing Clariant over possible Huntsman disclosure breach; Nestle to pick U.S. chocolate business buyer by end of week-sources; French group Sodexo keeps goals despite slow start to Q1; Richemont posts solid Q3 sales growth thanks to jewellery, Asia; CEO of Sweden's Hexagon found not guilty of insider trading; Tesco reports 1.9 percent rise in Christmas like-for-like sales; M&S clothing sales slightly better than expected in Christmas quarter?; Ultra Electronics sees "significant exposure" to U.S. defence spending; Premier Oil output set to rise by more than 10 pct (Helen Reid) ***** FUTURES POINT TO RECOVERY FOR EUROPEAN STOCKS (0705) European stocks look set for a recovery stronger than spreadbetters' calls suggested - futures are up 0.2 to 0.4 percent across the major benchmarks. This indicates early gains after a downbeat day yesterday when bond market worries seeped into stock trading. Here's your snapshot: (Helen Reid) ***** BITCOIN BURNED BY SOUTH KOREA BAN TALK (0654 GMT) Another eye-catching mover overnight was Bitcoin, which is down nearly 10 percent after South Korea's justice minister said the ministry is preparing a bill to ban cryptocurrency trading through its exchanges, dealing another blow to the cryptocurrency whose sharp rally has hit a speed bump over the past weeks. (Helen Reid) ***** RESULTS AND DEAL TALK TO DRIVE TRADING (0635 GMT) While we await some major UK retailers reporting today including Marks & Spencer and Tesco, results from Richemont and Sodexo have just hit the wire, while a late source-based story on Nestle's U.S. chocolate business sale could move the Swiss food giant. Cartier watch maker Richemont reported solid fourth-quarter sales growth thanks to strong jewellery demand in Asia: Food services firm Sodexo, which suffered broker downgrades hitting its shares on Tuesday, reported a slow start to its Q1 but stuck to growth and margin forecasts: Nestle is said to be picking a buyer for its U.S. chocolate business by the end of the week, with Ferrero seen as a front-runner: (Helen Reid) ***** MORNING CALL: EUROPEAN STOCKS TO DIP AS GLOBAL RALLY FIZZLES OUT (0614 GMT) Good morning and welcome to Live Markets. Stocks in Europe look set for a more hesitant open today with spreadbetters calling for slight gains for the DAX - which suffered a big fall yesterday - while the FTSE and CAC 40 are seen dipping. In Asian trading the New Year rally petered out as bond markets continued to sell off and Reuters reported Canadian government sources increasingly believe Trump will soon announce the U.S. intends to pull out of NAFTA. Here are your early calls: DAX is expected to open 5 points higher at 13,286.5 CAC 40 is expected to open 2 points lower at 5,502.7 FTSE 100 is expected to open 3 points lower at 7,745.1 (Helen Reid) ***** (Reporting by Danilo Masoni, Helen Reid, Kit Rees and Julien Ponthus)

Results drive sharp moves in European stocks

European share trading got off to a hesitant start on Thursday as concerns over protectionism and a bond market sell-off made the breakneck New Year rally in equities fizzle out.

LIVE MARKETS-Closing snapshot: Europe pulls back from highs

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.thomsonreutersoe.com@reuters.net CLOSING SNAPSHOT: EUROPE PULLS BACK FROM HIGHS (1708 GMT) Bond market jitters have weighed on the broader stock market today, leaving rate-sensitive banks, up 2.1 percent, as the only clear sectoral winner on the day, while bond proxies like utilities and real estate suffered the most. Overall that resulted in the STOXX 600 index falling just 0.4 percent after hitting fresh 2-1/2 year highs yesterday, while the bank-heavy FTSE MIB index managed to post a small gain. Here's your closing snapshot: (Danilo Masoni) **** EYES ON THE 2.6% LEVEL (1644 GMT) Nervousness on the bond market is the flavour of the day and equity investors are also closely watching U.S. Treasury yield charts for any further spike that could have meaningful repercussions on the stock market. "The 2.6% level on the 10-Year is an important level which if surpassed could be detrimental for equities," says Stephane Ekolo, Global Equity Strategist at Avalon Capital Markets. The yield on 10-year U.S. Treasuries has spiked today to fresh 10-month highs, to within striking distance from the 2.6% level. "US CPI data point (this Friday at 1:30pm UK) should be closely monitored as it may provide evidence confirming the uptrend on the 10yr yield," adds Ekolo. (Danilo Masoni) ***** CHRISTMAS CHEER? A MIXED BAG FOR UK RETAILERS (1606 GMT) Retailers' Christmas updates so far have been a mixed bag, Liberum analysts say, with electronics, clothing and fashion the weakest segments, although most warned of tough conditions going into 2018. Company updates and industry data alike paint a picture of weak in-store footfall being offset by strong online sales. "What we're seeing is the disparity between the 'new-world' retailers versus the more traditional, mid-market players where the consumer proposition and service elements are not compelling or agile enough, is widening," they note, adding that most retailers highlighted tough conditions in 2018. What to bet on? Strong online players and value propositions, according to them - Liberum's preferences include ASOS, B&M and Boohoo, while it remains concerned about M&S, which reports Christmas trading tomorrow. Today we've had some disappointing updates from Superdry and Moss Brothers sending their shares sliding 8.8 and 16 percent respectively. But overall valuations for the UK's general retail sector have ticked up recently as some Christmas updates beat gloomy expectations. (Helen Reid) ***** HOW DOES IT FEEL BEING A CRYPTO? 267 PCT HIGH THANK YOU! (1545 GMT) Shares of Eastman Kodak Co are up 65 percent today and have surged 267 percent since the beginning of the year after the one-time leader in photography became the latest company to jump on the cryptocurrency bandwagon. There's really something magical (or not) about crypto : Riot Blockchain shares have tripled since October when the former biotechnology firm changed its name. Same thing for soft drinks maker Long Island Iced Tea which has more than doubled since it said it was shifting focus to blockchain technology and changed its name to Long Blockchain. Here's crypto magic for you in the form of Kodak shares: (Julien Ponthus) ***** JPM AM STICKS WITH SLIGHT PRO-CYCLICAL TILT IN EUROPE (1510 GMT) Stephen Macklow-Smith, head of Europe equity strategy at JPMorgan Asset Management, tells us that the faster earnings growth he expects to see in Europe is probably going to be in the financial and cyclical area of the market. "If we're seeing higher growth and higher inflation, then yields should be moving higher and yield curves should be steepening, and that's exactly what we are seeing," Macklow-Smith says. "That's normally an environment in which financials and cyclicals outperform defensives and growth companies." Macklow-Smith adds that they are sticking with the "modest pro-cyclical financial tilt to the portfolio" they have had through most of the time since the yield curve in Europe started to steepen in the middle of 2016. (Kit Rees) ***** "NO I DON’T THINK THIS IS THE START": PERMABEAR REBUFFS BOND BEAR CLAIMS (1502 GMT) With bond kings such as Bill Gross claiming the start of a bear market has begun, you would have thought that SocGen's Albert Edwards, who's been warning for quite some time now about the possibility of a market collapse, would join in. But no, far from it. "The US 10y can rise all the way to 3% and we will still be in a long-term secular bull market", he just told us. "My own view is that we could visit 3% before yields crash lower in the next recession to -1% US10y (yes that is minus 1%)", he added. Just to reassure you guys, he is still a permabear : "Do I think the equity markets could collapse this year, just like in 1987? Yes I certainly do," he stressed. Here's the chart he used yesterday during a conference in London to make his case: (Julien Ponthus) ***** IS THIS THE TURNING POINT FOR A SOUR BET ON EUROPEAN BANKS?(1440 GMT) One equity trade of 2017 that has so far failed to pay off was euro zone banks, driven by the expectation that recovering economies and an eventual pull-back in bond purchasing by the ECB would finally nudge interest rates higher, firing up bank profits. But a turning point could be ahead with bank stocks shooting up today as bond yields rise. Every market watcher is talking about the interest rate outlook today and how to position in equities in preparation - with many strongly bullish on bank stocks. "Higher rates could be coming in our view, and given the moves can be vicious when they finally arrive it seems sensible to position for such ahead of the event," write Northern Trust Capital Markets analysts. They cite valuation discounts, dividend premiums, a peak in regulation as just a few of the reasons to buy bank stocks. "Clearly banks should win in a rising rate environment; so too should commodities," the analysts add. Citi analysts also remain overweight financials, saying the sector will be driven higher by rising bond yields, solid earnings growth, as well as the potential for sector M&A. (Helen Reid) ***** AFTERNOON UPDATE: EUROPEAN BANKS SOAR BUT STOXX STILL SOUR (1354 GMT) It's just past lunchtime and financials are the one bright spot in an otherwise negative European stockmarket. Over in the U.S. it looks like it's going to be a similar story with Wall St futures pointing to a muted start to trading following a report that China may slow its purchases of U.S. bonds. Here's your snapshot: (Kit Rees) ***** SMALL IS BEAUTIFUL IN EUROPEAN EQUITIES (1340 GMT) JP Morgan strategists are pouring praise on the small- and mid-cap parts of the market which they see as safe bets in this late-cycle stock market where valuations are running high. Small and mid-caps in Europe continue to offer faster earnings growth than large-caps, at discounted valuations, and with less leveraged balance sheets, they note. JPM believes the next global recession will start in the U.S., and accordingly analyzes the performance of small and mid-caps around the world during U.S. recession-linked downturns in the S&P 500. "Our findings suggest that some of the best alpha opportunities in small & mid-caps today would also be low beta plays when we hit the next economic downturn," they write. Accordingly they're overweight small and mid-caps versus large-caps in the Eurozone, but have the opposite positioning in the UK. Globally they also prefer the smaller side of the market, seeing U.S. stocks in particular as benefiting from tax reform they see as having a bigger impact than many expect. Small and micro-caps have indded strongly outperformed the large-cap market in Europe over the past five years as the economy recovered: (Helen Reid) ***** CONSENSUS BUILDS AROUND EUROPEAN STOCKS (1310 GMT) Morgan Stanley has just raised its overweight recommendation on European stocks and trimmed its US weighting, adding to those expecting European stocks to outperform Wall Street this year. "U.S. stocks have outperformed and are now close to our year-end price target with limited upside, while the backdrop for European stocks outperformance is intact," the U.S. bank's strategists said in a cross-asset note. Earlier on today, Tomas Hildebrandt, senior portfolio manager at Evli, said investors should favour non-U.S. equities including European ones. "Europe and Emerging Markets have the best upside potential in 2018, even though the U.S. tax resolution boosts US earnings. Both Europe and EM usually perform well in late-cycle markets. In Europe earnings and margins are still lagging long-term trends, hence a catch-up with the rest-of-world seems plausible for the region." Just yesterday, UBS strategists warned that the temperature in European - and global - markets is rising, but said EU stocks offered catch-up potential. (Helen Reid and Danilo Masoni) ***** THAT'S USUALLY NOT A GOOD SIGN RIGHT? (1209 GMT) Gold has jumped 1 percent during morning trading to its highest in about four months, usually a clear "risk-off" sign for markets. It has eased off a bit to 0.8 percent. In the U.S. futures are currently pointing to a dip of about 0.5 percent for the Dow and the S&P and of 0.7 percent for the Nasdaq as reports that China is looking to cut down on U.S. bond purchases send U.S. yields to fresh highs. Here's the gold report: Here are gold prices in the last three days: (Julien Ponthus) ***** COULD EUROPEAN EQUITIES CATCH UP WITH U.S.? (1144 GMT) They would have a long way to go in order to do so... Man Group says Europe's political travails have depressed the region's equity valuations versus U.S. stocks and the spread in price/earnings ratios on either side of the Atlantic is at its widest since the global financial crisis, according to its latest "Views From The Floor". "If 2018 does bring U.S. PE compression and Europe manages to stay on a political even keel (a big 'if' in our view given the culmination of Brexit negotiations as well as the Italian elections) then maybe we might start to see this trend reverse." Here's that big PE divergence: And looking at the performance of MSCI Europe versus MSCI World, Man Group concludes European equities are at their lowest ever versus the U.S.: (Tom Pfeiffer, Danilo Masoni and Helen Reid) ***** CHINA BOND PURCHASES REPORT ACCELERATES SELL-OFF (1117 GMT) A report that China is looking to cut down on U.S. bond purchases sent U.S. yields to fresh highs and sent the dollar tumbling, accelerating a sell-off in European stock markets as the euro shot up. Bank stocks are the only ones spared as higher bond yields are a blessing for lenders: Euro zone banks are flying up 1.3 percent while the STOXX 600 banks are up 1 percent. Saxo Bank's sales trader Pierre Martin tells Live Markets colleague Julien Ponthus he thinks it's only a temporary risk-off moment, "a temporary spike in nervousness". But others reckon this is just the beginning of a market-wide recalibration after Bond king Bill Gross's claim that a bond bear market has begun. "We look at financial markets and they hugely underestimate the potential for interest rate rises," says Nick Gartside, of JP Morgan Asset Management, who spoke to our colleague Marc Jones. "The biggest risk is Europe," he adds. "The market is pricing the first ECB rate rise in 2019. That's absurd: -0.4 rates are set from an emergency, is Europe in an emergency? Certainly not from the data we have just seen." (Helen Reid and Julien Ponthus) ***** CORRECTION AHEAD? (1040 GMT) Spiking global yields have sparked worries that bonds have entered a bear market, hitting bond proxy stocks like utilities yesterday and weighing on the broader market today. The reaction remains contained so far but the "correction" word has resurfaced in market commentary. "The resilience shown by risky assets (equity, corporate bond spread, emerging markets) is presumably due to the fact that real rates remain motionless in the current phase. Should this move continue, and be helped by a limited rise in real rates, stocks and emerging markets would likely correct (even slightly), if nothing else because of the short-term overbought levels reached during the euphoric start of 2018," said Alessandro Balsotti, head of asset management JCI Capital Ltd. Just about now the STOXX 600 has hit its day low, falling 0.4 percent, while the 10 year US Treasury yields have spiked to a fresh 10 month high. (Danilo Masoni) ***** STAY AWAY FROM BITCOIN, WATCHDOG URGES FRENCH TV REALITY STAR (1032 GMT) "Nabilla, bitcoin is very risky! One can lose it all. No such thing as a miracle investment. Stay away." France's financial watchdog AMF posted this warning on Twitter after a French TV reality star urged fans to invest in the crypto currency. "Even if you know nothing about it, it allows you to make money without investing much," Nabilla Benattia said in a video on a social network, which quickly went viral. I thought this could interest those of you looking for signs that the spread of crypto currencies into retail investors might, perhaps, be signalling a bubble. Here's Nabilla: (Julien Ponthus) ***** FTSE UNMOVED AFTER STRONG UK PRODUCTION (0958 GMT) No drama here: Britain's FTSE stuck to its modest gains in morning trading after data showed British industrial output was set to make a strong contribution to economic growth in the final months of 2017. Seems economists polled by Reuters are telling the right story so far: the world's sixth-largest economy should underperform most of its European peers in 2018 but will do better than the gloomy predictions made around the shock Brexit vote of 2016. The FTSE is cruising up about 0.2 percent on fresh new highs. (Julien Ponthus) ***** EUROPEAN CONSUMER STAPLES' DIVI YIELD STILL TRUMPS BONDS (0855 GMT) While there may be concerns that a rise in bond yields could dent appetite for dividend-paying sectors such as European consumer staples, which are also richly valued, the chart below shows that the MSCI European consumer staples index's dividend yield is still more than the yield on the German 10-year government bond. At least for now ... (Kit Rees) ***** OPENING SNAPSHOT: DEFENSIVES DRIVE EUROPEAN STOCKS LOWER (0821 GMT) Falls among European pharma firms, utilities and consumer staples are weighing on the broader market in early deals following a jump in bond yields, while steel producers are the biggest fallers among basic resources. The rise in bond yields is helping banking stocks, however -- the only sector aside from energy making any notable gains. Among individual stocks, Metro Bank is the top gainer after an upgrade from Citi, while IG Group is the biggest faller on the Stoxx 600 index following conclusions of a review of the contracts-for-difference market by the UK's FCA. Sainsbury's is up 0.6 percent. Here's your opening snapshot: (Kit Rees) ***** TIME TO WORRY ABOUT THE BOND MARKET? (0752 GMT) The recent rise in yields on both side of the Atlantic is making a number of analysts wonder where the global macro picture goes from here as the yield on the 10 year U.S. Treasury goes above 2.55 percent for the first time since March last year. "Have we finally entered a bond bear market?", Rabobank asks this morning while DNB notes that "yields weigh on dividend sectors". Utilities were under heavy pressure during the previous session, a trend which may very well continue if yields continue to rise. (Julien Ponthus) ***** WHAT WE ARE WATCHING (0752 GMT) Futures point to a slightly weaker open than what earlier financial spread betters suggested. The British economy is at the centre of attention with the BCC’s warning of a “underwhelming” 2018 and industrial and production data expected at 0930 GMT. It might not be all doom and gloom : Sainsbury's forecast beating sales and Ted Baker’s performance over Christmas seem to suggest that shorting high street may have been a dangerous trade after all. In the construction sector things don't seem that bad either with Britain's third-largest builder Taylor Wimpey saying its results in 2017 will be in line with expectations. Interserve also forecasts better-than-expected 2018 profit. On a more macro trend, the recent rise in bond yields may put utilities and other dividend proxies under pressure and tech stocks could suffer too from profit taking in Asia. Other movers in European include Airbus which is waiting for France's Macron to finalise a macro deal in China, Deutsche Bank, which is testing – again – investors’ patience. On the M&A front, Sweden's Tele2 is merging with cable TV firm Com Hem and Spain's Repsol is reportedly in talks to sell its Gas Natural stake to CVC. (Julien Ponthus) ***** BRITISH RETAIL: IT'S ALL ABOUT FOOD AND FASHION (0738 GMT) It looks like food retailers are coming out on top again after supermarket Sainsbury's beat forecasts for its Christmas sales and nudged up its profit guidance. Traders are calling the stock 1-2 percent higher. And elsewhere Ted Baker also reported a rise in Christmas retail sales. Given that Next issued an upbeat update earlier this year, perhaps fashion also held up over the festive period?. (Kit Rees) ***** STOCKS FUTURES TO A WEAK OPEN (0707 GMT) Futures are showing a slightly gloomier picture than early indications from spreadbetters with most bourses down or flat: (Julien Ponthus) ***** UK DATA UNDER SPOTLIGHT AFTER WARNING OF "UNDERWHELMING" 2018 (0650 GMT) "It’s an important day for UK data today", writes CMC Markets' Michael Hewson this morning as official data for industrial and construction output in November, as well as trade, are due at 0930 GMT. The release of the data comes after the British Chambers of Commerce (BCC) said the country should brace itself for "an underwhelming" 2018. With May's reshuffle dismissed by some of her allies as a failure, any unpleasant surprise will surely weigh on morale after the BCC's dire warning: "The economy is set to continue on an underwhelming growth trajectory over the near term with uncertainty over the impact of Brexit coupled with high inflation and weak productivity likely to dampen overall economic activity". (Julien Ponthus) ***** MORNING CALL: EUROPEAN SHARES SEEN MIXED (0617 GMT) Good morning and welcome to Live Markets. Stocks in Europe look set for a mixed open today with spreadbetters calling for slight losses for the FTSE while on the continent shares are expected to edge slightly higher. Asian shares flinched from testing their 2007 record peak, as investors booked profits in high-tech shares while oil prices hit three-year highs due to production cuts and a fall in inventories. Here are your early calls: Frankfurt's DAX is expected to open 5 points higher, Paris' CAC 40 by 6 points and London's FTSE 4 points lower. (Julien Ponthus) ***** (Reporting by Danilo Masoni, Helen Reid, Kit Rees and Julien Ponthus)

LIVE MARKETS-STOXX 600 closes 15 points from all time high

Welcome to the home for real time coverage of European equity markets brought to you by Reuters stocks reporters and anchored today by Helen Reid. Reach her on Messenger to share your thoughts on market moves: helen.reid.thomsonreutersoe.com@reuters.net STOXX 600 CLOSES 15 POINTS SHY OF ALL TIME HIGH (1635 GMT) Another robust session for European shares with the Stoxx 600 up 0.4 percent and only 15 points shy of its all time high of 415.18 of 15 April 2015. Here's your closing snapshot : (Julien Ponthus) ***** CONSENSUS NOT A DANGEROUS PLACE TO BE (1622 GMT) Consensus is only a dangerous place to be when you are approaching an inflection point, says Chris Godding, CIO of Tilney, which manages more than 20 billion pounds' worth of clients' money. And by consensus Godding means expecting 2018 to be another year of very strong global economic and earnings growth. "When we look at the world ... we find it very difficult to come up with a solid reason to think that the trend, or the consensus, is going to be different or it's going to be wrong," Godding says. He adds that while the potential inflection point was a change in liquidity provided by central banks, we have only just started achieving synchronized global growth. "This is another reason to think that maybe it’s not all over just yet." (Kit Rees) ***** JUST 9 DAYS INTO 2018, S&P 500 TOPS FORECASTS (1615 GMT) The ongoing stock market rally is taking many by surprise and only nine days into the new year, the U.S. benchmark index has already risen above the year-end forecasts of Morgan Stanley, Scotiabank, Stifel and HSBC. In the snapshot the forecasts for the S&P 500 from 19 top brokers, courtesy of a trader. More broadly, the MSCI all-country world index is also offering a bullish picture. Just nine days in, the index is on track for its best month since July 2016. (Danilo Masoni) ***** PLAYING FIAT CHRYSLER THROUGH EXOR? WHY NOT! (1608 GMT) Dealmaking talk has put Fiat Chrysler on a roll but for some investors it's safer to play the story through Exor, the holding company of Italy's Agnelli family which controls the automaker along with big holdings in other valuable assets including truck maker CNH Industrial , reinsurer Partner RE and Ferrari. Among them is Andrea Scauri, fund manager at Milan-based Ifigest. "Exor's 30 percent discount to NAV is higher than the average. Considering that there is also the optionality that CNH could sells assets, I believe Exor offers more long-term value and lower volatility than Fiat at the moment," he says. Scauri adds that Exor could benefit from an increase in premiums at Partner Re following damages linked to hurricanes in the U.S. While Fiat has gained 24 percent in just four days, Exor has gained a respectable 13 percent. (Danilo Masoni) ***** FIAT CHRYSLER RACES HIGHER IN HEAVY VOLUMES AS AUTOS EXCITEMENT DRIVES TRADING (1436 GMT) The Italian carmaker's shares are on a dizzying ride, up 24 percent in just four days, as dealmaking bets drive autos even higher. A Morgan Stanley note yesterday talked up Fiat's Jeep brand and the possibility of a spin-off, boosting its shares higher. Here's our story on Jeep growth expectations from yesterday: Investors are certainly piling into the stock: no fewer than 100 million shares - around 10 percent of the stock's free float - have changed hands in the past four days of trading. "Something is cooking," says a London-based trader focusing in special situations. Also helping drive the autos sector sharply higher is Continental, boosted to a record high by a report on a possible breakup of the car parts maker. For what it's worth over (nearly) six days of trading, the autos sector is easily Europe's best-performing so far in 2018. (Helen Reid) ***** BANKING MERGERS: A LITTLE LESS CONVERSATION, PLEASE? (1340 GMT) While M&A is powering markets (biotech has seen a flurry of bids since the beginning of the year), the banking sector isn't joining the rush. Quite the opposite... Speculation of a possible deal uniting Commerzbank with the likes of BNP Paribas , SocGen or UniCredit has subsided and investors don't appear to anticipate an imminent move. In its monthly newsletter, fund Axiom AI, which invests in banking securities, said it was not holding its breath: "Consolidation will be a hot topic but should remain marginal". Berenberg equity sales traders also note that some of Commerzbank's 54 percent overperformance since the beginning of 2017 can be credited to M&A rumours, but stress a tie-up is not a safe bet. "While the market has speculated that Commerzbank may be involved in M&A, we see cross-border consolidation as unlikely, particularly given regulation opposition", they said, adding that "material in-market consolidation in Germany is unlikely..." For "A little less conversation (and), a little more action", it's this way: http://www.reutersoe.com/1zYh2xS (Julien Ponthus and Helen Reid) ***** "THE RETURN OF PRICING POWER" (1331 GMT) Subdued inflation is making central banks comfortable in making only gradual steps towards policy normalisation, but from the corporate world there are scattered signs here and there of prices going up. Earlier on we told you about two big Chinese beer firms raising prices in their country. Well today we also have two brokers saying luxury groups will have stronger pricing power going forward following a 2017 driven mainly by volume growth. "2018 will see a return of pricing power for some players. The recent price increases at industry leaders such as Gucci, Chanel and Hermes seem to confirm that trend," says Berenberg. Bernstein too says pricing power is back: "Given better demand and more balanced price differentials between regions, brands that are enjoying strong momentum will most likely resume price increases." (Danilo Masoni) ***** MIDDAY SNAPSHOT: EUROPEAN STOCKS HOLD AT 2 1/2-YEAR HIGHS (1225 GMT) Halfway through the session, and that boost from the miners Helen just wrote about is helping European stocks stay at their highest levels since August 2015. Over in the U.S., stocks futures are signalling that Wall St is also set to make gains today, with futures up 0.1-0.2 percent. Here's your snapshot: (Kit Rees) ***** HOLD MY BEER WHILE I ENJOY A LIGHT "MARLBORO TUESDAY" (1214 GMT) Remember how in 1993, Philip Morris' decision to cut prices to defend its market share triggered a sell-off across consumer staples? Well, in a modest manner and in the opposite direction, it seems European beer makers are enjoying a similar moment after China Resources Beer and Tsingtao Brewery decided to raise prices in their country. "A stronger pricing environment in China is positive for European alcoholic beverage companies. In our beverage universe, Carlsberg (12%), AB InBev (10%), Remy (19%) and Pernod (11%) boast the highest China sales," Liberum analysts noted on Monday. As you can see below, AB InBev, Carlsberg and Heineken are outperforming the food and beverage index as we get into midday trading: In case you missed it yesterday, here is a nice piece on the correlation between beer sales and World Cups: (Julien Ponthus) ***** MINER SWING CONTINUES AS BROKER CONSENSUS BUILDS (1145 GMT) Europe's mining and basic resources index has hit its highest level in nearly six years, since March 2012, and topping the sector leaderboard today (see chart below). Similarly with the oil sector, brokers' optimism on miners has been noticeably increasing recently as commodities drive global markets higher. "A strengthening macro backdrop, limited capex, strong earnings momentum and cash generation, cheap valuation multiples on current commodity prices and light positioning create conditions for continued outperformance," Barclays analysts write. This year could mark the light at the end of the tunnel for a sector whose brutal restructuring and deleveraging will start to bear fruit. "On our base case BHP, Rio and Glencore will all be net cash by 2020, an historically unprecedented scenario," Barclays notes. "The key to rerating is judicious allocation of surplus cash." ETF Securities commodities analysts say historically the recovery in capital spending has lagged price recovery by about a year, so capex growth is likely to turn positive in 2018. (Helen Reid) ***** IT'S THE CHIEF ECONOMIST STUPID! (1110 GMT) Pundits speculating over who gets to replace Mario Draghi as President of the ECB could somewhat be losing some of their precious time, ING writes today. "Looking ahead, the replacement of Peter Praet by May 2019 will in our view have a bigger impact on the ECB’s monetary policy than the Draghi-succession," the bank says, arguing that the position of chief economist has much more of an impact on the actual monetary policy. "Praet’s successor will have to prepare the groundworks for the first rate hikes, balance sheet normalisation and the further exit from ultra-loose monetary policies. On substance, the next Peter Praet could be more influential on monetary policy than the next ECB president." Here are Draghi and Praet (centre and right): (Julien Ponthus) ***** EUROPEAN STOCKS "VERY HOT", BUT STILL OFFER CATCH-UP POTENTIAL - UBS (1054 GMT) UBS strategists warn the temperature in European - and global - markets is rising, saying sentiment is getting complacent as their bull-bear indicator soared 84 percent in a year and global risk aversion fell to a more than 10-year low. "Complacency is high, but EU is earlier cycle and still offers catch-up," write UBS strategists. Return on equity for Europe is lagging the U.S. cycle by the most in 50 years, and the trailing profit gap just hit a new high of 60 percent, they find, indicating there's indeed space for the region's corporates to catch up. Key to this will be European earnings, up against stiff competition from the U.S. market flattered by a sweeping tax cut package. "U.S. tax cuts dominate today, but Europe is improving," UBS adds. The bank's end-2018 target for the STOXX 600 is 440, which translates to 11 percent upside, and it expects 10 percent EPS growth. As you can see below, earnings have indeed been the main driver of equity returns in Europe - making the upcoming results season all the more important. (Helen Reid) ***** GLOBAL EARNINGS REVISIONS AT ALL-TIME HIGH - CITI (1024 GMT) The fourth-quarter earnings season is getting closer and investors have never been so upbeat. Citi says global earnings revisions remained positive this week (+41%) for the fourteenth week in a row, recording the best weekly upgrades since their data started in 2000. High earnings revisions are usually seen at the start or end of the economic/market cycle, strategists at the U.S. bank led by Robert Buckland note, but the good news this time is that their "Bear Market Checklist" says it's still too early to call the end of this cycle. Little wonder then that the global stock market rally isn't losing momentum as 2018 gets underway. (Danilo Masoni) ***** ABLYNX: ARE WHITE KNIGHTS REALLY QUEUING AT THE GATES? (0959 GMT) Because looking at the share price jumping another 11 percent this morning, it sure seems like a lot of merger-arbs are comfortable putting their money, and a lot of it, on a sweetened bid or a rival offer. A trader said this morning that speculation in the Belgian press about different suitors, such as the likes of Sanofi or AbbVie was among the reasons lifting Ablynx to reach 34.3 euros, over ten percent above Novo's 30.5 euros offer. Asked to comment yesterday about the market paying a premium on Novo's offer, the trader said: "the problem with biotech is that you need to be comfortable with valuations". Below, a taste of the action around Novo's offer: (Julien Ponthus) ***** POSITIVE VIBES FOR UK GROCERS (0916 GMT) It's a decent day for grocers, with Morrisons' shares up close to a three-month high, and Kantar data showing that Tesco was the best performer over Christmas, boding well for its update tomorrow. Morrisons' shares may have enjoyed gains last year, but Jefferies analysts say that they are "by far the most attractively valued equity in the space". "Whilst we are aware of the inevitable consumer challenges to the sector in 2018, investors' continued obsession with size does MRW a disservice," Jefferies analysts add in a note. (Kit Rees) ***** EUROPEAN SHARES RISE AS FOOD RETAILERS IN DEMAND (0818 GMT) It's a positive open for European stocks with Morrisons and Sainsbury's among the top gainers, while Altice is leading the pack following the spin-off announcement. Sodexo is at the bottom of the STOXX, however, after some broker downgrades. Later on this morning we've got data on the Euro zone unemployment rate due, which is expected to show a slight decline. Here's your opening snapshot: (Kit Rees) ***** WHAT'S ON THE RADAR FOR EUROPEAN STOCKS (0750 GMT) European stocks were set for a lukewarm start to trading on Tuesday while futures for Britain’s FTSE 100 indicated the index could recover from Monday’s fall, with investors still focusing on reports from retailers after Mothercare and McBride suffered sharp falls in the previous session after poor trading updates. Morrisons, the first UK supermarket to report on Christmas trading, beat expectations for like-for-like sales growth, signaling it’s not all doom and gloom for the UK retail sector, and setting a high bar for peers Tesco, Sainsbury’s and Marks & Spencer which report later this week. Morrisons shares are seen gaining up to 5 percent at the open. A strong Christmas update from Majestic Wine should help cement more optimistic sentiment on Britain’s squeezed retail sector. In Europe the struggling cable company Altice will be a focus after it said it would spin off its U.S. operation – its shares are indicated 2 to 5 percent higher in pre-markets. And Carillion said it doesn't know why the shares moved up so much yesterday. In other potential stock movers: UK builder Persimmon says 2017 profit will be ahead of expectations; UK's Morrisons beats forecasts for Christmas trading; Ski resort operator Compagnie des Alpes buys stake in Travelfactory; Britain's Majestic Wine sales rise in Christmas season; Europe's Altice to spin off U.S. operation, simplify business; Shire cuts 2020 revenue target, prepares for spin-off of ADHD drugs; Regulator rejects Spanish ministers' complaint on Atlantia bid; Carillion Says Not Aware Of Developments That Support Share Price Rise (Helen Reid) ***** MORRISONS TO FEEL THE XMAS CHEER (0745 GMT) Morrisons could see a strong day after all following its Christmas update, in which the UK supermarket beat forecasts. Traders are expecting the shares to gain between 2-5 percent at the open. "There’s still a pretty big short base and I think people were cautious heading in – so could open with a decent pop," one trader told Helen. "Beware another Next-like short squeeze (11.5% on loan)," tweeted Accendo Markets' Mike van Dulken. (Kit Rees and Helen Reid) ***** EUROPEAN STOCK FUTURES FALTER, BUT FTSE SET TO RISE (0709 GMT) Futures for the main euro zone indices have had a lukewarm open, with the CAC and DAX holding flat - while FTSE 100 futures indicate a small recovery rally for the British index which had a weak day yesterday after hitting a fresh intraday high in early trading. "With the FTSE indices again flirting with overbought territory and one-third of All-share stocks beginning the week within 10 percent of their 52-week high, the UK market is due a spell of consolidation on technical grounds," writes Peel Hunt analyst Ian Williams in a morning note, adding however that the underlying mood of investors seems resilient. Here's your snapshot: (Helen Reid) ***** UK RETAIL IN FOCUS: MORRISONS TO REPORT XMAS TRADING (0645 GMT) After a pretty poor performance from UK stocks yesterday, particularly retailers Mothercare and McBride who sank after poor trading updates, the retail sector will again be a focus today as Christmas trading results from supermarket Morrisons are awaited. HSBC analysts expect a weakening of like-for-like sales growth compared with last Christmas and Q3. "Morrisons is up against some tough comparisons (2.9% LFL last Christmas) and has been seeing a slowdown in trade as reported by Nielsen in its market share data," they pointed out in a preview note. Among other UK companies to watch today will be housebuilder Persimmon and Topps Tiles, the home improvement store which has been seen as a bellwether of consumers' confidence and willingness to splash out on DIY projects. (Helen Reid) ***** MORNING CALL: EUROPEAN SHARES SEEN MIXED (0621 GMT) Good morning and welcome to Live Markets. Stocks in Europe look set for a mixed open today with spreadbetters calling for slight gains for the FTSE - which lagged peers yesterday - while European shares are seen edging lower. Over in Asia, shares kept approaching their all-time highs overnight while the yen jumped after the Bank of Japan reduced its bond buying programme. Here are your early calls: DAX is expected to open 15 points lower at 13,351.7 CAC 40 is expected to open 4 points lower at 5,483 FTSE 100 is expected to open 11 points higher at 7,707.3 (Helen Reid) ***** (Reporting by Danilo Masoni, Helen Reid, Kit Rees and Julien Ponthus)

Retailers push European stocks higher, FTSE 100 recovers

European shares gained further ground on Tuesday, rising to new 2 1/2 year highs as consumer sectors got a boost from strong retailer results, and indebted telecoms group Altice surged on plans to spin off its U.S. business.

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