^FTSE - FTSE 100
| Previous close | 7,150.57 |
| Open | 7,150.57 |
| Volume | 0 |
| Day's range | 7,139.38 - 7,197.53 |
| 52-week range | 6,536.50 - 7,727.50 |
| Avg. volume | 770,356,473 |
- Bloomberg
Brexit Isn’t Done Yet, But We May Get There: Taking Stock
(Bloomberg) -- The job isn’t done yet. The British Parliament decided to extend what markets hate most: uncertainty. What’s next? Likely a delay, even if U.K. Prime Minister Boris Johnson’s vowed to leave by Oct. 31. Johnson will on Monday ask the House of Commons to support his deal a new “meaningful vote.” It’s going to be a long week, but judging by the contained reaction of the pound and the flat FTSE 100 futures this morning, the market is pricing some hope of a resolution in the coming days.U.K. domestic-oriented stocks are first in line. They have surged over the past six sessions, and had been tipped to outperform if the deal would have been approved over the weekend. Looking at the chart below, they still have plenty of room on the upside before returning to their pre-Brexit referendum level. Morgan Stanley strategists write that a reduction in Brexit uncertainty should lead to a re-rating in U.K. stocks as the market becomes “investable again.” While U.K. mid-caps offer 10% upside, small caps offer an even better risk-reward as they trade at 10-year valuation lows relative to mid-caps, the strategists write.The FTSE 100 and 250 have performed closely in line over the past months, but the recent surge in the pound has boosted the mid-cap FTSE 250 while holding back the exporters-heavy FTSE 100. The former’s relative performance is at its highest correlation with the pound since September 2016.Digging deeper, domestic banks, housebuilders and retailers are key sectors to consider this week. Shares of U.K. high-street lenders have been among the hardest hit by Brexit uncertainty.RBS, which Bloomberg Intelligence’s Jonathan Tyce calls the poster child for no-deal risk fears, as well as Lloyds, have rallied strongly in recent sessions but remain about 5% and 15% from their pre-Brexit referendum levels respectively.British housebuilders have also been under pressure amid Brexit uncertainty and Morgan Stanley predicted last month that the group could gain 20% if a deal was reached, or drop 18% in a no-deal scenario. Those with big exposure to London, like Crest Nicholson and Taylor Wimpey, have been hit the hardest, still down 26% and 13% respectively since the referendum. HSBC analysts said earlier this month Taylor Wimpey is best placed to gain from a post-Brexit market bounce back.U.K. retailers too have suffered. The FTSE 350 General Retailers Index is still down about 17% since the referendum. Dispersing Brexit clouds may help improve consumer confidence, a strong barometer for the retail sector. Gains in the pound may help supermarkets in particular, such as Marks & Spencer, Sainsbury’s and Tesco.In the event of an U.K. general election, caution might be required for utilities and other stocks likely to be targeted by a potential Labour government. Jeremy Corbyn has vowed to nationalize swathes of Britain’s water and energy firms, along with the railways and postal group Royal Mail.Outside of domestic-oriented U.K. shares, euro-area equities could also be a major beneficiary to a vote in favor of the deal this week. The soaring pound has been a key driver of the Euro Stoxx 50 outperformance, with correlation back near 2017 highs.No matter what happens at the end, multinational groups listed on the FTSE 100 are set to track the pound, with the benchmark rallying if sterling drops and vice versa. FTSE 100 members derive more than 70% of their revenues from abroad. Diageo is one such stock to watch, with Jefferies analysts estimating that every 1% move in sterling against the dollar is worth about 0.5% of the beverage group’s EPS.In the meantime, FTSE 100 futures are flat, Euro Stoxx 50 futures are up 0.1%, while S&P 500 contracts are up 0.2% ahead of the European open.SECTORS IN FOCUS TODAY:Watch trade-sensitive equities after China’s top trade negotiator offered positive signals that talks between Washington and Beijing are progressing toward a partial trade deal.Watch German property owners after governing parties in Berlin struck a deal to freeze rents in the capital for five years. Watch Deutsche Wohnen, Berlin’s largest residential apartment owner, along with other German real estate names including Vonovia, TAG Immobilien, ADO Properties, Adler Real Estate, LEG Immobilien and Grand City Properties.COMMENT:“We have been advocating a bullish equity stance, driven, among other factors, by the belief that the trade drag will ease and that one could see Brexit clarity as early as this month, with the risk of No-deal exit fading,” JPMorgan equity strategists write in a note. “We anticipate an inflection in PMI momentum and look for a continued bounce in bond yields. This is behind our recent reversal of preference for U.S. over Eurozone and the expectation that market leadership will broaden into cyclicals and Value style.”NOTES FROM THE SELL SIDE:Sandvik is raised to buy from neutral at Citi after its 3Q earnings beat on Oct. 18. Citi says it’s stayed on sidelines, instead seeing Volvo as resilience top-pick. But broker now adds Sandvik to its “value-resilience camp”. Separately, SEB also raises Sandvik to buy.COMPANY NEWS AND M&A:SAP Confirms 2019, Mid-Term Ambitions After 3Q Profit IncreasesWirecard Commissions KPMG to Carry Out Independent Audit (1)Shell to Sell Egypt Assets in Western Desert to Focus on GasAdvent Nears Guarantees on Cobham Deal: Telegraph (Oct. 20)Telenor Grameenphone 3Q Revenue NOK3.84B vs NOK3.34B Year AgoBawag to Start EU400 Million Buyback Offer for 11% of Stock (1)Sartorius Stedim Ups Sales View, Buys Parts of Danaher Life (2)Roche’s Tecentriq-Avastin Combo Shows Overall Survival IncreaseTECHNICAL OUTLOOK for Stoxx 600 index:Resistance at 395.1 (July high); 397.9 (June 2018 high)Support at 382.8 (50-DMA); 378.5 (200-DMA); 365.5 (50% Fibo)RSI: 57.2TECHNICAL OUTLOOK for Euro Stoxx 50 index:Resistance at 3,636 (February 2018 high); 3,687 (January 2018 high)Support at 3,519 (76.4% Fibo); 3,466 (50-DMA); 3,403 (61.8% Fibo)RSI: 59.3MAIN RESEARCH AND RATING CHANGES:UPGRADES:EDP raised to overweight at JPMorgan; PT 4 eurosGetinge raised to hold at SEB Equities; PT 143 kronorNorma raised to outperform at MainFirst; PT 40 eurosPearson raised to hold at Deutsche Bank; PT 600 penceSandvik raised to buy at CitiSandvik raised to buy at SEB Equities; PT 190 kronorYara raised to buy at Handelsbanken; PT 410 kronerDOWNGRADES:Assa Abloy Cut to Sell at Pareto Securities; PT 220 kronorBobst cut to underperform at MainFirst; PT 48 Swiss francsDanone cut to sector perform at RBC; PT 72 eurosDeutsche Boerse cut to reduce at Oddo BHF; PT 130 eurosGroupe Open cut to hold at Portzamparc; PT 12.10 eurosICADE cut to neutral at Invest Securities SA; PT 83.50 eurosJulius Baer cut to neutral at CitiKiadis Pharma cut to hold at Jefferies; PT 2.50 eurosKiadis Pharma cut to sell at KBC Securities; PT 3.50 eurosPremier Oil cut to outperform at RBC; PT 125 penceSchaeffler cut to neutral at Oddo BHF; PT 8 eurosWirecard cut to neutral at MainFirst; PT 150 eurosYara cut to hold at Arctic Securities; PT 400 kronerYara cut to sector underperform at Scotiabank; PT 320 kronerINITIATIONS:HelloFresh Rated New Reduce at Kepler CheuvreuxMARKETS:MSCI Asia Pacific down 0.3%, Nikkei 225 up 0.3% S&P 500 down 0.4%, Dow down 0.9%, Nasdaq down 0.8%Euro down 0.08% at $1.1158Dollar Index up 0.07% at 97.35Yen down 0.02% at 108.47Brent down 0.3% at $59.2/bbl, WTI down 0.2% to $53.7/bblLME 3m Copper up 0.2% at $5820.5/MTGold spot up 0.2% at $1492.4/ozUS 10Yr yield little changed at 1.75% ECONOMIC DATA (All times CET):11am: (EC) 2018 Govt Debt/GDP Ratio, prior 85.1%\--With assistance from Kit Rees, Joe Easton and Erin Roman.To contact the reporter on this story: Michael Msika in London at mmsika4@bloomberg.netTo contact the editors responsible for this story: Blaise Robinson at brobinson58@bloomberg.net, Namitha JagadeeshFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
- Financial Times
Hedge fund Lansdowne thinks ‘idiotic’ bond prices will fall
Lansdowne Partners, one of Europe’s biggest and most influential hedge funds, is betting that financial markets are on the brink of a reversal that will see a big fall in “idiotic” bond prices, a slump in technology stocks and a revival in UK equities. to fund spending, which could upset bond prices and some of the best-performing stocks of recent years. The portfolio overhaul is likely to mean a significant increase in Lansdowne’s exposure to UK equities, the person said.
- Bloomberg
‘Hopes Have Been Dashed’: Market Reaction to Brexit Developments
(Bloomberg) -- Want the lowdown on European markets? In your inbox before the open, every day. Sign up here.The weekend’s developments in the U.K.’s path to exit the European Union have left equity and sterling investors with yet more uncertainty, with outcomes ranging from a delay, a chaotic departure or -- if Prime Minister Boris Johnson succeeds in his latest plan -- an exit with a deal on Oct. 31.“Financial markets closed last week on an optimistic tone with hopes of resolution and certainty to the Brexit outlook. These hopes have been dashed,” said David Page, Senior Economist at AXA Investment Managers. The pound may see “knee-jerk weakness” on Monday, according to AMP Capital Investors Ltd., while the U.K.’s domestically-exposed FTSE 250, which gained 5.2% over the past six trading days, will also be in focus.Still, losses for the pound and U.K. domestic equities may be limited as a no-deal exit looks less likely, according to Credit Agricole strategists, who recommend using sterling dips as a buying opportunity.With another dramatic week in U.K. politics ahead, here’s what market participants are saying about the latest developments.Alberto Tocchio, Colombo Wealth SA“We are back to square one unfortunately and the market is not going to like it on Monday. The pound will fall back after recent strength and European markets should lose at least 1%.”“On the positive side, Chinese top trade negotiators said that talks with U.S. are making progress and both sides are working toward a partial trade deal. This might partially offset the negative side effect of no-Brexit deal on Monday.”David Page, AXA Investment Managers“Gains in sterling, mid-cap equities and U.K. gilt yields look likely to face an early retracement over the coming week. Insofar as broader global assets, including U.S. Treasury yields had also moved on these developments, we can expect to see some retracement of these moves as well.”“Volatility associated with Brexit uncertainty looks set to remain elevated over the coming two weeks at least. However, we continue to view the prospect of a “no deal” exit on 31 Oct. as unlikely and an eventual extension to Article 50 still, on balance, appears the most likely outcome.” Oliver Harvey, Deutsche Bank“The next focus for the market will be votes next week on the legislation needed to implement the government’s Withdrawal Agreement. There will be a second opportunity for MPs to get the deal done. We retain our constructive outlook on the U.K., and long sterling and short U.K. real yield recommendations.”Joshua Mahony, IG GroupThe Letwin vote has been seen as a proxy for the meaningful vote on Johnson’s Brexit deal, so “markets are understandably treating this result with disappointment.”“It has been clear that there is no majority in Parliament for anything other than opposition for a no-deal Brexit, and thus it is evident that Brexit could yet only occur once we have seen a general election. For traders, the hope of greater certainty has been dashed, with Parliament looking ever more likely to push for an extension into 2020.”Stephane Barbier De La Serre, Makor Capital Markets“The (weekend’s) developments by no means imply that Brexit will necessarily not happen by Oct. 31. It just strongly increases the odds of further status quo aka uncertainty, the thing markets just hate the most.”He expects in coming days U.K. stocks to “brutally relinquish most of their recent gains”, with FTSE 250 down about 5%, while FTSE 100 to be more or less unchanged, cushioned by exporters’ negative correlation with the pound.\--With assistance from Kit Rees and Macarena Munoz.To contact the reporters on this story: Sam Unsted in London at sunsted@bloomberg.net;Ksenia Galouchko in London at kgalouchko1@bloomberg.net;Joe Easton in London at jeaston7@bloomberg.netTo contact the editors responsible for this story: Beth Mellor at bmellor@bloomberg.net, Blaise RobinsonFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
- FX Empire
The Week Ahead – Earnings, Geopolitics and Stats to Drive the Majors
It’s another big week for the global financial markets, Corporate earnings, Brexit, trade and economic data in Focus. It’s also Draghi’s last media show…
- Financial Times
Canadian elections, Brexit, ECB meeting
Canada leads the week’s election action when prime minister Justin Trudeau’s Liberal party seeks to hold on to power on Monday. Argentina also holds the first round of presidential elections this coming Sunday — though there is a distinct possibility that Peronist opposition candidate Alberto Fernández will secure outright victory. The same day regional elections in the eastern German state of Thuringia and Umbria in central Italy will be seen as gauges of the national mood.
- Financial Times
UK stocks are trapped in a never-ending Brexit loop
Brexit is no easier to write about than to invest around. When writing about the London market it is impossible, however, to avoid Brexit. The past three-plus years have trained investors to always view the UK as divided between domestic earners and exporters.
- Bloomberg
Johnson May Not Get His Decisive Vote on Saturday: Brexit Update
(Bloomberg) -- Boris Johnson is talking to MPs as he tries to build a majority in Parliament for the Brexit agreement he reached with the European Union on Thursday. But rebels expelled from his own Conservative Party are moving to postpone the decisive vote -- forcing the prime minister to seek a further extension from the bloc.French President Emmanuel Macron added to the pressure on MPs weighing how to vote when he told reporters in Brussels that a further extension shouldn’t be granted if Parliament rejects the deal.Must read: Two Crisis Phone Calls Unlocked the ‘Impossible’ Brexit DealKey DevelopmentsJohnson meeting with cabinet in LondonJohnson Sells Brexit Deal to Parliament Before Knife-Edge VoteDUP reaffirms its 10 MPs will vote against Johnson’s dealJudge Rejects Bid to Block Saturday’s Debate (5:35 p.m.)A Scottish judge rejected an attempt by legal activist Jolyon Maugham to block Saturday’s vote. The lawyer, who successfully got the courts to quash the prime minister’s prorogation of Parliament, had sought to argue that Johnson’s plans violated an existing law that prevents Northern Ireland being put in a separate customs union to the U.K.Hammond Seeks Assurances (5:25 p.m.)Former Chancellor of the Exchequer Philip Hammond warned he can’t back Johnson’s deal in its current form because it could be used to trigger a no-deal Brexit in 2020.Writing in The Times of London, Hammond says he wants assurances from the prime minister that the government won’t crash the U.K. out of the EU without a deal at the end of the transition period.“I haven’t come this far seeking to avoid no deal in 2019 to be duped into voting for a heavily camouflaged no-deal at the end of 2020,” he wrote. “But I am not a lost cause!”Labour MPs Propose Referendum Amendment (4:40 p.m.)Labour MP Peter Kyle has proposed an amendment that would give Parliament’s backing to a referendum on any deal agreed with the EU.The proposed change is to a motion requesting Parliament’s permission to leave without a deal which might be proposed by the government on Saturday if it fails to win backing for Boris Johnson’s agreement.“Tomorrow government will ask us to vote on two motions. First, on the new deal. Second, if that fails, for permission to leave with no deal,” Kyle said. “Should the deal fail to get a majority, MPs will move forward and be given the chance to vote” for the amendment, he said. However, ministers could opt not to move the no-deal motion.The proposed change would add to the motion that Parliament “rejects leaving the European Union without a deal and believes that any final decision on the future relationship between the U.K. and the EU should be subject to a confirmatory referendum before exit day,” Kyle said in a posting on Twitter.Letwin Says Amendment is ‘Insurance’ (4:15 p.m.)Former Tory minister Oliver Letwin said he will back Johnson’s deal and his amendment (see 3:15 p.m.) is simply an insurance policy to stop the U.K. accidentally crashing out without a deal if the necessary legislation isn’t completed in time.“My aim is to ensure that Boris’s deal succeeds, but that we have an insurance policy which prevents the U.K. from crashing out on Oct. 31 by mistake if something goes wrong during the passage of the implementing legislation,” Letwin said in an email. “Nothing in my amendment or in the Benn Act itself in any way delays the actual departure of the U.K. from the EU immediately following the ratification of the Withdrawal Agreement.”SNP Indicates Support for Vote Delay (3.30 p.m.)Nicola Sturgeon, leader of the Scottish National Party, suggested her party would vote for a proposal to delay the vote on Johnson’s deal until after Saturday. The amendment, drawn up by former Tory Oliver Letwin and Labour’s Hilary Benn, would withhold approval for the Brexit deal until the bill which implements it is law (see 3:15 p.m.).“We will ultimately vote against this deal but we would be sympathetic to something that would make sure it doesn’t get through tomorrow,” Sturgeon told reporters in London. She said an extension to the Oct. 31 deadline followed by a general election or a referendum would be her preferred outcome.Saturday May Not Seal the Deal (3:15 p.m.)Boris Johnson may not even get the chance to put his Brexit deal to the vote on Saturday, with support growing for a move by an alliance of former Conservatives and opposition Members of Parliament to delay the decision by a week or more.Former Tory minister Oliver Letwin and Labour MP Hilary Benn have put down an amendment to Johnson’s motion which would withhold approval for the Brexit deal until the bill that implements it is law.If it is passed, Johnson would be unable to put his deal to the vote, leaving him in a situation where he’s obliged by law to seek a delay to Brexit.Don’t Assume EU Extension, Varadkar Says (2:30 p.m.)U.K. lawmakers should not assume the EU would grant another Brexit extension if it’s requested, Irish Prime Minister Leo Varadkar warned, noting such a move would need unanimous consent from EU members. The current proposal is the final offer, he added.Speaking to reporters in Brussels, Varadkar said he “cannot see the European Union coming back for another set of negotiations” if the British Parliament rejects this plan. Asked what the alternative is if this deal is shot down in Westminster, he responded that “plan B is no deal.”Macron Says U.K. Mustn’t Get Delay If Vote Fails (2 p.m.)French President Emmanuel Macron said the U.K. should not get another extension to the Brexit process if Boris Johnson loses the vote on his Brexit deal in Parliament on Saturday.“I don’t think a new extension should be granted,” Macron said at a press conference after a summit of EU leaders in Brussels. “The Oct. 31 deadline must be met.”BNP: U.K. Stocks Could Drop 10% If Vote Lost (12:20 p.m.)Stocks with heavy exposure to the U.K. economy could wipe out the rally seen over the past week if MPs reject Boris Johnson’s Brexit deal on Saturday, according to BNP Paribas.The bank forecasts downside of as much as 10% for the FTSE 250 index in such a scenario, with the exporter-heavy FTSE 100 gaining amid weaker sterling, strategists including Edmund Shing wrote in a note to clients.Johnson Goes on Charm Offensive (12 p.m.)With Saturday’s vote looking incredibly tight, Boris Johnson and his team are spending the day trying to persuade MPs from all parties to back his Brexit deal.Labour MPs are being offered more assurances on workers’ rights in the Withdrawal Agreement Bill, which would be brought to Parliament next week if Johnson wins on Saturday, according to a person familiar with the discussions.The Prime Minister’s personal focus is on winning around hard line Brexiteers in the European Research Group, and that operation is starting in earnest today, the person said.The government currently thinks about 17 or 18 of the 21 rebels who were expelled from the Tory party last month will back the deal, the person said. Many of them are seeking a way back into the party and want assurances any MP who votes against the government this time around will also be expelled.DUP Affirms Opposition to Deal (10:30 a.m.)Sammy Wilson, the DUP’s Brexit spokesman, extinguished any hopes his party will pivot toward supporting Johnson’s deal. “We will definitely be voting against it,” he told Sky News.Wilson said he’s disappointed Johnson “folded to the unreasonable demands of the EU,” especially since the DUP had given him a “fair degree of latitude” on temporary Northern Irish regulatory alignment with Europe.While acknowledging tariffs on goods coming into Northern Ireland from the U.K. would be refunded if they are proven not to have entered the Republic of Ireland, Wilson said the cash-flow problems this would create for local businesses would be damaging.At Least 10 Labour MPs Back Deal, Mann Says (Earlier)As speculation mounts over the way votes will fall on Saturday, Labour’s John Mann said at least 10 Labour MPs are likely to vote for Johnson’s deal. Asked on Ireland’s RTE radio how many of his party would back Johnson’s Brexit proposal, Mann responded that he expected the total to be in the “double digits.”Mann, who will vote for the plan, supported former prime minister Theresa May’s deal and is a vocal critic of Labour leader Jeremy Corbyn, who has called for Labour MPs to reject the deal.Earlier:Johnson Sells Brexit Deal to Parliament Before Knife-Edge VoteLondon Bankers Ready for Wave of Debt Deals If Johnson Wins Vote\--With assistance from Peter Flanagan, Joe Easton and Helene Fouquet.To contact the reporters on this story: Robert Hutton in London at rhutton1@bloomberg.net;Jessica Shankleman in London at jshankleman@bloomberg.net;Greg Ritchie in London at gritchie10@bloomberg.netTo contact the editors responsible for this story: Tim Ross at tross54@bloomberg.net, Thomas PennyFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
- Bloomberg
U.K. Domestic Stock ETF Is the Most Popular in Nine Months
(Bloomberg) -- Conflicting Brexit headlines keep coming and Boris Johnson’s ability to pull off a deal remains in doubt. But this isn’t stopping stock investors from taking a bet on the U.K. economy.The Vanguard FTSE 250 UCITS exchange-traded fund, which tracks the index of mid-cap companies that are more sensitive to domestic growth and benefit when sterling is stronger, has attracted about 81 million pounds ($104 million) so far this week, the largest inflow since January, according to data compiled by Bloomberg.Ever since speculation emerged on Tuesday that the European Union and the U.K. are nearing a deal, the ETF’s underlying FTSE 250 Index has been outpacing its FTSE 100 counterpart of larger companies, many of which are international exporters that suffer when the pound rises. This is also visible in fund flows, with the iShares Core FTSE 100 UCITS ETF attracting just 14 million pounds since Monday, down 85% from the previous week.“The FTSE 250 is more domestic and benefits from improved domestic growth prospects,” said Lars Kreckel, global equity strategist at Legal & General Investment Management in London. “It’s reflecting the changing probabilities” of a Brexit deal.JPMorgan Chase & Co. strategists Mislav Matejka and Prabhav Bhadani raised U.K. domestic stocks to overweight on Monday, saying they appear attractively priced and can ride increased consumer confidence and corporate spending as clarity over Brexit grows.Consumer ConfidenceIf Johnson succeeds in getting the Brexit deal through Parliament on Saturday, BNP Paribas strategists including Edmund Shing say that the FTSE 250 will rise at least 5%. They estimate a drop of as much as 10% if the deal falls through.It’s an important turning point for scorned U.K. equities that are the most vulnerable to the state of economic growth. Prior to this week, Vanguard’s FTSE 250 ETF had barely seen any inflows since June, whereas record flows were heading to BlackRock Inc.’s FTSE 100 ETF.Investors have been avoiding U.K. equities for years and the country’s stock market is the least popular in the world, according to the latest Bank of America fund manager survey released on Tuesday. In a monthly poll that ended Oct. 10 -- before the optimistic Brexit deal reports -- respondents forecast British stocks as having the lowest chance of outperformance among major equity markets over the next decade.U.K.-focused equity funds saw their first weekly inflows in a month in the seven days through Oct. 16, attracting $184 million, according to EPFR Global data.Despite the ETF inflows and a brief rally, uncertainty continues to haunt U.K. stock traders. Johnson is now battling to sell his new Brexit deal to skeptical members of the U.K. Parliament before a crucial vote on Saturday. French President Emmanuel Macron added to the pressure when he told reporters in Brussels that a further extension shouldn’t be granted if Parliament rejects the deal.(Updates with weekly flows data from EPFR in the penultimate paragraph.)To contact the reporter on this story: Ksenia Galouchko in London at kgalouchko1@bloomberg.netTo contact the editors responsible for this story: Blaise Robinson at brobinson58@bloomberg.net, John Viljoen, Jon MenonFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
- Financial Times
Hong Kong protests hit Holiday Inn owner InterContinental
The FTSE 100 company, which owns the Crowne Plaza and Holiday Inn brands, said that overall revenue per available room — the industry’s preferred metric — fell 0.8 per cent in the three months to the end of September. For Greater China, the drop was 6.1 per cent, due to a 36 per cent fall in “revpar” in Hong Kong. Pro-democracy protests in Hong Kong have escalated since they started in spring and this week, the city’s chief executive Carrie Lam declared that Hong Kong was in a “technical recession”.
- FX Empire
Weak Data Weighs On U.S. Markets, Brexit Deal Reached, Asia Moves Lower
Stocks rise on the back of a new Brexit deal but the highs were not held, Parliament and the EU still need to accept the arrangement to stave off a hard-Brexit.
- FX Empire
Risk-On as UK and EU Strike New Brexit Deal
Equities rallied on the news as well as the British Pound, which jumped more than 1%. At the same time, investors dumped their hedge protection, leading to weakness in the Japanese Yen, Gold and U.S. Treasury bonds. The U.S. Dollar is also getting crushed against a basket of currencies.
- Financial Times
Women executives demand legal quotas for females on boards
Top women executives called for legal quotas for females in the boardroom at an FT summit on Thursday in an uncompromising push to improve gender equality at UK listed companies. Inga Beale, former head of Lloyd’s of London, and Tiina Lee, Deutsche Bank’s UK and Ireland chief executive, demanded the moves at the FT’s Women at the Top Conference in the capital.
- Financial Times
Beyond the game of ping pong headlines
FT subscribers can click here to receive Market Forces every day by email. Politics remained a principal driver of market sentiment on Wednesday. A look at 30-year bond yields suggests a bottom has formed since hitting mid-August lows.
- Bloomberg
Investors Have Started Preparing for Brexit Endgame
(Bloomberg) -- When it comes to Brexit, investors have endured three years of deadlines and disappointments. Now with a finish line tantalizingly in sight, they have switched from expectations it could last forever to perhaps pricing the endgame.As talks toward a deal enter overtime, negotiators from Britain and the European Union will still need official approval for any accord, and on the U.K. side that means Prime Minister Boris Johnson must win the support of Parliament. It could prove a formidable challenge, yet across multiple asset classes optimism is surging.Here’s a look at what’s happening in some key markets:Domestic StocksThanks to their exposure to the U.K. economy and inability to benefit from currency weakness, domestically-focused British companies are seen most at risk from a hard Brexit. As investors bet these businesses have had a stay of execution, the FTSE 250 Index -- seen as the more domestic stock gauge -- has surged in the past week and closed Tuesday at the highest in more than a year.On a percentage basis the gauge has gained more than five times the exporter-heavy FTSE 100 Index in the period.Pound OptionsInvestors in options are looking for the pound to rally in the run-up to the Oct. 31 deadline, with contracts that confer the right to buy the currency (calls) trading at a premium to those offering the right to sell (puts). The below chart shows the prices of options that expire in two and three weeks -- the lines slope up toward the right, where the calls are plotted.Overall, options signal that the pound will trade between $1.3490 and $1.3925 with more than 95% certainty over the next two weeks should a divorce deal be closed. It traded Wednesday in Asia at $1.2751.Pound VolatilityMeanwhile, the currency’s volatility surface, which just a week ago showed a marked preference for options that fall due in December, has now inverted. In plain English? Seven days ago traders thought the key Brexit events were weeks away, yet now they’re clamoring for options that mature in one week.The image above once again plots calls and puts, but adds an extra dimension: Time. All the action -- in both puts and calls -- has shifted to the near term.Bank BondsBrexit has left a trail of victims in the credit market, but resurgent bank capital securities hint the endgame may be here. A 1.25 billion-pound ($1.6 billion) issue from Barclays Plc of callable contingent convertible bonds surged to the highest since May 2018 Tuesday. The asset class is designed to help transfer the risk of bank rescues to bondholders instead of taxpayers, and has been battered amid fears financial services would be disrupted by a disorderly U.K. exit.Corporate CreditAt JPMorgan Chase & Co., the credit strategists are so confident the country will avoid crashing out they have closed out their Brexit hedge, a group of default swaps on companies most vulnerable to an isolated British economy.Fear is subsiding in Europe, too. The cost to insure high-yield, euro-denominated corporate bonds fell by the most in more than three weeks on Tuesday, according to Markit‘s iTraxx indexes. For investment-grade debt it was the biggest drop in a month.\--With assistance from Vassilis Karamanis.To contact the reporters on this story: Samuel Potter in London at spotter33@bloomberg.net;Ven Ram in London at vram1@bloomberg.net;Cecile Gutscher in London at cgutscher@bloomberg.netTo contact the editors responsible for this story: Samuel Potter at spotter33@bloomberg.net, Cormac Mullen, Joanna OssingerFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
- Financial Times
Trade dominates the air waves
FT subscribers can click here to receive Market Forces every day by email. Corporate earnings, economic data and central bank tidings face a tough time eclipsing the primetime dramas of trade and Brexit for investors. What links the big issues of trade friction and Brexit is how slowing economic activity (duly challenging the outlook for corporate earnings) instils a sense that deals must be struck at some point, and hopefully before the macro climate turns decidedly wintry.
- FX Empire
Guessing The Brexit Door
This week will be critical for the British currency, which may result in increased volatility of sterling both downwards and upwards. Right now, positive market sentiment supported by hopes for approval of the UK exit from the EU.
- FX Empire
U.S. Stocks Turn Lower as Investors Sour on ‘Phase One’ Trade Deal
Investors took no chances upon hearing the news. Besides driving stocks lower and erasing some of Friday’s gains, hedgers drove December Treasury Notes 0.46% higher. December Comex gold futures rose 0.73% and the Japanese Yen jumped 0.24% higher. These protection moves are likely to increase if investors continue to turn sour on the deal.
- FX Empire
The Week Ahead – Brexit, Earnings, Stats and the IMF and EU Summit in Focus
It is a big week ahead, with corporate earnings, trade talks, Brexit and economic data in focus. There’s also the IFM meetings and the EU Summit.
- Bloomberg
Here Are Some of the Big Stock Winners If Brexit Deal Gets Done
(Bloomberg) -- Want the lowdown on European markets? In your inbox before the open, every day. Sign up here.U.K. domestic stocks may shake off their pariah status as beaten-down banks, housebuilders and retailers would be the biggest winners if the U.K. and European Union agree a deal on Brexit before the U.K. is scheduled to leave the bloc on Oct. 31.After a red-letter day for U.K.-exposed stocks on Friday amid signs of progress in talks, all eyes turn to next week’s EU Summit. The U.K.’s FTSE 250 index closed the week 4.2% higher, posting its best day since May 2010.“If there was a Brexit deal, political uncertainty would be reduced, sterling would appreciate, and that would be naturally positive for U.K. domestics and negative for international companies,” Matthew Hall, portfolio manager at Allianz Global Investors, said in an interview, adding that housebuilders and U.K. banks should see the biggest gains.With a crucial few days ahead, here’s a roundup of some of the biggest stock-market winners -- and losers -- if a Brexit deal is clinched:U.K. BanksU.K. high street lenders have been among the stocks hardest hit by Brexit uncertainty, and analysts at Citigroup Inc. predicted in August that a no-deal scenario could cut their earnings by as much as 25%.Both Royal Bank of Scotland Group Plc and Lloyds Banking Group Plc’s shares surged on Friday. RBS -- the “poster child” of no-deal risk fears, according to Bloomberg Intelligence’s Jonathan Tyce -- rallied as much as 16%, the most in almost a decade.Even after Friday’s jump, RBS shares are still down about 13% since the referendum, while Lloyds is down about 18%. A deal would clarify the risk around small and medium-size enterprise lending, Tyce said in a note, while also preventing a Labour victory in any potential election as well as further rate cuts by the Bank of England.U.K. MidcapsSmaller U.K. companies would also benefit from a deal. This summer saw a string of British companies warn of the impact Brexit will have on their businesses, including firms such as recruitment agency PageGroup Plc, car dealer Pendragon Plc and property firm Savills Plc, while Thomas Cook Group Plc, a stalwart of the travel world, went bankrupt.Among other FTSE 250 members, Dixons Carphone Plc and Card Factory Plc have been hit by the slowdown in spending weighing on Britain’s high street, and are down 70% and 51% respectively since the Brexit vote. The worst-performer in the Index, subprime lender Provident Financial, has shed more than 80% as more customers have struggled to repay while it grapples with U.K. regulatory probes into its lending practices.HomebuildersBritish housebuilders have been under pressure amid Brexit uncertainty and Morgan Stanley predicted last month that the group could gain 20% if a deal was reached, or drop 18% in a no-deal scenario.Crest Nicholson Holdings Plc, which focuses on London and the surrounding commuter areas, has plummeted 31% since the referendum, while FTSE 100 member Taylor Wimpey Plc, also with big operations in the capital, has dropped about 15%.“We believe Taylor Wimpey is best-placed amongst U.K. housebuilders to gain from a post-Brexit market bounce back,” HSBC Holdings Plc’s Brijesh Siya wrote Oct. 9, citing the company’s strategy of building large sites and its potential to cut costs.RetailersU.K. retailers have suffered as consumers curtailed spending amid uncertainty about how the economy would fare. The FTSE 350 General Retailers Index is down about 20% since the Brexit referendum.With more clarity, consumer and business confidence would both rise and the whole retail sector would benefit, Shore Capital analyst Clive Black said. Supermarkets would feel the impact of a stronger pound more quickly than non-food retailers, given they have shorter lead times on buying products from overseas, with Marks & Spencer Group Plc and Tesco Plc likely among the biggest beneficiaries.UtilitiesUtilities investors have been hoping to avoid a Jeremy Corbyn government. The Labour leader has vowed to nationalize swathes of Britain’s water and energy firms, along with the railways and postal group Royal Mail Plc.If a Brexit deal increases the Conservative Party’s chances of winning an election, that could be positive for the sector. RBC Europe analyst John Musk wrote last month that an election would be a chance to scrutinize Labour’s “unchecked rhetoric” on the sector.National Grid Plc and United Utilities Group Plc are among the utilities stocks to watch. They’re down 17% and 10% respectively since the 2016 vote.ExportersOn the other hand, if a deal is cemented, the resulting gain in the pound may negatively impact exporters to the U.S., which have benefited from the currency’s weakness against the dollar. Analysts at Morgan Stanley said in August that U.K. drugmakers GlaxoSmithKline Plc and AstraZeneca Plc would benefit from a no-deal scenario and could see their valuations lowered by 8% and 11%, respectively, if a deal is reached.A strong pound is also negative for Diageo Plc, which slumped as much as 4% on Friday. Every 1% move against the dollar is worth about 0.5% of the London-based beverage giant’s earnings per share, Jefferies analyst Ed Mundy said in an email.Other stocks to watch include British American Tobacco Plc, Reckitt Benckiser Group Plc and Victrex Plc.To contact the reporters on this story: Kit Rees in London at krees1@bloomberg.net;Joe Easton in London at jeaston7@bloomberg.net;Erin Roman in London at eroman16@bloomberg.netTo contact the editors responsible for this story: Celeste Perri at cperri@bloomberg.net, Beth MellorFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
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European Stock Investors Finally Get a Friday to Smile About
(Bloomberg) -- It’s that Friday feeling. The mood is turning decidedly upbeat in the market, with glimmers of hope for two sagas that have plagued European stocks this year -- trade talks and Brexit.As the week began, equities were coming off the worst slump since August, the trade war was heating up with the U.S. blacklisting Chinese tech giants, and U.K. Prime Minister Boris Johnson had deemed a Brexit agreement by the end of the month “essentially impossible.” Fast forward to Friday, and equities are poised for their biggest weekly rally since mid-March.The Stoxx Europe 600 Index traded 1.9% higher as of 4:02 p.m. CET, the biggest gain since January. Despite the rout at the start of October, the gauge is now less than 1% away from a one-year high reached last month. The coming days will confirm whether investors’ optimism is warranted, and provide catalysts for further stock market moves.“The slightest glimmer of hope literally gives the stock market wings and all worries and crises seem to have been forgotten,” Andreas Lipkow, strategist at Comdirect Bank, said by phone. “It remains to be seen if the very high expectations can be met. As after any big party, the headache on the following morning can be equally painful.”The gains were even more pronounced for U.K.-domestic stocks, boosted by hopes the U.K. may reach a deal with the EU on Brexit. The pound has been surging since Irish Premier Leo Varadkar said Thursday that he believed an agreement is possible by the Oct. 31 deadline, following two-and-a-half hours of “constructive” talks with Prime Minister Boris Johnson. On Friday, EU Chief Negotiator Michel Barnier recommended that detailed talks can begin in earnest.The FTSE 250 was up 3% on Friday, the most since July 2016, with Royal Bank of Scotland Group Plc jumping 16% and Marks & Spencer Group Plc climbing 11%. The FTSE 100, home of multinationals such as BP Plc and GlaxoSmithKine Plc, was only up 0.5%, hurt by the rally in the pound.“What we see today is mostly short-covering in cyclical sectors and financials,” said Markus Steinbeis, managing director at asset manager Steinbeis & Haecker in Munich, adding that the rally could last for a little while, given the attractive valuations and the significant underweight in these value stocks among investors.The September fund manager survey from Bank of America showed the U.K. has been the least-favored region by investors in terms of equity allocation globally. The poll showed that overall, a net 30% of fund managers said they were underweight U.K. stocks, 1.2 standard deviations below the long-term average.On the trade war front, the second day of U.S.-China negotiations kick off on Friday after U.S. President Donald Trump said the first day had gone “very well.” It’s the first senior-level in-person talks since late July to attempt to end an 18-month standoff. Trade-sensitive sectors including autos and miners were surging, with Volkswagen AG up 3.5%, Daimler AG up 2.5%, and ArcelorMittal up 4.8%.Uwe Becker, co-CIO of Shareholder Value Management, remained skeptical about the overall market rally, however. “The reason for this upward move is lacking the facts. We haven’t heard any details on trade talks or Brexit besides the comments that talks are ‘going well,’ hence the move lacks substance to me.”To contact the reporters on this story: Namitha Jagadeesh in London at njagadeesh@bloomberg.net;Jan-Patrick Barnert in Frankfurt at jbarnert3@bloomberg.netTo contact the editors responsible for this story: Blaise Robinson at brobinson58@bloomberg.net, John ViljoenFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
- Bloomberg
No Easy Bets on Halloween Event Spooking Markets
(Bloomberg) -- The Halloween deadline for Brexit has the qualities investors hate most in market events -- unpredictability and uncertainty.In a month when jitters already abound on global growth and trade, there’s still no deal in sight for the U.K. With Prime Minister Boris Johnson insisting the country plans to exit on Oct. 31 even as EU officials remain unconvinced by proposals put forth so far, it could all come down to the wire. So far, an extension and early general elections have high odds in strategists’ scenarios, which leaves traders of U.K. assets in a wait-and-see mode.Deal or no-deal, it appears U.K. stocks are not expected to come out as winners. Even if the two sides pull off the near-impossible feat of reaching an agreement before the deadline, the big winners would be euro-area stocks, JPMorgan strategists said earlier this week, partially because the exporter-heavy FTSE 100 would be penalized by the soaring pound.Should the U.K. leave the EU without a deal by Oct. 31, sterling may fall “through 1.15 or even 1.10” versus the dollar, levels not seen since 1985, Jefferies wrote in a note yesterday.Faced with extreme scenarios, Bank of America Merrill Lynch strategists recommend a volatility play. They forecast the pound will depreciate 15% against the dollar in case of a no-deal Brexit, while moving up 10% in case of a deal. In both situations, they expect European equities to move in the same direction as sterling, and the Euro Stoxx 50 to “realize more than the FX-dampened FTSE in the lead up to and following such Brexit scenarios.”In fact, the risk premium associated with U.K. equities has been rising much faster than that of the euro area since the referendum, and remains in upward trend.Credit Suisse economists shared their view on Monday that an extension of Article 50 is the most likely scenario, but the path to get there could require “increased stress” in the second half of October. They price the odds of a no-deal Brexit at 20% and see a 90% chance of a general election by the end of the year. This continuous political stress could weigh on sterling and U.K. assets, they say.In the end, prolonged uncertainty seems to be the most painful scenario, as it drags on the economy and makes planning difficult, with consequences for the job market as well. Although the unemployment rate is hovering near its lowest since the 70s, U.K. staffing companies warned yesterday that a lack of clarity around Britain’s departure from the European Union has continued to hurt hiring trends. No surprise then that U.K. business confidence has been sinking.That leaves U.K. stocks as a trade for the brave, or for the value hunter. Sustained worries about Brexit have already dragged the FTSE 100 to near its cheapest level relative to the Euro Stoxx 50 in 13 years, prompting strategists at Citi and Pictet to recommend the shares on valuation grounds.In the meantime, Euro Stoxx 50 futures are little changed ahead of the European open, while S&P 500 contracts are up 0.2%.SECTORS IN FOCUS TODAY:Watch European exporters given the deteriorating relations between China and the U.S. over the past 48 hours, with the U.S. cracking down on China over human rights and the National Basketball Association running afoul of Chinese sensibilities.Watch for luxury stocks as markets may position ahead of French luxury conglomerate LVMH reporting third-quarter sales after the close and may give a sense of how much the industry has been affected by the unrest in Hong Kong.COMMENT:“Markets have rallied in 3Q, but not on earnings prospects. Following the sharp cuts to EPS growth estimates, now at -4% y/y in Europe and -3% in the U.S., soft 3Q results may not come as a surprise to investors,” Barclays strategists write in a note. “However, the September market rebound to near ytd highs reduces the cushion, in our view, in particular for cyclicals.”NOTES FROM THE SELL SIDE:Following a sustained period of downgrades and de-rating for the U.K. pub and restaurant sector, there appears to be some confidence returning as reflected in an upturn in consolidation, which may continue to be a catalyst, Jefferies says, initiating on 6 stocks.While DNB, SEB and Nordea remain buy rated, the banks are not estimated to show any “superior outperformance” in the upcoming 3Q results, Handelsbanken says in note.COMPANY NEWS AND M&A:GAM Said to Halt Sales Talks With Suitors Including GeneraliCredit Suisse Weighs Return to U.S. Private Banking After ExitRenault Chairman Wants to Start Search for New CEO: FigaroBoostheat Paris IPO Priced at EU14/Share vs EU14-EU17 RangeDBV Technologies Prices $125M of Shares, Closing Seen Oct. 11Takeaway Third Quarter Orders 41.6 MlnKappahl 4Q Operating Profit Rises to SEK108 MlnCropEnergies 2Q Operating Profit EU28.6 Mln Vs. EU9.6 Mln Y/yBKW Acquired Germany’s LTB Leitungsbau; No Financial DetailsAMG Buys International Specialty Alloys Assets From KennametalBourbon: Takeover Offer Made by A Co. Owned by French BanksTECHNICAL OUTLOOK for Stoxx 600 index:Resistance at 395.1 (July high); 397.9 (June 2018 high)Support at 380.6 (50-DMA); 376.6 (200-DMA); 365.5 (50% Fibo)RSI: 41.6TECHNICAL OUTLOOK for Euro Stoxx 50 index:Resistance at 3,573 (July high); 3,596 (May 2018 high)Support at 3,436 (50-DMA); 3,403 (61.8% Fibo); 3,363 (200-DMA)RSI: 48.2MAIN RESEARCH AND RATING CHANGES:UPGRADES:Cellnex upgraded to outperform at MainFirst; PT 48 EurosDWS raised to overweight at JPMorgan; PT 34 eurosKBC Group raised to buy at Jefferies; PT 70 eurosVeolia raised to overweight at JPMorgan; PT 25.50 eurosDOWNGRADES:HSBC cut to underweight at Morgan Stanley; PT 540 penceInwido cut to hold at Handelsbanken; PT 56 kronorNetcompany cut to hold at ABG; PT 280 kronerINITIATIONS:4imprint rated new hold at HSBC; PT 2,875 penceAj Bell rated new sell at Liberum; PT 295 penceAscential rated new buy at HSBC; PT 460 penceAvast rated new buy at HSBC; PT 455 penceBenchmark Holdings rated new buy at HSBC; PT 61 penceBlue Cap rated new buy at GSC Research; PT 23 eurosBlue Prism rated new hold at HSBC; PT 1,100 penceDart Group rated new buy at HSBC; PT 1,050 penceDomino’s Pizza Group rated new underperform at JefferiesEquiniti rated new buy at HSBC; PT 295 penceGreene King reinstated hold at Jefferies; PT 850 penceHargreaves Lansdown re-initiated buy at Liberum; PT 2,125 penceIntegraFin rated new hold at Liberum; PT 390 penceJ D Wetherspoon reinstated hold at Jefferies; PT 1,590 penceKeywords Studios rated new buy at HSBC; PT 1,700 penceMarston’s reinstated underperform at Jefferies; PT 90 penceMitchells & Butlers reinstated buy at Jefferies; PT 530 penceNucleus Financial Group rated new hold at Liberum; PT 150 penceQuilter rated new buy at Liberum; PT 159 penceRWS Holdings rated new hold at HSBC; PT 600 penceRestaurant Group reinstated buy at Jefferies; PT 170 penceRicardo rated new hold at HSBC; PT 630 penceRobert Walters rated new buy at HSBC; PT 615 penceSThree rated new buy at HSBC; PT 350 penceSavills rated new hold at HSBC; PT 920 penceShareholder Value Beteiligungen rated new buy at GSC ResearchSophos rated new hold at HSBC; PT 435 penceMARKETS:MSCI Asia Pacific down 0.6%, Nikkei 225 down 0.6% S&P 500 down 1.6%, Dow down 1.2%, Nasdaq down 1.7%Euro up 0.02% at $1.0959Dollar Index down 0% at 99.13Yen down 0.08% at 107.18Brent down 0.4% at $58/bbl, WTI down 0.4% to $52.4/bblLME 3m Copper up 0.5% at $5703.5/MTGold spot up 0.1% at $1507.3/ozUS 10Yr yield up 1bp at 1.53% ECONOMIC DATA (All times CET):8am: (DE) Aug. Trade Balance ex Ships, prior 8.1b8am: (DE) Aug. Current Account (Seasonally Adjusted), prior 15.1b8:30am: (FR) Sept. Bank of France Ind. Sentiment, est. 99, prior 99To contact the reporter on this story: Michael Msika in London at mmsika4@bloomberg.netTo contact the editors responsible for this story: Blaise Robinson at brobinson58@bloomberg.net, Namitha JagadeeshFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
- Bloomberg
Liquidity Angst Over Brexit Is Fueling a $1 Billion ETF Bet
(Bloomberg) -- Brexit is a muddle, U.K. shares are the world’s most shunned and, to top it off, the FTSE 100 Index just suffered its worst week in a year. Yet the biggest British stock ETF is flying high.BlackRock Inc.’s iShares Core FTSE 100 fund took in 825 million pounds ($1 billion) in September, the highest monthly total in its 19-year history, according to data compiled by Bloomberg. Investors continued to add cash last week even as a global growth scare sparked a 3.7% sell-off in U.K. stocks.What’s going on? While the inflows reflect bets on a weaker currency boosting British multi-nationals, they’re also part of broader message from investors: Active mutual funds are out, and more liquid, easy-to-sell exchange-traded products are very much in.“This is about a shift into ETFs and an even greater fall in active exposure,” said Edward Park, deputy chief investment officer at Brooks Macdonald Asset Management. “For those looking for cheap exposure to the multi-national exporters, the FTSE 100 ETF is a way to get rapid exposure with plenty of liquidity.”Even as the U.K. barrels toward its planned divorce from the European Union on Oct. 31 and money managers treat the country as uninvestable, BlackRock’s 7.6 billion pound fund has never been so flush with assets.By contrast, investors have pulled $4.9 billion from U.K.-focused equity mutual funds since June, according to data provided by EPFR. About a third of investors are underweight U.K. stocks, the highest share for any market in the world, according to the latest Bank of America Corp. SurveyThat’s been a boon to BlackRock’s passive product.Active equity funds are heavily positioned in small- and mid-cap domestic companies, according to Park. These firms are seen as vulnerable not only to a weaker pound but also to the types of liquidity scares suffered by star manager Neil Woodford’s flagship fund.“Small and mid-cap U.K. equities are significantly more difficult to trade in large volumes,” said Park. “As a result investors, are selling some of their active U.K. fund exposure fearing market pressure around Oct. 31, which would be exacerbated by lower liquidity.”Pound WeaknessMeanwhile, the pound -- which has slid 18% since the referendum -- has been a tailwind for the U.K.’s biggest firms. The index tracked by BlackRock’s ETF “generates four-fifths of its sales revenue from outside the U.K., and as a result tends to be less susceptible to GBP weakness,” a spokesperson for the firm said.In the latest twist of the three-year political saga, Prime Minister Boris Johnson told German Chancellor Angela Merkel a Brexit deal is essentially impossible if the EU demands Northern Ireland should stay in the bloc’s customs union. The FTSE 100 Index was down 0.3% as of 12:59 p.m. London time on Tuesday.The shift toward passive instruments by U.K. stock investors highlights a broader turn away from active styles. On Sept. 13, BlackRock’s FTSE 100 fund was the most heavily traded security on the London Stock Exchange, with $270 million worth changing hands, according to the firm. A U.S.-listed ETF tracking similar stocks just got its first weekly inflow since May.While there’s a global trend of ETFs siphoning cash from active funds, there are still old-fashioned stock bulls who say U.K. equities could be in for a rally should things settle down.“If in 4-5 months time we get a deal, we leave the EU, the Tory government does fiscal spending, U.S. investors are going to look and say that the sterling and U.K. stocks look pretty cheap and they can make an easy 25% return,” said Andrew Cole, head of multi-asset at Pictet Asset Management in London.(Updates with Brexit development and FTSE 100 move in paragraphs 11 and 12.)\--With assistance from Akiko Itano.To contact the reporter on this story: Ksenia Galouchko in London at kgalouchko1@bloomberg.netTo contact the editors responsible for this story: Blaise Robinson at brobinson58@bloomberg.net, Yakob Peterseil, Rachel EvansFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
- Financial Times
Evaporating optimism reveals the cracks
FT subscribers can click here to receive Market Forces every day by email. Trade tension and Brexit are two long-running stories for investors and on Tuesday the cracks in the ground for markets are a little wider.
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JPMorgan Says Euro Area to Be Key Equities Winner in Brexit Deal
(Bloomberg) -- Euro-area stocks would stand to gain more from a Brexit deal by the end of this month than U.K. shares, JPMorgan Cazenove strategists said.While such a scenario would be bullish for domestic British companies, a strengthening of the pound would take away much of the upside for U.K. equities, strategists led by Mislav Matejka wrote in a note. Euro-zone shares, however, would be a “big potential indirect beneficiary,” they said.JPMorgan on Monday reiterated its overweight stance on euro-area equities, while maintaining an underweight position on U.K. shares. In addition to a potential Brexit-deal boost, euro-area stocks are under-owned and trading cheaply on most valuation metrics, while speculation is mounting for fiscal stimulus in the region, the strategists said.The U.K.’s benchmark FTSE 100 Index has tended to move inversely to the pound since the 2016 referendum to leave the European Union, thanks to a heavy weighting of exporters that benefit from a weaker currency. Last week, a stronger pound and a slump in commodities dragged the gauge to its worst drop in almost a year.JPMorgan’s base case is for the Oct. 31 deadline to be pushed out to January-February, with early elections likely, but the strategists cautioned that “one shouldn’t ignore the likelihood that Boris Johnson gets his deal through in October.”Prospects of a breakthrough ahead of the deadline faded again over the weekend as talks between the two sides stalled. The EU has indicated that proposals made by Prime Minister Johnson last week to resolve the impasse won’t cut it.The FTSE 100 has underperformed the Euro Stoxx 50 Index this year amid lingering uncertainty about the timing and details of Brexit.To contact the reporter on this story: Namitha Jagadeesh in London at njagadeesh@bloomberg.netTo contact the editors responsible for this story: Blaise Robinson at brobinson58@bloomberg.net, Monica Houston-Waesch, Jon MenonFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.
Reuters VideosGlobal markets cheer trade and Brexit hopes
Hopes of deals around the world gave global markets that Friday (October 11) feeling. Asian shares jumped after a first day of trade talks between U.S. and Chinese delegates. Donald Trump described the discussions as "very very good", and has agreed to meet with China's top trade negotiator. MSCI's broadest index of Asia-Pacific shares outside Japan rose 1.3 percent. The bullish market mood continued in Europe. The pan-European STOXX 600 climbed 0.5 percent with shares in Frankfurt up 0.8 percent. Germany's SAP helped with that. Its shares jumped 7.4 percent after the world's leading enterprise software firm pre-released strong Q3 results, as well as news that its CEO is stepping down after a decade at the helm. Bill McDermott is handing the task of completing SAP's transition to cloud computing to new co-CEOs Jennifer Morgan and Christian Klein. It ends an an era in which McDermott struck a string of multi-billion-dollar deals. They built SAP into Europe's leading technology group, but also created complexity that frustrated many clients. Tech sector shares were up 2.5 percent - touching a two-month peak. There was respite from Brexit gloom too. Irish Prime Minister Leo Varadakar said on Thursday (October 10) that a Brexit deal could be clinched by the end of October. That followed a meeting in the UK with Boris Johnson. Bucking the trend though was London's FTSE 100. It shed 0.3 percent as shares of export reliant firms took a beating from a firm sterling.
