UK Finance Minister On Brexit Plan For Banks

* STOXX 600 up 0.7%, hits highest since May 6 after dovish Fed * Italy and Germany lead gains as oil, tech stocks rally * FTSE 100 up 0.3%, lags on stronger sterling * Delivery Hero storms higher after co lifts profit forecast June 20 - Welcome to the home for real-time coverage of European equity markets brought to you by Reuters stocks reporters and anchored today by Josephine Mason. Reach her on Messenger to share your thoughts on market moves: josephine.mason.thomsonreuters.com@reuters.net UK STOCKS TO WATCH AS ELECTION RISK RISES (0849 GMT) It's still all to play for in Britain's Conservative Party leadership - and Premiership - contest. At least that's what Johnson's remaining rivals are saying, despite the favourite increasing his lead yesterday with 143 out of 313 votes. The remaining candidates face two further votes today resulting in a final two who will go head-to-head in a vote put to Conservative Party grassroots members. Regardless who wins the race, several media reports and economists predict a rocky road ahead for the next Prime Minister with a relatively high chance of an early general election. ING developed markets economist James Smith sees a 35% chance of a general election being forced through by parliament through a no-confidence vote. So which UK stocks are most vulnerable to a general election? Goldman Sachs looks at those with high domestic sales exposure, and sensitivity to a change of government, and finds they've been falling overall this year and have relatively low valuations. The companies on their list (reproduced below) include the usual suspects: banks, contractors, utilities. "We have argued through this year that UK domestic stocks while at a discount to the market are not 'cheap'," write GS strategists. "We believe their valuations reflect the weak UK growth backdrop and the persistent, high risks." Though an election is not their base case, they say "continued stalemate over Brexit has increased the risk". Barclays' European equity strategist Emmanuel Cau echoes Goldman Sachs' advice: stick with exporters over domestic plays. Cau sees a further Brexit delay and/or a second referendum as more likely than a crash-out or general election. (Helen Reid) ***** DARK CLOUDS LOOM EVEN AFTER FED (0817 GMT) Equities are celebrating the Fed's dovish monetary policy stance overnight, but some investors are warning markets are getting a little ahead of themselves. DWS says the risk of a full-blown correction - with the S&P 500 declining more than 10% from its peak - is high as the much-hoped-for Q2 earnings recovery looks shaky, U.S. President Trump's erratic trade measures dent sentiment and tariffs create distortions. "The combination of the year-to-date rally, deteriorating prospects of a trade deal and potential near-term volatility in the U.S. budgetary process make the near-term risk-reward for equities unattractive, in our view," say Thomas Schüßler and Andre Köttner co-heads of equities in a note this morning. Schüßler and Köttner estimate tariffs implemented so far will cut U.S. earnings per share by 3% this year as a direct result of higher costs. That does not reflect the reduced value of U.S.-owned plants abroad for instance. Still, they're keeping their base case view that a global earnings recession will be avoided, with defensive sectors such as software and healtcare, as well as share buybacks helping to support moderate growth in EPS in the US, Europe and emerging markets. While low interest rates should allow equities to remain at above historical averages, that hinges on trade tensions not getting out of hand completely, they say. Most major equity markets remain more expensive than recent historic avaerages and fears of a global slowdown could prompt further corrections, they say. There are number of events that may undermine the DWS thesis - the chances may be low, but Washington and Beijing may agree a deal at the upcoming talks between China and the U.S. at the G20 summit and with investors pinning their hopes on central banks cutting rates, markets have recently interpreted bad macroeconomic data as good news. (Josephine Mason) ***** OPENING SNAPSHOT: FED ADDS FUEL TO STOCK RALLY (0731 GMT) The Fed is injecting further fuel to the equities rally and investors' appetite for riskier assets, pushing the German and French bourses to their highest in almost seven weeks. How much further stocks have to run before interest rate cuts are priced in isn't clear, but the pan-European STOXX 600 is up almost 5% so far this month, on track for its best monthly performance since January and close to wiping out all May's heavy losses. The upbeat mood is lifting all sectors except for travel & leisure which has been hammered by a series of profit warnings from tour operators like Saga and airlines including Lufthansa. London's FTSE 100 is lagging its peers due to a strong sterling against the dollar ahead of the BOE's policy meeting at 1100 GMT, even as oil and mining stocks rally. Crude prices are being boosted by escalating tensions in the Middle East as a U.S. official said one of the country's military drones was shot down by an Iranian missile. In individual moves, Delivery Hero is surging more than 10% and lifting Takeaway and Just Eat with it, while the UK high street is in focus with Dixons Carphone plunging almost 20% after warning of another drop in profits for its FY to end-April 2020. Dunelm is rising 6% after it lifted its FY profit forecast. (Josephine Mason) ***** ON OUR RADAR: BANKS, FOOD DELIVERY AND RETAILERS (0650 GMT) European stock futures are up 0.6% in early deals at their highest in ten months after the Federal Reserve delivered the monetary policy goods investors had been hoping for - a strong signal it will cut rates next month. Bond proxy stocks like utilities and telecoms are likely to benefit the most, while expectations for ultra-low interest rates may dent banking stocks. Banks will remain in the spotlight as Deutsche Bank shares come under pressure after a New York Times report that U.S. authorities are investigating whether the bank complied with laws meant to stop money-laundering and other crimes. Its shares are down almost 2% in early dealings. Credit Suisse shares are also falling after an FT report the Swiss bank's plan to take majority control of a Chinese securities brokerage is threatened by a legal battle between a Beijing-based conglomerate and one of China's most prestigious universities. Elsewhere, trading updates are trickling in. Delivery Hero shares are up as much as 10% after the food delivery company raised its FY sales guidance, with the news likely to lift Just Eat and Takeaway too. But more bad news for Britain's retailers: Dixons Carphone could fall as much as 30% after Britain's biggest seller of electricals and mobile phones warned of another big fall in profits in its FY to end-April 2020. In contrast, Swiss watchmakers Swatch and Richemont are rising in pre-market trade after Swiss watch exports data. Better-than-expected profits from Oracle overnight may give its European rival SAP a boost. (Josephine Mason) ***** AS FED DELIVERS, EUROPEAN STOCK FUTURES RISE (0621 GMT) After taking a bit of a breather yesterday, European stock futures are staging a decent rally in early deals, rising 0.5% and hitting their highest levels since August after the Fed delivered the dovish message the market had been looking for. For some investors, Fed chairman Powell went further than expected, dropping a previous promise to be "patient" in adjusting rates. Stéphane Barbier de la Serre, macro strategist at Makor Capital Markets, says Powell was even more dovish than he would have expected during the briefing with the press after the statement. He notes Powell said "financial conditions" AND "risk sentiment" have deteriorated, didn't rule out a 50-basis-point cut in July after saying "we haven’t really engaged yet on the size of a possible cut" and said the bank would always be "willing to adjust balance sheet policy so that it serves our dual mandate”, which he says wasn't "exactly hawkish". (Josephine Mason) ***** EARLY HEADLINES: DEUTSCHE BANK, DELIVRY HERO, AIRBUS (0600 GMT) Deutsche Bank shares are down 2.2% in premarket trading in Frankfurt after the New York Times reported federal authorities are investigating whether the bank complied with laws meant to stop money laundering and other crimes. The investigation includes a review of the German bank's handling of so-called suspicious activity reports that its employees prepared about possibly problematic transactions, including some linked to President Donald Trump's son-in-law and senior adviser, Jared Kushner, the Times reported. Elsewhere in Germany, shares in Delivery Hero have surged as much as 10%, according to Lang & Schwarz, after raising its FY revenue guidance by 200 million euros and forecasting Q2 group growth rates for orders and revenues will be slightly higher than in Q1. A rally in Oracle shares after the close following the U.S. business software maker's better-than-expected profit forecast may provide support to SAP shares. At the Paris Airshow, Airbus battled back a day after a surprise order by British Airways' owner for rival Boeing's grounded 737 MAX jet, sealing deals with big buyers for its latest passenger jet. There may be some relief after EU officials signalled Brussels is unlikely to recommend next week the opening of a disciplinary procedure against Italy over the country's rising debt because it will wait for Rome's measures on how it wants to comply with EU rules. Some early headlines: GSK kicks off sale of $1.2 bln consumer health drugs -sources Airbus seals deals with big buyers, following Boeing's MAX sale Deutsche Bank faces investigation for potential money-laundering lapses -NYT Renault CEO Bollore has no plans to reduce Nissan stake U.S. fund Apollo presents rescue plan for Italy's Carige-sources Airbus seals deals with big buyers, following Boeing's MAX sale EU unlikely to take further steps against Italy over debt next week 3 DOWN, ONE TO GO (0525 GMT) Three down, one to go - the Fed overnight kept its rates unchanged but signalled a rate cut next month, following in ECB chief's Draghi dovish comments earlier this week and the Bank of Japan has just held its fire on policy but joined the U.S. central bank in warning of darkening global growth outlook. Later today, the Bank of England will be the last to declare its monetary position and is expected to plough on alone among the major central banks by sticking to its message that it plans to raise interest rates. Even so, the overall dovish tone from the other major central banks, particularly the Fed's overnight, is expected to boost stocks in Europe this morning. The S&P500 closed near records overnight, but it's not clear how much of a cut is now priced in to markets after recent solid gains. "Economic data will give a better hint on the necessity for larger rate cuts in the U.S., but the current expectations seem to have gone too aggressive," says Ipek Ozkardeskaya, senior market analyst at London Capital Group. "At this stage, it is important to remember that the U.S. economy did just fine in the first quarter." Spreadbetters, IG, expect London's FTSE to open 24 points higher at 7,427, Frankfurt's DAX to open 42 points up at 12,351, and Paris' CAC to open 23 points higher at 5,541. (Josephine Mason) ***** (Reporting by Danilo Masoni, Helen Reid, Josephine Mason and Thyagaraju Adinarayan)

Source : https://uk.finance.yahoo.com/news/live-markets-uk-stocks-watch-090847364.html

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