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LIVE MARKETS-What we're watching: Elliott's European Saga and semiconductors

Published 17/07/2019, 04:59 pm
Updated 17/07/2019, 05:00 pm
LIVE MARKETS-What we're watching: Elliott's European Saga and semiconductors

LIVE MARKETS-What we're watching: Elliott's European Saga and semiconductors

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

WHAT WE'RE WATCHING: ELLIOTT'S EUROPEAN SAGA AND SEMICONDUCTORS (0658 GMT)

European stock futures are on the backfoot this morning after U.S. President Trump's threat overnight that he could slap another round of hefty tariffs on Chinese goods if it needed to, dampening hopes about the recent talks between the world's two economies.

London's FTSE futures are down 0.2% erasing some of yesterday's gains as the sterling languishes near its lows. The UKs domestically focused midcaps were unusually resilient on Wednesday to the sinking pound.

On the corporate front, Elliott continues to splash the cash in Europe, announcing it has built a more than 5% stake in Saga SAGAG.L , the travel and services company catering for people over 50 which has struggled to shake off its image as only serving "old people". Its CEO left in June.

The shares could rise as much as 10%, according to one dealer. The news will stir hopes of a management shake-up, another trader says.

Based on SAP and Bayer (DE:BAYGN) shares after the activist shareholder disclosed stakes in the German companies in recent month, it could be an explosive day for the shares, which are down more than 80% from their 2016 peaks.(Bayer had its best day in a decade a few weeks ago and SAP shot to record highs in April).

There's plenty of earnings to digest. It's a mixed picture in tech stocks and a generally downbeat tone in the industrial sector underscoring worries about slowing manufacturing demand.

Dialog Semiconductor DLGS.DE shares are up 2% in early Frankfurt trade after the chip maker forecast higher-than-expected Q2 profits, while traders are calling semiconductor equipment maker ASML ASML.AS down 1-2% after its trading update - Q2 beat expectations, but dealers are focusing on the softer Q3 guidance.

Brenntag BNRGn.DE has cut its FY outlook, the latest chemicals company to warn of slowing demand after BASF's alert last week while SKF SKFb.ST , the world's largest maker of industrial bearings which competes with Germany's Schaeffle SHA_p.DE , has cautioned that demand is slowing. Brenntag shares are down 5% in pre-market Frankfurt trade.

In London, BHP Group BHPB.L BHP.AX shares are expected to rise, following its shares listed in Australia after its results, while Fresnillo FRES.L shares are seen falling 3% after the miner cut its FY gold and silver output targets.

(Josephine Mason)

*****

ON OUR RADAR: CHIPS ARE UP, BUT BRENNTAG SPREADS CHEMICALS GLOOM (0559 GMT)

While the protracted trade war rumbles on and expectations for Q2 earnings deteriorate, two semiconductor companies have brought some cheer to the European tech market this morning - chip equipment maker ASML ASML.AS and Dialog Semiconductor DLGS.DE say Q2 profits will be better than expected.

Shares in Dialog, which says revenues were higher than its guidance, are up more than 3% in early trade.

In contrast though, Brenntag BNRGn.DE has cut its FY outlook, the latest chemicals company to warn of slowing demand after BASF's alert last week. Its shares are down almost 6% in pre-market Frankfurt trade.

Some early headlines:

BHP iron ore output rebounds in Q4, set for modest growth in 2019/20 Q2 net profit just misses forecast as costs rise Q2 profit margin tops estimates, maintains FY outlook Semiconductor sees better-than-expected profits in Q2 as revenue beats cuts payout policy amid money laundering fallout Q2 operating profit matches expectations Group hit by Hong Kong turbulence as sales, profit fall iron ore output rebounds in Q4, set for modest growth in 2019/20 Monte dei Paschi launches 300 mln euro subordinated bond AG cuts FY outlook due to 'noticeable' slowdown in demand Mason)

*****

RENEWED TRADE TENSIONS KEEPING EUROPE SUBDUED (0524 GMT)

Europe's stock trading is likely to be muted this morning after U.S. President Trump's threat overnight that he could slap another round of hefty tariffs on Chinese goods if it needed to, dampening hopes about the recent talks between the world's two economies.

He complained again that Beijing was defying a pledge made at the G20 summit to buy more U.S. farm goods, like soybeans. financial spreadbetters expect London's FTSE to open 20 points lower at 7,558, Frankfurt's DAX to open 20 points lower at 12,411, and Paris' CAC to open 11 points lower at 5,604.

Adding to the downbeat mood was the dimming outlook for Q2 earnings. The consensus for STOXX 600-listed companies' EPS growth has fallen to just 0.2%, which would be one of the weakest quarterly performances for the region in years and from 0.8% last week. chart below shows the fast pace at which growth forecasts have been slashed over the past two months.

(Josephine Mason)

*****

<^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^ Refinitiv

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