Here’s What to Watch in European Stocks This Morning

(Bloomberg) -- Good morning. Here’s what we are watching ahead of the market open in Europe, including...

Sell-Off Signs

Futures are pointing lower once more and the signs for how trading may go on Monday are not too positive. Hedge funds that binged on stocks in the U.S. are still sitting on large inventories, with levels well above previous market lows in the past decade and leaving more space for selling. Indeed, much has now changed in comparison to previous sell-offs the market has experienced, so looking to the past may not prove as helpful as it once was. It could well be another day driven by wider direction rather than individual stock stories.

Delay, Or Not To Delay?

Theresa May faces a big decision on whether to delay the key vote on her Brexit plans currently scheduled for Tuesday given barely a single person would put money on her winning it at present. The alternative would be a delay, allowing May to head to a European Union summit on Thursday to try to get further concessions that may sate U.K. lawmakers. Right now, the vote is still on. Watch domestic-focused U.K. stocks and the pound through the day.

“Grand Gesture”

French President Emmanuel Macron will address the nation on Monday evening and all are hoping he will propose a solution which will resolve the crisis the country faces. “Yellow Vest” protests gripped France again over the weekend and the hope is Macron, having allowed this anger over fuel price hikes to go on for some time now, will come up with a “grand gesture” that will remove some of this risk from French assets.

Huawei Fallout

The arrest of the CFO of Chinese telecoms company Huawei Technologies Ltd. has brought a new front to the trade war between the U.S. and China, even if U.S. trade officials want to separate the two issues. China’s Foreign Ministry has now summoned the U.S. ambassador in protest at the arrest, so this overhang is likely to remain in play for trade tension-impacted stocks, particularly technology companies. For those sectors, note also that Chinese inflation slowed again in November, indicating continued weakening demand in the economy.

Italian Analysis

Italy’s populist government is to discuss the results of a cost analysis of its 2019 budget proposals this week, just as the country prepares for a further stand-off with the European Union over its planned deficit and seeks to avoid any sanctions that could be imposed over it breaking the rules. Italian Cabinet Undersecretary Giancarlo Giorgetti said a compromise will be found with the EU if both sides act reasonably. Watch Italian assets, and banking stocks in particular.

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