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:

Blue House

The Democrats are poised to take control of the U.S. House of Representatives for the first time since 2010, after midterm elections that were viewed as a referendum on Donald Trump’s presidency, and which may have spurred the highest voter turnout for half a century. While the Republicans appear to have tightened their grip on the Senate, losing the House will probably make imposition of their policies more difficult for the next two years. The market reaction to the probable outcome was undramatic, given that it was widely forecast, although Asian equities and U.S. stock futures trimmed earlier gains while the dollar dipped with U.S. Treasury yields.

In terms of European sectors to watch, industries hit hardest by recent trade war concerns, like miners and automakers, might benefit if investors believe the White House’s aggressive stance can be tamed. Meanwhile, defense and infrastructure companies hoping to benefit from uplifts in spending driven by Trump policies might lose out.

Spanish Reversal

Spain’s Supreme Court reversed a ruling that banks should pay stamp duty on mortgages. While Spanish politicians from all sides of the political spectrum took to Twitter to lament the reversal, shares of the country’s largest lenders, Banco Santander SA and Banco Bilbao Vizcaya Argentaria SA, jumped in New York. The Oct. 18 decision had threatened to inflict billions of euros of losses on the sector, while potentially resulting in savings for hundreds of thousands of households.

Defensive Adidas

Social media users are flashing their Adidas Originals online, according to Bloomberg Intelligence analyst Chen Grazutis, who thinks the retro-style sneakers are gaining momentum at a time when the brand’s manufacturer is lacking a stand-out shoe. That might be the case, but Adidas AG reduced its full-year revenue growth outlook slightly this morning, citing “lower-than-initially-expected growth in western Europe.” The company did, however, boost its gross margin outlook somewhat. Interestingly, ahead of the release, analysts at HSBC wrote that sporting goods are becoming a defensive sector -- one that’s relatively immune to economic cycles -- supported by a continued shift toward healthy living in China. Shares of German peer Puma SE could move this morning, as could U.S. rivals like Nike Inc. and Under Armour Inc. later.

Super Spoons

JD Wetherspoon Plc issues a sales update before the open and, while even the British appetite for beer is susceptible to economic uncertainty, recent reports from other U.K. pub operators have suggested an improvement in demand following a somewhat shaky first half of 2018, according to analysts at Liberum. The sector is still grappling with cost inflation, with analyst Joe Brent noting many pubs are having to pay head chefs more in order to boost staff retention ahead of the U.K.’s exit from the European Union. Wetherspoon’s maverick chairman and founder, Tim Martin, will likely once again use the release as an opportunity to wax lyrical on the benefits of Brexit, but investors are more likely to focus on the company’s margins.

Love Island’s Legacy

Three months on, and we’re all still gripped by Dani and Jack’s whirlwind romance. Aren’t we? ITV Plc’s record-breaking reality show Love Island may have finished back in July, but its advertising pull is likely to have had an impact on the broadcaster’s third-quarter results, which are due to be published this morning. But despite “very good” viewing figures, the company’s advertising-revenue growth is set to decline this year, according to analysts at Morgan Stanley, who cite weak demand for TV time among supermarkets, high street retailers and the telecoms sector. Watch for any potential read-across for rival broadcasters including Sky Plc, and advertising firms like WPP Plc.

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