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:
China Trades On
The countdown has begun. Chinese exports for October rose more than economists had forecast, in a sign that companies are rushing to place orders before higher U.S. tariffs on the nation’s products take effect in the new year. The value of the country’s imports also jumped more than expected, providing some relief after the release of softer-than-expected gross domestic product and industrial production statistics last month. Miners, in particular, could get a lift this morning.
It’s a monstrous day on the European earnings calendar, with about 50 members of the Stoxx Europe 600 Index -- a benchmark tracking companies of various sizes across 17 countries -- due to give updates. Morgan Stanley said last week that this earnings season could turn out to be the worst in four years, based on the ratio of companies falling short of analyst profit estimates versus those exceeding consensus. In terms of sectors, non-essential goods, or “consumer discretionary,” and industrials and materials have been weakest so far. Energy and IT have been among the strongest, analyst Matthew Garman wrote.
Europe’s biggest engineering firm, Siemens AG, raised its dividend and announced plans to buy back 3 billion euros ($3.4 billion) of shares. Strength at the Munich-based company’s factory-software business continues to make up for weakness at its ailing power unit. Deutsche Bank notes that about 30 percent of the conglomerate’s profits had already been reported, as medical tech firm Siemens Healthineers AG and Siemens Gamesa Renewable Energy SA released numbers earlier this week. Watch Swiss power and automation technology firm ABB Ltd. and elevator manufacturer Schindler Holding AG, as well as the broader European engineering sector, for a potential read-across this morning.
U.K. Prime Minister Theresa May has begun briefing senior ministers on the text of an almost-complete Brexit deal, people familiar with the matter told Bloomberg. But an agreement to keep trade flowing freely across the Irish border remains elusive. Brexit Secretary Dominic Raab will announce a “moment of decisive progress” on Thursday, the BBC reported earlier this week, citing a leaked timetable. A U.K. government spokesman disputed the document’s authenticity, noting that it contained “childish language.” The pound is heading toward its fourth consecutive session of gains. Sterling strength is negative for many larger, FTSE 100-listed companies that earn a lot of money abroad, but a smoother Brexit is likely to benefit smaller firms who are more dependent on domestic economic prosperity.
Rapper M.I.A. and actor Matt Smith, star of Netflix’s The Crown, were unveiled as members of Burberry Group Plc’s Christmas campaign cast last week. But before festive promotions begin, investors will get a chance to assess what impact Riccardo Tisci’s arrival as chief creative officer had on the British trench coat-maker’s half year sales. While it’s too early for their have been consumer interest in Tisci’s products, given they are not yet broadly available in stores, the Italian’s appointment may had a positive brand impact, analysts say. Also watch out for any potential comments on a new share repurchase program, MainFirst Bank AG wrote ahead of this morning’s statement.
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