January 30, 2018 / 8:48 AM / in 5 months

LIVE MARKETS-Is a correction on the cards?

    Jan 30 (Reuters) - Welcome to the home for real time coverage of European equity markets
brought to you by Reuters stocks reporters and anchored today by Helen Reid. Reach her on
Messenger to share your thoughts on market moves: helen.reid.thomsonreuters.com@reuters.net
 
 
    IS A CORRECTION ON THE CARDS? (0845 GMT)
    A negative day like today lays bare investor concerns about a more potent pullback in equity
markets.
    "Given current complacency and positioning, when things go wrong there may be quite a
violent market reaction and I think we are moving more into that territory in 2018," Nicholas
Brooks, head of research and investment strategy at Intermediate Capital Group, said, adding
that he thinks we are due a correction.
    Brooks recommends moving into lower-beta sectors and companies and seeking out businesses
with high cash flows in relatively defensive sectors.
    (Kit Rees and Tom Pfeiffer)
    *****
        
    OPENING SNAPSHOT: CYCLICAL SLIDE PULLS EUROPEAN SHARES LOWER (0817 GMT)
    European shares have opened lower thanks to falls among commodities-related sectors and
financials - almost all sectors are in the red. Is this the start of a pullback?
    But elsewhere it's all about earnings, with a sprinkling of M&A. Alfa Laval and
Swatch are the biggest risers after their updates, while UBM is also up there
after Informa confirmed its deal with the conference organiser.
    Here's your opening snapshot:
 
    (Kit Rees)
    *****
    
    WHAT'S ON THE RADAR FOR EUROPEAN STOCKS (0750 GMT) 
    Taking its cue from Wall Street and Asia, Europe’s stock market is set to suffer losses with
futures down 0.6 to 0.8 percent across the major benchmarks. A slide in Apple shares was the
catalyst for the weaker U.S. session, after a Nikkei report said the tech giant would halve its
iPhone X production.
    The report came out during European trading hours on Monday and weighed on iPhone suppliers
including AMS, Dialog Semiconductor and STMicro, but there may be
further pressure on the chipmakers and tech stocks in this session as investors grow skittish
about high valuations and the equity ‘melt-up’ with the MSCI World entering its longest ever
period without a correction of more than 5 percent. 
    Mining stocks could also be a weight, indicated lower in pre-market as base metals lose
ground with the strengthening dollar.
    Under the benchmark level, a slew of company results should keep traders busy today. 
    Europe’s top tech company, SAP, will be a focus after its results came in shy of
expectations and it bought a U.S. software firm for $2.4 billion. The stock is indicated down 1
percent in pre-market. 
    Swatch meanwhile is seen rising 3 to 4 percent after impressive guidance and
accelerating sales.
    (Helen Reid)
    *****
    
    EARLY MORNING ROUND-UP (0739 GMT)
    Here are the company headlines grabbing our attention in Europe this morning:

    SAP talks up cloud business, buys $2.4 bln U.S. sales software firm 
    Debt-ridden Altice to further reduce share capital 
    Philips delivers on Q4 sales growth on higher order intake
    SCA 2017 operating profit just beats forecasts, dividend higher
    France's Elis doubles targeted cost synergies from Berendsen acquisition 

    Swatch "very positive" on 2018 after H2 sales accelerate 
    Renault-Nissan group pips VW to become top-selling carmaker in 2017 
    Cevian Capital raises Ericsson stake to 9 pct 
    PZ Cussons Says Profitability Expected To Improve In H2 
    Volkswagen faces inquiry call over diesel fume tests on monkeys 
    Biggest investor in Italy's Safilo has no intention to change its stake 
    Luxottica sees strong adj. net profit growth after FY sales meet guidance

    Hedge fund Elliott increases stake in Fox takeover target Sky 
    Alfa Laval CEO sees slower Marine unit demand in Q1 after bumper Q4  
    (Kit Rees and Tom Pfeiffer)
    *****
    
    FUTURES POINT TO PULL-BACK IN EUROPEAN STOCKS (0710 GMT)
    As expected futures have gapped significantly at the open - down 0.5 to 0.7 percent across
the board now. Looks like the risk-off mood across the Atlantic will sour today's trading in
Europe as well. The chipmakers and Apple suppliers will again be ones to watch, as will all
those cyclical sectors leading the rally year-to-date.
    
 
 
 
    (Helen Reid)
    *****
    
     CORRECTION BECOMING INCREASINGLY LIKELY, SAYS GS (0656 GMT)
     The S&P 500 has had the longest period since 1929 without a correction of more than 5
percent, Goldman Sachs finds, saying a correction is overdue. The MSCI World has also entered
its longest period ever without a correction of more than 5 percent. 
    "As inflows into equities rise strongly alongside increasing optimism, the equity market
becomes more vulnerable to disappointments," GS writes. 
    They're staying bullish, though - seeing a sharp correction as more likely than a full-blown
bear market. 
    One interesting observation they make is that this year the S&P 500 and the VIX volatility
index have been rising together. "The increase in volatility amid a market rally may, in part,
reflect increasing risks, and may also reflect a bullish willingness to spend premium to add to
upside exposure." 
    GS recommends buying on dips, but would also buy hedges as protection.
    If you're more of a glass half full kind of person, then you can keep looking at global
growth - running at above 5%, the strongest pace since 2010 - and global earnings - where
expectations are finally being revised up sharply.
    (Helen Reid)
    *****
    
    SAP ANNOUNCES $2.4 BLN ACQUISITION, ALTICE TO FURTHER CUT SHARE CAPITAL (0636 GMT)
    With tech a notable focus yesterday, and ahead of the U.S. giants reporting later this week,
all eyes will be on results from European firms in the sector to see how they stack up.
    Germany's SAP, Europe's top tech company, just announced a $2.4 billion
acquisition of U.S. cloud software company Callidus Software Inc - a sweetener on 2017
results which came in at the lower end of market expectations.
    The firm's guidance was in line with analysts' expectations - but we'll have to see what
they make of this purchase. 
    At the intersection of health and tech, Dutch firm Philips reported Q4 sales growth
in line with expectations. 
    Elsewhere in stocks to watch today there's telecoms and cable group Altice which
is reducing its share capital to help improve returns while it restructures.
    And it's a sad day for Volkswagen whose position as world's top-selling carmaker
was just nabbed by the Renault-Nissan alliance.
    (Helen Reid)
    *****
    
    MORNING CALL: TAKING CUE FROM WALL ST AND ASIA, EUROPEAN STOCKS TO FALTER (0618 GMT)
    Good morning and welcome to Live Markets. 
    Spreadbetters are calling European stocks markedly lower after a weaker U.S. session spread
a somewhat more bearish mood to Asian trading as well.
    A slide in Apple shares was the catalyst for a broad-based pull-back on Wall Street. The
tech stock fell 1.6 percent on a Nikkei report Apple will halve its iPhone X production target,
causing the Dow and the S&P 500 to suffer their biggest one-day declines in around 5 months.
    Asian stocks then retreated from their record highs, while the dollar found some support as
U.S. bond yields rose.
    Spreadbetters call the FTSE down 30 points at 7,641.1 points, the DAX 51 points lower at
13,273.2 points and the CAC 40 down 16 points at 5,505.4.
    (Helen Reid)
    *****

    
 (Reporting by Danilo Masoni, Helen Reid, Kit Rees and Julien Ponthus)
  
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