January 19, 2018 / 9:52 AM / a year ago

LIVE MARKETS-Semis: in chip shape

    * European shares edge higher
    * STOXX at 2 1/2 year peak
    * Carpetright, Dignity drop after profit warnings

    Jan 19 (Reuters) - Welcome to the home for real time coverage of European equity markets
brought to you by Reuters stocks reporters and anchored today by Danilo Masoni. Reach him on
Messenger to share your thoughts on market moves: danilo.masoni.thomsonreuters.com@reuters.net  
    You'd think European semiconductor stocks wouldn't have much impetus for going higher given
the gains we saw last year: ASML, AMS, Infineon and STMicro
 rose between 36 and 208 percent in 2017.
    But the tech sector is once again outstripping the STOXX even this early in the
year, while this week's results from ASML and subsequent 5 percent rise in its shares
plus broker upgrades suggest that there is further strength in these stocks, defying Morgan
Stanley's view in their November note "Global Technology: Time for a Pause".
    Marcus Morris-Eyton, European equities portfolio manager at Allianz, for whom ASML is a core
holding, said that ASML's results and commentary illustrated the end market demand that semis
are seeing at the moment.
    "At the moment, (ASML are) in a beautiful place where their demand is outstripping their
production so they are getting increasing demand from customers to bring forward some of their
equipment," Morris-Eyton said.
    "A company like ASML with their EUV technology - that will be the market-leading technology
now for many, many years to come." Extreme Ultra Violet technology aims to make smaller and more
powerful mobile devices.
    Morris-Eyton added that while he is confident for tech in 2018 and it remains his biggest
sector, it is unlikely to see the same multiple expansion as in 2017.
    Allianz Global Investors are the biggest shareholder in Infineon, one of Morris-Eyton's top
three positions.
    As you can see in the chart below, European tech firm valuations are approaching those of
the U.S.:
    (Kit Rees)
    With the euro rising again to a new 18-month high against the dollar, Deutsche Bank's
forex strategists up their forecasts for the currency - which they say doesn't bode well for
European earnings and could worsen the region's underperformance relative to the US. 
    They've raised their year-end prediction for the trade-weighted index by 4 percent, implying
7 percent upside from current levels. Every 10 percent rise in the euro TWI reduces STOXX 600
EPS growth by 5 percentage points, they reckon. 
    This could bring them closer to increasing their relative underweight Europe vs US equities,
which we mentioned earlier this week.
    They see European EPS growing 2 percent this year, already significantly under the 9 percent
consensus estimate.    
    (Helen Reid)
    It's a familiar story with Carpetright and Dignity - big falls after profit
warnings, which has been the case this year with UK firms such as Mothercare, Countrywide and
    Inflationary pressures on consumers seem to be to blame, with Dignity caught in a price
battle and forced to cut funeral prices, while Carpetright's sales in the post-Christmas period
missed expectations.
    "Again it's the same old story as with other brands that have failed to adapt to changing
consumer trends – lower footfall has left transaction numbers down significantly from last
year," Neil Wilson, senior market analyst at ETX Capital, said in relation to Carpetright.
    "We must also consider weaker consumer sentiment for big ticket items as a factor, as well
tougher competition from a more diverse marketplace."
    Dignity is also in the top 20 most-shorted stocks in the UK, according to regulatory data.
As you can see from the chart below, shares in both stocks have struggled over the past two
    (Kit Rees)
    It's not a particularly strong open in Europe as gains for basic resources and defensive
stocks only just outweigh losses among financials and energy.
    Likewise moves among individual stocks are limited to a range of between +3 to -3 percent on
the STOXX, but elsewhere UK firms Dignity and Carpetright have just opened and slumped 41
percent and 48 percent respectively.
    Here's your opening snapshot:
    (Kit Rees)
    European shares are expected to open little changed at the end of a directionless week that
has seen the top pan-regional STOXX 600 benchmark steady around  a 2 ½ year peak as confidence
over economic and earnings growth helped consolidate a strong start of the year. 
    In spite of the flat weekly performance EPFR Global said it was a good week for European
equity funds with inflows into Sweden and the UK more than offsetting outflows from France and
Italy. Futures were last up 0.1 percent.
    On the corporate front earnings are in focus. In the UK shares in Carpetright and
Dignity could be heavily hit after both groups issued a profit warning, while French
spirits group Remy Cointreau are seen rising after like-for-like sales growth slowed
to 3.2 percent but topped expectations.
    For other possible stock movers see the post below on overnight headlines.
    (Danilo Masoni)

Nestle nominates three board directors to help advance strategy    
Deutsche Bank CEO says overhaul will take time          
UK's Carpetright warns on profit after post-Christmas sales fall   
Software AG takes hit on U.S. tax reform              
Peugeot CEO: UK plants uncompetitive,open to S.America alliance   
British Land names Simon Carter as next CFO                
BASF says 2017 adjusted EBIT up 32 percent on basic chemicals    
UK's esure CEO steps down, finance chief at helm in interim    
Thyssenkrupp CEO says will sharpen strategy - Handelsblatt      
Daimler, Bosch hit by walkouts in sector-wide labour dispute     
Airbus says supplier bottlenecks easing as deliveries rise      
HSBC to pay $100 mln to settle U.S. probe into currency rigging    
TF1 announces deal to buy Aufeminin From Springer        
Late timing of Chinese New Year weighs on Remy Cointreau Q3    
At AstraZeneca, fewer drug projects bring big productivity jump    
Italy's Geox to name top Gucci executive as new CEO          
    (Tom Pfeiffer)
    Futures have opened with marginal gains in Europe, reversing earlier indications from
spreadbetters for a dip. Both however suggest the market is lacking of clear direction and could
move sideways through the session.    
    (Danilo Masoni) 
    That's what Cameron Brandt, Research Director at EPFR Global, said in his latest weekly
update on fund flows. The positive week came despite the broader European market was little
changed in percentage terms with the STOXX 600 up less than 0.1 percent so far this week.
    At the country level there were divergences: "flows into Sweden and UK Equity Funds hit 12
and 39-week highs while France Equity Funds saw their three-week inflow streak snapped and Italy
Equity Funds experienced net redemptions for the 11th time in the past 12 weeks," he added.    
    On sectors globally, cyclicals dominated. Financials, Industrials and Technology Sector
Funds all took in over $600 million during the week ending Jan. 17 while Real Estate Sector
Funds recorded their biggest outflow since late October, he said.
    (Danilo Masoni)
    Good morning and welcome to Live Markets. European shares are set to open lower today at the
end of a directionless week where the pan-regional STOXX 600 has gained less than 0.1
percent so far following two weeks of gains.
    Over in Asia, stocks shook off losses on Wall Street and edged up to record highs on Friday
following China's announcement of faster-than-expected fourth quarter growth, while worries over
a possible U.S. government shutdown weighed on the dollar.
    Here are your opening calls, courtesy of CMC Markets:
    FTSE100 is expected to open 6 points lower at 7,694
    DAX is expected to open 20 points lower at 13,261
    CAC40 is expected to open 9 points lower at 5,486    
    And here are the weekly moves on the STOXX over the past 3 months.
    (Danilo Masoni)

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