* European stocks rise
* Next drives retail sector up after strong Christmas update
* Tech stocks, industrials make gains
* 2017 sees record number of deals worldwide
* MiFID II reforms, U.S. Fed FOMC minutes in focus
Jan 3 (Reuters) - Welcome to the home for real time coverage of European equity markets
brought to you by Reuters stocks reporters and anchored today by Kit Rees. Reach her on
Messenger to share your thoughts on market moves: kit.rees.thomsonreuters.com@reuters.net
MiFID II: I'm doing a middle office job today, trader says (1601 GMT)
As MiFID II kicks in, a number of high net worth retail clients are not always compliant
with the new rules and have had difficulties getting their trades processed, a sales trader
reported.
"It's middle office rather than front today, he said, explaining that much of his day was
devoted to sorting out his clients' problems rather than focusing on sales.
(Julien Ponthus)
MiFID II-Are secondary brokers already missing out? (1526 GMT)
"Some clients prefer going through their prime (broker) rather than through us to make sure
things go smoothly," a trader from a second-tier brokerage told us this afternoon.
"There is less volume for us today," he said, adding that some clients were not MiFID
II-ready and that trade reporting was proving to be a difficult task.
(Julien Ponthus)
**
2017 sees record number of deals worldwide (1435 GMT)
Deal making is another theme investors are considering at the beginning of the year, and
whether the M&A wagon will continue to roll on in 2018.
Last year was another blockbuster year: the number of worldwide deals hit a record in 2017,
totaling $3.6 trillion, according to Thomson Reuters data.
This was also the fourth year in a row where M&A activity surpassed $3 trillion.
Interestingly while European M&A was up 17 percent in 2017, the U.S. saw a decline of 16
percent in the value of deals. Perhaps this is testament to the strength of the European
economy, or the fact that debt has been so cheap? Here's a graphic from our Deals Intelligence
colleagues:
(Kit Rees)
**
Gnawing on the bone of European equities: enjoy it while it lasts (1339 GMT)
SocGen has repeatedly warned its clients that European equities are close to their
historical averages in terms of valuation. Its message today is that there is "not much meat on
the bone" left, even if today's traders seem to be in a clear "risk-on" mood.
Strategists reckon "exit strategies" will do better this year as central banks start to turn
the taps of stimulus off, and recommend holding sovereign bonds over equities.
"Be ready for the end of Goldilocks," strategists warn.
Here are SocGen's top tips :
(Helen Reid and Julien Ponthus)
*****
Lunchtime Update: European stocks hold in positive territory (1325 GMT)
As we cruise into afternoon trading, European stocks remain positive, with tech the
top-gaining sector.
Over in the U.S. stocks futures are pointing to Wall St also opening higher, following the
S&P 500's record close.
Here's your European equity market snapshot:
(Kit Rees)
*****
Shorting UK retailers, there's your thriller! (1222 GMT)
While the first MIFID II trading day is not the action movie some had expected, the return
to favour today of the UK retail sector is likely to be a real thriller (and not in a good way)
for those short sellers who are betting on its downfall.
Data from Astec Short Interest compiled by Helen shows that the amount of Next shares on
loan surged in a year, from 2.3 million last January to 4.3 million yesterday.
The cost to borrow also rose, indicating demand to short the shares increased. No doubt many
of those short sellers are feeling the squeeze today and exiting their trades, helping the stock
rise.
Next, which had a horrible start in 2017, losing over 17 percent on Jan 4, is currently
leading the FTSE with a 7 percent jump, lifting the sector with the likes of Primark owner
Associated British Foods.
Alasdair has an additional interesting fact for you : out of the 10 most shorted British
stocks, 5 are from the retail sector: Debenhams, Ocado, WM Morrison, Marks &
Spencer and Sainsbury.
(Julien Ponthus and Helen Reid)
**
Buy-side traders say MiFID II could make it harder to access quality liquidity -survey (1120
GMT)
Although the wide-ranging new regulations don't seem to be making huge ripples in trading
immediately, some buy-side traders think it could make their jobs more difficult, a survey by
trading platform ITG found.
While 45 percent of respondents thought MiFID II would have "no significant impact" on their
ability to access quality liquidity, 37 percent said it would become harder. That's nearly twice
the 18 percent who saw the regulation actually helping traders find liquidity.
Of course what makes liquidity 'quality' could be subjective, but MiFID II's clampdown on
dark pools certainly takes some of the options off the table for traders.
The survey also revealed some interesting patterns in the types of venues traders are more
likely to transact in post-MiFID. Traditional lit markets were by far the most popular, while
traders were more likely to shun electronic market maker and bank SIs.
As many traders have been telling us this morning, it'll take a little more adaptation time
before we can see for sure who the MiFID winners and losers are.
(Helen Reid)
**
If MIFID II were a movie, it wouldn't be a thriller (1100 GMT)
While there has been some kind of excitement ahead of the implementation today of MIFID II
rules, the feedback we're getting from trading floors across the markets is, well, not that
exciting at all.
"At 1125, Paris time, after more than two hours of trading, there is nothing in particular
to report," a major asset manager told us. There is, according to Thomson Reuters data, a drop
in activity.
Our correspondent Alasdair Pal, who dug the data, reports volumes on the STOXX 600
were down by around 25 percent in the first hour of Wednesday compared with a day previously.
Against the first hour of trading on Jan 3 2017, volumes were down by 11 percent.
Antoine Lesne, head of SPDR ETF Strategy for EMEA at State Street, told Helen that was to be
expected. "We clearly expect a slightly slower take-off as people are testing the pipes and so
on. The expectation is that it (trading) will be slower but I am not sure. It was very slow
yesterday as well so I wouldn’t say it’s because of MiFID only".
Maybe City A.M.'s spooky front page was a bit over the top:
(Julien Ponthus)
Dark pool migration drives December volumes for exchanges -UBS (1022 GMT)
On the topic of MiFID II, UBS analysts made an interesting observation about the market
share gains traditional European exchanges enjoyed in December 2017:
"We believe the December gains to market share were driven by a migration of volume away
from dark venues as the market prepares for the implementation of the Double Volume Caps under
MiFID II (starting today)."
Euronext is UBS' top pick and they also rate Deutsche Boerse a "buy",
while LSE and Flow Traders are "neutral" and BME is a "sell".
(Kit Rees)
**
European stocks hold on to gains, FTSE muted (1002 GMT)
While the STOXX 600 is off its early highs, it's still in positive territory as industrials,
health stocks and retailers drive gains, though it's pretty quiet just after the festive season.
The FTSE 100 is the laggard, flat even though sterling has given up its gains following a
disappointing construction PMI. Financials are taking the most points off the FTSE, followed by
consumer staples.
Here's your mid-morning market snapshot:
(Kit Rees)
**
Stronger start for European equities (0817)
It's a decidedly stronger open across the European benchmarks this morning with Next
leading the way on the STOXX 600, up 7.5 percent after its Christmas sales beat. Marks & Spencer
is rising as well as concerns around the ailing retail sector are placated somewhat by
Next's update.
Cyclical strength is also coming back with industrials and tech stocks helping drive the
market. Apple supplier AMS is up 5.5 percent after the iPhone maker and other Internet
giants drove gains on Wall Street.
No sign yet of MiFID II day having a substantial impact on trading, but we'll give you an
update on liquidity soon as some have said the new regulation kicking in could distract
investors from the trading day.
(Helen Reid)
**
What we're watching (0759)
While yesterday was a rather damp start to European equity trading in the New Year, today
stocks futures are pointing to a firmer session, though company news being on thin side means
that it will be more of a drift higher. We’ll be keeping an eye on the FTSE 100 in case it makes
another bid for a record level.
Trading, however, is likely to continue to be muted as investors come back from holiday and
the MiFID II reforms are launched. FOMC minutes after the market closes are another factor to
watch.
Company news/stock movers:
Passenger rights group takes legal action that could block Niki sale to IAG;
Novartis breast cancer therapy gets FDA breakthrough designation;
Spreadbetting company Plus500 sees higher 2017 profit and revenue;
UK's FCA opens investigation into Carillion;
UK's Next upgrades profit forecast on Christmas sales beat (shares seen 2-5 pct
higher)
(Kit Rees)
**
European airlines in focus once again (0722)
It's not a huge day for company news, but we could see some more action among airlines
today.
On Tuesday shares in BA owner IAG ended at a two-month high after it agreed to buy
Air Berlin's insolvent Austrian airline Niki.
But now a passenger rights group is taking legal action which could block the sale of Niki
to IAG.
Interestingly, airline stocks enjoyed some very strong gains last year, with both IAG and
Lufthansa's shares up 150 percent in 2017, while IAG was up a comparatively more
modest 48 percent and easyJet gained 45.7 percent.
(Kit Rees)
**
European stocks futures climb (0707 GMT)
Equity stocks futures are indeed pointing to a positive session today, and perhaps we could
even see the FTSE making another bid for a record level.
Here's your futures snapshot:
(Kit Rees)
**
European shares seen edging higher -spreadbetters
Good morning!
Financial spreadbetters see European stocks opening flat to slightly higher on Wednesday,
with Germany's DAX expected to rise by 37 points and France's CAC by 3 points.
A less ebullient euro should also help.
The FTSE 100 is seen broadly unchanged, as oil prices steady and copper falls back.
While Wall St saw a strong session on Tuesday and China stocks extended their rally, trading
in European shares could be more muted on day one of the MiFID II reforms. Later on we've also
got the release of the U.S. Federal Reserve's FOMC minutes from its December policy meeting
after the market has closed.
"Strength in domestic currencies may be sapping some of the strength in European markets.
Traders in FTSE 100 shares may be looking for the index to re-test the old highs at 7600 before
pushing on toward new records," Jasper Lawler, head of research at London Capital Group, said in
a note.
(Kit Rees)
**
(Reporting by Danilo Masoni, Helen Reid, Kit Rees and Julien Ponthus)
