LIVE MARKETS-Winners and losers during coronavirus times, cash is king

  • Reuters
LIVE MARKETS-Winners and losers during coronavirus times, cash is king

* STOXX turned negative

* Q1 season kicks in Welcome to the home for real-time coverage of European equity markets brought to you by Reuters stocks reporters. You can share your thoughts with Thyagaraju Adinarayan (, Joice Alves ( and Julien Ponthus ( in London and Stefano Rebaudo ( in Milan.


The earnings season is up, but if we really want to bet on the winners of this huge pandemic disaster we have to go back to basics: cash generation and balance sheet strength.

This is exactly what Jefferies did by stress-testing different scenarios to find out which companies will really be able to weather the storm.

"Each team considered everything, from payable and receivable terms, factoring, loan dynamics, rent reductions, employee furloughs, repayment schedules and more", the investment bank says in a research note.

Here are the "Paid In Full" stocks, where the strength of balance sheets backstops "risks of prolonged end market weakness":

Gedeon Richter GDRB.BU

Persimmon PSN.L

Spectris SXS.L

Then, Jefferies lists six companies with "access to significant liquidity polls", which will help smooth their short-term volatility:



Ashtead AHT.L



Rio Tinto RIO.L

With the following shares, expect some weakness in the short term, but coupled with a longer-term buying opportunity:

Ferguson FERG.L

Land Securities LAND.L

Stora Enso STER.HE

Vodafone VOD.L

In the red zone, find the "Get Money", which are affected by liquidity concerns, weak demand and balance sheet:


Renault RENA.PA

Tarkett TKTT.PA

Tullow TLW.L


(Stefano Rebaudo)



Do not be fooled by their big P/E discount, there maybe further selling pressure coming on European commercial aerospace stocks.

Investors often "underestimate the highly cyclical nature of multiples in this industry," Barclays (LON: BARC ) says. So we should not forget that their price-to-earnings ratio was at 5-6x during the 2008 global financial crisis down from high teens to low twenties at cycle peaks.

Currently civil European stocks are trading on 8.4 times average 2019 actual EPS and are around 45% below their historical "through-cycle multiples," Barclays says.

And if Covid-19 will have the same impact on ratios of the global financial crisis the multiples are expected to erode by a further 30-35%.

Safran SAF.PA , MTU Aero Engines MTXGn.DE and Airbus AIR.PA are well above the global financial crisis levels, while Meggitt MGGT.L and Senior SNR.L are more close to it.

We will probably see these shares make their way back in positive territory, but we first need the coronavirus outbreak to sound a retreat.

At least two quarters a traffic recovery at sustained levels is a precondition for these stocks to outperform the market, Barclays adds.

(Stefano Rebaudo)



One of the factors that helped the STOXX 600 bounce back about 25% from its March 16 lows is price-to-earnings ratios clawing back their way to where they were about six months ago:

The PE curve has enjoyed a much faster pace than its index and as you can see below, it's back to its historic levels.

But what happens if that rerating trend crumbles and PE ratios actually fall to the lows experienced during previous recessions?

Have a look for instance at how low the STOXX' PE ratio fell during the last decade. It just begs the question to how hard of an impact a derating could have on European stocks moving forward.

On that note, TS Lombard Chief Economist Charles Dumas wrote this morning that S&P earnings falling 25% in 2020 would put forward p/e at a "bubbly" 24.

"With S&P 'e' down 25% from 2019, forward p/e of 16 puts index at 1,900" against 2,874 points at the moment, he warned.

Here's a bit of reading on the valuation debate and on the Q1 earnings season in Europe Ponthus)



The good news: investors have not been spooked out by the Q1 earnings reports which have started piling up this morning.

The bad news: the upward trend which was displayed by futures prior of the open has lost its steam. The STOXX 600 which opened well into positive territory is now hovering up and down the 0% bar.

As a sign that sentiment has not soured yet, Travel & Leisure shares, the typical coronavirus fear and greed gauge, are up 0.7%.

Among blue chips which have given a Q1 trading update, Vivendi (PA: VIV ) is leading the CAC 40 with a 4.4% rise after publishing resilient growth in revenue in the first quarter.

Still in Paris, EssilorLuxottica is also up 1.5% after its earnings release.

In Amsterdam, Philips is also up after its Q1 update and its shares rising 2.8%.

Things went less smoothly for fish farmer Mowi which is down about 9% after it posted weaker than expected first-quarter earnings and said costs were rising due to the impact on operations from the COVID-19 outbreak.

(Julien Ponthus)



The somewhat arguably encouraging trend in new covid-19 cases and deaths coupled with some lockdowns easing measures (or plans to) are helping sentiment.

As a sign that businesses are seeking to get back to “new normal”, IKEA aims to start reopening shops in Europe in May, its chief executive said.

So far this morning in terms of earnings, Philips reported a 33% decline from a year earlier in first-quarter core earnings while EssilorLuxottica, the spectacles company, said it would scrap its dividend and would look to cut costs.

Vivendi reported a 4.4% growth in revenue in the first quarter but its advertising unit Havas, as well as publishing subsidiary Editis, suffered a decline in their activities due to the coronavirus outbreak.

French car parts company Faurecia reported a 13.5% drop in first-quarter sales.

Two retailers applied for state-backed loans: in Germany electronics retailer Ceconomy and Fnac Darty in France.

Talking about state aid, KLM withdrew a proposed bonus increase for its chief executive following public outrage that the company, which is trying to secure state support, should have even considered the move.

Novartis has won the go-ahead from the U.S. Food and Drug Administration to conduct a randomized trial of malaria drug hydroxychloroquine against COVID-19 disease.

Among smaller companies British sofa retailer DFS Furniture is negotiating an additional debt facility and preparing an equity issue of up to 19.9% of its existing share capital to get it through the coronavirus crisis.

Good news on the other hand for Premier Foods which expects annual trading profit to be at the top end of market expectations, as the coronavirus pandemic fuelled a short-term peak in volumes in March.

(Julien ponthus and Stefano Rebaudo)



European futures are trading cautiously in positive territory - +1.3% for the STOXX50 - as investors brace for an earnings season like no other in financial history.

Reporting for the first quarter of 2020 is still thin this Monday but will gradually accelerate from Tuesday and shed some light on the scope of the hit experienced by Europe Inc. in March as most of the old continent went into lockdown.

So far this morning, Philips reported a 33% decline from a year earlier in first-quarter core earnings while EssilorLuxottica, the spectacles company, said it would scrap its dividend and would look to cut costs.

In the meantime, Asian bourses eased a tad overnight but it's the fall in crude oil futures which is currently at the centre of attention. Ponthus)


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