Europe midday: ECB action a possibility, but politics may be an issue
- ECB meeting in focus
- Eurozone politics a factor
- Worsening security situation in Ukraine
- Morgan Stanley ups targets for Spanish banks
FTSE 100: 0.21%
DAX: 0.91%
CAC 40: 0.42%
FTSE MIB: 1.19%
IBEX 35: 0.54%
Stoxx 600: 0.31%
Cyclical sectors, such as basic resources and automobiles, were in the lead early as traders chose to focus on the possibility of more dovish rhetoric from the European Central Bank (ECB) at its policy meeting on 4 September.
Only a minority seem to believe that new measures will be implemented as soon as next Thursday. However, quite a few do expect ECB president Mario Draghi to somehow acknowledge, or reiterate, the risk posed by the recent decline in medium-term price expectations.
Meanwhile, Ukraine's President Petro Poroshenko accused Russia of "undisguised aggression".
However, acting as a backdrop is the continued deterioration of the security situation in Ukraine. A top government official cited by The Wall Street Journal Europe has said that Kiev is moving towards a more 'defensive' posture. That came amid reports that Ukrainian troops had abandoned an airfield in the east of the country in the face of an onslaught by Russian tanks.
Despite the above, Barclays Research recommended on Tuesday morning to clients that they stay in European equities, given the now greater likelihood of full-blown quantitative easing in the euro-area.
Politics within the Eurozone, however, are an issue.
As such, any remarks from Draghi might, perhaps, be more muted. That at least is the view of analysts at Berenberg who explained to clients that: "Open disagreements between the ECB and Berlin have made investors nervous in the past: We expect Draghi to tone down the issue and merely recommend for governments to let automatic fiscal stabilisers work within the rules of the EU stability and growth pact."
Morgan Stanley ups price targets for most Spanish banks
Morgan Stanley has raised its price targets for almost all the major listed Spanish banks, including: Banco Popular, Banco Sabadell, Bankia, Bankinter, BBVA and Santander.
"Net interest margin (NII) will continue to be supported by lower funding costs in the short term, but a further flattening of the yield curve and lower corporate loan spreads will weigh on NII 2015/2016, we think," the American bank said on Tuesday.
In a bid to ease competition concerns in Brazil, Spanish telecommunications giant Telefonica will exit from Telecom Italia once it has finalised the purchase of Vivendi's unit GVT in that South American nation, Reuters reports.
French carmaker Peugeot will cut 300 jobs at its Sochaux plant, in eastern France, starting in November, as output is reduced.
Swiss broker UBS has raised its recommendation on Vallourec to 'buy' from 'neutral'.
From a sector standpoint the best performance was to be seen in the following industrial groups within the DJ Stoxx 600: basic resources (1.02%), automobiles and parts (0.80%) and chemicals (0.77%).
Oil futures continue to slip
The euro slipped by 0.10% to $1.3112.
Brent crude futures dropped 0.745% to $102.42 per barrel, according to the ICE.
AB