(Bloomberg) -- In a market that took a breather after China played hardball on trade and talks on Brexit hit a dead-end, one sector got hot again: food delivery. But Amazon’s decision to take the lead in a $575 million funding round in British startup Deliveroo wasn’t welcomed by all investors.

The news plunged the sector into turmoil, as the three major Europe-listed players -- Just Eat, Takeaway.com and Delivery Hero -- had the better part of $1 billion of their collective market value wiped out. It doesn’t necessarily spell trouble for those players in the long run, though.

“A bounceback is on the cards -- after all, the others aren’t going away, so Just Eat etc., will be looking for investment now, too, in order not to be left behind,” wrote IG Group Chief Market analyst Chris Beauchamp in an email. “The sector has plenty of room for growth, so the race is on to see who can get funding next.”

The hit was still sizable, and those stocks already have a large short base, which is something to keep an eye on.

The concerns about the risks to Just Eat’s model are overdone, Liberum analysts Ian Whittaker and Harry Read wrote in a note to clients. Market leadership is vital to attract advertisers and customers, and in the U.K. Just Eat has an estimated three-to-four times greater share than Uber Eats and Deliveroo combined, they said. Just Eat’s local presence - over 60% of its customers are in small towns -- is also an edge.

Liberum goes further. Market leaders such as Just Eat, Delivery Hero and Takeaway.com are likely to become takeover targets themselves, as trying to grow organically in those businesses makes little sense and can lead to significant losses, they said. U.S. peers Uber, GrubHub and DoorDash are cited as potential suitors, while Amazon or Naspers could also make a move.

Amazon likes a good disruption and they previously entered another market with a bang when they bought Whole Foods. The move had a knock-on effect on grocery retailers in Europe, but fundamentals prevailed fairly quickly after the initial hit.

All that said, while Amazon’s ultimate plans remain unknown, the move is still important, as highlighted by Bloomberg columnist Alex Webb. It allows the online retail giant to re-enter the food-delivery business after it shuttered the London operations of Amazon Restaurants last year, and gives access to a new network. It could also be a way to broaden its expansion in European food services in Europe.

In the meantime, Euro Stoxx 50 futures are trading little changed ahead of the open.

SECTORS IN FOCUS TODAY:

• Watch oil stocks after crude prices rose following signals from OPEC that it will continue output cuts and as the U.S. threatens Iran.
• Watch stocks with exposure to the Australian market after the country’s center-right government secured a surprise election victory. Watch Paddy Power Betfair, John Menzies, Victoria, Serco, Inchcape, Millennium & Copthorne, Purplebricks, CMC Markets, Saipem, PageGroup, Sandvik, Campari, Sensirion.
• Watch the pound and U.K. stocks Prime Minister Theresa May has vowed another push to get her Brexit deal through Parliament, while Conservatives have her succession in mind. Labour leader Jeremy Corbyn is moving closer to backing a second referendum. In the meantime, house prices in London continue to suffer.

COMMENT:

• “At the recent peak, the market had run ahead and was already pricing in a strong rebound in macro as well as earnings growth,” Deutsche Bank strategists write in a note. “At the Monday bottom, the market was back in line with current growth but with the latest modest rebound it is again slightly ahead, leaving it vulnerable in the near term.”

COMPANY NEWS AND M&A:

• Ryanair Cautious on Outlook as Slumping Fares Weigh on Earnings
• Infineon Technologies Suspends Shipments to Huawei, Nikkei Says
• Three Wirecard Partners Contributed Half of Its 2016 Sales: FT
• T-Mobile, Sprint Said to Prepare U.S. Government Concessions
• Le Maire Postpones Decision on Aeroports de Paris Privatization
• Enel Sees 2019 Ebitda Benefit EU180m From Accord With Argentina
• RWE’s Bleak Gas Outlook Prompts Rethink for Further Price Drop
• Deutsche Bank Didn’t Alert Watchdog on Suspicious Trump Accounts: NYT
• London Office Builders Shake Off Brexit Gloom With New Projects
• Marel to Sell Up to 100M Shares and List in Amsterdam in 2Q

NOTES FROM THE SELL SIDE:

• Citi says 1&1 Drillisch remains unattractive longer term, but it is “prudent” to upgrade to neutral. Citi says that the longer the German 5G auction continues “the more binary it becomes”; either Drillisch wins spectrum at high prices, or reverts to mobile virtual network operator arrangements and is free cash flow rich, with strong balance sheet an apparent good valuation.

TECHNICAL OUTLOOK for Stoxx 600 index:

• Resistance at 383 (50-DMA); 385.7 (76.4% Fibo)
• Support at 374.5 (61.8% Fibo); 369.1 (200-DMA)
• RSI: 47.5

TECHNICAL OUTLOOK for Euro Stoxx 50 index:

• Resistance at 3,516 (76.4% Fibo); 3,596 (May 18 high)
• Support at 3,406 (50-DMA); 3,309 (50% Fibo)
• RSI: 51

MAIN RESEARCH AND RATING CHANGES:UPGRADES:

• 1&1 Drillisch upgraded to neutral at Citi; PT 30 Euros
• Amplifon upgraded to outperform at MainFirst; PT 24 Euros
• Bouygues upgraded to outperform at Credit Suisse; PT 40 Euros
• Evraz upgraded to buy at VTB Capital; PT 6.70 Pounds
• Hays upgraded to outperform at RBC
• Hellenic Petroleum upgraded to add at AlphaValue
• Ipsen upgraded to neutral at JPMorgan; Price Target 110 Euros
• Lufthansa upgraded to neutral at MainFirst; PT 17.50 Euros
• Maersk Drilling Raised to Buy at Kepler Cheuvreux; PT 660 Kroner
• Next upgraded to buy at Goldman; PT 66 Pounds
• Tokmanni Group Upgraded to Buy at SEB Equities; PT 9.40 Euros
• UBS upgraded to buy at Bankhaus Lampe

DOWNGRADES:

• Fiskars Downgraded to Hold at SEB Equities; PT 21.30 Euros
• HeidelbergCement cut to sell at SocGen; Price Target 62 Euros
• Merlin downgraded to reduce at HSBC; PT 3.15 Pounds
• Natixis Downgraded to Hold at Kepler Cheuvreux; PT 4.90 Euros

INITIATIONS:

• Adevinta rated new overweight at Barclays; PT 99 Kroner
• Adevinta rated new overweight at JPMorgan; PT 100 Kroner

MARKETS:

• MSCI Asia Pacific down 0.4%, Nikkei 225 up 0.3%
• S&P 500 down 0.6%, Dow down 0.4%, Nasdaq down 1%
• Euro down 0.05% at $1.1152
• Dollar Index up 0.03% at 98.03
• Yen down 0.06% at 110.15
• Brent up 1.3% at $73.1/bbl, WTI up 1.2% to $63.5/bbl
• LME 3m Copper down 0.2% at $6044/MT
• Gold spot down 0.1% at $1275.9/oz
• US 10Yr yield up 1bps at 2.4%

MAIN MACRO DATA (all times CET):

• 10am: (IT) March Current Account Balance, prior 3.25b
• 10am: (EC) March ECB Current Account SA, prior 26.8b

To contact the reporters on this story: Michael Msika in London at mmsika4@bloomberg.net;Lisa Pham in London at lpham14@bloomberg.net

To contact the editors responsible for this story: Blaise Robinson at brobinson58@bloomberg.net, Jon Menon

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