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European stocks rally on renewed trade optimism, Italian budget compromise

Dec 12, 2018

 

*Data in Price Return and Updated Real-Time (with a delay), Source: StockDio

European Markets

  • European stocks surged today and closed near the highs of the session on renewed trade optimism and Italy's budget compromise with the EU
  • President Trump's statement that he would intervene in the Huawei CFO case to get a trade deal plus concrete moves by China to open access for foreign companies fueled today's strong performance
  • Italy is proposing a 2% budget deficit to the EU, bringing it within EU budget rules, according to press reports today
  • UK Prime Minister Theresa May vows to defeat a challenge to her leadership in a confidence vote that could occur as soon as this evening
  • 2 German leading economic institutes note the German economic boom has passed, but forward growth will be moderate with low risk of recession
  • The Euro Stoxx 600 closed up +1.69%, the FTSE 100 advanced +1.08%, the DAX rose +1.38%, and the CAC 40 finished up +2.15%
  • Investor sentiment for European stocks finished trading positive with the advance/decline ratio for the Euro Stoxx 600 currently at 10.11x
  • Basic Resources (+2.84%), Banks (+2.73%), and Utilities (+2.35%) stocks were the top performers in the Euro Stoxx 600 today
  • Retail (-0.05%), Chemicals (+0.77%), and Telecommunications (+1.11%) stocks were the worst performers in the Euro Stoxx 600 today
  • 20 stocks in the Euro Stoxx 600 hit 4-week highs while 137 stocks closed at 4-week lows
  • 4 stocks in the Euro Stoxx 600 finished the trading session overbought while 68 stocks closed oversold according to the 16-day RSI Measure
  • VSTOXX, the European stocks equivalent of the VIX, closed  down -1.37 points today to 19.72 after closing at 21.09 yesterday

Stocks Trending in the News

Click name for Q-Factor score and financial data

  • ABB Ltd. (SWX: ABBN) and Hitachi Ltd. (TSE: 6501) are reportedly in talks to partner on a deal relating to power grids after ABB reportedly considered putting its power grid division on the block earlier in 2018. According to a report by Nikkei, Hitachi is preparing to purchase the business from ABB for up to 800bn yen (USD$7bn). Upon completion of the deal, ABB will spin-off its power grid business into a separate company, after which Hitachi will purchase a 50% stake in the spun-off company before turning into a subsidiary. ABB is rated “Neutral” in our European Large-Cap Global Top Stock Ideas. Hitachi is rated “Top Buy” in our Japan Large-Cap Global Top Stock Ideas.
  • Apple (AAPL) is considering moving iPhone production out of China is tariffs become onerous, according to a Bloomberg story today.  Apple, for now, will maintain its current setup but will reassess its situation if tariffs rise more than 10%.  Up until now, iPhones have not been targeted for tariffs, but Apple will continue monitoring developments.  Apple is rated “Top Buy” in our US Large-Cap and US Information Technology Global Top Stock Ideas.
  • Boeing (BA) will see its USD$22 billion order for jets canceled by Lion Air in the wake of its 737 Max crash.  Lion Air’s owner is angry at Boeing and said he feels betrayed in an interview with Bloomberg.  The order has not been formally canceled but he is preparing to do so. Boeing is rated “Attractive” in our US Large-Cap Global Top Stock Ideas and “Neutral” in our US Information Technology Global Top Stock Ideas.
  • British American Tobacco (LSE: BATS) released a trading update that maintains its financials guidance for the second half of its fiscal year. In the trading update, British American Tobacco said that it expects to surpass its, “high single-figure constant-currency adjusted diluted EPS growth target,” for the year. British American Tobacco also highlighted strong growth in its combustibles and tobacco heating products, vapor, and oral business segments in the trading update. British American Tobacco is rated “Attractive” in our United Kingdom All-Cap Global Top Stock Ideas. 
  • Commerzbank AG (DB: CBK) shares are trading higher on reports that the German government is ramping up efforts to merge Commerzbank and Deutsche Bank AG (DB: DBK). Discussions have reportedly been had between Finance Minister Olaf Scholz and Deutsche Bank CEO Christian Sewing. The alleged talks involve changing existing laws and regulation to make the merger less costly. Commerzbank is rated “Unattractive” in our European Large-Cap Global Top Stock Ideas. Deutsche Bank is rated “Neutral” in our European Large-Cap Global Top Stock Ideas.
  • Distribuidora Internacional de Alimentacion SA (BME: DIA) shares are soaring on news that it is mulling a capital increase after entering a stand-by underwriting commitment with Morgan Stanley for 600mm euros (USD$680mm). The underwriting commitment is more than double DIA’s current capitalization, which has plunged to just 260mm euros amid its turbulent year. DIA is rated “Top Short” in our European SMID-Cap Global Top Stock Ideas. 
  • Inditex (BME: ITX) reported results that were below expectations as the company resisted price cuts to drive sales, as has been the case with many other players.  Inditex saw same store sales rise 3% which came below its target range for sales growth.  Inditex did not cut prices as it is confident in its coming collection, expecting it to sell well and rekindle sales growth.  Inditex is rated “Attractive” in our European Large-Cap Global Top Stock Ideas. 
  • John Woods Group (LSE: WG) is reporting that it expects to deliver at least 10% full-year revenue growth after observing above-average growth in the first half of its fiscal year. For the full-year, John Woods Group forecasted revenue between USD$10.9bn and USD$11.1bn while projecting ebitda to come between USD$620mm and USD$630mm. The company cited increased cost synergies, successful projects, and wider market recovery as reasons for its strong performance.  John Woods Group is rated “Neutral” in our United Kingdom All-Cap Global Top Stock Ideas. 
  • Marshalls (LSE MSLH) recent acquisition of Edenhall makes both financial and strategic sense, according to a note from Canaccord Genuity.  The notes highlight an expectation that consensus estimates will rise in the wake of the acquisition as it exposes the company to the new housing market.  Marshalls is not rated in our Global Top Stock Ideas.
  • Pandora A/S (CPSE: PNDORA) shares are falling the most in a month after Carnegie slashed its price target for the global jewelry maker from DKK375/share to DKK350/share. Carnegie cited lower estimates and weak like-for-like momentum as reasons for the price target cut, although it did maintain its “Hold” recommendation for the stock. Pandora is rated “Neutral” in our European Large-Cap Global Top Stock Ideas.
  • Pernod Ricard SA (ENXTPA:RI) now has activist hedge fund Elliot Management as a shareholder, with the fund having built a stake of more than 2.5% in Pernod Ricard thus far.   Elliot Management is known to boost returns and improve governance in the companies in which it takes a position.  The same is expected to occur with Pernod Ricard.  Pernod Ricard is rated “Attractive” in our European Large-Cap Global Top Stock Ideas.
  • Tencent (TCEHY, HK 700) priced its Tencent Music (TME) IPO at USD$13, the bottom of the IPO price range.  Tencent sold 82 million shares in the IPO and the company will debut with a valuation of just over USD$23 billion.  Tencent raised USD$1.1 billion in the offering.  Tencent is rated “Attractive” in our China All-Cap Global Top Stock Ideas.  Tencent Music is not rated in our Global Top Picks.

What is Going on with European Currencies?

  • EUR€ is currently up +0.415% against the USD$ to 1.1364
  • GBP£ is currently up +1.257% against the USD$ to 1.2644
  • CHF is currently little changed against the USD$ at 1.0076

Highlights from the European Bond Market

  • Generic Euro 10-Year Bonds are lower with yields up 4.7 basis points to 0.279%
  • German 10-Year Bunds are lower with yields up 4.7 basis points to 0.279%
  • French 10-Year Government Bonds are lower with yields up 2.1 basis points to 0.734%
  • UK 10-Year GILTs are lower with yields up 9.1 basis points to 1.279%
  • Italian 10-Year Government Bonds are higher with yields down -12.2 basis points to 3%
  • Spanish 10-Year Government Bonds are higher with yields down -0.8 basis points to 1.429%

 

Euro Stoxx 50 Movers

In local currency.
On Mobile/Tablet scroll to the right.

Outperformers Sector Price 1D % Chg Volume
Fresenius SE & Co KGaA Telecommunication Services 42.30 6.86%               7,644,590
Intesa Sanpaolo SpA Industrials 2.01 4.08%          132,884,707
Banco Santander SA Health Care 4.01 3.39%            63,074,570
Airbus SE Industrials 91.5 3.25%               2,067,671
Koninklijke Philips NV Financials 33 3.23%               2,712,436
 
Underperformers Sector Price 1D % Chg Volume
Industria de Diseno Textil SA Materials 25.05 -4.86%               2,466,790
Linde PLC Real Estate 141 -0.92%               1,093,480
CRH PLC Telecommunication Services 33.43 -0.35%               3,323,976
Deutsche Post AG Health Care 25.2 -0.16%               6,214,723
Munich Re Financials 188 0.29%                  450,636