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European stocks close flat as ECB President Draghi warns economic risks increasing

Dec 13, 2018

 

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

European Markets

  • European Central Bank President Mario Draghi said in Frankfurt today that economic risks "are trending to the downside" due to geopolitical risks, trade protectionism and increased volatility; the ECB's QE bond-buying program ends this month
  • After surviving a confidence vote Wednesday night, UK Prime Minister Theresa May is in Brussels attempting to negotiate for increased concessions, notably on the “Ireland Question” as she tries to build support for a BREXIT vote in the UK Parliament
  • Goldman Sachs believes UK Prime Minister Theresa May’s victory last night among her Conservative Party colleagues will serve as a “Pyrrhic Victory” with the possibility that BREXIT could be reversed – Goldman is suggesting that the support for BREXIT outside of Prime Minister May’s Conservative Party is limited (remember that PM May was part of the Conservative Party that advocated for “Remain” ahead of the BREXIT referendum)
  • A large portion of Saudi Arabia's export cuts will be of those to the US market, as the kingdom looks to avoid inventory build-ups in North America, according to Bloomberg
  • China Ministry of Commerce said its officials have been in constant contact with counterparts in the US and disccussions are going "smooth"; US officials were invited to China and the Ministry said Chinese officials would be happy to visit the US
  • China resumed today purchases of US soybeans with between 1.5 and 2 million metric tons bought overnight
  • China has detained a second Canadian citizen and is investigating him for "suspected activites harming state security"
  • The Euro Stoxx 600 closed down -0.17%, the FTSE 100 declined -0.04%, the DAX fell -0.04%, and the CAC 40 finished down -0.26%
  • Utilities (+1.3%), Automobiles & Parts (+0.25%), and Basic Resources (+0.24%) stocks were the top performers in the Euro Stoxx 600 today
  • Telecommunications (-0.81%), Technology (-0.52%), and Real Estate (-0.52%) stocks were the worst performers in the Euro Stoxx 600 today
  • 40 stocks in the Euro Stoxx 600 hit 4-week highs while 40 stocks closed at 4-week lows
  • 10 stocks in the Euro Stoxx 600 finished the trading session overbought while 25 stocks closed oversold according to the 16-day RSI Measure
  • VSTOXX, the European stocks equivalent of the VIX, closed little changed +0.19 points today to 19.91 after closing at 19.73 yesterday
     

Stocks Trending in the News

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  • Apple (AAPL) said it plans to invest USD$1 billion to build a new campus in Austin, Texas that could eventually have 15,000 employees.  Apple will also open new offices in San Diego and Culver City, California.  Apple is making the investments in an effort to make good on its promise to strengthen its contributions to the American economy.  Apple is rated “Top Buy” in our US Large-Cap Global Top Stock Ideas and “Top Buy” in our US Information Technology Global Top Stock Ideas.
  • Ball Corporation (BLL) announced intentions to sell its metal beverage packaging facilities in China to ORG Technology Co. Ltd. (SZSE: 002701). ORG Technology will pay USD$225mm in total for the Chinese facilities with the deal expected to close in the second half of 2019. Ball Corporation is rated “Neutral” in our US Large-Cap Global Top Stock Ideas. ORG Technology is not rated in our Global Top Stock Ideas.
  • GAM Holdings (SWX: GAM) said it is having problems stemming outflows from its asset management business in the wake of its scandal involving a well-known portfolio manager.  GAM Holdings said it will post a loss of USD$931mn for this year as it is forced to write-down the value of its business.  GAM Holdings will also cut 10% of its workforce.  GAM Holdings is rated “Neutral” in our European SMID-Cap Global Top Stock Ideas.
  • General Electric (GE) was upgraded by JP Morgan to neutral from overweight.  JP Morgan set GE’s price target at USD$6, a market low.  The consensus price target for GE is presently USD$11.38.  General Electric is rated “Unattractive” in our US Large-Cap Global Top Stock Ideas and “Unattractive” in our US Industrials Global Top Stock Ideas.
  • G4S Plc (LSE GFS) is considering an exit from the armored car business via an IPO of its unit.  G4S said the dwindling use of physical notes in developed countries has led to its consideration of an IPO.  G4S said the unit could be worth about USD$2 billion and G4S rose the most in 2 years on the news.  G4S is rated “Top Short” in our United Kingdom All-Cap Global Top Stock Ideas.
  • Japan Post (TSE 6178) will buy a stake in US insurer Aflac (AFL), according to the Nikkei newspaper.  Japan Post will spend USD$2.6 billion to buy a 7-8% stake in Aflac.  The holding would become an equity-method affiliate in about 4 years, the report notes.  Japan Post is making the investments as it seeks to boost long-term profitability.  Japan Post is rated “Neutral” in our Japan Large-Cap Global Top Stock Ideas.  Aflac is rated “Attractive” in our US Large-Cap Global Top Stock Ideas.
  • LEONI AG (DB: LEO) shares are popping after Reuters reported that it is in the early stages of talks to merge with Motherson Sumi Systems Limited (BSE: 517334). The report by Reuters cites that Motherson Sumi still needs to secure financing. The deal is expected to be worth 1bn euros.  Leoni is rated “Unattractive” in our European SMID-Cap Global Top Stock Ideas. Motherson Sumi is not rated in our Global Top Stock Ideas.
  • Metro AG (DB: B4B) shares are falling after CEO Olaf Koch said on the sidelines of the company’s annual press conference that its efforts to reverse sales declines in Russia will take another 2 to 3 quarters. Koch detailed further that, while he is optimistic of the company’s turnaround in Russia, FY2018 and FY2019 profit in the country will still fall. Metro AG is rated “Neutral” in our European SMID-Cap Global Top Stock Ideas.
  • Sacyr S.A. (BME: SCYR) and Salini Impregilo SpA (BIT: SAL), the two building companies behind a consortium to expand the Panama Canal, are plummeting on a report that an arbitration court has ordered the consortium to pay back nearly USD$548mm in after cost overruns. The initial advanced payments for the venture came in 2009. Sacyr is rated “Unattractive” in our European SMID-Cap Global Top Stock Ideas. Salini is rated “Neutral” in our European SMID-Cap Global Top Stock Ideas.
  • Sports Direct International Plc (LSE: SPD) shares are plunging the most in 2 years after CEO Mike Ashley commented that the company’s business in November was, “unbelievably bad.” Additionally, Sports Direct International warned investors that fixing problems at its House of Fraser department-store will cost more than expected. Sports Direct International is not rated in our Global Top Stock Ideas.
  • XXL ASA (OB: XXL) shares are trading down after being downgraded by Credit Suisse from outperform to neutral. Additionally, Credit Suisse slashed its price target for XXL by 37.14% from 70 Norwegian Krone/share to 44 Norwegian Krone/share. Credit Suisse cited concerns of current leverage posing a risk to the firm’s dividend payments as the reason for the downgrade and price target cut. XXL is rated “Unattractive” in our European SMID-Cap Global Top Stock Ideas.

What is Going on with European Currencies?

  • EUR€ is currently little changed against the USD$ at 1.1358
  • GBP£ is currently little changed against the USD$ at 1.2629
  • CHF is currently little changed against the USD$ at 1.0061
     

Highlights from the European Bond Market

  • Generic Euro 10-Year Bonds are lower with yields up 0.6 basis points to 0.285%
  • German 10-Year Bunds are lower with yields up 0.6 basis points to 0.285%
  • French 10-Year Government Bonds are higher with yields down -0.2 basis points to 0.732%
  • UK 10-Year GILTs are lower with yields up 1 basis points to 1.289%
  • Italian 10-Year Government Bonds are higher with yields down -4.4 basis points to 2.956%
  • Spanish 10-Year Government Bonds are higher with yields down -0.5 basis points to 1.424%

 

Euro Stoxx 50 Movers

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

Outperformers Sector Price 1D % Chg Volume
Iberdrola SA Consumer Staples 7.01 2.37%            26,012,895
Bayerische Motoren Werke AG Utilities 74.2 1.94%               2,261,273
Banco Bilbao Vizcaya Argentaria SA Information Technology 4.74 1.87%            25,129,963
Enel SpA Industrials 5.02 1.80%            39,071,673
Banco Santander SA Health Care 4.07 1.51%            49,380,305
 
Underperformers Sector Price 1D % Chg Volume
Fresenius SE & Co KGaA Telecommunication Services 41.4 -2.38%               2,411,215
Airbus SE Industrials 90 -1.65%               1,739,620
Sanofi Consumer Discretionary 78.6 -1.49%               3,543,604
Orange SA Materials 14.6 -1.22%               7,690,336
L'Oreal SA Health Care 207 -1.19%                  761,896