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European stocks lower as Asos' profit warning drives risk-off

Dec 17, 2018

 

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

European Markets

  • European stocks sold off through most of the session as concerns over growth outlook were exacerbated by online retailer  Asos' (AIM: ASC) profit warning 
  • The Federal Reserve's FOMC will meet this week and annouce its rate hike decision Wednesday afternoon as President Trump complains in a tweet that it's "incredible" that the Fed is considering raising interest rates
  • UK Prime Minister Thersesa May said Parliment will vote on the Brexit deal the week of January 14th and that a second referendum would be a betrayal of voters
  • In the wake of UK Prime Minister Thersesa May's meetings with European leaders, the EU said the UK should not expect any further meetings to discuss Brexit
  • Italy's Prime Minister and its populist parties have formally agreed to a revised budget proposal with a 2.04% deficit to submit to the EU
  • WTI crude traded below USD$50 today and is presently down 1.9% at USD$50.25
  • The Euro Stoxx 600 closed down -1.14%, the FTSE 100 declined -1.05%, the DAX fell -0.86%, and the CAC 40 finished down -1.11%
  • Emerging markets stocks ETFs experienced net fund flows of +USD$948.1 million – the 9th straight week of positive fund flows
  • Investor sentiment for European stocks finished trading negative with the advance/decline ratio for the Euro Stoxx 600 currently at 0.17x
  • Basic Resources (+0.73%), Telecommunications (+0.07%), and Media (-0.52%) stocks were the top performers in the Euro Stoxx 600 today
  • Retail (-2.7%), Personal & Household Goods (-1.72%), and Construction & Materials (-1.52%) stocks were the worst performers in the Euro Stoxx 600 today
  • 25 stocks in the Euro Stoxx 600 hit 4-week highs while 88 stocks closed at 4-week lows
  • 13 stocks in the Euro Stoxx 600 finished the trading session overbought while 34 stocks closed oversold according to the 16-day RSI Measure
  • VSTOXX, the European stocks equivalent of the VIX, closed little changed +0.75 points today to 19.91 after closing at 19.16 last week
     

Stocks Trending in the News

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  • Amazon.com Inc. (AMZN) is stressing to investors that strikes at two of its German logistics sites will not impact holiday deliveries in Germany. Roughly 350 Amazon employees are striking for better pay and working conditions. Germany is Amazon’s second-largest market outside of the US. Amazon is rated “Neutral” in our US Large-Cap Global Top Stock Ideas and “Attractive” in our US Consumer Discretionary Global Top Stock Ideas.
  • Asos Plc (AIM: ASC), the e-commerce retailer, has said the holiday shopping season has gotten off to a horrible start for the company.  Asos said its Christmas season got off to poorly with a “significant deterioration” in November.  Asos cut its full-year forecast as it has been discounting in-stock merchandise to lower inventory.  Asos is rated “Neutral” in our United Kingdom Global Top Stock Ideas.
  • BHP Group (ASX: BHP) declared a special dividend of USD$1.02 per shares to be pain January 30th for holders January 11th.  BHP’ special dividend represents the USD$5.2 billion residual balance after selling onshore US assets and buying back shares.  After the dividend payout BHP will have returned USD$21 billion over the last 2 years.  BHP Group is rated “Attractive” in our Australia Large-Cap Global Top Stock Ideas.
  • Bristol-Myers Squibb Co. (BMY) is reportedly nearing a deal to sell its over-the-counter unit to Taisho Pharmaceutical Holdings Co. (TSE: 4581), according to people familiar with the matter. The deal is reportedly valued at about USD$1.6bn. Bristol-Myers is rated “Neutral” in our US Large-Cap Global Top Stock Ideas. Taisho Pharmaceutical Holdings is not rated in our Global Top Stock Ideas.
  • Embraer’s (ERJ) approved its Commercial Aviation JV with Boeing (BA), it announced.  Embraer said the value attributed by the parties to the JV is USD$5.2 billion.  The new JV will hold 100% of the commercial aviation business.  The deal still needs to be approved by the Brazilian government.  Embraer is rated “Neutral” in our Brazil All-Cap Global Top Stock Ideas.  Boeing is rated “Attractive” in our US Large-Cap Global Top Stock Ideas and “Neutral” in our US Information Technology Global Top Stock Ideas.
  • Goldman Sachs (GS) is facing its first charges in Malaysia in the 1MDB scandal.  Authorities are alleging that Goldman Sachs misled investors when it sold 1MDB bonds since it knew the proceeds would be misappropriated.  Authorities are seeking fines well above the USD$2.7 billion of misused funds and USD$600mn is fees generated on the transaction.  Goldman Sachs blames the scandal on “rogue employees”.  Goldman Sachs is rated “Neutral” in our US Large-Cap Global Top Stock Ideas.
  • Hennes & Mauritz (OM: HM B) reported sales figures that as it reduces its large inventory.  H&M said sales rose 12% to 56.4 billion kroner (USD$6.2 billion) while consensus was for 56.1 billion kronor.  H&M did not report profitability and analysts are questioning how much discounting H&M had to do in order to move the inventory.  H&M will report full results on January 31st.   Hennes & Mauritz is rated “Unattractive” in our European Large-Cap Global Top Stock Ideas.
  • Hitachi Ltd. (TSE: 6501) will acquire ABB Ltd.’s (SWX: ABBN) power grid division for USD$6.4bn in what is the Japanese conglomerate’s largest deal ever. Hitachi will acquire about 80.1% of the ABB’s power grid business, which maintains a total enterprise value of USD$11bn including net debt. The acquisition comes amid Hitachi’s shift from nuclear plants to the higher-growth market for electricity networks. Hitachi is rated “Top Buy” in our Japan Large-Cap Global Top Stock Ideas. ABB is rated “Neutral” in our European Large-Cap Global Top Stock Ideas.
  • Ingenico Group (ENXTPA: ING) shares are falling after the company, who has been the subject of takeover discussions, said that it ended deal discussions. Ingenico Group is now focusing on preparing a plan for next year. Ingenico Group is rated “Top Short” in our European Large-Cap Global Top Stock Ideas.  
  • JD.com (JD) coverage was reinstated today at GF Securities will an accumulate rating.  JD.com’s price target was set at USD$27.75 implying 25% upside to its last closing price.  JD.com is rated “Top Short” in our China All-Cap Global Top Stock Ideas.
  • Johnson & Johnson (JNJ) shares gave up roughly USD$40bn in market value last week after Reuters reported that the consumer brands group knew its baby powder could contain traces of asbestos for at least 40 years. Reuters cites documents from a Missouri court case that awarded USD$4.7bn to 22 women who developed ovarian cancer from Johnson & Johnson products. Johnson & Johnson has since called the story, “an absurd conspiracy theory.” Johnson & Johnson is rated “Attractive” in our US Large-Cap Global Top Stock Ideas.
  • Netflix Inc. (NFLX) shares still have strong upside potential, according to MKM Partners. In a note to clients, MKM Partners said that Netflix’s fundamentals and earnings are, “as strong as ever,” while reaffirming its buy rating and USD$415/share price target. As of Friday’s close, Netflix shares are down more than 30% since October. Netflix is rated “Unattractive” in our US Large-Cap Global Top Stock Ideas and “Unattractive” in our US Consumer Discretionary Global Top Stock Ideas.
  • Sopra Steria Group (ENXTPA: SOP) shares are trading lower after being downgraded by Morgan Stanley from equal-weight to underweight. Morgan Stanley also lowered its price target for Sopra Steria Group from 152 euros/share to 75 euros/share, implying a 14% downside from Friday’s close. Sopra Steria maintains an average price target of 132.36 euros/share across 12 different estimates. Sopra Steria is rated “Neutral” in our European SMID-Cap Global Top Stock Ideas. 
     

What is Going on with European Currencies?

  • EUR€ is currently up +0.31% against the USD$ to 1.1341
  • GBP£ is currently up +0.167% against the USD$ to 1.2604
  • CHF is currently up +0.519% against the USD$ to 1.007

Highlights from the European Bond Market

  • Generic Euro 10-Year Bonds are lower with yields up 0.4 basis points to 0.256%
  • German 10-Year Bunds are lower with yields up 0.4 basis points to 0.256%
  • French 10-Year Government Bonds are lower with yields up 2.6 basis points to 0.738%
  • UK 10-Year GILTs are lower with yields up 2.6 basis points to 1.266%
  • Italian 10-Year Government Bonds are lower with yields up 2.1 basis points to 2.96%

 

Euro Stoxx 50 Movers

In local currency.
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Outperformers Sector Price 1D % Chg Volume
Bayer AG Information Technology 64 1.01%               3,371,095
Linde PLC Real Estate 140 0.99%                  909,084
Iberdrola SA Consumer Staples 7.1 0.97%            21,971,253
Deutsche Telekom AG Financials 15.2 0.73%            12,100,418
Telefonica SA Financials 7.83 0.46%            42,638,653
 
Underperformers Sector Price 1D % Chg Volume
adidas AG Financials 187 -4.42%               1,756,247
Industria de Diseno Textil SA Materials 23.6 -3.87%               7,846,323
ING Groep NV Consumer Discretionary 9.91 -2.99%            17,860,446
Societe Generale SA Energy 29 -2.76%               5,597,321
Koninklijke Philips NV Financials 31.7 -2.45%               3,263,198