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European stocks close higher on resolution of Italian budget standoff

Dec 19, 2018

 

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

European Markets

  • European stocks closed higher for the first time in 5 trading sessions with risk-on sentiment supported by the resolution of the EU/Italy budget standoff 
  • The EU has decided against implementing sanctions against Italy following negotiations between EU officials and members of the Italian coalition government regarding Italy’s target budget deficit for CY2019  -- Italian banks are rallying on the news
  • According to US Treasury Secretary Steven Mnuchin, US and Chinese trade officials continue to make progress in their talks about the trade impasse 
  • The US Federal Reserve is set to release its interest rate decision today at 2pm EST 
  • The Euro Stoxx 600 closed up +0.31%, the FTSE 100 advanced +0.96%, the DAX rose +0.24%, and the CAC 40 finished up +0.49%
  • Investor sentiment for European stocks finished trading positive with the advance/decline ratio for the Euro Stoxx 600 currently at 2.51x
  • Basic Resources (+1.54%), Utilities (+1.26%), and Telecommunications (+1.06%) stocks were the top performers in the Euro Stoxx 600 today
  • Industrial Goods & Services (-0.42%), Health Care (-0.18%), and Travel & Leisure (+0.06%) stocks were the worst performers in the Euro Stoxx 600 today
  • 10 stocks in the Euro Stoxx 600 hit 4-week highs while 191 stocks closed at 4-week lows
  • 6 stocks in the Euro Stoxx 600 finished the trading session overbought while 57 stocks closed oversold according to the 16-day RSI Measure
  • VSTOXX, the European stocks equivalent of the VIX, closed little changed -0.13 points today to 19.91 after closing at 20.04 yesterday

Stocks Trending in the News

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  • Brazil’s Finance Minister said he sees no restrictions to get in the way of the Boeing (BA) / Embraer (ERJ) joint venture in commercial aviation.  This comes in the wake of a labor court judge removing an injunction and sending the case back to standard courts.  The companies are close to completing the commercial aviation deal they have been working on.  Boeing is rated “Attractive” in our US Large-Cap Global Top Stock Ideas and “Neutral” in our US Industrials Global Top Stock Ideas.  Embraer is rated “Neutral” in our Brazil All-Cap Global Top Stock Ideas.  
  • Burford Capital Limited (AIM: BUR) shares are trading higher after announcing that it secured its next USD$1.6bn in funding for litigation finance investments. To receive the funding, Burford entered a strategic relationship with a sovereign wealth fund. Burford Capital is rated “Neutral” in our United Kingdom All-Cap Global Top Stock Ideas. 
  • Citigroup Inc. (C) reportedly may face as much as USD$180mm in losses from loans made to an Asian hedge fund. A hedge fund managed by a unit of GF Holdings lost significant funds in foreign currency investments and it will not be able to pay back the loan made by Citigroup. The situation has prompted board-level discussions at Citigroup and is resulting in more oversight in the firm’s FX prime brokerage unit. Citigroup is rated “Neutral” in our US Large-Cap Global Top Stock Ideas.
  • Deutsche Bank (DB: DBK) and JPMorgan Chase & Co. (JPM) lost a trial in a criminal case related to losses from financial products sold to the German city of Pforzheim. Pforzheim lost millions of euros related to swaps sold by Deutsche Bank and JPMorgan in 2004 and 2008, prompting the city to sue for 12mm euro (USD$13.7mm) in losses. Deutsche Bank is rated “Neutral” in our Europea Large-Cap Global Top Stock Ideas. JPMorgan is rated “Neutral” in our US Large-Cap Global Top Stock Ideas.
  • Embraer S.A. (BOVESPA: EMBR3) and Azul S.A. (BOVESPA: AZUL4) have signed a contract pertaining to a previously announced order of 21 E195-E2 jets. The contract is valued at USD$1.4bn and will be listed in Embraer’s 2018 4Q backlog. Embraer is rated “Neutral” in our Brazil All-Cap Global Top Stock Ideas. Azul is rated “Top Buy” in our Brazil All-Cap Global Top Stock Ideas.
  • FedEx (FDX) said demand for shipping services outside the US has been weak.  As a result, FedEx cut its profit forecast and is trimming international air freight capacity.  FedEx said adjusted earnings for 2019 no greater than USD$16.60 a share.  FedEx increased its profit outlook 3 months ago only to cut it yesterday.  FedEx is rated “Neutral” in our US Large-Cap Global Top Stock Ideas and “Attractive” in our US Industrials Global Top Stock Ideas.  
  • General Electric (GE) has reportedly filed for an initial public offering (IPO) of its health-care unit in an effort to spin-off the business unit. The health care unit of General Electric is the conglomerate’s second-most profitable. The spin-off would follow a similar move by Germany-based Siemens AG (DB: SIE), which spun-off its Healthineers business in March -- Siemens Healthineers AG (XTRA: SHL) is up 32% since its IPO with a market capitalization of 37bn euro (USD$42bn). General Electric is rated “Unattractive” in our US Large-Cap Global Top Stock Ideas and “Unattractive” in our US Industrials Global Top Stock Ideas. Siemens AG is rated “Unattractive” in our European Large-Cap Global Top Stock Ideas. Siemens Healthineers AG is rated “Unattractive” in our European Large-Cap Global Top Stock Ideas.
  • GlaxoSmithKline (LSE: GSK) will combine its consumer business with that of Pfizer (PFE) to create a consumer products giant.  In the new company, GlaxoSmithKline will hold 68% and Pfizer will hold 32%.   The new company will have US$12.7 billion in annual sales.  The deal is expected to close in the second half of 2019.  Within 3 years the company is expected to be listed on the stock market.   GlaxoSmithKline is rated “Attractive” in our United Kingdom All-Cap Global Top Stock Ideas.  Pfizer is rated “Attractive” in our US Large-Cap Global Top Stock Ideas.  
  • Japan Post (TSE: 6178) will take a 7% stake in US insurer Aflac (AFL).  Aflac’s biggest market is Japan.  The 7% stake is valued at USD$2.4 billion with the total investment said to be USD$2.7 billion.  The shares will be bought in the open market or via private block trades.  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.
  • Natixis SA (ENXTPA: KN) shares are falling after reporting that it booked an unexpected 260mm euro (USD$296mm) loss in 4Q2018 from its Asia business. A model that Natixis uses to hedge some structured products traded with clients in Asia reportedly backfired and proved deficient in current market conditions. Natixis is rated “Unattractive” in our European Large-Cap Global Top Stock Ideas. 
  • P/F Bakkafrost (OB: BAKKA) shares are trading higher after being upgraded by Nordea from hold to buy. Additionally, Nordea raised its price target to 500 kroner/share, implying a 15% upside from yesterday’s closing price. Bakkafrost maintains an average price target of 495 kroner/share across 11 analyst forecasts. Bakkfrost is rated “Top Buy” in our European SMID-Cap Global Top Stock Ideas.
  • Siemens AG (DB: SIE) and Alstom S.A. (ENXTPA: ALO) have reportedly agreed to sell-off some of their older high-speed train and signaling technology in an effort to secure EU approval for their merger. The agreement concerns four specific sets of assets although the two companies warned that there is, “no certainty that the content of this package will be sufficient.” Siemens AG is rated “Unattractive” in our European Large-Cap Global Top Stock Ideas. Alstom is rated “Attractive” in our European SMID-Cap Global Top Stock Ideas. 
  • Softbank Corp (TSE: 9434), the telecom spin-off from Softbank Group (TSE: 9984), shares debuted overnight after closing its IPO and promptly fell over 14%.  Concerns over a telecom price war weighed on the shares.  Softbank Group raised USD$23.6 billion with the IPO of Softbank Corp.  Softbank Group is rated “Neutral” in our Japan Large-Cap Global Top Stock Ideas.  Softbank Corp is not rated in our Global Top Stock Ideas.
  • Twitter (TWTR) shows a bias towards Democrats, according to an allegation from President Trump.  The President complained about US tech companies overall and singled out Twitter in his complaint.  He said Twitter makes it hard for people to follow him, without offering specifics.  Twitter is rated “Attractive” in our US Large-Cap Global Top Stock Ideas and “Top Buy” in our US Information Technology Global Top Stock Ideas

What is Going on with European Currencies?

  • EUR€ is currently up +0.563% against the USD$ to 1.1425
  • GBP£ is currently up +0.198% against the USD$ to 1.2664
  • CHF is currently little changed against the USD$ at 1.0083

Highlights from the European Bond Market

  • Generic Euro 10-Year Bonds are higher with yields down -0.5 basis points to 0.239%
  • German 10-Year Bunds are higher with yields down -0.5 basis points to 0.239%
  • French 10-Year Government Bonds are higher with yields down -0.6 basis points to 0.704%
  • UK 10-Year GILTs are higher with yields down -0.6 basis points to 1.274%
  • Italian 10-Year Government Bonds are higher with yields down -16.6 basis points to 2.772%
  • Spanish 10-Year Government Bonds are flat with yields little changed 0 basis points to 1.378%
     

 

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 0 4.17%                              -  
Air Liquide SA Financials 108 2.28%               1,214,373
Enel SpA Industrials 5.12 2.23%            51,284,617
Telefonica SA Financials 7.6 1.71%          182,778,951
Intesa Sanpaolo SpA Industrials 2.02 1.71%          155,202,646
 
Underperformers Sector Price 1D % Chg Volume
Deutsche Post AG Health Care 24.2 -4.16%            10,005,263
Bayer AG Information Technology 61.6 -2.81%               5,049,523
Airbus SE Industrials 87.2 -1.64%               1,731,218
ASML Holding NV Health Care 141 -1.51%               1,704,218
Siemens AG Utilities 99.5 -0.81%               2,623,829