Dampened sentiment fuels risk-off for European stocks as they close at a 2-year low
Dec 20, 2018
*Data in Price Return and Updated Real-Time (with a delay), Source: StockDio
- European stocks close down, at a 2-year low, with risk-off sentiment being fueled by concerns over higher interest rates and the outlook for global growth
- The Euro Stoxx 600 closed down -1.45%, the FTSE 100 declined -0.8%, the DAX fell -1.44%, and the CAC 40 finished down -1.78%
- The Bank of England did not raise interest rates, saying the uncertainty around Brexit is intensifying
- The European Union is investigating banks' trading in US dollar national and supranational bonds, alleging they exchanged "commercially sensitive information and coordinated on prices" without mentioning which banks, press reports say Credit Suisse and Deutsche Bank are targets of the probe
- The US Justice Department has indicted 2 Chinese nationals and alleges they waged a decades-long economic espionage campaign, coordinating with Chinese state security agencies, infiltrating 45 US companies and government agencies
- Investor sentiment for European stocks finished trading negative with the advance/decline ratio for the Euro Stoxx 600 currently at 0.12x
- Utilities (-0.2%), Personal & Household Goods (-0.69%), and Financial Services (-0.7%) stocks were the top performers in the Euro Stoxx 600 today
- Basic Resources (-2.74%), Technology (-2.63%), and Banks (-2.48%) stocks were the worst performers in the Euro Stoxx 600 today
- 17 stocks in the Euro Stoxx 600 hit 4-week highs while 112 stocks closed at 4-week lows
- 8 stocks in the Euro Stoxx 600 finished the trading session overbought while 51 stocks closed oversold according to the 16-day RSI Measure
- VSTOXX, the European stocks equivalent of the VIX, closed up 1.13 points today to 20.73 after closing at 19.60 yesterday
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- Airbus (ENXTPA:AIR) is being investigated by the US Justice Department, according to a report in the French press. The investigation would parallel investigations in France and England. The press report said the company could face billions in fines as a result of the investigations. Airbus is rated “Neutral” in our European Large-Cap Global Top Stock Ideas.
- Amazon (AMZN) has seen the number of Prime members who buy groceries with Amazon decline in 2018 compared with 2017 in the wake of its acquisition of Whole Foods. This comes from a UBS survey of consumers. UBS commented that this was surprising given the USD$13.7 billion it spent to acquire Whole Foods. Amazon is rated “Neutral” in our US Large-Cap Global Top Stock Ideas and “Attractive” in our US Consumer Discretionary Global Top Stock Ideas.
- Apple (AAPL) is tweaking the software in its iPhones in Germany in an effort to head of a legal challenge from Qualcomm (QCOM), according to a report in the Financial Times. Apple is making the move ahead of a ruling expected today in Munich. Apple and Qualcomm are locked in a global legal battle over the royalties Apple pays Qualcomm for the use of its chips. 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. Qualcomm is rated “Unattractive” in our US Large-Cap Global Top Stock Ideas and “Neutral” in our US Information Technology Global Top Stock Ideas.
- Embraer (ERJ) finalized an order with Republic Airways (RJETQ) for 100 E175s. The order has previously been announced and now the details have been completed. As part of the deal Republic Airways can convert any number of the planes to Embraer’s E2 platform. Embraer is rated “Neutral” in our Brazil All-Cap Global Top Picks. Republic Airways is not rated in our Global Top Stock Ideas.
- Facebook (FB) is being sued by Washington, DC over its privacy policies. Facebook violated DC’s Consumer Protection regulations the suit alleges. Facebook was lax in the oversight of third-party applications, according to the allegations. Facebook is rated “Neutral” in our US Large-Cap Global Top Stock Ideas and “Attractive” in our US Information Technology Global Top Stock Ideas.
- Funding Circle Holdings Plc (LSE: FCH) shares are trading at all-time low levels after Citigroup analysts cut their recommendation for the stock from neutral to sell. In a note to clients, Citigroup cited that, “There’s evidence of credit deterioration,” while attributing the deterioration to the performance of the Funding Circle SME Income Fund. Funding Circle Holdings Plc is rated “Top Short” in our United Kingdom All-Cap Global Top Stock Ideas.
- Hutchison China Meditech Limited (AIM: HCM) shares are trading lower today after amending an agreement to acquire the rights to an Eli Lilly (LLY) license agreement. Hutchison China will receive an increase in all milestone and royalty payments from Eli Lily in exchange for assuming all costs associated with life cycle indications in China. Hutchison China is rated “Neutral” in our European SMID-Cap Global Top Stock Ideas. Eli Lilly is rated “Attractive” in our US Large-Cap Global Top Stock Ideas.
- Nike (NKE) is set to report earnings after the close today as the company’s stock nears bear market territory. Nike shares are down 19.8% since their YTD high of USD$86.04 on September 21st. Analysts expect Nike to report earnings between USD$0.45/share and USD$0.50/share. Nike is rated “Unattractive” in our US Large-Cap Global Top Stock Ideas and “Attractive” in our US Consumer Discretionary Global Top Stock Ideas.
- Softbank Corp (TSE: 9434), the telecom spin-off of the Softbank Group (TSE: 9984), fell 14.5% in its first day of trading. Softbank Group raised almost USD$24 billion and the stock lost a historic USD$3.5 billion in its first day of trading, a record. No other IPO has ever lost that much rain in its first day of trading. 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.
- Tencent (TCEHY, SEHK: 700) will invest USD$1 billion in Indian food-delivery service Swiggy. This is Swiggy’s third round of funding in 2018 and includes a number of investment firms as well. Since its last round of funding Swiggy has expanded to 42 additional cities and seeks to keep expanding at a torrid pace. Tencent is rated “Attractive” in our China All-Cap Global Top Stock Ideas.
- UBS Group AG (SWX: UBSG) is intensifying its succession planning for CEO Sergio Ermotti. Switzerland’s largest bank is reportedly considering external candidates for the role. Reports stress that a change is not imminent and that Ermotti could remain CEO for up to two years. UBS Group is rated “Neutral” in our European Large-Cap Global Top Stock Ideas.
What is Going on with European Currencies?
- EUR€ is currently up +0.694% against the USD$ to 1.1455
- GBP£ is currently up +0.46% against the USD$ to 1.2668
- CHF is currently up +0.458% against the USD$ to 1.01
Highlights from the European Bond Market
- Generic Euro 10-Year Bonds are higher with yields down -1.1 basis points to 0.228%
- German 10-Year Bunds are higher with yields down -1.1 basis points to 0.228%
- French 10-Year Government Bonds are higher with yields down -2.7 basis points to 0.677%
- UK 10-Year GILTs are higher with yields down -0.8 basis points to 1.266%
- Italian 10-Year Government Bonds are higher with yields down -3.4 basis points to 2.738%
- Spanish 10-Year Government Bonds are higher with yields down -0.4 basis points to 1.374%
Euro Stoxx 50 Movers
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