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European stocks surge with risk-on fueled by US jobs data, US-China trade news and Powell comments

Jan 04, 2019

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

European Markets

  • European stocks surged today to close the week, the best day in over 2 years, with strong risk-on sentiment fueled by US Decemeber jobs data well above expectations, Fed President Powell's comments and news on US-China trade
  • The Euro Stoxx 600 closed up +2.83%, the FTSE 100 advanced +2.16%, the DAX rose +3.37%, and the CAC 40 finished up +2.72%
  • US change in non-farm payrolls for December came at 312k, well above the 184k consensus; also, US average hourly earnings rose 0.4% m/m, above the 0.3% consensus; both data points were strong drivers of today's market
  • Federal President Jerome Powell said the Fed's policy is flexible and that the Fed is "listening carefully" to the markets, animating investors who fear an overly agressive Fed
  • Chinese trade officials confirm that US Deputy Trade Representative Jeffrey Gerrish (and other trade officials) will meet his Chinese counterparts in Beijing next Monday
  • Investor sentiment for European stocks finished trading positive with the advance/decline ratio for the Euro Stoxx 600 currently at 26.27x
  • Basic Resources (+5.38%), Automobiles & Parts (+4.49%), and Industrial Goods & Services (+4.01%) stocks were the top performers in the Euro Stoxx 600 today
  • Telecommunications (+1.05%), Utilities (+1.12%), and Food & Beverage (+1.88%) stocks were the worst performers in the Euro Stoxx 600 today
  • 19 stocks in the Euro Stoxx 600 hit 4-week highs while 85 stocks closed at 4-week lows
  • 3 stocks in the Euro Stoxx 600 finished the trading session overbought while 35 stocks closed oversold according to the 16-day RSI Measure
  • VSTOXX, the European stocks equivalent of the VIX, closed down 2.53 points today to 20.47 after closing at 23 yesterday

Stocks Trending in the News

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  • Alphabet’s (GOOGL) Verily division, formerly known as Google Life Sciences, has raised USD$ 1 billion in funding to grow its business.  This round of funding was led by Silver Lake, an investment fund backed by a host of large international companies.  Verily is involved in a number of projects including glucose monitoring contact lenses and a medical monitoring smart watch for older adults.  Alphabet 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.
  • Apple (AAPL) shares fell 10% yesterday in the wake of its guidance cut for 1Q revenue.  Apple’s action sent global markets lower yesterday.  Apple is now the 5th largest seller of mobile phones in China now, with 4 local players selling more phones and often at a price point well below what Apple sells its iPhones for and now with most if the same features.  Analysts say many local players are more in tune with the tastes of Chinese consumers than Apple.  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.
  • Bayer (DB: BAYN) are trading higher after receiving a favorable ruling in its Roundup case.  The judge has limited the evidence that can be presented by the plaintiffs, a ruing that could potentially benefit Bayer.  Plaintiffs will not be able to allege that Bayer’s Monsanto unit tried to influence regulators who were overseeing its use in agriculture.  Bayer is rated “Unattractive” in our European Large-Cap Global Top Stock Ideas.
  • Daimler AG (XTRA: DAI) investors are launching a class action lawsuit in Germany against the company over its diesel engines scandal.  Daimler was late to inform clients too late about its use of defeat devices in its diesel vehicles.  The case has been filed in Stuttgart.  Daimler is rated “Unattractive” in our European Large-Cap Global Top Stock Ideas.
  • Intel Corporation (INTC) has been upgraded to buy from neutral at Bank of America Merril Lynch. Bank of America also raised its price target for Intel from USD$52/share to USD$50/share. In a note to clients, Bank of America cited that Intel, “provides attractive exposure to growth trends in cloud computing, AI, advanced autos, and 5G.” Intel is rated “Attractive” in our US Large-Cap Global Top Stock Ideas and “Top Buy” in our US Information Technology Global Top Stock Ideas.
  • NEXON Co. Ltd. (TSE: 3659) founder Kim Jung-ju said in a statement that he is considering ways to make the company more competitive. Kim detailed further that he will announce when detailed measures are decided. Nexon is not rated in our Global Top Stock Ideas. 
  • ProSiebenSat.1 Media SE (XTRA: PSM) shares are falling, touching their lowest intraday price since December 2011, after analysts slashed the traditional television operator’s price target. Analysts at Independent Research GmbH and Morgan Stanley cut ProSiebenSat.1’s price target, citing lack of momentum for the classical TV business in the medium-term. Analysts are also concerned about the advertising trend from traditional TV to streaming. ProSiebenSat.1 is rated “Neutral” in our European Large-Cap Global Top Stock Ideas. 
  • Snap (SNAP) was downgraded at Goldman Sachs today to neutral from buy.  Snap's price target was reduced to USD$6 from USD$10. Goldman's target for Snap implies just 5.6% upside to last close.  Snap is rated “Unattractive” in our US Large-Cap Global Top Stock Ideas and “Neutral” in our US Information Technology Global Top Stock Ideas.
  • Swiss Re AG (SWX: SREN) has reportedly been approached by British insurer Rothesay Life about a potential acquisition. The acquisition would reportedly be for Swiss Re AG’s ReAssure unit for about 3.5bn pounds (USD$4.4bn). Swiss Re AG is rated “Unattractive” in our European Large-Cap Global Top Stock Ideas.  
  • Investors suing Tesla (TSLA) over its CEO’s tweets are attempting to drag his girlfriend at the time into the case.  Plaintiffs say Tesla CEO Elon Musk was with his girlfriend when he sent the texts about taking Tesla private that are the source of the case and that she may have relevant information about the case.  Musk is vehemently against her being subpoenaed.  Tesla is rated “Unattractive” in our US Large-Cap Global Top Stock Ideas and “Attractive” in our US Consumer Discretionary Global Top Stock Ideas.
  • Texas Instruments (TXN) has been downgraded from buy to neutral at Bank of America Merril Lynch. Additionally, Texas Instruments has its price target lowered from USD$117/share to USD$105/share, implying an 18% upside from Thursday’s close. Texas Instruments 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.
  • Volvo’s (OM: VOLV B) SEK7bn provision, equal to SEK3.50/share, related to its emissions-control component flaw is better than the SEK10bn, or SEK5/share, that Citi included it its price target. The news is a relief for investors as the company will reportedly consider paying an extra dividend. Volvo is rated “Top Buy” in our European Large-Cap Global Top Stock Ideas.
     

What is Going on with European Currencies?

  • EUR€ is currently little changed against the USD$ at 1.1408
  • GBP£ is currently up +0.863% against the USD$ to 1.2737
  • CHF is currently little changed against the USD$ at 1.0142

Highlights from the European Bond Market

  • Generic Euro 10-Year Bonds are lower with yields up 5.5 basis points to 0.208%
  • German 10-Year Bunds are lower with yields up 5.5 basis points to 0.208%
  • French 10-Year Government Bonds are lower with yields up 4.5 basis points to 0.699%
  • UK 10-Year GILTs are lower with yields up 8.2 basis points to 1.276%
  • Italian 10-Year Government Bonds are lower with yields up 3.9 basis points to 2.899%
  • Spanish 10-Year Government Bonds are lower with yields up 4.5 basis points to 1.474%

 

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Euro Stoxx 50 Movers

In local currency.
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Outperformers Sector Price 1D % Chg Volume
Bayer AG Information Technology 64.9 6.74%               5,066,291
BASF SE Utilities 63.2 5.28%               4,197,991
CRH PLC Telecommunication Services 24.1 5.16%               1,058,844
Intesa Sanpaolo SpA Industrials 2 5.14%          135,132,342
Daimler AG Consumer Staples 47.1 5.13%               5,093,300
 
Underperformers Sector Price 1D % Chg Volume
Orange SA Materials 14.3 0.71%               6,544,823
Iberdrola SA Consumer Staples 7.06 0.74%            15,163,632
Deutsche Telekom AG Financials 15 0.77%            10,704,000
Koninklijke Ahold Delhaize NV Consumer Discretionary 22.3 0.84%               3,647,157
Sanofi Consumer Discretionary 75.3 0.91%               2,350,785

Global Top Stock Ideas
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