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European stocks close lower, weighed down by growth fears after weak German data

Jan 07, 2019

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

European Markets

  • European stocks close lower, unable to build on US's strong opening, instead remain weighed down after German factory order fell much more than expected
  • The Euro Stoxx 600 closed down -0.15%, the FTSE 100 declined -0.39%, the DAX fell -0.18%, and the CAC 40 finished down -0.38%
  • German factory orders fell in November 1%, well above the 0.1% fall that was expected
  • According to UBS, European stocks valuations are implying at 18% cut to CY2019 ESP estimates (assuming a return to a 14.5x long-term forward 12-month P/E) -- according to the analysis, nearly 22 out of the 29 major European sectors imply double-digit reductions to forecaster EPS 
  • EPS growth is now forecasted to be +7.8% for CY2018, down from +9.1% at the end of November.  
  • Strategists at French investment bank SocGen believe earnings growth in the US and Europe will be flat in CY2019 with risks coming from semiconductors and capital goods stocks.  SocGen favors pharmaceutical and HPC stocks within the “defensive” healthcare and consumer staples sectors. 
  • JP Morgan stock strategists disagree with strategists at SocGen and suggest record levels for stocks buybacks, best in world earnings growth, and an acceleration in top-line growth point to continued support for US stocks valuation 
  • Investor sentiment for European stocks finished trading positive with the advance/decline ratio for the Euro Stoxx 600 currently at 1.7x
  • Technology (+1.5%), Retail (+1.14%), and Travel & Leisure (+1.02%) stocks were the top performers in the Euro Stoxx 600 today
  • Personal & Household Goods (-1.11%), Food & Beverage (-1.1%), and Health Care (-0.81%) stocks were the worst performers in the Euro Stoxx 600 today
  • 81 stocks in the Euro Stoxx 600 hit 4-week highs while 23 stocks closed at 4-week lows
  • 3 stocks in the Euro Stoxx 600 finished the trading session overbought while 5 stocks closed oversold according to the 16-day RSI Measure
  • VSTOXX, the European stocks equivalent of the VIX, closed  moving down 0.33 points today to 20.15 after closing at 20.48 last week
     

Stocks Trending in the News

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  • Alphabet Inc. (GOOGL) was upgraded to buy from hold at Pivotal Research Group while its price target for the tech giant was raised from USD$1,010/share to USD$1,240/share. Pivotal cited that Google’s parent company, “remains the dominant player in digital advertising,” as reasoning for the upgrade. Alphabet is rated “Neutral” in our US Large-Cap Global Top Stock Ideas and “Attractive” in our US Information Technology Global Top Stock Ideas.
  • Alstom SA (ENXTPA: ALO) shares are trading lower after Les Echos reported that the European Union (EU) is unlikely to approve the rail business’ merger with Siemens AG (DB: SIE). The merger will reportedly not be approved because of a competitive threat from China. Alstom is rated “Top Buy” in our European Large-Cap Global Top Stock Ideas. Siemens is rated “Neutral” in our European Large-Cap Global Top Stock Ideas.
  • Anheuser-Busch InBev (BUD) was downgraded by Goldman Sachs today to neutral from buy.  Anheuser-Busch InBev, like a number of players in the sector, is likely to have a tough 2019 as demand is expected to be less than originally expected.  Anheuser-Busch InBev is rated “Top Short” in our European Large-Cap Global Top Stock Ideas.
  • Apple Inc. (AAPL) and Samsung (KOSE: A005930) have announced a deal that will see the iPhone maker offer iTunes movies and TV shows on its rival’s TV sets. The move by Apple displays a shift towards developing its tech and media services business as product sales continue to wane for the company. 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. Samsung is not rated in our Global Top Stock Ideas. 
  • Adyen (ENXTAM: ADYEN) shares are soaring after Bank of America Merrill Lynch upgraded the company’s stock from neutral to buy. Bank of America Merrill Lynch cited that previous Adyen share prices were not accounting for any, “material growth contribution,” from potential future merchant wins. Adyen is rated “Top Short” in our European Large-Cap Global Top Stock Ideas.
  • Six current and former BASF SE (DB: BAS) engineers have been arrested in Taiwan for allegedly accepting bribes and sharing the German company’s technology with China’s Jiangyin Jianghua Microelectronics Materials Co. (SHSE: 603078). The employees were reportedly offered 40mm yuan (USD$5.8mm).  BASF SE is rated “Top Short” in our European Large-Cap Global Top Stock Ideas. Jiangyin Jianghua Microelectronics Materials is not rated in our Global Top Stock Ideas.
  • British American Tobacco (LSE: BATS) shares are falling after Cowen warned investors to be cautious of the impact of higher e-cigarette usage on US combustible cigarette volumes. While cutting its rating for British American Tobacco, Cowen also slashed the rating for Imperial Brands (LSE: IMB) and Altria (MO). British American Tobacco is rated “Top Buy” in our United Kingdom All-Cap Global Top Stock Ideas. Imperial Brands is rated “Attractive” in our United Kingdom All-Cap Global Top Stock Ideas. Altria is rated “Neutral” in our US Large-Cap Global Top Stock Ideas and “Top Buy” in our US Consumer Staples Global Top Stock Ideas. 
  • Eli Lilly (LLY) is acquiring Loxo Oncology (LOXO) for USD$235 per shares, or about USD$8 billion.  Eli Lilly is expanding its cancer treatment business with the acquisition.  The companies will hold a press conference this morning to go over the details of the deal.  Eli Lilly is rated “Attractive” in our US Large-Cap Global Top Stock Ideas.  Loxo Oncology Nvidia is rated “Top Short” in our US Large-Cap Global Top Stock Ideas.
  • General Motors Company (GM) was upgraded to outperform from market perform by GMO while its price target for the automobile manufacturer was raised from USD$38/share to USD$41/share. BMO cited a strong outlook and better catalysts from GM in 2019 for the upgrade. GM is rated “Unattractive” in our US Large-Cap Global Top Stock Ideas and “Top Buy” in our US Consumer Discretionary Global Top Stock Ideas.
  • Nvidia (NVDA) introduced a new gaming chip, the GeForce RTX 2060 chip, last night at a CES event.  The RTX 2060 is 60% faster than prior generation chips and according to the company, puts Turing architecture within reach of many more PC gamers worldwide.  Nvidia is rated “Attractive” in our US Large-Cap Global Top Stock Ideas and “Top Buy” in our US Information Technology Global Top Stock Ideas.
  • Norwegian Air Shuttle ASA (OB: NAS) shares are gaining after Pareto said that the firm’s December yield was ahead of its estimate while the firm’s load factor was below its estimate. Additionally, Pareto said that, while Norwegian Air’s hedging loss of NOK2bn adds pressure on its book equity, there is no covenant breach expected in FY4Q2018. Norwegian Air is rated “Top Short” in our European SMID-Cap Global Top Stock Ideas.
  • Petroleum Geo-Services ASA (OB: PGS) shares are trading higher after issuing a FY4Q update indicating a stronger-than-expected quarter. PGS reported that it expects segment EBITDA of about USD$145mm for FY4Q2018 while citing, “strong customer interest and momentum,” in the quarter. Petroleum Geo-Services is rated “Attractive” in our European SMID-Cap Global Top Stock Ideas. 
  • Tesla (TSLA) today broke ground on its new factory in China.  Tesla calls the newest factory Gigafactory 3 and is located in Shanghai.  Tesla’s factory will be the first production facility of its type that is fully owned by a foreign company.  Tesla expects to build the factory in record time.  Tesla is rated “Unattractive” in our US Large-Cap Global Top Stock Ideas and “Attractive” in our US Consumer Discretionary Global Top Stock Ideas.

What is Going on with European Currencies?

  • EUR€ is currently up +0.676% against the USD$ to 1.1472
  • GBP£ is currently up +0.424% against the USD$ to 1.2777
  • CHF is currently up +0.681% against the USD$ to 1.0199

Highlights from the European Bond Market

  • Generic Euro 10-Year Bonds are lower with yields up 1.3 basis points to 0.221%
  • German 10-Year Bunds are lower with yields up 1.3 basis points to 0.221%
  • French 10-Year Government Bonds are lower with yields up 2.7 basis points to 0.726%
  • UK 10-Year GILTs are higher with yields down -2.2 basis points to 1.254%
  • Italian 10-Year Government Bonds are flat with yields little changed 0 basis points to 2.899%

 

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Euro Stoxx 50 Movers

In local currency.
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Outperformers Sector Price 1D % Chg Volume
ASML Holding NV Health Care 137 2.50%               1,166,373
Engie SA Industrials 13.02 2.40%                              7,234,776
Nokia OYJ Financials 5.21 2.16%            16,597,787
Intesa Sanpaolo SpA Industrials 2.03 1.69% 152,334,668
Vivendi SA Consumer Discretionary 21.6 1.07%               2,967,559
 
Underperformers Sector Price 1D % Chg Volume
Sanofi Consumer Discretionary 73.8 -1.99%               2,304,714
Danone SA Financials 60.8 -1.84%               1,592,645
Airbus SE Industrials 83.6 -1.83%               1,428,948
CRH PLC Telecommunication Services 23.6 -1.83%               1,668,869
Safran SA Industrials 103 -1.66%                  883,028

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