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European stocks close session higher with trade optimism driving risk-on sentiment

Jan 09, 2019

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

European Markets

  • European stocks closed higher, with risk-on sentiment growing amid US-China trade progress
  • The Euro Stoxx 600 closed up +0.53%, the FTSE 100 advanced +0.66%, the DAX rose +0.83%, and the CAC 40 finished up +0.84%
  • The US and China wrapped up trade negotiations with both sounding an optimistic tone that a final agreement could be reached
  • The US confirmed that China agreed to buy more agricultural goods, energy, and manufactured items
  • WTI crude oil is surging 4.8%, trading at $52.16, after Saudi Arabia confirmed it is committed to supporting the price of crude
  • Multiple Federal Reserve regional bank heads echoed comments of Fed Chief Powell, with all saying a go-slow approach to rate hikes makes the most sense at this time 
  • UK Prime Minister Theresa May will spend the day trying to convince Parliament of the merits of her Brexit deal, there will be 5 days of deliberations before a January 15th vote  
  • JP Morgan, in a strategy report, said the main challenge for the euro as it starts its third decade is to remain in existence as populist parties try to undermine it
  • Investor sentiment for European stocks finished trading positive with the advance/decline ratio for the Euro Stoxx 600 currently at 2.97x
  • Automobiles & Parts (+2.44%), Technology (+2.06%), and Basic Resources (+1.46%) stocks were the top performers in the Euro Stoxx 600 today
  • Telecommunications (-1.1%), Real Estate (-0.44%), and Utilities (-0.38%) stocks were the worst performers in the Euro Stoxx 600 today
  • 204 stocks in the Euro Stoxx 600 hit 4-week highs while 11 stocks closed at 4-week lows
  • 9 stocks in the Euro Stoxx 600 finished the trading session overbought while 0 stocks closed oversold according to the 16-day RSI Measure
  • VSTOXX, the European stocks equivalent of the VIX, closed  down 0.49 points today to 18.99 after closing at 19.48 yesterday
     

Stocks Trending in the News

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  • Carbonite (CARB) was upgraded from equal-weight to overweight at Barclays with a USD$38/share price target. Barclays cites an out-of-line valuation as reasoning for the upgrade. Carbonite shares fell 23% in the most recent quarter. Carbonite is rated “Attractive” in our US SMID-Cap Global Top Stock Ideas and “Neutral” in our US Information Technology Global Top Stock Ideas.
  • Delta Airlines (DAL) was downgraded at Imperial Capital to in-line from outperform.  Imperial lowered Delta Airlines’ price target to USD$53 from USD$77.  Delta Airlines’ consensus price target is presently USD$67.81.  Imperial expects fewer fare hikes and an overall more challenging environment in 2019.  Delta Airlines is rated “Top Buy” in our US Large-Cap Global Top Stock Ideas and “Attractive” in our US Consumer Discretionary Global Top Stock Ideas.
  • Facebook (FB) and Alphabet’s (GOOGL) Google are violating cyber laws in Vietnam, according to regulators there.  Facebook and Google are allowing anti-government content on their sites, inciting anti-government sentiment, which is against Vietnamese law.  Authorities said Facebook and Google have one year to fix the problems and must work with authorities to make that happen.  Facebook is rated “Attractive” in our US Large-Cap Global Top Stock Ideas and “Top Buy” in our US Information Technology Global Top Stock Ideas.  Alphabet is rated “Neutral” in our US Large-Cap Global Top Stock Ideas and “Attractive” in our US Information Technology Global Top Stock Ideas
  • Fiat Chrysler Automobiles NV (BIT: FCA) is reportedly near settling a two-year long criminal investigation by the US Justice Department. The investigation concerns if Fiat Chrysler knowingly sold diesel vehicles that violated emissions rules. In October, Fiat Chrysler allocated USD$810mm to deal with expenses related to diesel probes by the US Justice Department. Fiat Chrysler is not rated in our Global Top Stock Ideas.
  • Greggs Plc (LSE: GRG) reported 4Q sale-store-sales growth of 5.2% at company managed stores.  Greggs raised its earnings forecast for pretax profit of 88 million pounds, up from 86 million pounds.  Shore Capital reiterated its hold ratings, saying the company is fully valued at these levels.  Greggs is rated “Attractive” in our United Kingdom All-Cap Global Top Stock Ideas.
  • Lennar (LEN) reported 4Q18 net earnings of USD$796.1 million or USD$2.42 per diluted share.  Lennar delivered 14,15 new homes, up 64% y/y.  Backlog of USD$6.6 billion is up 85% y/y.  Total revenues of USD$6.5 billion is up 71% y/y.  Lennar is rated "Attractive" in our US Large-Cap Global Top Stock Ideas and "Neutral" in our US Consumer Discretionary Global Top Stock Ideas.
  • Man Group Plc (LSE: EMG) shares are edging slightly lower after reports that Kuwait's Public Institution for Social Security (PIFSS) is suing the world’s largest public hedge fund firm for USD$156mm. The lawsuit relates to, “secret contracts with a former PIFSS executive between 1996 to 2013,” according to a statement from the government-run institution. Man Group is rated “Neutral” in our United Kingdom All-Cap Global Top Stock Ideas.  
  • Ted Baker Plc (LSE: TED) shares are soaring more than 30% after the company reported a strong Christmas sales update. Ted Baker’s stock has faced turmoil amid reports of inappropriate behavior by its founder towards staff. Ted Baker is not rated in our Global Top Stock Ideas. 
  • Tencent (TCEHY, SEHK: 700) will soon introduce its own digital assistant called “Xiaowei” for WeChat.  Tencent is introducing the digital assistant that will link to a large variety of apps, allowing users to do things like play music or order food.  Tencent has not made clear how and when Xiaowei will be rolled out.  Tencent is rated “Attractive” in our China All-Cap Global Top Stock Ideas.
  • United Continental Holdings, Inc. (UAL) has been downgraded by Imperial Capital from in-line to underperform while its price target was slashed from USD$110/share to a street-low USD$73/share. Imperial Capital cites potential weakness in China and valuation re-rating due to low fuel prices as reasons for the downgrade. United Continental is rated “Neutral” in our US Large-Cap Global Top Stock Ideas and “Attractive” in our US Industrials Global Top Stock Ideas.
  • Wacker Chemie AG (XTRA: WCH) shares are rallying on news that China will begin to promote grid-parity solar and wind power projects. Bloomberg Intelligence analyst James Evans wrote on the news that, “Any acceleration of subsidy-free solar projects within China would encourage more sustainable long-term demand for suppliers across the value chain.” Wacker Chemie is rated “Unattractive” in our European SMID-Cap Global Top Stock Ideas.  
  • Weibo (WB) was downgraded yesterday by Morgan Stanley to equal-weight from overweight.  Weibo is feeling the pinch of competition from smaller players and has seen margin compression, both were cited as reasons for the downgrade.  Weibo’s next earnings report is February 12th.  Weibo is rated “Neutral” in our China All-Cap Global Top Stock Ideas.

What is Going on with European Currencies?

  • EUR€ is currently up +0.734% against the USD$ to 1.1525
  • GBP£ is currently up +0.338% against the USD$ to 1.276
  • CHF is currently up +0.53% against the USD$ to 1.0245
     

Highlights from the European Bond Market

  • Generic Euro 10-Year Bonds are higher with yields down -0.7 basis points to 0.226%
  • German 10-Year Bunds are lower with yields up 5.3 basis points to 0.226%
  • French 10-Year Government Bonds are higher with yields down -1.9 basis points to 0.732%
  • UK 10-Year GILTs are higher with yields down -1.3 basis points to 1.253%
  • Italian 10-Year Government Bonds are higher with yields down -7.5 basis points to 2.879%
  • Spanish 10-Year Government Bonds are higher with yields down -2.1 basis points to 1.492%
     

 

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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 141 3.59%               1,655,082
Airbus SE Industrials 89.7 3.50%               2,365,398
Daimler AG Consumer Staples 48.9 2.98%               6,022,579
Koninklijke Philips NV Financials 30.8 2.66%               3,184,745
Volkswagen AG Consumer Staples 146 2.43%               1,370,289
 
Underperformers Sector Price 1D % Chg Volume
Telefonica SA Financials 7.53 -2.04%            23,668,194
Air Liquide SA Financials 105 -1.36%               1,054,076
ING Groep NV Consumer Discretionary 9.82 -1.19%            20,728,127
Anheuser-Busch InBev SA/NV Energy 60.78 -1.12%                          2,468,998 
Iberdrola SA Consumer Staples 6.86 -1.08%            19,459,304

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