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European stocks close lower, with weak EU industrial production and Chinese trade data fueling risk-off

Jan 14, 2019

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

European Markets

  • European markets closed lower with risk-off being fueled by weak trade data from China and weaker than expected EU industrial production data
  • Chinese exports dropped 4.4% Y/Y while imports fell 7.6% Y/Y in December -- the worst results since CY2016 and raises worries about the impact of the ongoing trade dispute between the US and China on Chinese growth (and global growth) 
  • EU industrial prodution contracted 1.7% in December, worse than the 1.5% contraction expected
  • The Euro Stoxx 600 closed down -0.48%, the FTSE 100 declined -0.91%, the DAX fell -0.29%, and the CAC 40 finished down -0.39%
  • The Brexitr vote in the UK Parliament will be tomorrow and is expected to fail
  • The EU again would not agree to any time limit on a backstop if Brexit fails
  • Morgan Stanley stocks strategists argue that UK stocks are trading at attractive valuations following the 4Q sell-off with the median dividend yield now close to 4.3%, a 25-year high (excluding C3Q2008/C1Q2009)
  • JP Morgan speculates that the current cuts to oil production by OPEC+ is meant to create a USD$60/barrel floor for global oil; WTI is trading at $51.26, down 0.64% today
  • Investor sentiment for European stocks finished trading negative with the advance/decline ratio for the Euro Stoxx 600 currently at 0.38x
  • Automobiles & Parts (+0.92%), Insurance (+0.35%), and Real Estate (+0.2%) stocks were the top performers in the Euro Stoxx 600 today
  • Technology (-1.48%), Health Care (-1.42%), and Personal & Household Goods (-1%) stocks were the worst performers in the Euro Stoxx 600 today
  • 233 stocks in the Euro Stoxx 600 hit 4-week highs while 6 stocks closed at 4-week lows
  • 9 stocks in the Euro Stoxx 600 finished the trading session overbought while 1 stocks closed oversold according to the 16-day RSI Measure
  • VSTOXX, the European stocks equivalent of the VIX, closed  moving down -17.42 points today to 0 after closing at 17.42 last week
     

Stocks Trending in the News

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  • Citigroup (C ) reported weak 4Q18 results, with fixed-income trading  revenue dropping 21% y/y to USD$1.94 billion while USD$2.4 billion was expected.  Citigroup’s largest trading unit saw its weakest revenue quarter since 2011.  Citigroup net income came at USD$4.3 billion, total revenue of USD$17.1 billion came below consensus of USD$17.5 billion.    CEO Michael Corbat said that after the volatile 4Q and its weak results, the main focus for 2019 will be to boost profitability.  Citigroup is rated “Unattractive” in our US Large-Cap Global Top Stock Ideas.
  • Continental AG (DB: CON) provided guidance a bit below consensus estimates.  Continental expects 2019 sales of 45-47 billion euros while consensus is 46.6 billion euros.  Continental sees 2019 ebitda margin 8-9% while present consensus is for 9.5%.  Continental is rated “Top Short” in our European Large-Cap Global Top Stock Ideas.
  • Delta Airlines (DAL) had its rating cut at Merrill Lynch to neutral from buy.   Merrill Lynch cut its Delta Airlines rating because it does not sees any near term earnings catalysts.   The near-term wind headwinds for Delta Airlines make it unlikely to see any margin expansion any time soon.  Delta Airlines’ price target was cut to USD$51 from USD$62.  Delta Airlines is rated “Top Buy” in our US Large-Cap Global Top Stock Ideas and “Top Buy” in our US Industrials Global Top Stock Ideas. 
  • Embraer (ERJ) said part of the proceeds from the sale of its commercial aviation business to Boeing (BA) will be paid as a special dividend.  Embraer expects to yield ~US$3 billion from the sale, net of transaction costs.  Embraer has not decided how much of the USD$3 billion will be paid as a dividend and how much will be retained as working capital.  Embraer is rated “Neutral” in our Brazil All-Cap Global Top Stock Ideas.  Boeing is rated “Top Buy” in our US Large-Cap Global Top Stock Ideas and “Neutral” in our US Industrials Global Top Stock Ideas.
  • MNG Enterprises has offered to buy Gannett Corp (GCI) for USD$1.36 billion.  MNG Enterprises is offering USD$12 per share, a 23% premium to Friday’s close.  MNG Enterprises owns over 90 newspapers and is looking to add scale to its operations.  Gannett is rated “Attractive” in our US Large-Cap Global Top Stock Ideas and “Neutral” in our US Consumer Discretionary Global Top Stock Ideas. 
  • Gymboree (GYMB) is close to a bankruptcy filing, according to the Wall Street Journal.  Gymboree is lining up bankruptcy financing in anticipation of a filing, the paper is reporting.  Gymboree will close all of its 900 stores, it is being reported.  Gymboree is not rated in our Global Top Stock Ideas.
  • Infosys (NSEI:INFY) was upgraded today at Susquehanna to neutral from negative.  Susquehanna raised the Infosys price target to USD$11 from USD$7.50.  Infosys raised guidance for 2019 and announced its second share buy back in 13 months.  Infosys is rated “Attractive” in our India All-Cap Global Top Stock Ideas.
  • JD Sports (LSE: JD) hiked guidance for full year today.  JD Sports sees revenue for the full year to be at the upper end if its 325-352 million pounds range.  JD Sports said full year same-stores sales are growing ~5% after growing only 3% in the first half.  Total sales are growing ~15%  thus far for the year.  JD Sport is rated “Attractive” in our United Kingdom All-Cap Global Top Stock Ideas.
  • Newmont Gold (NEM) will acquire its rival Goldcorp (TSX: G) in a USD$10 billion deal.  The deal will create a gold mining behemoth.  A statement from Newmont Gold said, “The combination will create the world’s leading gold business.”   The combination of Newmont Gold and Goldcorp will be a company producing 7.9 million ounces of gold per year.  Goldcorp is rated “Top Short” in our Canada All Cap Global Top Stock Ideas.  Newmont Gold is rated “Unattractive” in our US Large-Cap Global Top Stock Ideas. 
  • Northrop Grumman (NOC) was upgraded to outperform from neutral by Credit Suisse today.  Credit Suisse sees improving margins this year and cited this as a reason for the upgrade.  Northrop Grumman should see organic sales growth 2-3% in the coming quarter.  Northrop Grumman is rated “Top Buy” in our US Large-Cap Global Top Stock Ideas and “Top Buy” in our US Industrials Global Top Stock Ideas.
  • Pandora (CPSE:PNDORA) suffered 2 downgrades, with both Morgan Stanley and Carnegie cutting their price targets.  Morgan Stanley cut Pandora’s target by 10% to DKK335.  Morgan expects a disappointing 4Q results when Pandora reports February 3rd.  Carnegie also cut its price target to DKK335 and maintains a hold rating.  Pandora is rated “Neutral” in our European Large-Cap Global Top Stock Ideas.  
  • Snap (SNAP) was upgraded today at Citi to neutral from sell with a USD$7 reiterated.  Citi sees growth potential and an attractive valuation and cited both in its upgrade.  Snap will introduce an upgrade to its app shortly and that should improve user engagement, the report highlights.  Snap is rated “Unattractive” in our US Large-Cap Global Top Stock Ideas and “Neutral” in our US Information Technology Global Top Stock Ideas
  • Bloomberg is reporting that Telecom Italia (BIT: TIT) has made an offer for the Italian business of BT Group (LSE: BT.A).  The report says the bid is non-binding and there have been other expressions of interest.  BT Group is in the midst of a global restructuring and with a new CEO starting next month, is anxious to shed the assets in Italy.  Telecom Italia is rated “Neutral” in our European Large-Cap Global Top Stock Ideas.  BT Group is rated “Neutral” in our United Kingdom All-Cap Global Top Stock Ideas.
  • Viacom (VIAB) is in talks to sell a majority stake in its China operations, according to a report in Bloomberg today.  Viacom is in talks with a Chinese entity to purchase the stake, without citing the potential buyer.  The sale talk comes as Viacom struggles to scale its operations in China.  Viacom 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 little changed against the USD$ at 1.1477
  • GBP£ is currently up +0.335% against the USD$ to 1.2887
  • CHF is currently up +0.305% against the USD$ to 1.0198
     

Highlights from the European Bond Market

  • Generic Euro 10-Year Bonds are higher with yields down -0.5 basis points to 0.178%
  • German 10-Year Bunds are higher with yields down -0.8 basis points to 0.231%
  • French 10-Year Government Bonds are higher with yields down -2.4 basis points to 0.64%
  • UK 10-Year GILTs are lower with yields up 0.7 basis points to 1.297%
  • Italian 10-Year Government Bonds are higher with yields down -1.1 basis points to 2.843%

 

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Euro Stoxx 50 Movers

In local currency.
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Outperformers Sector Price 1D % Chg Volume
Airbus SE Industrials 89.9 1.73%               1,339,132
Volkswagen AG Consumer Staples 144 1.36%               1,072,599
Fresenius SE & Co KGaA Telecommunication Services 43.4 0.88%               1,800,755
Daimler AG Consumer Staples 49.3 0.76%               3,410,411
AXA SA Health Care 19.7 0.62%               6,951,021
 
Underperformers Sector Price 1D % Chg Volume
Amadeus IT Group SA Materials 60.2 -2.65%            10,856,059
LVMH Moet Hennessy Louis Vuitton SE Consumer Discretionary 252 -2.56%                  678,686
Kering SA Consumer Staples 398 -2.02%                  214,949
Unilever NV Information Technology 46.1 -1.69%               3,512,450
Sanofi Consumer Discretionary 72.9 -1.66%               1,934,999

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