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European stocks surge to close week, risk appetite strong on optimism for an end to US-China trade dispute

Jan 18, 2019

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

European Markets

  • European stocks surge after Bloomberg reports China has presented the US with a plan to significantly close the trade gap with the US by ramping up imports
  • China would seek to increase imports by USD$1 trillion by 2024 at which point it would aim to have the trade gap eliminated, according to the report
  • The Euro Stoxx 600 closed up +1.8%, the FTSE 100 advanced +1.95%, the DAX rose +2.63%, and the CAC 40 finished up +1.7%
  • Global equities gained further support after Chicago Fed President Charles Evans said the American economy is doing well, and that the Fed "can easily be patient", further evidence that the number of Fed hikes in 2019 is likely to be less than originally expected
  • UK Prime Minister Theresa May is talking to other EU leaders today searching for a Brexit compromise that can work in Parliament as talks with other UK parties have faltered
  • Oil is surging with WTI crude up almost 3% trading at $53.60 
  • The DAX, the German large-cap stocks benchmark index, is poised to break above 11,000 as sentiment towards US-China trade negotiations continues to trend positive.  11,000 was previously a technical support level for the before a breakdown in December.  A break above 11,000 would point to a new regime change in the DAX’s technical outlook and would make 11,000 a technical support level again.
  • Investor sentiment for European stocks finished trading positive with the advance/decline ratio for the Euro Stoxx 600 currently at 9.71x
  • Technology (+2.97%), Automobiles & Parts (+2.68%), and Chemicals (+2.51%) stocks were the top performers in the Euro Stoxx 600 today
  • Health Care (+0.85%), Real Estate (+1.11%), and Travel & Leisure (+1.16%) stocks were the worst performers in the Euro Stoxx 600 today
  • 134 stocks in the Euro Stoxx 600 hit 4-week highs while 19 stocks closed at 4-week lows
  • 21 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  down 1.13 points today to 14.28 after closing at 15.41 yesterday
     

Stocks Trending in the News

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  • American Express (AXP) reported 4Q18 EPS of USD$2.32 while USD$1.80 was consensus.  American Express 4Q18 revenue of USD$10.50 billion came in line with USD$10.57 billion consensus.  American Express saw loan loss provision grow 14% in the quarter to USD$954 million  American Express gave full year 2019 revenue guidance of USD$7.85-8.35 billion.  American Express is rated “Unattractive” in our US Large-Cap Global Top Stock Ideas and “Neutral” in our US Consumer Discretionary Global Top Stock Ideas.
  • Apple (AAPL) supplier Foxconn has cut 50,000 seasonal jobs at its factory in China.  The jobs are renewed monthly from August until January, but this year there has not been the need for these workers given lower handset sales expected.  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.
  • J.B. Hunt Transport (JBHT) reported 4Q18 EPS of 81 cents while USD$1.24 was consensus, though a change in reporting does not make the numbers comparable.  J.B. Hunt Transport 4Q18 operating revenue of USD$2.32 billion came in line with USD$2.30 billion consensus.   Intermodal revenue was USD$1.26 billion while dedicated contract solutions revenue was USD$595.8 million.  J.B. Hunt Transport is rated “Neutral” in our US Large-Cap Global Top Stock Ideas.  J.B. Hunt Transport is rated “Attractive” in our US Large-Cap Global Top Stock Ideas and “Top Buy” in our US Industrials Global Top Stock Ideas.
  • Kansas City Southern (KSU) reported 4Q18 adjusted EPS of USD$1.56/share while consensus was for USD$1.53/share.  Kansas City Southern generated CY4Q18 revenue of USD$694.0mm while analysts expected USD$685.2mm.  Kansas City Southern's operating ratio of 63.1% in CY4Q2018 was slightly below consensus for 64%.  Kansas City Southern is rated “Attractive” in our US Large-Cap Global Top Stock Ideas and “Attractive” in our US Industrials Global Top Stock Ideas.
  • Netflix (NFLX) reported 4Q18 EPS of 30 cents while 24 cents was consensus.  Netflix 4Q18 revenue of USD$4.19 billion came in line with USD$4.21 billion consensus.  Netflix added 8.8 million new subscribers, below the consensus of  9.4 million.  Netflix gave 1Q19 revenue guidance of USD$4.49 billion while present consensus is USD$4.60 billion.  Netflix said it has no plans to cut The Bird Box despite cries from critics to remove the film.  Netflix is rated “Neutral” in our US Large-Cap Global Top Stock Ideas.
  • Ryanair Holdings plc (ISE: RY4C) cut its full-year profit guidance for the second time in just 3 and a half months. Ryanair lowered full-year profit guidance from between 1.1bn euros and 1.2bn euros to between 1.0bn euros and 1.1bn euros. Ryanair is also considering cuts to air fares and it is warning of another potential cut to guidance if Brexit adversely impacts yields by the end of March. Ryanair is rated “Unattractive” in our European SMID-Cap Global Top Stock Ideas. 
  • Schlumberger (SLB) reported 4Q18 EPS of 36 cents in line with 35 cents consensus.  Schlumberger 4Q18 revenue of USD$8.2 billion came in line with USD$8.04 billion consensus.  Schlumberger sees 2019 capex dropping to USD$1-5-1.6 billion, down from USD$2.1 billion in 2018.  Schlumberger is rated “Unattractive” in our US Large-Cap Global Top Stock Ideas.
  • Sophos Group Plc (LSE: SOPH) shares plummeted after a 3Q update raised concerns of the company’s growth. Sophos Group told investors that its constant currency billings increased 2% in the quarter which will result in a, “modest decline,” in its full-year growth. Sophos Group is rated “Top Short” in our United Kingdom All-Cap Global Top Stock Ideas. 
  • Telecom Italia SpA (BIT: TIT) management warned investors of a slowdown in the company’s home market that will negatively impact profits. Telecom Italia is citing tough competition in 2018 as reasoning for a projected decline in FY2018 ebitda -- prior, the company forecasted a gain in ebitda. Telecom Italia is rated “Neutral” in our European Large-Cap Global Top Stock Ideas. 
  • Tiffany and Co. (TIF) is reporting that its FY2018 net earnings will likely come in at the lower end of its previous guidance between USD$4.65/share and USD$4.80/share. CEO Alessandro Bogliolo is attributing underwhelming holiday sales performance and lower sales in foreign markets, primarily China. Tiffany’s is rated “Neutral” in our US Large-Cap Global Top Stock Ideas and “Neutral” in our US Consumer Discretionary Global Top Stock Ideas.
  • Tesla (TSLA) is cutting 7% of its staff in a cost-cutting move.  Tesla is looking to cut costs in an effort to keep the cost of the Model 3 a slow as is possible in the wake of the federal tax credit expiring.  CEO Elon Musk said, “The road ahead is very difficult”.  Tesla is rated “Unattractive” in our US Large-Cap Global Top Stock Ideas and “Attractive” in our US Consumer Discretionary Global Top Stock Ideas.
  • VF Corp (VFC) reported fiscal 3Q18 EPS of USD$1.16 above USD$1.08 consensus.  VF Corp fiscal 3Q18 revenue of USD$3.94 billion rose 7% y/y.  VF Corp raised 2019 EPS guidance to USD$3.52-3.57.  VF Corp is rated “Unattractive” in our US Large-Cap Global Top Stock Ideas.
  • Walmart (WMT) and CVS Health Corp (CVS) have reached a resolution concerning their disagreement over pricing. The disagreement drove Walmart to cut some ties with CVS Health Corp earlier in the week. In a joint statement Friday, the companies informed that Walmart will allow its stores to participate in CVS Health Corp’s pharmacy networks. Walmart is rated “Top Buy” in our US Large-Cap Global Top Stock Ideas and “Attractive” in our US Consumer Staples Global Top Stock Ideas. CVS Health Corp is rated “Unattractive” in our US Large-Cap Global Top Stock Ideas.

What is Going on with European Currencies?

  • EUR€ is currently down -0.281% against the USD$ to 1.1357
  • GBP£ is currently down -0.732% against the USD$ to 1.2891
  • CHF is currently little changed against the USD$ at 1.0044
     

Highlights from the European Bond Market

  • Generic Euro 10-Year Bonds are lower with yields up 1.9 basis points to 0.262%
  • German 10-Year Bunds are lower with yields up 1.9 basis points to 0.262%
  • French 10-Year Government Bonds are lower with yields up 1.7 basis points to 0.66%
  • UK 10-Year GILTs are lower with yields up 1.6 basis points to 1.353%
  • Italian 10-Year Government Bonds are higher with yields down -3.5 basis points to 2.73%
  • Spanish 10-Year Government Bonds are higher with yields down -1.8 basis points to 1.346%
     

 

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Euro Stoxx 50 Movers

In local currency.
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Outperformers Sector Price 1D % Chg Volume
BASF SE Utilities 65.6 4.13%               5,316,270
Daimler AG Consumer Staples 50.9 4.00%               5,831,306
ASML Holding NV Health Care 143 3.91%               1,961,371
Bayer AG Information Technology 66.5 3.65%               4,321,322
Fresenius SE & Co KGaA Telecommunication Services 44 3.60%               2,757,070
 
Underperformers Sector Price 1D % Chg Volume
Sanofi Consumer Discretionary 72.9 -1.07%               3,678,787
EssilorLuxottica SA Consumer Staples 112 -0.04%               1,421,292
Societe Generale SA Energy 28.6 0.37%               8,797,465
Vivendi SA Consumer Discretionary 22 0.41%               3,201,630
Unilever NV Information Technology 46.9 0.63%               5,505,105

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