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European stocks end session lower with UBS results and IMF growth downgrade driving selling

Jan 22, 2019

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

European Markets

  • European stocks closed lower today with fears of lower growth and trade uncertaintly weighing on market sentiment
  • The Euro Stoxx 600 closed down -0.36%, the FTSE 100 declined -0.99%, the DAX fell -0.41%, and the CAC 40 finished down -0.42%
  • UK opposition leader Jeremy Corbyn is supporting holding a number of votes on how to move forward on Brexit, one of which is holding a second referendum
  • The EU said it is waiting for UK PM Theresa May to make the next move and present a new offer after the Brexit vote failure
  • Global growth will be in focus this week as the 2019 Annual World Economic Forum in Davos begins today
  • The IMF expects global growth of 3.5% in 2019, down from 3.7% previously
  • According to Bank of America fund manager surveys, underweight/short British stocks is one of the most popular trades.  HSBC believes this pessimism is overdone and that investors are missing the fact that the FTSE 100 offers a dividend yield of 4.9%, one of the most attractive yields in developed markets.  Just as a point of reference the FTSE 100 dividend yield is more than double that of the S&P 500! 
  • Yesterday’s release by China’s National Bureau of Statistics that shows China 4Q GDP slowing to 6.4% in CY2018 vs 6.8% in CY2017 has rekindled worries about a deceleration in global growth 
  • Investor sentiment for European stocks finished trading negative with the advance/decline ratio for the Euro Stoxx 600 currently at 0.49x
  • Travel & Leisure (+0.92%), Media (+0.42%), and Retail (+0.42%) stocks were the top performers in the Euro Stoxx 600 today
  • Basic Resources (-1.23%), Oil & Gas (-1.13%), and Banks (-0.94%) stocks were the worst performers in the Euro Stoxx 600 today
  • 248 stocks in the Euro Stoxx 600 hit 4-week highs while 3 stocks closed at 4-week lows
  • 40 stocks in the Euro Stoxx 600 finished the trading session overbought while 2 stocks closed oversold according to the 16-day RSI Measure
  • VSTOXX, the European stocks equivalent of the VIX, closed down 0.60 points today to 15.99 after closing at 15.39 yesterday

Stocks Trending in the News

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  • Allegheny Technologies Inc. (ATI) reported CY4Q2018 earnings that fell short of analyst estimates despite reporting sales that beat the highest analyst estimate. Allegheny generated USD$1.04bn of sales in CY4Q2018 while analyst estimates ranged between USD$956.0mm and USD$1.03bn. Allegheny’s CY4Q2018 EPS of USD$0.30/share missed analysts’ consensus of USD$0.34/share. Allegheny is rated “Neutral” in our US Large-Cap Global Top Stock Ideas. 
  • Halliburton (HAL) reported fourth quarter EPS from continuing operations of 41 cents while consensus was for 37 cents.  Halliburton fourth quarter revenue came at USD$5.9 billion while USD$5.87 billion was consensus.  Halliburton is rated “Attractive” in our US Large-Cap Global Top Stock Ideas.
  • Henkel (XTRA: HEN3) shares were downgraded to sell from hold at Independent Research GmbH.  Henkel’s price target was also lowered from 110 euros/share to 84 euros/share at Independent Research GmbH, implying a 3.5% downside from Monday’s closing price. Over the last 3 months, analysts’ consensus price target for Henkel has fallen 12%. Henkel is rated “Attractive” in our European Large-Cap Global Top Stock Ideas.  
  • Hugo Boss AG (DB: BOSS) announced CY4Q2018 financials that largely surpassed analyst estimates. Hugo Boss reported CY4Q2018 sales of 783.0mm euros, beating the highest analyst estimates that ranged between 744.0mm euros and 775.0mm euros. Hugo Boss is rated “Attractive” in our European SMID-Cap Global Top Stock Ideas.
  • IG Group (LSE: IGG) reports 1FH2019 financials that are mostly in-line with analyst expectations. IG Group reported 1FH2019 EPS of GBP0.25/share while analysts expected GBP0.25/share. IG Group’s top line revenue in 1FH2019 of GBP251.0mm slightly missed analysts’ consensus of GBP252.4mm. IG Group is rated “Unattractive” in our United Kingdom All-Cap Global Top Stock Ideas.  
  • Johnson & Johnson (JNJ) reported adjusted fourth quarter EPS of USD$1.97 while consensus was for USD$1.95.  Johnson & Johnson fourth quarter revenue came at USD$20.4 billion while USD$20.2 was consensus.  Johnson & Johnson is rated “Attractive” in our US Large-Cap Global Top Stock Ideas.
  • Pekao (WSE: PEO) shares fell after stricter stress-test capital buffers will require Poland’s second-largest lender to cut its maximum possible payout ratio for CY2018 from an expected 90% to 75%. MBank analysts wrote in a note to clients that, “The reduction in dividends is a disappointing development given Pekao’s excellent stress test results during the recent EBA exercise, where the bank placed in the top three.” Pekao is rated “Neutral” in our European SMID-Cap Global Top Stock Ideas. 
  • SGS SA (SWX: SGSN) reported full-year adjusted operating income that came in-line with the average analyst estimate. SGS generated adjusted operating income of 1.05bn Swiss francs in its fiscal year while analyst estimates called for 1.06bn Swiss francs. SGS’ full-year revenue of 6.71bn Swiss francs fell slightly short of analysts’ consensus, which called for 6.75bn Swiss francs. SGS is rated “Neutral” in our European Large-Cap Global Top Stock Ideas.
  • Soitec SA (ENXTPA: SOI) reported revenue growth guidance that surprised investors amid a weaker broad semiconductor industry. Soitec raised its revenue growth outlook to 40%, guidance that Jefferies analysts believe is, “reasonable.” Jefferies cited overwhelming content per device/use cases as the driver for Soitec’s projected revenue growth. Soitec is rated “Neutral” in our European SMID-Cap Global Top Stock Ideas.
  • Stanley Black & Decker (SWK) reported fourth quarter EPS of USD$2.11 while consensus was for USD$2.10.  Stanley Black & Decker fourth quarter revenue came at USD$3.63 billion versus USD$3.62 billion expected.  Stanley Black & Decker sees 2019 EPS coming at USD$8.45-8.65.  Stanley Black & Decker is rated “Attractive” in our US Large-Cap Global Top Stock Ideas. a
  • Steel Dynamics (STLD) reported fourth quarter EPS of USD$1.31 while consensus was for USD$1.21.  Steel Dynamics fourth quarter revenue came at USD$2.9 billion while USD$2.93 billion was consensus.  Steel Dynamics is rated “Neutral” in our US Large-Cap Global Top Stock Ideas.
  • Tesla (TSLA) plans acquire batteries for its new China factory from Panasonic (TSE: 6752), according to Nikkan Kogyo.  The new arrangement will be an expansion of their existing relationship.  Presently, Panasonic is the main supplier of batteries to Telsa.  Tesla is rated “Unattractive” in our US Large-Cap Global Top Stock Ideas and “Attractive” in our US Information Technology Global Top Stock Ideas.  Panasonic Tesla is rated “Top Buy” in our Japan Large-Cap Global Top Stock Ideas 
  • Travelers (TRV) reported fourth quarter EPS of USD$2.13 while consensus was for USD$2.08.  Travelers fourth quarter revenue came at USD$7.8 billion while USD$7.7 billion consensus.  Travelers return on equity in the fourth quarter was 10.9%.  Travelers is rated “Neutral” in our US Large-Cap Global Top Stock Ideas.
  • Tryg A/S (CPSE: TRYG) reported a CY4Q2018 combined ratio of 88.2% that missed analysts’ consensus of 87.6%. Tryg CEO Morten Hubbe informed that the company’s CY2018 results were hindered by, “tough weather and large claims.” Goldman Sachs and Citi analysts are warning investors of limited potential for dividend growth. Tryg is rated “Attractive” in our European SMID-Cap Global Top Stock Ideas.  
  • UBS (SWX: UBS) reported USD$13 billion withdrawals by its customers.  UBS said it saw USD$8 billion withdrawn from its wealth management unit while USD$5 billion was withdrawn from its asset management unit.  UBS comments that it does not believe the weakness of the fourth quarter has completely passed.  UBS Travelers is rated “Neutral” 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 1.1364
  • GBP£ is currently up +0.52% against the USD$ to 1.2959
  • CHF is currently little changed against the USD$ at 1.0028

Highlights from the European Bond Market

  • Generic Euro 10-Year Bonds are higher with yields down -1.9 basis points to 0.236%
  • German 10-Year Bunds are higher with yields down -1.9 basis points to 0.236%
  • French 10-Year Government Bonds are higher with yields down -1.2 basis points to 0.643%
  • UK 10-Year GILTs are flat with yields little changed 0 basis points to 1.323%
  • Italian 10-Year Government Bonds are higher with yields down -1.8 basis points to 2.741%
  • Spanish 10-Year Government Bonds are higher with yields down -3.2 basis points to 1.334%

 

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Euro Stoxx 50 Movers

In local currency.
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Outperformers Sector Price 1D % Chg Volume
Linde PLC Real Estate 142 1.32%                  872,579
Koninklijke Philips NV Financials 31.6 1.19%               2,755,636
CRH PLC Telecommunication Services 25.3 0.58%               1,367,902
Iberdrola SA Consumer Staples 7.05 0.54%            18,193,906
Industria de Diseno Textil SA Materials 24 0.29%               3,727,104
 
Underperformers Sector Price 1D % Chg Volume
BNP Paribas SA Financials 41.5 -1.86%               5,480,516
Societe Generale SA Energy 27.8 -1.61%               4,548,815
ASML Holding NV Health Care 141 -1.52%               1,331,203
Nokia OYJ Financials 5.26 -1.50%            14,047,754
Siemens AG Utilities 99.4 -1.32%               2,155,155

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