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European stocks end session lower, with trade concerns and mixed earnings front and center

Feb 27, 2019

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

European Markets

  • European stocks close lower with trade and growth outlook concerns weighing on investor sentiment
  • The Euro Stoxx 600 closed down -0.28%, the FTSE 100 declined -0.61%, the DAX fell -0.46%, and the CAC 40 finished down -0.26%
  • US trade negotiators are insisting on "significant structural changes" from China as part of any trade deal, saying buying more US agricultural goods is not sufficient
  • Today is the second day of US Federal Reserve Chairman Jerome Powell's 2-day testimony to the US Congress. US Fed Chairman Powell is speaking to the House Financial Services Committee. 
  • Tensions continue to rise between India and Pakistan.  The Pakistani government claims to have downed 2 Indian fighters while the Indian government confirms it has lost one MIG 21 jet with a pilot missing in action (MIA).  Analysts are suggesting the current escalation between the two countries is the first it has been since the Indo-Pakistani War of 1971 (the War of Bangladeshi Independence).  The Pakistani government has formally extended an offer to the Indian government to de-escalate the current conflagration between the two neighbors. 
  • While news headlines continue to pound the idea that active managers continue to lose to passive funds, since the start of 2019, more than half of actively managed US mutual funds are outperforming their benchmarks.  Assuming the current trend holds for the entirety of CY2019, it would be the best year for the US mutual fund industry (in terms of performance) in a decade according to analysis by Goldman Sachs.
  • Investor sentiment for European stocks finished trading negative with the advance/decline ratio for the Euro Stoxx 600 currently at 0.43x
  • Banks (+1.5%), Basic Resources (+0.26%), and Oil & Gas (+0.15%) stocks were the top performers in the Euro Stoxx 600 today
  • Travel & Leisure (-1.53%), Personal & Household Goods (-1.07%), and Food & Beverage (-1.05%) stocks were the worst performers in the Euro Stoxx 600 today
  • 128 stocks in the Euro Stoxx 600 hit 4-week highs while 29 stocks closed at 4-week lows
  • 86 stocks in the Euro Stoxx 600 finished the trading session overbought while 3 stocks closed oversold according to the 16-day RSI Measure
  • VSTOXX, the European stocks equivalent of the VIX, closed little changed +0.06 points today to 13.96 after closing at 13.89 yesterday

Stocks Trending in the News

Click name for Q-Factor score and financial data

  • ABN Amro (ENXTAM: ABN) took investors by surprise after it quietly purchased 680mm euros (USD$775mm) worth of Air France-KLM (ENXTPA: AF) shares over just 5 trading sessions. Over the period that ABN Amro accumulated Air France shares, the latter’s stock appreciated 23%. State-controlled ABN Amro began to purchase Air France shares on behalf of the Dutch government on February 20th. ABN Amro is rated “Neutral” in our European Large-Cap Global Top Stock Ideas. Air France is rated “Neutral” in our European Large-Cap Global Top Stock Ideas.
  • Adyen (ENXTAM:ADYEN) reported second half 2018 adjusted ebitda of 111.7 million euros beating consensus of 88.6 million euros.  Adyen reported fourth quarter adjusted revenue of 192.5 million euros beating consensus of 182.9 million euros.  Adyen saw 60% revenue growth in the second half, well above the 40% guidance given at the start of the year.  Adyen gave revenue growth guidance of mid-twenties to mid-thirties for the coming years.  Adyen is rated “Neutral” in our European Large-Cap Global Top Stock Ideas.
  • Bank of East Asia (SEHK: 23) shares fell the most in 6 months after the company declared a smaller-than-expected special dividend payment in its FY2018 annual report. Bank of East Asia shares rallied leading up to the special dividend declaration on rumors that the bank would announce a big special dividend for its 100-year anniversary. Bank of East Asia is rated “Neutral” in our China All-Cap Global Top Stock Ideas.
  • Bayer AG (DB: BAYN) shares edged slightly lower after the company reported CY4Q2018 adjusted Ebitda in line with the average analyst estimate. Bayer AG generated an adjusted Ebitda of 2.07bn euros in CY4Q2018 while analysts expected 2.04bn euros. Bayer also maintained FY2019 earnings guidance for 6.80 euros/share, which is slightly below consensus of 6.88 euros/share. Bayer AG is rated “Neutral” in our European Large-Cap Global Top Stock Ideas.
  • Beiersdorf AG (XTRA: BEI) shares slumped to a 2-year low after the company announced a profit warning for FY2019. Beiersdorf cut its FY2019 margin guidance while telling investors that the company plans to invest more to reach growth targets. The profit warning triggered a slew of analyst downgrades for Beiersdorf stock. Beiersdorf is rated “Unattractive” in our European Large-Cap Global Top Stock Ideas.
  • eBay (EBAY) and its activist shareholders are nearing an agreement to give them board seats at eBay.  Elliott Management and Starboard Value LP would.  The deal being described in the press would see the funds receive multiple board seats and have eBay perform an operational and strategic review of the company.  The review could include considering breaking up the company to maximize profitability.  eBay is rated “Top Buy” in our US Large-Cap Global Top Stock Ideas and “Attractive” in our US Information Technology Global Top Stock Ideas.
  • ITV Plc (LSE: ITV) shares slipped after the company reported lower than expected advertising revenue. ITV attributed slumping advertising revenue to Brexit and companies bracing for the event. “Most people in Britain in business thought there would be a withdrawal agreement by now,” said CEO Carolyn McCall, adding, “I’m afraid companies have to look at their bottom line and be more cautious,”. ITV Plc is rated “Unattractive” in our United Kingdom All-Cap Global Top Stock Ideas.
  • Kuehne + Nagel International AG (SWX: KNIN) shares fell the most in more than a year after the company reported a CY4Q2018 profit miss and disappointed investors with FY2019 guidance. Kuehne + Nagel reported CY4Q2018 Ebit that was about 7% below the average analyst estimate. Kuehne + Nagel also pulled back its FY2019 guidance as the company, “seemingly failed to appreciate the degree of market slowdown,” said RBC. Kuehne + Nagel is rated “Neutral” in our European Large-Cap Global Top Stock Ideas.
  • Lowe’s (LOW) reported fourth quarter adjusted EPS of USD$0.80 beating consensus of USD$0.79.  Lowe’s reported fourth quarter adjusted revenue of USD$15.65 billion in line with consensus of USD$15.74 billion.  Lowe’s CEO said he is happy with the quarter with the company reaping the benefits of much of its hard work over the past 6 months.  Lowe’s is rated “Unattractive” in our Large-Cap Global Top Stock Ideas and “Attractive” in our US Consumer Discretionary Global Top Stock Ideas.
  • Metro Bank Plc (LSE: MTRO) shares plummeted to a record low after the lender disclosed that British regulators are probing how the company misclassified assets. The UK Financial Conduct Authority and Prudential Regulation Authority will, “investigate the circumstances and events,” that led Metro Bank to adjust the risk-weightings of its assets last month. Metro Bank is rated “Unattractive” in our United Kingdom All-Cap Global Top Stock Ideas.
  • Papa John’s Pizza (PZZA) reported fourth quarter loss of USD$0.44 per share missing consensus of EPS of USD$0.18.  Papa John’s Pizza reported fourth quarter adjusted revenue of USD$374 million missing consensus of USD$393.2 million.  Papa John’s Pizza gave same store sales guidance of -1% to -5%.  Papa John’s Pizza is rated “Top Short” in our Large-Cap Global Top Stock Ideas and “Unattractive” in our US Consumer Discretionary Global Top Stock Ideas.
  • Pirelli SpA (BIT: PIRC) shares fell notably lower after China National Chemical Engineering Corporation (SEHK: 601117) said it is considering reducing its stake in the Italian tiremaker. China National Chemical Engineering is considering several options for its stake in Pirelli, including a block sale or a sale directly to an investor. China National Chemical Engineering’s current stake in Pirelli is worth about 2.1bn euros (USD$2.4bn) as of Tuesday’s closing price. Pirelli is rated “Attractive” in our European SMID-Cap Global Top Stock Ideas. China National Chemical Engineering is not rated in our Global Top Stock Ideas.  
  • Solvay SA (ENXTBR: SOLB) shares fell after the Belgian chemical maker announced FY2019 financial guidance that indicates modest growth, most of which will be in the second-half of the year. CEO Jean-Pierre Clamadieu also noted that the end of Solvay's A380 program will not be a big loss due to ramp ups in other aircraft programs, which include A320 and A220 programs. Solvay is rated “Neutral” in our European SMID-Cap Global Top Stock Ideas.  
  • Ted Baker (LSE:TED) updated guidance for its fiscal year that is about to end January 26th, saying pretax profit will be about 63 million pounds, below the 74 million pounds consensus.  Ted Baker said currency movements and other factors weighed on its performance.  Ted Baker is in the middle of an investigation of alleged sexual misconduct by its founder, but this warning was related to inventory and product costs.  Ted Baker is not rated in our Global Top Stock Ideas.
  • Toll Brothers (TOL) reported fourth quarter adjusted EPS of USD$0.76 beating consensus of USD$0.61.  Toll Brothers reported fourth quarter adjusted revenue of USD$1.36 billion beating consensus of USD$1.26 billion.  Toll Brothers gave second quarter delivery guidance of 1,650 to 1,850 homes.  Toll Brothers backlog stands at USD$5.37 billion.  Toll Brothers is rated “Unattractive” in our Large-Cap Global Top Stock Ideas and “Attractive” in our US Consumer Discretionary Global Top Stock Ideas.
  • Unilever (LSE: ULVR) shares slipped after Exane BNB Paribas downgraded its recommendation for company shares from outperform to neutral. Unilever also cut its price target for Unilever from 54 euros/share to 52 euros/share, implying a 9.2% upside from Tuesday’s closing price -- Unilever maintains an average price target of 50.72 euros/share across 32 analyst forecasts. Unilever is rated “Neutral” in our United Kingdom All-Cap Global Top Stock Ideas.  
  • Versum Materials (VSM) intends to move forward with a planned merger between itself and Entegris Inc. (ENTG) despite a USD$5.9bn acquisition offer by German conglomerate Merck (MRK) that aimed to break up the merger. Merck’s acquisition offer equates to a USD$48/share offering, implying a 16% premium to Tuesday’s closing price.  Versum is rated “Top Buy” in our US SMID-Cap Global Top Stock Ideas and “Attractive” in our US Information Technology Global Top Stock Ideas. Entegris is rated “Attractive” in our US Large-Cap Global Top Stock Ideas and “Attractive” in our US Information Technology Global Top Stock Ideas. Merck is rated “Attractive” in our US Large-Cap Global Top Stock Ideas.  
  • Walmart (WMT) wants to become a bigger player in online advertising.  Walmart is bringing its advertising business in-house after a third-party contract is set to expire soon.  Walmart is looking to build additional sources of revenue and sees advertising as a promising avenue.   Walmart will offer its deep customer activity database to help advertisers target their ads.  Walmart is rated “Attractive” in our Large-Cap Global Top Stock Ideas and “Attractive” in our US Consumer Staples Global Top Stock Ideas.
  • Weight Watchers (WTW) reported fourth quarter adjusted EPS of USD$0.63 beating consensus of USD$0.60.  Weight Watchers reported fourth quarter adjusted revenue of USD$330 million missing consensus of USD$346.4 million.  Weight Watchers gave 2019 EPS guidance of USD$1.25-1.50.  Weight Watchers is rated “Neutral” in our Large-Cap Global Top Stock Ideas and “Neutral” in our US Consumer Staples Global Top Stock Ideas.
  • Wynn Resorts (WYNN) has been fined USD$20 million over sexual misconduct complaints by the Nevada Gaming Authority.  Wynn’s CEO was accused of multiple assaults on employees, allegations that were first reported in the Wall Street Journal.  Wynn will not lose its gaming license as part of the fine and the fine closes the matter for the state of Nevada.  Wynn Resorts is rated “Top Short” in our Large-Cap Global Top Stock Ideas and “Neutral” in our US Consumer Discretionary Global Top Stock Ideas.

What is Going on with European Currencies?

  • EUR€ is currently down -0.176% against the USD$ to 1.1369
  • GBP£ is currently up +0.468% against the USD$ to 1.3314
  • CHF is currently little changed against the USD$ at 0.9994

Highlights from the European Bond Market

  • Generic Euro 10-Year Bonds are lower with yields up 3 basis points to 0.148%
  • German 10-Year Bunds are lower with yields up 3 basis points to 0.148%
  • French 10-Year Government Bonds are lower with yields up 2.5 basis points to 0.551%
  • UK 10-Year GILTs are lower with yields up 6.8 basis points to 1.274%
  • Italian 10-Year Government Bonds are lower with yields up 8.1 basis points to 2.785%
  • Spanish 10-Year Government Bonds are lower with yields up 2.1 basis points to 1.159%

 

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Euro Stoxx 50 Movers

In local currency.
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Outperformers Sector Price 1D % Chg Volume
Bayer AG Information Technology 69.4 4.18%               2,461,614
Societe Generale SA Energy 26.2 3.09%               1,386,254
Intesa Sanpaolo SpA Industrials 2.1 2.65%            56,465,939
Banco Bilbao Vizcaya Argentaria SA Information Technology 5.38 2.44%            31,576,822
BNP Paribas SA Financials 44.2 2.42%               6,044,690
 
Underperformers Sector Price 1D % Chg Volume
Unilever NV Information Technology 47.2 -2.60%               2,454,422
Danone SA Financials 66.4 -1.80%               1,461,323
L'Oreal SA Health Care 220 -1.70%                  569,031
Engie SA Industrials 13.9 -1.63%               5,000,814
EssilorLuxottica SA Consumer Staples 107 -1.52%                  574,409
Global Top Stock IdeasTOP LONG & TOP SHORT STOCK IDEAS FOR GLOBAL MARKETSMONTHLY TOP IDEAS FROM OUR MULTI-FACTOR QUANTITATIVE MODELS
Global Top Stock IdeasTOP LONG & TOP SHORT STOCK IDEAS FOR GLOBAL MARKETSMONTHLY TOP IDEAS FROM OUR MULTI-FACTOR QUANTITATIVE MODELS