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European stocks close flat, news of potential cuts to growth outlook dampens risk-appetite today

Mar 06, 2019

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

European Markets

  • European stocks close flat with news of potential cuts to economic forecasts for 2019 dampening risk-appetite today
  • Bloomberg reports that European officials are poised to cut growth and inflation forecast for 2019 enough to justify another round of loans for banks
  • The Euro Stoxx 600 closed down -0.04%, the FTSE 100 advanced +0.17%, the DAX fell -0.28%, and the CAC 40 finished down -0.16%
  • While European stocks have been rallying to start the year, net flows into US-listed European ETFs have been notably negative.  Just as an example, the iShares Euro Stoxx 50 ETF (FEZ) has lost nearly 10% of its total assets to start the year. 
  • US President Donald Trump is allegedly pressuring US trade officials to reach a deal with their Chinese counterparts.  The hope is that an end to the US-China trade spat will fuel a continued rally in US stocks. 
  • According to Investors Intelligence (II), newsletter writer optimism continues to edge up, now currently sitting at 52.9% (52.4% in the previous reading last week).  The II reading has improved 9 straight weeks in a row, the longest streak since September-November 1998. 
  • Investor sentiment for European stocks finished trading negative with the advance/decline ratio for the Euro Stoxx 600 currently at 0.63x
  • Basic Resources (+0.89%), Oil & Gas (+0.37%), and Media (+0.36%) stocks were the top performers in the Euro Stoxx 600 today
  • Automobiles & Parts (-0.92%), Technology (-0.76%), and Real Estate (-0.56%) stocks were the worst performers in the Euro Stoxx 600 today
  • 87 stocks in the Euro Stoxx 600 hit 4-week highs while 21 stocks closed at 4-week lows
  • 88 stocks in the Euro Stoxx 600 finished the trading session overbought while 6 stocks closed oversold according to the 16-day RSI Measure
  • VSTOXX, the European stocks equivalent of the VIX, closed little changed +0.05 points today to 13.56 after closing at 13.51 yesterday

Stocks Trending in the News

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Global Consumer Stocks Trending in the News

  • Anheuser-Busch Inbev (ENXTBR:ABI) CEO Oliver Goudet will soon, an unexpected development.  Mr. Goudet will assume the top spot at JAB Holdings Ltd. (AIM:JBH), the consumer goods giant.  Anheuser-Busch Inbev said it will announce succession plans in due course with Mr. Goudet pledging to assist however possible.  He will leave right after the company’s annual shareholders meeting on April 24th.  Anheuser-Busch Inbev is rated “Unattractive” in our European Large-Cap Global Top Stock Ideas
  • British American Tobacco Plc (LSE: BATS) shares traded notably higher after the head of the US Food and Drug Administration stepped down, invoking speculation that the agency may walk back on proposals to restrict menthol cigarette sales. Jefferies analyst Owen Bennett wrote in a note to clients, “Without Gottlieb pushing this forward, then we think near-term risk around this is reduced significantly.” British American Tobacco is rated “Top Buy” in our United Kingdom All-Cap Global Top Stock Ideas.  
  • Burberry Group Plc (LSE: BRBY) shares slipped after Goldman Sachs downgraded the high-end trench-coat maker from neutral to sell, citing a need for higher incremental investments to sustain brand momentum. “We continue to see positive brand momentum ahead but now apply higher incremental costs medium term,” wrote Goldman Sachs analyst Louise Singlehurst in a note to clients. Goldman Sachs cut its price target for Burberry from 2,148 pence/share to 1,855 pence/share. Burberry is rated “Attractive” in our United Kingdom All-Cap Global Top Stock Ideas.  
  • Harley-Davidson (HOG) announced the acquisition of StaCyc Inc, a maker of electric powered two-wheelers for children.  Harley-Davidson said the acquisition reinforces its “commitment to lead in the electrification of motorcycling”.   Harley-Davidson has been seeking to expand its electric portfolio and is likely to make other acquisitions along the same line.  Harley-Davidson is rated “Unattractive” in our US Large-Cap Global Top Stock Ideas and “Neutral” in our US Consumer Discretionary Global Top Stock Ideas.
  • HelloFresh (DB: HFG) shares slid despite the company reporting an adjusted Ebitda loss of 2.9mm euros, narrower than the expected loss of 14.8mm euros. HelloFresh told investors that it expects FY2019 revenue to grow by between 25% and 30%. HelloFresh is rated “Unattractive” in our European SMID-Cap Global Top Stock Ideas.  
  • Just Eat (LSE:JE) reported full year revenue of 779.5 pounds, in line with consensus of 786 million pounds.  Just Eat expects 2019 revenue of 1.0-1.1 billion pounds.  Investors expect an announcement of a potential divestiture of its stake in Latin-American food delivery concern iFood, which could generate up to 650 million pounds for Just Eat in a sale of its stake.  Just East is rated “Top Short” in our United Kingdom All-Cap Global Top Stock Ideas.
  • Proctor & Gamble (PG) will delist its shares from the Euronext Paris due to low trading volume.  Proctor & Gamble said the costs to keep the listing are not justified given the high costs of maintaining the listing.  Holders will be given the chance to swap their Euronext shares for those on the NYSE at a point in the near future.  Proctor & Gamble is rated “Attractive” in our US Large-Cap Global Top Stock Ideas and “Top Buy” in our US Consumer Discretionary Global Top Stock Ideas.  
  • Revlon (REV) share are lower after Jefferies highlights Nielsen data showing recent weak sales of its products.  Nielsen shows a drop in sales of over 15% over the last 4 weeks.  Jefferies cites ongoing challenges for Revlon with the recent deceleration in sales chief among them.  Revlon is rated “Top Buy” in our US SMID-Cap Global Top Stock Ideas and “Top Short” in our US Consumer Staples Global Top Stock Ideas.  
  • Schaeffler AG (DB: SHA) announced it is cutting 900 jobs, 700 of which are in Germany, as part of a consolidation plan among its 5 factories in Europe.  Schaeffler cut its guidance across the board and now sees single-digit high single-digit profit margins.  Schaeffler in the past was targeting profit margin of 12-13%.  Schaeffler has an 18-24 month plan to turnaround its operations.  Schaeffler is rated “Neutral” in our European SMID-Cap Global Top Stock Ideas.
  • Tesla (TSLA) CEO Elon Musk would better serve the company he founded by being less combative and less outspoken, according to James Anderson, partner and portfolio manager at Baillie Gifford.  He said he registered an “extraordinarily unsuccessful” pleas in July for Musk to run Tesla in a more peaceful manner.  Anderson wondered if Musk could do more by being in the background helping the company and not in the spotlight on a regular basis.  Tesla is rated “Top Short” in our US Large-Cap Global Top Stock Ideas and “Neutral” in our US Consumer Discretionary Global Top Stock Ideas.  
  • Thor Industries (THO) second quarter 2019 loss of 10 cents per share matching consensus.  Thor Industries second quarter 2019 sales of USD$1.29 billion well below consensus of USD$1.57 billion.  Thor Industries affirmed that in 2019 “we expect to face challenges that may affect our financial results.”  Thor Industries is rated “Unattractive” in our US Large-Cap Global Top Stock Ideas and “Unattractive” in our US Consumer Discretionary Global Top Stock Ideas.  
  • Trip Adviser (TRIP) was downgraded to underperform from neutral at Cowen.    Cowen cut Trip Adviser’s price target to USD$40 from USD$50 while the average target price in the market is USD$56.14.  Cowen sees the slow start to 2019 for Trip Adviser weighing on results with weak revenue growth in 2019.  Trip Adviser is rated “Neutral” in our US Large-Cap Global Top Stock Ideas and “Neutral” in our US Consumer Discretionary Global Top Stock Ideas.  

Global Information Technology & Communication Services Stocks Trending in the News

  • Baidu (BIDU) was upgraded to outperform from neutral at CCB International Securities.  CCB cut its price target for Baidu to USD$187 from USD$190, with an 11% upside to its new price target.  The upgrade comes in the wake of updated guidance from Baudi which expects first quarter revenue of USD$3.5-3.68 billion.  Baidu is rated “Unattractive” in our China All-Cap Global Top Stock Ideas. 
  • Dialog Semiconductor (DB:DLG) fourth quarter EPS od USD$1.06 matching consensus of USD$1.06.  Dialog Semiconductor fourth quarter revenue of USD$430.7 million below consensus of USD$442 million.  Dialog Semiconductor affirmed 2019 EPS guidance of USD$2.90 with revenue falling in the single digits.   Dialog Semiconductor is not rated in our Global Top Stock Ideas.  
  • Weibo (WB) reported a 62% jump in profit in 2018, delivering a USD$571.8 million with revenue up 49% from a year ago.  Weibo saw as spending rise 50% in 2018 and made up 87% in Weibo’s revenue.  Weibo saw 462 million daily active users in December.  Weibo is rated “Attractive” in our China All-Cap Global Top Stock Ideas.
  • VMware (VMW) was downgraded to sell from neutral at Goldman Sachs while maintaining its price target of USD$177.  The downgrade of VMware was based on valuation with Goldman saying it sees all the good news priced into the stock.  VMware is rated “Neutral” in our US Large-Cap Global Top Stock Ideas and “Attractive” in our US Information Technology Global Top Stock Ideas.  

Global Industrials Stocks Trending in the News

  • DS Smith (LSE: SMDS) shares edged higher after the company announced the sale of its plastics unit for USD$585mm. Jefferies wrote in a note to clients that the valuation of the business is, “attractive,” and ahead of what investors expected. DS Smith is rated “Neutral” in our United Kingdom All-Cap Global Top Stock Ideas.  
  • General Electric (GE) CEO Larry Culp said yesterday the power unit will continue to burn through cash in 2019 and the company will post a negative cash flow, a surprise to investors.  General Electric’s cash burn will be mainly from the power unit and “other operational pressures”.  He added that deleveraging GE Capital “is key to reducing its risk profile.  Culp highlighted that General Electric’s turnaround is a multi-year effort and that the company must “pay the piper” in the ongoing revamp.  General Electric is rated “Neutral” in our US Large-Cap Global Top Stock Ideas and “Unattractive” in our US Industrials Global Top Stock Ideas.

What is Going on with European Currencies?

  • EUR€ is currently little changed against the USD$ at 1.1317
  • GBP£ is currently down -0.22% against the USD$ to 1.3149
  • CHF is currently little changed against the USD$ at 0.9963

Highlights from the European Bond Market

  • Generic Euro 10-Year Bonds are higher with yields down -4 basis points to 0.128%
  • German 10-Year Bunds are higher with yields down -4 basis points to 0.128%
  • French 10-Year Government Bonds are higher with yields down -4.9 basis points to 0.512%
  • UK 10-Year GILTs are higher with yields down -6 basis points to 1.227%
  • Italian 10-Year Government Bonds are higher with yields down -11.7 basis points to 2.59%
  • Spanish 10-Year Government Bonds are higher with yields down -4.1 basis points to 1.113%

 

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Euro Stoxx 50 Movers

In local currency.
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Outperformers Sector Price 1D % Chg Volume
Banco Santander SA Health Care 4.31 1.66%            44,968,980
Enel SpA Industrials 5.4 1.31%            34,713,987
Banco Bilbao Vizcaya Argentaria SA Information Technology 5.37 1.22%            16,851,126
Intesa Sanpaolo SpA Industrials 2.18 0.95%          106,400,334
Air Liquide SA Financials 112 0.86%                  735,454
 
Underperformers Sector Price 1D % Chg Volume
ING Groep NV Consumer Discretionary 11.2 -2.22%                  251,123
ASML Holding NV Health Care 161 -1.82%                  895,839
Daimler AG Consumer Staples 52.2 -1.34%               3,005,278
Volkswagen AG Consumer Staples 152 -1.32%               1,067,248
CRH PLC Telecommunication Services 27.9 -1.10%               1,055,282
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