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Worrisome growth outlook from European Central Bank sends European stocks lower

Mar 07, 2019

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

European Markets

  • European stocks close lower after the European Central Bank extended further stimulus as it lowers its GDP forecast for 2019 to 1.1%
  • A number of members of the ECB continue to believe the lowered growth outlook is still too rosy, according to a report in Bloomberg
  • The Euro Stoxx 600 closed down -0.43%, the FTSE 100 declined -0.53%, the DAX fell -0.6%, and the CAC 40 finished down -0.39%
  • In spite of the rally in emerging markets stocks to start the year, EPS trends remain negative.  Analysts at investment banks continue to cut their forecasts and price targets for emerging markets stocks.  It will be interesting to see how this impasse between bullish and bearish investors plays out. 
  • The fees war among ETFs has reached socially responsible strategies (ESG) as well!  Starting today, DWS Group’s Xtrackers MSCI USA ESG Leaders Equity ETF (USSG) will drop its fees to USD$1 for every $1,000 invested, or a net expense ratio of 0.10%. 
  • Investor sentiment for European stocks finished trading negative with the advance/decline ratio for the Euro Stoxx 600 currently at 0.37x
  • Utilities (+1.94%), Real Estate (+1.16%), and Telecommunications (+1.06%) stocks were the top performers in the Euro Stoxx 600 today
  • Basic Resources (-2.19%), Automobiles & Parts (-2.17%), and Banks (-1.88%) stocks were the worst performers in the Euro Stoxx 600 today
  • 84 stocks in the Euro Stoxx 600 hit 4-week highs while 19 stocks closed at 4-week lows
  • 71 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 +0.12 points today to 13.56 after closing at 13.44 yesterday

Stocks Trending in the News

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Global Consumer Stocks Trending in the News

  • Amazon (AMZN) said it is closing its pop-up electronics stores as it adjusts its bricks and mortar strategy.    Amazon had opened 87 pop-up stores in malls and some larger retailers and expects to close them all within a month, calling it an experiment that will no longer continue.  Amazon will continue with its book stores and 4-star stores, where it sells only items rated 4 stars or more on its site.  Amazon is rated “Neutral” in our US Large-Cap Global Top Stock Ideas and “Attractive” in our US Consumer Discretionary Global Top Stock Ideas.
  • American Eagle’s (AEO) weak first quarter guidance is a temporary situation that will revert by the second quarter, according to Telsey Advisory.  American Eagle’s spending in the first quarter will deliver better EPS for the remainder of 2019.  Telsey highlights a number of positives for the stock that far outweigh the temporary weakness expected in the first quarter, including continued strength in denim and the Aerie brand.  American Eagle is rated “Neutral” in our US Large-Cap Global Top Stock Ideas and “Attractive” in our US Consumer Discretionary Global Top Stock Ideas.
  • Burlington Stores (BURL) reported fourth quarter EPS of USD$2.83, beating consensus of USD$2.77.  Fourth quarter revenue of USD$2 billion came in line with USD$2.05 billion consensus.  Merchandise inventory of USD$954 million is well above the USD$752 million consensus.  Burlington gave first quarter EPS guidance of USD$1.21-1.31 while below present consensus of USD$1.36 and same store sales growth of 0-2%.  Burlington Stores is rated “Attractive” in our US Large-Cap Global Top Stock Ideas and “Top Buy” in our US Consumer Discretionary Global Top Stock Ideas.
  • Continental AG (DB:CON) said it is seeing a “muted” start to the year, saying it expects 2019 to see lower vehicle production as compared to 2018.  Continental is the largest maker of auto parts in the world.  Continental sees a slowdown in China in the first half and expects margins to drop to 8-9%, down from 9.3% in 2018.  Continental is rated “Unattractive” in our European Large-Cap Global Top Stock Ideas.
  • Dollar Tree (DLTR) announced it is closing or rebranding almost 600 Family Dollar Stores.  Dollar Tree took a USD$2.73 billion charge in its most recent results on an asset it paid USD$9 billion for in 2015. Dollar Tree's Family Dollar stores have lagged in performance and are weighing on Dollar Tree’s results.  Dollar Tree is rated “Attractive” in our US Large-Cap Global Top Stock Ideas and “Attractive” in our US Consumer Discretionary Global Top Stock Ideas. 
  • Quiz Plc (AIM:QUIZ) issued its third profit warning in the last six months.  Quiz shares have fallen 92% from the July peak as Quiz battles intense online competition.  Analysts have commented that is it unlikely to see growth in the near term from Quiz as management has not come up with a turnaround strategy.  Quiz is not rated in our Global Top Stock Ideas.

Global Information Technology & Communication Services Stocks Trending in the News

  • Care.com (CRCM) fourth quarter revenue was USD$49.9 million matching consensus of USD$49.8 million.  Fourth quarter ESP of 26 cents beat 21 cents consensus.  Care.com gave first quarter EPS guidance of 8 cents below consensus of 17 cents and revenue of USD$52.5-52.8 million while consensus is USD$53.3 million.  Care.com is rated “Neutral” in our US SMID-Cap Global Top Stock Ideas and “Top Short” in our US Information Technology Global Top Stock Ideas.
  • Facebook (FB) said it intends to focus on private communications and not as much on shareable content.  Facebook will encrypt its messaging service and is working to combine its messenger, Whatsapp and Instagram platforms to give users 1 integrated platform for messaging.  Facebook said it sees the future of social media as small chat groups and not public sharing of content.  Facebook is rated “Neutral” in our US Large-Cap Global Top Stock Ideas and “Attractive” in our US Information Technology Global Top Stock Ideas.
  • Fitbit (FIT) announced the release of 4 new or updated models today.  Fitbit will release a cheaper version of its Versa and Inspire smartwatches.  A version of the Versa with Sp02 sensor for sleep apnea will also be released.  Fitbit also intends to redesign its app to allow for more personalization.  Fitbit is rated “Neutral” in our US Large-Cap Global Top Stock Ideas and “Neutral” in our US Information Technology Global Top Stock Ideas. 
  • International Game Technology (IGT) reported fourth quarter EPS of USD0.24, missing consensus of USD$0.35.  Fourth quarter revenue of USD$1.27 billion came in line with USD$1.26 billion consensus.  International Game Technology gave 2019 adjusted ebitda guidance of USD$1.70-1.76 billion while present consensus is USD$1.75 billion.  International Game Technology is rated “Attractive” in our US Large-Cap Global Top Stock Ideas and “Top Buy” in our US Consumer Discretionary Global Top Stock Ideas. International Game Technology is not rated in our Global Top Stock Ideas.
  • Micron (MU) has its revenue outlook cut at Cleveland Research to USD$24 billion from USD$25.5 billion for 2019.  Micron will continue to see pricing headwinds and competition remains strong.  Cleveland also highlights that numerous clients have a high level of inventory, contributing to the weak end-demand.  Micron will report second quarter results March 20th.  Micron is rated “Unattractive” in our US Large-Cap Global Top Stock Ideas and “Neutral” in our US Information Technology Global Top Stock Ideas.
  • Xerox (XRX) said its board has approved a reorganization of its corporate structure into a holding company.  The change will allow Xerox greater strategic, operational and financial flexibility. Holders of Xerox will receive an equal number of shares in the holding company with the change being implemented mid-2019.  Xerox is rated “Attractive” in our US Large-Cap Global Top Stock Ideas and “Neutral” in our US Information Technology Global Top Stock Ideas.

Global Financials Stocks Trending in the News

  • Deutsche Bank (DB:DBK) made deep cuts to the bonuses it paid today according to a report in Bloomberg.  The bank was said to have cut its bonus pool by 15% with some people in New York and London receiving zero.  Deutsche Bank’s continued weak performance is primarily to blame for the cuts.  Deutsche Bank is rated “Unattractive” in our European Large-Cap Global Top Stock Ideas

Global Industirals Stocks Trending in the News

  • Fedex (FDX) had its price target cut to USD$210 from USD$225 at Citi ahead of reporting results on March 19th.  Fedex has seen “one of the rockiest periods in memory” according to Citi while maintaining its buy rating.  Citi is looking for clarity on progress on the integration of TNT that it acquired.  Fedex is rated “Unattractive” in our US Large-Cap Global Top Stock Ideas and “Top Buy” in our US Industrials Global Top Stock Ideas.

What is Going on with European Currencies?

  • EUR€ is currently down -0.734% against the USD$ to 1.1224
  • GBP£ is currently down -0.448% against the USD$ to 1.3111
  • CHF is currently down -0.523% against the USD$ to 0.9899

Highlights from the European Bond Market

  • Generic Euro 10-Year Bonds are higher with yields down -6.1 basis points to 0.067%
  • German 10-Year Bunds are higher with yields down -6.1 basis points to 0.067%
  • French 10-Year Government Bonds are higher with yields down -9 basis points to 0.422%
  • UK 10-Year GILTs are higher with yields down -5.5 basis points to 1.172%
  • Italian 10-Year Government Bonds are higher with yields down -12.1 basis points to 2.469%
  • Spanish 10-Year Government Bonds are higher with yields down -6.9 basis points to 1.044%

 

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Euro Stoxx 50 Movers

In local currency.
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Outperformers Sector Price 1D % Chg Volume
Iberdrola SA Consumer Staples 7.64 3.52%            25,371,503
Unilever NV Information Technology 48.5 2.01%               4,250,104
Enel SpA Industrials 5.5 1.93%            45,897,420
L'Oreal SA Health Care 228 1.83%                  551,157
Amadeus IT Group SA Materials 66 1.66%               1,251,727
 
Underperformers Sector Price 1D % Chg Volume
Societe Generale SA Energy 25.9 -4.32%               7,420,274
Banco Santander SA Health Care 4.16 -3.51%            71,318,078
BNP Paribas SA Financials 43.2 -3.38%               6,908,751
Daimler AG Consumer Staples 50.4 -3.37%               5,304,294
Banco Bilbao Vizcaya Argentaria SA Information Technology 5.22 -2.85%            27,831,516
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