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European stocks drop on growth and Brexit concerns, weak US payrolls

Mar 08, 2019

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

European Markets

  • European stocks close lower today with ongoing growth concerns, a lack of Brexit progress and weak US payrolls data today
  • Change in US Non-farm payrolls in February was an addition of only 20,000, well below the 180,000 expected and 304,000 in January
  • The Euro Stoxx 600 closed down -0.89%, the FTSE 100 declined -0.74%, the DAX fell -0.52%, and the CAC 40 finished down -0.7%
  • Brexit talks have completely stalled with the latest EU offer very similar to that which the UK has already rejected, making any progress near-term unlikely
  • UK PM Theresa May is again appealing to Parliament to support her most recent Brexit plan
  • Citic Securities, the largest Chinese brokerage in China, recommends its clients sell People’s Insurance Company of China, one of the top performing A-shares stocks in the Shanghai Composite.  Traders are concluding this downgrade was authorized by government officials and that officials in Beijing would like to cool the current rally in Chinese stocks. 
  • Investor sentiment for European stocks finished trading negative with the advance/decline ratio for the Euro Stoxx 600 currently at 0.35x
  • Real Estate (+0.99%), Telecommunications (+0.32%), and Technology (-0.3%) stocks were the top performers in the Euro Stoxx 600 today
  • Travel & Leisure (-1.92%), Basic Resources (-1.83%), and Oil & Gas (-1.8%) stocks were the worst performers in the Euro Stoxx 600 today
  • 70 stocks in the Euro Stoxx 600 hit 4-week highs while 41 stocks closed at 4-week lows
  • 40 stocks in the Euro Stoxx 600 finished the trading session overbought while 9 stocks closed oversold according to the 16-day RSI Measure
  • VSTOXX, the European stocks equivalent of the VIX, closed little changed -0.31 points today to 13.56 after closing at 13.87 yesterday

Stocks Trending in the News

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Global Consumer Stocks Trending in the News

  • 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 outweighs 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.
  • Berry Group (BERY) has agreed to acquire RPC Group Plc (LSE:RPC) for 3.34 billion pounds (USD$4.4 billion) which will create one of the largest plastic packaging companies in the world.  Berry Group beat out a rival bid from Apollo Management (APO).  Berry Group was a holding of Apollo in the past only to be a competitor for acquisition targets now.  Berry Group is rated “Top Buy” in our US Large-Cap Global Top Stock Ideas.  RPC Group is rated “Attractive” in our United Kingdom All-Cap Global Top Stock Ideas.  Apollo Management is rated “Neutral” in our US SMID-Cap Global Top Stock Ideas.
  • Big Lots (BIG) reported fourth quarter adjusted EPS of USD$2.68, beating consensus of USD$2.30.  Fourth quarter revenue of USD$1.6 billion came in line with USD$1.6 billion consensus.  Same store sales growth of 3.1% came well above 1% consensus.  Big Lots gave first quarter EPS guidance of USD0.65-0.75, below present consensus of USD$0.95.  Big Lots is rated “Attractive” in our US Large-Cap Global Top Stock Ideas and “Top Buy” in our US Consumer Discretionary Global Top Stock Ideas.
  • Costco Wholesale Corp. (COST) shares rose the most intraday in more than 2 years after the company reported better-than-expected FY2Q2019 results, described by Stifel as, “impressive,” and, “solid,”. Costco financials for FY2Q2019 were highlighted by strong margins and an EPS of USD$2.01 that beat the highest analyst estimates, which ranged between USD$1.59 and USD$1.76. Costco is rated “Neutral” in our US Large-Cap Global Top Stock Ideas and “Attractive” in our US Consumer Staples Global Top Stock Ideas.  
  • EssilorLuxottica Societe (ENXTPA: EL) shares slipped after the company announced a delay in its planned investor day. Bernstein analyst Luca Solca explained, “Markets are impatient: investors want to start counting the synergies and want to see results improving on the basis of that.” EssilorLuxottica said that it will now plan a capital markets day for September 18th, 2019. EssilorLuxottica is rated “Unattractive” in our European Large-Cap Global Top Stock Ideas. 
  • GVC Holdings Plc (LSE: GVC) shares slid after stock sales by CEO Kenny Alexander and Chairman Lee Feldman caught both investors and analysts off-guard. Across 15 analyst ratings for GVC Holdings stock, all were a buy or equivalent rating at the time of the stock sales. Alexander and Feldman sold GVC Holdings shares worth a total of roughly 20mm pounds (USD$26mm). GVC Holdings is rated “Unattractive” in our United Kingdom All-Cap Global Top Stock Ideas.  
  • Kroger’s (KR) lackluster fourth quarter results have weighed on the stock with analysts highlighting its turnaround initiative is not going so smoothly.  Kroger is in the midst of a program that is overhauling how it uses shelf space in its stores.  Kroger is also working to build out its delivery service at the same time so disruptions to its results are not such a surprise to many.  Kroger is rated “Neutral” in our US Large-Cap Global Top Stock Ideas and “Attractive” in our US Consumer Discretionary Global Top Stock Ideas.
  • National Beverage Corp. (FIZZ), the owner of LaCroix sparkling water, shares fell the most intraday in over two decades after posting disappointing financial results for its most recent quarter that spurred a downgrade and ratings cut for the stock at Guggenheim.  National Beverage Corp. CEO Nick Caporella said in a statement to investors, “We are truly sorry for these results stated above. Negligence nor mismanagement nor woeful acts of God were not the reasons – much of this was the result of injustice!” Guggenheim cut National Beverage Corp. shares to sell on the news while slashing its price target for the stock from USD$72/share to USD$45/share. National Beverage Corp. is rated “Top Buy” in our US SMID-Cap Global Top Stock Ideas and “Neutral” in our US Consumer Staples Global Top Stock Ideas.  
  • Tesla (TSLA) has secured up to USD$521 million in a syndicated loan for its new Chinese factory.  Tesla CEO Elon Musk previously said Telsa would need about USD$500 million to open its factory in China and this announcement should be sufficient to build the car and battery manufacturing facilities planned.  Tesla broke ground on the factory on January 7th and plans to start production before the year-end.  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.
  • Vail Resorts (MTN) shares soared after the company reported FY2Q2019 adjusted EPS of USD$5.02 that was above consensus of USD$4.83. Vail Resorts told investors that it expects FY2019 Ebitda between USD$683mm and USD$707mm, the midpoint of which is in line with consensus of USD$697.6mm. Vail Resorts 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

  • Alibaba (BABA) and Ant Financial, one of its units, will create a joint steering committee, according to a report in Bloomberg.  The committee will be headed by Alibaba and will be tasked with finding joint ventures for the 2 to work together on.  The committee will also ensure both companies long-term interests are aligned.  The committee will hold executives accountable in the event that is not the case.  Alibaba is rated “Top Buy” in our China All-Cap Global Top Stock Ideas. 
  • Eventbrite Inc. (EB) shares tumbled after announcing that tougher-than-expected customer integration efforts associated with a 2017 acquisition will drive slower revenue growth in the near-term. Eventbrite lost as much as a quarter of its value on the announcement. Eventbrite told investors that it expects revenue of between USD$80mm and USD$84mm for its next quarter, missing consensus of USD$91.4mm. Eventbrite is rated “Neutral” in our US SMID-Cap Global Top Stock Ideas and “Unattractive” 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)  and Commerzbank (DB:CBK) have intensified their merger talks, according to a report in Bloomberg.  The report says the talks are still informal at this point and the boards have not given the mandate to start the process, yet.  The Finance Ministry has previously indicated its desire to see the two banks merge for the benefit of its small and mid-sized clients that are the backbone of the German economy, the report adds.  Deutsche Bank is rated “Unattractive” in our European Large-Cap Global Top Stock Ideas.  Commerzbank is rated “Unattractive” in our European Large-Cap Global Top Stock Ideas.
  • Futu Holding (FHL), an online Chinese broker backed by Tencent (TCEHY, SEHK: 700), completed its IPO raising USD$90 million.  Futu priced its IPO at USD$12, the top of the range it mentioned during pre-pricing meetings.  Futu helps Chinese investors trade overseas and is the fourth largest broker in Honk Kong.  Tencent is rated “Neutral” in our China All-Cap Global Top Stock Ideas.  Futu Holdings is not rated in our Global Top Stock Ideas.

Global Industrials Stocks Trending in the News

  • American Airlines (AAL) was forced to pull 14 of its 304 Boeing (BA) 737-800s after it discovered a third-party contractor has not properly secured overhead bins. American Airlines said the contractor’s work “was not up to our standards”.  American highlighted that there was no effect on flight safety as it had to cancel 40 flights because of the pulled jets.  American Airlines is rated “Neutral” in our US Large-Cap Global Top Stock Ideas and “Neutral” in our US Industrials Global Top Stock Ideas. 
  • 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.
  • Ferrellgas Partners (FGP) shares plummeted after the company announced FY2Q2019 Ebitda of USD$119.7mm, missing the lowest analyst estimates that ranged between USD$120.0mm and USD$132.0mm. Ferrellgas also reported revenue of USD$5573.4mm for FY2Q2019, missing consensus of USD$671.0mm. Ferrellgas is rated “Neutral” in our US SMID-Cap Global Top Stock Ideas.  
  • Navistar (NAV) reported first quarter 2019 adjusted EPS of USD$0.11, beating consensus of USD$2.30.  First quarter 2019 revenue of USD$2.43 billion beating USD$2.18 billion consensus.  Navistar gave full year revenue guidance of USD$10.75-11.25 billion while above present consensus of USD$10.74.  Navistar is rated “Attractive” in our US SMID-Cap Global Top Stock Ideas and “Attractive” in our US Industrials Global Top Stock Ideas.

Global Financials Stocks Trending in the News

  • Iliad SA (ENXTPA: ILD) shares edged lower after Exane BNB Paribas analyst Sam McHugh downgraded the stock from neutral to underperform. Iliad currently maintains 13 buy, 12 hold, and 1 sell recommendation across analyst ratings. Iliad's consensus price target based on underlying analyst forecasts has slipped 4.9% over the last 3 months. Iliad is rated “Unattractive” in our European SMID-Cap Global Top Stock Ideas.  
  • Roche Holding’s (SWX: ROG) Genetech has agreed to make a USD$120mm upfront payment to biopharmaceutical company Xencor (XNCR) as part of a research pact. The two companies have agreed to co-develop and commercialize novel IL-15 cytokine therapeutics. Roche is rated “Top Buy” in our European Large-Cap Global Top Stock Ideas. Xencor is rated “Unattractive” in our US SMID-Cap Global Top Stock Ideas.  

What is Going on with European Currencies?

  • EUR€ is currently up +0.42% against the USD$ to 1.124
  • GBP£ is currently down -0.673% against the USD$ to 1.2997
  • CHF is currently up +0.405% against the USD$ to 0.9928

Highlights from the European Bond Market

  • Generic Euro 10-Year Bonds are lower with yields up 0.2 basis points to 0.069%
  • German 10-Year Bunds are lower with yields up 0.2 basis points to 0.069%
  • French 10-Year Government Bonds are higher with yields down -1.5 basis points to 0.407%
  • UK 10-Year GILTs are lower with yields up 1.7 basis points to 1.189%
  • Italian 10-Year Government Bonds are lower with yields up 3.5 basis points to 2.504%
  • Spanish 10-Year Government Bonds are lower with yields up 0.7 basis points to 1.051%

 

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Euro Stoxx 50 Movers

In local currency.
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Outperformers Sector Price 1D % Chg Volume
Unibail-Rodamco-Westfield Telecommunication Services 147 1.61%                  479,336
Orange SA Materials 13.6 1.04%               8,980,585
Deutsche Post AG Health Care 27.7 0.73%               3,643,595
L'Oreal SA Health Care 229.10 0.44%  472,334 
Vinci SA Consumer Discretionary 84.4 0.40%               1,348,049
 
Underperformers Sector Price 1D % Chg Volume
EssilorLuxottica SA Consumer Staples 102 -6.30%               2,162,404
Societe Generale SA Energy 25.3 -2.47%               6,531,095
ING Groep NV Consumer Discretionary 10.4 -2.47%            27,015,130
Schneider Electric SE Industrials 67.6 -2.40%               2,085,806
Bayer AG Information Technology 69.5 -2.32%               3,207,320
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