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Indications of weaker growth in both Germany and US send European stocks lower; Asia mixed

Mar 22, 2019

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scroll down for the Asian markets recap

International Stock Markets Indexes

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

European Markets Recap

  • European stocks sell off broadly to end the week with weak economic data in both Germany and the US pushing stocks lower
  • Germany reported Manufacturing PMI that cratered to 44.7, well below the 48 consensus as its economic contraction worsens
  • The yield on Germany's 10-year bond, the benchmark of the EU, fell to 0% in the wake of the weak economic reading
  • The US Treasury Yield Curve has inverted for the first time since the financial crisis in 2007, underscoring the concern over the growth outlook in the US
  • Oil is selling off today with WTI crude down over 2.5% in midday trading
  • Precious metals are set to be the primary beneficiaries of the Fed’s shift to a more dovish stance.  A weaker US dollar will support higher price moves for Gold, Silver and the PGMs.  We still like Silver here.   
  • The Euro Stoxx 600 is currently down -1.24%, the FTSE 100 is down -2.13%, the DAX is down -1.55%, and the CAC 40 is down -1.99%
  • Utilities (+0.15%), Banks (-2.17%), and Basic Resources (-1.2%) stocks are the top performers in the Euro Stoxx 600 today
  • Retail (-0.21%), Health Care (-0.88%), and Construction & Materials (-1.78%) stocks are the worst performers in the Euro Stoxx 600 today
  • Investor sentiment for European stocks is negative with the advance/decline ratio for the Euro Stoxx 600 currently at 0.09x
  • 86 stocks in the Euro Stoxx 600 are at 4-week highs while 49 stocks are at 4-week lows
  • 77 stocks in the Euro Stoxx 600 are overbought while 2 stocks are oversold according to the 16-day RSI Measure

Asian Stock Markets Indexes

Asian Markets Recap

  • The Nikkei 225 finished up +0.09%, the Hang Seng ended up +0.14%, the Hang Seng China Enterprise declined -0.23%, and the CSI 300 was -0.08%
  • Investor sentiment for Japanese stocks finished positive with the advance/decline ratio for the Nikkei 225 closing at 1.81x
  • 55 stocks in the Nikkei 225 hit 4-week highs while 22 stocks reached 4-week lows
  • 14 stocks in the Nikkei 225 closed overbought while 5 stocks closed oversold according to the 16-day RSI Measure
  • Investor sentiment for Hong Kong stocks finished negative with the advance/decline ratio for the Hang Seng closing at 0.92x
  • 8 stocks in the Hang Seng hit 4-week highs while 5 stocks reached 4-week lows
  • 4 stocks in the Hang Seng closed overbought while 0 stocks closed oversold according to the 16-day RSI Measure

Stocks Trending in the News

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Global Consumer Stocks Trending in the News

  • Avon (AVP) are rising after the Wall Street Journals reports that Brazil’s Natura (NATU3) is in talks to acquire the company.  Natura is discussing acquiring both the North American private-equity owned business as well as the London-based publicly traded business.  Natura previously acquired the Body Shoppe.  Avon announced a 10% cut in its workforce in January so a deal with Natura would not surprise the market.  Avon is not rated in our Global Top Stock Ideas.  Natura is rated “Top Buy” in our Brazil All-Cap Global Top Stock Ideas.
  • Debenhams Plc (LSE: DEB) shares fell after the company announced it’s seeking 200mm pounds (USD$262mm) of funding under a creditor plan. Because the new funding could wipe out shareholders such as billionaire Mike Ashley, he counteroffered to purchase and take control of the struggling UK retailer, an offer that was swiftly rejected. Debenhams is not rated in our Global Top Stock Ideas. 
  • Geely Automotive (SEHK:175) was upgraded to overweight from equal-weight at JP Morgan.  Geely reported results that were in line with consensus, which for JP Morgan saw a pleasant surprise.  JP Morgan said an aggressive new model pipeline should lead to market share gains over the coming year.  Geely should be able to hike its dividend with the greater free cash flow it expects.  Geely Automotive is rated “Neutral” in our China All-Cap Global Top Stock Ideas.
  • Hibbett Sports (HIBB) shares soared the most intraday in their history after the company reported, “much-better-than-expected,” results for CY4Q2018, prompting a short-squeeze. Despite a FY2019 comparable sales forecasts of between –1% and 1%, Baird analyst Peter Benedict wrote in a note that this was a, “Strong finish that should squeeze shares higher,”. Hibbett Sports is rated “Neutral” in our US SMID-Cap Global Top Stock Ideas and “Top Short” in our US Consumer Discretionary Global Top Stock Ideas.  
  • MGM Resorts (MGM) is entering an equal partnership with Orix (TSE: 8591) to, “create Japan’s firs integrated resort in Osaka,” MGM Executive Vice President Ed Bowers said in a statement Friday. The resort is yet to be approved and the Osaka city government will likely announce a winning bid in March 2020. The news comes ahead of Osaka hosting the 2025 World Expo. MGM Resorts is rated “Top Short” in our US Large-Cap Global Top Stock Ideas and “Neutral” in our US Consumer Discretionary Global Top Stock Ideas. Orix is not rated in our Global Top Stock Ideas.  
  • Nike (NKE) reported fiscal third quarter 2019 results that were generally in line.  Nike fiscal third quarter EPS of 68 cents came above 65 cents consensus.  Third quarter revenue of USD$9.61 billion trailed consensus of USD$9.65 billion.   Nike’s CEO commented, “Our business momentum is being accelerated by our ability to scale innovation at a faster pace and expand new digital experiences around the world.”  Nike is rated “Neutral” in our US Large-Cap and “Top Buy” in our US Consumer Discretionary Global Top Stock Ideas.
  • Papa John’s International Inc. (PZZA) has added former NBA superstar Shaquille O’Neal to its board of directors. O’Neal will be the first black board member for Papa John’s as the struggling pizza chain attempts to undo damage caused by use of a racial slur by the company’s founder. O’Neal also agreed to enter into a marketing agreement with Papa Johns to pitch the brand. Papa John’s is rated “Top Short” in our US Large-Cap Global Top Stock Ideas and “Unattractive” in our US Consumer Discretionary Global Top Stock Ideas.  
  • Tiffany (TIF) reported fourth quarter results in line with consensus.  Tiffany reported fourth quarter EPS of USD$1.67, matching consensus with revenue of USD$1.32, also matching consensus.  Same store sales were flat (0%) with same store sales in Japan rising 3%, Americas 1% and the rest of the world flat.  Tiffany is rated “Neutral” in our US Large-Cap Global Top Stock Ideas and “Neutral” in our US Consumer Discretionary Global Top Stock Ideas.
  • Tesla (TSLA) is alleging that one of its Chinese engineers stole confidential information on its autopilot system and then left to join Chinese rival Xpeng Motors.  Xpeng Motors in not being accused of any wrongdoing, with its CEO saying the company “plays by the rules.”  He added a flow of talent between companies is normal given that both companies are innovators.  Telsa is rated “Top Short” in our US Large-Cap and “Neutral” in our US Consumer Discretionary Global Top Stock Ideas.
  • Tyson Foods (TSN) is recalling 69,000 pounds of ready-to-eat chicken strips.  Tyson Foods is recalling the chicken because they may contain pieces of metal.  Tyson informed the US Department of Agriculture and they are coordinating the recall.  Tyson Foods is rated “Neutral” in our US Large-Cap Global Top Stock Ideas and “Neutral” in our US Consumer Staples Global Top Stock Ideas. 

Global Information Technology & Communication Services Stocks Trending in the News

  • Facebook (FB) said the passwords of hundreds of millions of its users were visible to employees of Facebook because of a flaw.  Facebook said that while reviewing security in January it found that these passwords were stored in a readable format, in violation of its own procedures, and has since been fixed.  The passwords, Facebook assures, were not visible to the public.  Facebook says it has not found any unauthorized access to or abuse of these passwords.  Facebook is rated “Neutral” in our US Large-Cap Global Top Stock Ideas and “Attractive” in our US Information Technology Global Top Stock Ideas.
  • Nokia Oyj (HLSE: NRE1V) shares fell after the company told investors that it is investigating compliance practices at Alcatel-Lucent (TCK), the Frech rival it purchased in 2016 for USD$18bn. Nokia shares dropped by as much as 8.2% during intraday trading on the news. Nokia is rated “Attractive” in our European SMID-Cap Global Top Stock Ideas. Alcatel-Lucent is not rated in our Global Top Stock Ideas.  

Global Financials  Stocks Trending in the News

  • BlackRock (BLK) is set to acquire French analytics firm eFront for about USD$1.3 billion, according to a report from Bloomberg.  BlackRock will make the acquisition to expand private equity and real estate analytics for its clients, the report notes.  BlackRock is looking to add eFront to its suite of analytic offerings for its institutional clients.  BlackRock is rated “Attractive” in our US Large-Cap Global Top Stock Ideas
  • Citigroup Inc. (C) shares fell after it ousted eight equities traders in Hong Kong while suspending 3 others following an internal investigation into their dealings with some clients. Senior Equities Executive at Citigroup, Philip Shaw, was among those fired as a result of the investigation. The investigation focused around whether traders properly disclosed Citigroup’s own financial interest when facilitating stock trades. Citigroup is rated “Neutral” in our US Large-Cap Global Top Stock Ideas.  
  • Wells Fargo (WFC) put out a statement of support for its CEO Tim Sloan after media reports that it was looking to replace him.  Wells Fargo said the board of directors is fully supportive of Mr. Sloan, with its head saying, “rumors that Wells Fargo’s board reached out to potential CEO candidates are completely false.”  A number of politicians have recently called for the ouster of Wells’ CEO.  Wells Fargo is rated “Neutral” in our US Large-Cap Global Top Stock Ideas.

Global Industrial Stocks Trending in the News

  • Boeing (BA) saw the first cancellations of orders for its grounded 737 Max-8 jet.  Garuda Indonesia, the flag carrier of Indonesia is looking to cancel its order of 49 737 Max jets, saying passengers have lost confidence in the jet in the wake of the crashes.  Garuda informed Boeing of its desire on March 14th.  Boeing is rated “Attractive” in our US Large-Cap and “Neutral” in our US Industrials Global Top Stock Ideas.
  • Fedex (FDX) was downgraded to neutral from outperform at Daiwa Securities.  Daiwa sees growing risks to its Ground margin being under pressure in a slowing economy.  Express margins should continue to expand, Daiwa adds.  A weak international freight environment adds to the concerns.  Fedex is rated “Unattractive” in our US Large-Cap Global Top Stock Ideas and “Top Buy” in our US Industrials Global Top Stock Ideas.
  • Tenaris SA (BIT: TEN) announced the acquisition of TMK PJSC’s US unit for USD$1.21bn, excluding debt. The acquisition comes after the TMK PJSC, Russia’s largest pipemaker, delayed multiple attempts to list the business. The acquisition will include USD$270mm of working capital. Tenaris is rated “Neutral” in our European Large-Cap Global Top Stock Ideas.  
  • UPS (UPS) is considering launching a vaccination service in the United States.  The service would include the dispatch of nurses to homes to administer vaccines to patients, Reuters is reporting today.  Merck (MRK) is reportedly in discussions with USP about participating in the project.  UPS’ head of healthcare logistics strategy made comments about the project.  UPS is rated “Neutral” in our US Large-Cap Global Top Stock Ideas and “Neutral” in our US Industrials Global Top Stock Ideas.  Merck is rated “Attractive” in our US Large-Cap Global Top Stock Ideas.

Global Commodities & Power Stocks Trending in the News

  • China Resources Power Holdings Company Limited (SEHK: 836) shares fell by as much as 15% after the company announced FY2018 net income that missed the consensus estimate by 41%. The net income missed drove China Resources Power to slash its dividend payment by more than half despite promising investors to match last year’s dividend payment. China Resources Power is rated “Neutral” in our China All-Cap Global Top Stock Ideas.  
  • Murphy Oil (MUR) in exiting Malaysia, selling its assets there to PTT (PTTEP) of Thailand for USD$2.13 billion.  Murphy Oil is exiting Malaysia to focus on opportunities in the United States.  Murphy said it will use USD$750 million of the proceeds to fund the expansion of its activities in the US.  Murphy Oil is rated “Top Short” in our US Large-Cap Global Top Stock Ideas.
  • Petrobras (PBR) is looking to raise USD$10 billion from the sale of refineries and it accelerates its focus on crude production, Bloomberg reports.  The state-run oil company of Brazil is looking to sell at least half of its refining capacity, its CEO said, and a more detailed plan is due in the coming months.  Petrobras holds 98% of the crude processing capacity and its CEO argues Brazil would do better with competition in the sector.  Petrobras is rated “Attractive” in our Brazil All-Cap Global Top Stock Ideas.

 

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Global Top Stock IdeasTOP LONG & TOP SHORT STOCK IDEAS FOR GLOBAL MARKETSMONTHLY TOP IDEAS FROM OUR MULTI-FACTOR QUANTITATIVE MODELS