Sep 03 ,2024
Synopsis:
European indices ended in negative territory, tracking a similar performance in US indices and finishing on the session's lows. Macro-calendar was light today with focus in Europe remaining on political developments. German Bund yields posted 1-month high following AfD performance in regional elections. In central bank developments, as ECB easing takes rates to ~3%, internal divisions expected to intensify over necessity of further cuts to control inflation. While initial rate reductions from current 3.75% likely to be smooth, debates will arise as differing views emerge on inflation risks and the neutral rate, estimated between 2%-3%. In the late afternoon, wires reported ECB's Simkus stating that it would be "quite unlikely the ECB will cut rates in October (via Econostream)
In France, budget deficit may exceed expectations this year, potentially reaching 5.6% of GDP due to weaker tax revenues and additional expenses from security crisis in New Caledonia and snap elections. Deteriorating finances, which could worsen to 6.2% by 2025, add pressure on President Macron as he struggles to form a new government following a hung parliament. Recall, France under scrutiny since April for risk of excessive deficit. On the same topic, Italy is finalizing its 2025 budget, crucial for complying with European fiscal rules. Italy aims to keep 2025 deficit within compliance, projected at 4.1% of GDP. Government is likely to opt for 7-year fiscal structural plan, which requires a smaller annual adjustment. Italy's debt-to-GDP ratio expected to increase until 2026, making fiscal consolidation essential to meet long-term debt reduction targets
In the UK, August retail sales saw modest growth, driven by increased consumer spending on food and drink during warm weather, as reported by Barclays and the British Retail Consortium. Barclays noted 1.0% y/y rise in card spending, breaking a two-month decline, while BRC recorded strongest shop spending increase since March. Summery weather led to surge in grocery and clothing sales, although non-food items like furniture and appliances continued to struggle. Despite this, concerns remain about retail outlook, with potential challenges ahead as households remain cautious in their spending
On the corporate newsflow front, DACH names kicked off the session, with Swiss Life Holding (SLHN.SW) dormakaba Holding (DOKA.SW) and Partners Group Holding (PGHN.SW) posting their most recent numbers, whilst Qiagen (QIA.GR) launched a $450M convertible bonds offering; in M&A news, M1 Kliniken (M12.GR) CEO Attila Strauss provided an update on interest from private equity. In the UK, Ashtead Group (AHT.LN) released its earnings report and also appointed a new CFO, with DS Smith (SMDS.LN), Midwich Group (MIDW.LN) and Craneware (CRW.LN) also updating investors before the open. In the aerospace / airline sector, Cathay Pacific found engine issues on 15 A350s with no effect so far on shares of Airbus (AIR.FP) and Rolls-Royce (RR.LN); also, Ryanair Holdings (RYA.ID) and Wizz Air Holdings (WIZZ.LN) reported August traffic stats. In Spain, BBVA (BBVA.SM) received the green light from U.K's Prudential Regulation Authority to take indirect control of Banco Sabadell's British unit TSB (SAB.SM) and eDreams ODIGEO (EDR.SM) released its Q1 report
Looking ahead to tomorrow's calendars, bioMerieux (BIM.FP), Seche Environnement (SCHP.FP), Clas Ohlson (CLAS.B.SS), M&G (MNG.LN), Barratt Developments (BDEV.LN), Direct Line Insurance (DLG.LN), Cairn Homes (C5H.ID), Nordnet (SAVE.SS), flatexDEGIRO (FTK.GR) and Figeac Aero (FGA.FP) will be among few other names to update investors, whilst BELIMO Holding (BEAN.SW) and Elopak (ELO.NO) will hold CMDs. Macro-data will include Italy, Spain, Sweden Aug services PMIs as well as final reads for Eurozone, France, Germany and UK, Eurozone Jul PPI, Ireland Aug unemployment rate and Austria Q2 final GDP
Digest:
Sectors - STOXX Europe 600:
Outperformers: Food & Beverage +0.10%, Persnl & HHold Goods +0.09%, Insurance +0.04%, Utilities (0.06%), Telecom (0.08%), Chemicals (0.28%), Travel & Leisure (0.28%), Retail (0.39%), Media (0.44%), Health Care (0.58%), Construct & Mtls (0.89%)
Underperformers: Basic Resources (3.31%), Oil & Gas (2.77%), Technology (2.33%), Banks (1.83%), Financial Svcs (1.74%), Autos & Parts (1.45%), Real Estate(1.23%), Ind Goods & Svcs (1.04%)
Macro:
The choice facing Germany's far right: radicalism or power (FT)
French finance ministry's deficit warning adds to Macron's political headache (Reuters)
France's Macron mulls relatively unknown Thierry Beaudet as PM (F24)
Netanyahu blasts 'shameful' UK ban on Israel arms exports (Politico)
German Stock Market Record Defies the Country's Economic Gloom (BBG)
Company news:
Notable Gainers
+14.1% M12.GR (M1 Kliniken €16.20, +2.00) -- CEO comments on PE interest; earnings
+8.0% CRW.LN (Craneware £22.35, +1.65) -- FY earnings
+7.3% TFBANK.SS (TF Bank SEK265.00, +18.00) -- intends to divest non-performing loan portfolios
+6.2% DOKA.SW (dormakaba Holding CHF568.00, +33.00) -- FY earnings
+6.1% ALU.LN (Alumasc Group £2.68, +0.16) -- FY earnings
+5.4% WOSG.LN (Watches of Switzerland Group £4.00, +0.20) -- FY trading update
+2.5% GIMB.BB (Gimv €40.70, +1.00) -- trading update
+2.4% RR.LN (Rolls-Royce Holdings £4.75, +0.11) -- Cathay Pacific finds engine issues on 15 A350s - South China Morning Post
+2.0% SIFG.NA (Sif Holding €12.02, +0.24) -- Consortium of Sif and Smulders will supply Transition Pieces for Bałtyk 2&3 Offshore Wind Farm
+1.6% ORSTED.DC (Ørsted DKK398.40, +6.40) -- UK's Dept. for Energy Security and Net Zero publishes the outcome of the Contracts for Difference (CfD) allocation round 6
+1.1% SLHN.SW (Swiss Life Holding CHF695.60, +7.80) -- H1 earnings
+1.1% VLA.FP (Valneva €3.23, +0.04) -- study results
+1.0% RYA.ID (Ryanair Holdings €15.87, +0.15) -- Aug traffic
+0.8% ATEA.NO (Atea NOK144.20, +1.20) -- wins large public sector frame agreement worth between €780M and €1.16B over the the 4-year term
+0.7% LEON.SW (Leonteq CHF27.05, +0.20) -- initiates new cooperation with Saxo Bank A/S for the manufacturing and distribution of structured products
+0.5% EDR.SM (eDreams ODIGEO €6.66, +0.03) -- earnings
+0.4% AHT.LN (Ashtead Group £53.84, +0.22) -- Q1 earnings; appoints new CFO
+0.4% UPR.ID (Uniphar €2.67, +0.01) -- H1 earnings
+0.2% SMDS.LN (DS Smith £4.73, +0.01) -- earnings
+0.1% EMEIS.FP (Emeis SA €7.94, +0.01) -- appoints new CFO
Notable Decliners
-9.2% PGHN.SW (Partners Group Holding CHF1,110.50, -112.50) -- H1 earnings
-5.3% MBH.LN (Michelmersh Brick Holdings £0.99, -0.06) -- H1 earnings
-4.0% SAB.SM (Banco de Sabadell €1.87, -0.08) -- UK's PRA approves merger with BBVA
-3.3% JSG.LN (Johnson Service Group £1.54, -0.05) -- H1 earnings
-1.9% WIZZ.LN (Wizz Air Holdings £12.57, -0.25) -- Aug traffic
-1.6% AIR.FP (Airbus SE €134.58, -2.20) -- Cathay Pacific finds engine issues on 15 A350s - South China Morning Post
-1.1% VOW3.GR (Volkswagen €96.12, -1.10) -- CUPRA brand could be adversely affected by proposed EU tariffs, according to brand's CEO -- Reuters
-0.7% SAP.GR (SAP €198.36, -1.48) -- CTO Jürgen Müller to step down effective 30-Sep
EU companies reporting tomorrow:
France: bioMerieux (BIM.FP), Seche Environnement (SCHP.FP)
Nordics: Clas Ohlson (CLAS.B.SS)
UK/Ireland: M&G (MNG.LN), Barratt Developments (BDEV.LN), Direct Line Insurance (DLG.LN), Cairn Homes (C5H.ID), Dalata Hotel (DHG.ID), CAB Payments (CABP.LN), Ecora Resources (ECOR.LN), Shield Therapeutics (STX.LN), Polarean Imaging (POLX.LN)
Trading Update: Nordnet (SAVE.SS), Clas Ohlson (CLAS.B.SS), flatexDEGIRO (FTK.GR), Figeac Aero (FGA.FP)
CMD/events: BELIMO Holding (BEAN.SW), Elopak (ELO.NO)
Data:
Economics:
Switzerland Aug CPI +1.1% y/y vs consensus +1.2% and prior +1.3%; 0.0% m/m vs consensus +0.1% and prior (0.2%)
Spain Aug
Unemployment Change (21.9K) vs consensus (6.3K) and prior (10.8K)
Electricity consumption 22,347 GWh, +3.1% y/y; adjusted for effects of working hours and temperatures +3.8% y/y
Switzerland Q2 GDP +1.8% y/y vs consensus +0.9% and prior +0.6%; +0.7% q/q vs consensus +0.5% and prior +0.5%
Markets:
WTI Crude (Oct 24): ($2.78) or (3.78%) to $70.77
€-$ (0.0031) or (0.28%) to 1.1043
£-$ (0.0052) or (0.39%) to 1.3095
€-£ +0.0010 to 0.8433
S&P 500 (1.35%)
Performance year-to-date
FTSE 100: +7.29%
DAX: +11.97%
CAC: +0.43%
MIB: +11.55%
Stoxx 600: +8.52%
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