Oct 15 ,2024
Synopsis:
European equity markets closed mostly lower Tuesday with different dynamics in play, namely tech sector getting hit late session on ASML's (ASML.NA) Q3 pre-release, energy stocks declined amid falling oil prices, while Ericsson (ERIC.B.SS) surged on strong earnings, UK labour data showed mixed signals suggesting potential BoE easing, ZEW survey showed turn in sentiment for Eurozone and Germany, and US banks were stronger amid latest well-received earnings from the likes of BAC, C and GS. Focus turns to the European luxury space after the market close today as industry bellwether LVMH (MC.FP) and S. Ferragamo (SFER.IM) both report earnings.
Among stocks and sectors on the move today, Energy was under pressure with the STOXX Europe 600 Super Sector (3.2%) amid a slide in oil prices. WTI (November) was down ~5.0% to $70.1 and Brent (December) was down ~4.7% to $73.81. Heavy selling pressure after report Israeli PM Netanyahu has approved a retaliation against Iran which does not include oil or nuclear targets. Netanyahu said he was willing to strike military targets instead, suggesting a more limited counterstrike aimed at preventing escalation. Nothing specific on timing with officials saying Israel's strike to be carried out before 5-Nov US election. Comes after Citi raised its bull case scenario for oil yesterday and said Middle East supply disruption potential could send oil above $100/barrel. Meanwhile, both OPEC and IEA cut their global oil demand growth in 2024, with China accounting for the bulk of the downgrades. In stock specific news, TotalEnergies (TTE.FP) reports Q3 European refining margin indicator ($/t) 15.4 vs year-ago 100.6
Telcos outperformed as Ericsson (ERIC.B.SS) jumped +10% following this morning's Q3 earnings release. Analysts note ~inline revenues with a significant EBITA beat. Some saw latter flattered somewhat by one-offs, but still see a c.4% underlying beat stripping these out. Strong gross margin at group level, aided by strength at Network division is well flagged. Several also point out strong FCF. Elsewhere, analysts note management expects Q4 to see below average seasonality at both Networks and Cloud Software & Services. From notes seen, a couple anticipate MSD% upgrades to FY consensus estimates.
Tech sector took a big hit late in the session, as ASML (ASML.NA) pre-released Q3 earnings (was due to report tomorrow), with bookings weaker than expected and also ASML expects 2025 total net sales to be between €30B and €35B vs consensus €35.8B, and gross margin between 51% and 53%. ASML said "while there continue to be strong developments and upside potential in AI, other market segments are taking longer to recover. It now appears the recovery is more gradual than previously expected. This is expected to continue in 2025, which is leading to customer cautiousness." EU tech names among the biggest laggards, including ASM.NA down (13.7%), BESI.NA down (11%).
Other European stocks on the move today included MTU (MTX.GR) +5%, which reported preliminary 9M earnings and raised FY adj. EBIT guidance. Bellway (BWY.LN) shares rose 8.8% as it reported solid FY results and issued better than expected FY25 guidance. Tate & Lyle (TATE.LN) traded higher on renewed round of takeover rumors. Vestas (VWS.DC) shares fell on back of a Redburn downgrade.
Official UK labor market data corroborated signals seen in recent survey data. The ILO unemployment rate ticked down to 4% versus consensus 4.1% and prior 4.1%, but the August claimant count increased 27.9K, higher than 20.2K forecast and compared with prior 0.3K versus 23.7K initially reported. ONS highlighted smaller sample size has increased volatility of estimates and should be treated with caution. However, does fit in with surveys showing slower pace of hiring. Number of vacancies also down again by 34K on the quarter to 841K. Key for BoE policy, wage growth moderated with average regular earnings at 4.9% versus consensus 4.9% and prior 5.1%, which is the lowest since February 2022. With bonus, earnings at 3.8% versus consensus 3.7% and prior 4.0%. While total pay growth the slowest since November 2020, ONS Head of Labour Market and Household Division Freeman pointed out that earnings continue to rise faster than inflation. Overall, data likely tilts the BoE towards further easing in November with inflation also forecast to move below target on Wednesday's release.
ECB bank lending survey showed rate cuts have boosted loan demand, though credit standards remain tight overall. ZEW sentiment readings for Eurozone and Germany increase in October
Digest:
Sectors - STOXX Europe 600:
Outperformers:
Telecom +1.97%, Media +1.50%, Utilities +1.32%, Real Estate +1.00%, Personal Care Drug and Grocery Stores +0.90%, Travel & Leisure +0.72%, Insurance +0.69%, Retail +0.46%, Banks +0.20%, Financial Svcs +0.19%, Construct & Mtls +0.02%, Health Care (0.29%), Chemicals (0.46%), Ind Goods & Svcs (0.48%)
Underperformers:
Technology (6.35%), Energy(3.23%), Basic Resources (2.28%), Consumer Products and Services (1.21%), Autos & Parts (0.76%)
Macro:
Company news:
Notable Gainers
+14.4% DLAR.LN (De La Rue £1.07, +0.14) -- confirms proposed sale of Authentication Division to Crane NXT for £300M
+10.8% ERIC.B.SS (Telefonaktiebolaget LM Ericsson SEK87.10, +8.44) -- Q3 earnings
+9.8% TFBANK.SS (TF Bank SEK303.00, +27.00) -- Q3 earnings
+8.3% BWY.LN (Bellway £33.16, +2.54) -- FY earnings
+7.0% DSCV.LN (discoverIE Group £6.40, +0.42) -- H1 trading update
+6.6% ADOC.FP (Adocia €5.78, +0.36) -- files patents of stable formulations of hormone combinations for the treatment of obesity and diabetes
+5.4% TAM.LN (Tatton Asset Management £7.04, +0.36) -- H1 trading update
+5.2% TATE.LN (Tate & Lyle £7.27, +0.37) -- Betaville reports renewed round of takeover rumors
+4.9% IHP.LN (Integrafin Holdings £3.82, +0.18) -- Q4 trading update; transferred overweight at Barclays
+4.9% MTX.GR (MTU Aero Engines €304.10, +14.30) -- target price increased to Street high at JPMorgan
+4.9% MTX.GR (MTU Aero Engines €304.10, +14.30) -- prelim 9M results, raises FY adj. EBIT guidance
+4.8% PDX.SS (Paradox Interactive SEK193.20, +8.90) -- initiated buy at Kepler Cheuvreux
+3.6% BOSN.SW (Bossard Holding CHF216.50, +7.50) -- to acquire the Ferdinand Gross Group
+2.7% DOCM.SW (DocMorris CHF31.74, +0.82) -- Q3 earnings
+2.6% TEL2.B.SS (Tele2 SEK114.00, +2.85) -- appoints new CEO
+1.8% ODHN.SW (Orascom Development Holding CHF3.99, +0.07) -- Egyptian subsidary secures $155M loan facility
+1.7% BAMI.IM (Banco BPM €6.33, +0.11) -- Deutsche Bank upgrade
+1.5% CICN.SW (Cicor Technologies CHF53.80, +0.80) -- Q3 earnings
+1.3% ZEAL.DC (Zealand Pharma DKK787.50, +10.00) -- initiated buy at BofA
+1.3% SSE.LN (Scottish and Southern Energy £19.01, +0.25) -- SSE rebuffed EDP proposal to merge -- Reuters, citing sources
+1.2% RCH.LN (Reach £0.96, +0.01) -- Q3 trading update
Notable Decliners
-15.6% ASML.NA (ASML Holding €685.60, -123.90) -- Q3 earnings pre-released
-6.3% ETTE.FH (Etteplan €10.40, -0.70) -- lowered FY guidance
-5.5% ALFEN.NA (Alfen €12.37, -0.73) -- updates on structural improvement measures to further focus its strategy and reduce costs
-5.2% OCI.NA (OCI NV €25.62, -1.40) -- CEO change / to pay interim extraordinary distribution of €14.5 per share
-4.8% VWS.DC (Vestas Wind Systems DKK125.65, -6.30) -- Redburn Atlantic downgrade
-4.8% TTE.FP (TotalEnergies €59.49, -3.00) -- Q3 update
-4.7% VCP.LN (Victoria £1.21, -0.06) -- H1 trading update
-4.0% PAG.LN (Paragon Banking Group £7.40, -0.31) -- transferred hold at Jefferies
-3.4% STERV.FH (Stora Enso €11.23, -0.40) -- issues clarification on Dagens Industri article
-3.3% FLU.AV (Flughafen Wien €52.60, -1.80) -- Spet traffic numbers
-2.7% ENI.IM (Eni €13.96, -0.39) -- år Energi CFO Stefano Pujatti to be pursuing new opportunities within company
-2.4% NHY.NO (Norsk Hydro NOK67.68, -1.64) -- Norne Securities downgrade
-2.2% DHER.GR (Delivery Hero €37.09, -0.82) -- Citi downgrade
-1.7% MGN.NO (Magnora NOK22.95, -0.40) -- Q3 earnings
-1.4% NEXT.NO (Next Biometrics Group NOK7.30, -0.10) -- 5.5M new share private placement, guides Q4 and FY25
-1.3% EMG.LN (Man Group £2.10, -0.03) -- BNP Paribas Exane downgrade
-0.7% QTX.LN (Quartix Technologies £1.53, -0.01) -- 9M trading update
EU companies reporting tomorrow:
Earnings: ASML Holding (ASML.NA), Whitbread (WTB.LN), Kinnevik (KINV.B.SS), Dustin Group (DUST.SS), Exsitec Holding (EXS.SS), NEL (NEL.NO), Olvi (OLVAS.FH), Vertu Motors (VTU.LN), Sanderson Design Group (SDG.LN), Groupe OKwind (ALKOW.FP)
Trading Update:
France: Gecina (GFC.FP), Lagardere (MMB.FP), Pullup Entertainment (ALPUL.FP), HighCo(HCO.FP)
Other: Just Eat Takeaway.com (TKWY.NA), Bystronic (BYS.SW), NSI (NSI.NA)
UK: Quilter (QLT.LN), Brooks MacDonald Group (BRK.LN), X5 Retail Group NV (FIVE.LN), Marshalls (MSLH.LN)
Traffic: Aeroport de Paris (ADP.FP)
Production: Antofagasta (ANTO.LN)
CMD/events: British American Tobacco (BATS.LN), Marston's (MARS.LN), Primary Health Properties (PHP.LN), Autoneum Holding (AUTN.SW), SNAM (SRG.IM)
Data:
Economics:
Norway Sep Trade Balance NOK 42.8B vs consensus NOK 45.8B and prior NOK 66.0B
Sweden Sep CPI +1.6% y/y vs preliminary +1.6%
UK Aug Unemployment Rate 4.0% vs consensus 4.1% and prior 4.1%
UK Aug Claimant Count Change 27.9K vs consensus 20.2K and prior 0.3K from 23.7K
France Sep CPI +1.1% m/m vs preliminary +1.2%
Spain Sep Final CPI +1.5% y/y vs preliminary +1.5%
Germany Oct ZEW Economic Sentiment Indicator 13.1 vs consensus 10.2 and prior 3.6
Germany Oct ZEW Current Situation (86.9) vs consensus (84.5) and prior (84.5)
Eurozone Aug Industrial Production +0.1% y/y vs consensus (1.0%) and prior revised (2.1%) from (2.2%)
Eurozone Aug Industrial Production +1.8% m/m vs consensus +1.8% and prior revised (0.5%) from (0.3%)
Markets:
WTI Crude (Nov 24): ($3.83) or (5.19%) to $70.00
€-$ (0.0007) or (0.06%) to 1.0904
£-$ +0.0030 or +0.23% to 1.3089
€-£ (0.0022) to 0.8332
S&P 500 (0.33%)
Performance year-to-date
FTSE 100: +6.67%
DAX: +16.32%
CAC: (0.28%)
MIB: +13.93%
Stoxx 600: +8.68%
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