The week from the 26th February to the 2nd March 2018 saw volumes traded on the STOXX 600 10% above the 12 month average as the index fell widely, losing 3.7% through the week. 82.8% of stocks lost 1% or more, as markets fell on concerns of a potential trade war following Donald Trump’s comments. The week also saw the release of macroeconomic data, with inflation at its lowest since 2016, at 1.2% YoY in February, below the 2% target. The Eurozone economic sentiment index fell to a 3 month low in February on weakness across all sectors (bar services). In more positive news, Eurozone unemployment fell to its lowest level since December 2008 at 9.6%. In political news, in Germany Angela Merkel’s party and the SPD finalised an agreement for a grand coalition (GroKo), with the next government now formed. Meanwhile political uncertainty in the Eurozone was renewed, as Italy’s election results gave no clear indication of who would be the next leader, as Eurosceptic parties fared well, with no party boasting a strong majority.
In terms of country performances, all major indices were down, led lower by the DAX 30 (-4.6%), with the OMXC20 and the OMXH25 losing 3.8% and 3.7% respectively. In France, the CAC 40 was down 3.4%. In terms of sector performance, all sectors were in the red. The Healthcare sector, down 2.8% was the best performing.
Basic Materials hit by fears around global trade war
The Basic Materials sector was the worst performing through the week, down 5.8% as Donald Trump’s commented “Trade wars are good”. Only one of the 41 sector companies was up, as Miners suffered notably. Rio Tinto (-9.1%) and Glencore (-8.7%) saw significant losses. Amongst other, these companies produce steel and aluminium, exports Trump threatened to impose a 25% tariff on. Rio Tinto also faces a potential shareholder revolt concerning its membership of an Australian Coal lobby.
German shares suffer
The DAX 30 was the worst performing main index in Europe, losing 4.6% through the week, as not one of its constituents was up. German auto stocks were hit by rising prospects of a trade war, whilst the worst performer on the index was steel producer, ThysennKrupp, which lost 7.4%
Sky surged by 24.4% after US cable Comcast emerged with a GBP22.1bn takeover bid announcement. The US company’s bid represents a 16% premium on 21st Century Fox's buyout offer, which is linked to a Walt Disney deal for Fox assets.
Getlink , formerly known as Eurotunnel, soared 10.5% after Italian infrastructure investor Atlantia announced that it had acquired a 15.5% stake in the Channel Tunnel concessionaire.
Erste Group soared 7.2% after the Austrian lender posted the biggest profit in its history for 2017. The bank is rolling out its online banking platform across the seven countries in which it operates to help tap into an economic upswing in central and Eastern Europe, and will consider new markets after encouraging early results.
Peugeot gained 6.3% after beating analyst expectations as its annual net income rose 11.5% to €1.93bn on a 20.7% revenue increase to €65.21bn. The French carmaker shrugged off losses at the newly acquired Opel division to lift sales, profit and operating margin to new records in 2017.
Poste Italiane added 2.3% after it announced a sweeping restructuring plan with focus on parcel delivery under which it aims to increase net profits by 13% over the next five years. Italy’s national postal group and largest employer said it will pay a dividend of €0.42 per share for 2017, and increase the payout by 5% per cent per year until 2020.
Volumes exchanged for Jupiter Fund Management were high after its rating was downgraded by a number of sell-side analysts on the back of expectations of lower inflows as a result of the recent outflows from the company’s Dynamic Bond fund.
Zalando tumbled 11.0% after the fast-growing Berlin-based online fashion retailer reported a slight slowdown in sales growth and a drop in earnings due to the costs of funding its rapid expansion.
Carrefour fell sharply by 9.2% after the French supermarket retailer posted lower operating profit for the second straight year, as earnings dropped sharply in its core French market.
Each of the five largest ETFs by exposure to European listed companies saw outflows through the week, with an aggregate outflow of $4.2bn from these five funds, equivalent to a 1.5% decrease in AUMs. These flows are something for listed companies to be aware of from an IR perspective as these weigh on share price performance (see Passive IQ for more information).
- 07.03.2018: Eurozone GDP 4Q17 estimate
- 08.03.2018: ECB rate decision
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Nasdaq Advisory Services European Team Alexander Free
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