Live Markets: Autos: That ugly dent is hard to fix
11/07/2019 10:44
* European stocks rise after dovish Fed testimony, FOMC notes
* STOXX 600 up 0.3%, driven by oil & gas stocks
* UK housebuilders rally on upbeat survey
* Indivior soars after lifting profit guidance, Reckitt rises after U.S. settlement
Welcome to the home for real-time coverage of European equity markets brought to you by Reuters
stocks reporters and anchored today by Thyagaraju Adinarayan. Reach him on Messenger to share
your thoughts on market moves: thyagaraju.adinarayan.thomsonreuters.com@reuters.net
AUTOS: THAT UGLY DENT IS HARD TO FIX (0943 GMT)
Auto stocks are in red again today and that's five straight sessions of losses. In build-up
to earnings, auto stocks have lost about 2% since the start of July. They are still up 9% for
this year as a broader stock market rally on hopes of rate cuts and a de-escalation of
U.S.-China trade war offset fundamental concerns over a steep fall in global auto sales.
"We remain cautious and would not buy into any rally as we believe the hope for a China
sales recovery will likely reverse in July... Depressed production across regions is unlikely to
pick up materially," analysts at Bank of America Merrill Lynch say.
Recent warnings from Daimler DAIGn.DE , China's Geely 0175.HK , BASF BASFn.DE and Fuchs
Petrolub FPEG_p.DE highlight the weakness in the sector.
And more from today by European small-caps Aumann AAGG.DE and Sensirion SENSI.S , and one
from Hong Kong's Johnson Electric 0179.HK , shows nobody in the sector is spared and that we
are far from seeing any recovery in this sector.
BAML: "As we move into Q2/H1 2019 we see risks to companies' guidance again as the
anticipated recovery in Q2 has not materialised and many market participants also flag risks and
lack of visibility for H2, when we no longer anticipate a market recovery."
Ouch! That hurts.
On top of this, Trump might soon turn his attention back to Europe, especially on autos.
Yesterday, a European Union member said the bloc should brace for U.S. tariffs on several fronts
in the months ahead, just hours before Washington launched a probe of a planned French digital
tax. urn:newsml:reuters.com:*:nL2N24B18E
Despite the sector trading at a huge discount (see below), investors are likely to avoid
autos until there is some comforting news.
(Thyagaraju Adinarayan)
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OPENING SNAPSHOT: AUTO SUPPLIERS, UK HOUSEBUILDERS, RECKITT & INDIVIOR (0748 GMT)
European stocks are 0.4% higher driven by oil & gas and defensive stocks as strong rate-cut
hints by the U.S. Fed and higher crude oil prices brought back some cheer to markets after four
straight sessions of losses.
Gerresheimer GXIG.DE is rallying 9% and on track for its best day since February after its
results, while Fresenius Medical Care is leading Frankfurt's blue chip index, up 1.8%, after
Washington pushed ahead with its plans to move more kidney disease treatment into patients'
homes.
UK housebuilders are rallying after an industry survey showed tentative signs of recovery in
the battered housing market in June as interest among buyers rose for the first time since
shortly after the 2016 Brexit referendum.
Barratt Developments (+3%), Taylor Wimpey TW.L (+1.9%) and Persimmon PSN.L (+1.5%) were
among the top risers on the FTSE 100. Barratt is getting additional boost from bullish broker
notes by Morgan Stanley and Berenberg.
Reckitt Benckiser RB.L was among the best performing stocks on FSTE 100 .FTSE after it
reached settlement in a U.S. probe related to its involvement in the mis-selling of Suboxone in
the U.S. Jefferies sees the resolution of uncertainty as a positive, while among negatives the
broker believes the company might be barred from participation in other Federal programmes.
Meanwhile, FTSE small-cap Indivior, which Reckitt used to own, is soaring 40% after sharply
increasing its outlook driven by lower-than-expected erosion of Suboxone film by generic
competition. urn:newsml:reuters.com:*:nL4N24C1HU
A slew of warnings by small-cap auto/industrial suppliers are hitting large-cap car parts
suppliers Valeo VLOF.PA and Continental CONG.DE .
JohnsonElectric slumped 10% in Hong Kong after the motor manufacturer forecast sharp decline
in first-half profits citing a decline in light vehicle production globally, Germany's Aumann
AAGG.DE and Switzerland's Sensirion SENSI.S flagged similar issues and warned on profits.
Aumann has slumped 18% and Sensirion is down 8%.
(Thyagaraju Adinarayan)
*****
STOCK FUTURES RISE ON RATE CUT HINTS, BUT WORRIES ABOUT RESULTS WEIGH (0642 GMT)
European stock futures are rising 0.4% to 0.5% as investors seem to be shifting focus back
to rate cuts after U.S. Fed chairman Powell's testimony strongly hinted at "insurance" cuts
later this month.
But, global growth worries and the impact on corporate profits could keep a lid on gains as
the second-quarter earnings season gets underway.
Last afternoon's trading highlighted the nervousness among investors after Europe swung from
negative to positive to then closed in the red.
That's "a neat summary of the current battle of influence between central bank support and
the still cloudy outlook for economic growth and hence corporate profits," Ian Williams,
economics & strategy research analyst at Peel hunt said.
Germany's Aumann AAGG.DE , Krones KRNG.DE and Deutsche Beteiligungs DBANn.DE have
issued warnings on profits, sending their shares down 8-10% in premarket trade. Europe's largest
sugar refiner, Suedzucker, is seen 7% lower as it continues to struggle with a collapse in world
sugar prices.
In positive news, Barry Callebaut is rising 2.6% premarket after the Swiss chocolate maker
confirmed its mid-term guidance and posted an acceleration in sales volumes for the nine months
to May 31.
But news not related to results may take the spotlight this morning.
The boss of Europe's Ryanair has warned the impact of the prolonged grounding of Boeing's
737 MAX on the budget airline's growth plans may start to spill over to next summer if the
airplane is not flying again by November.
Swiss Re SRENH.S is seen 0.5% lower after suspending its planned $4.1 billion public
offering of its UK life insurance company ReAssure citing weak demand from institutional
investors.
Reckitt Benckiser shares could be hit after it said it would pay up to $1.4 billion to
resolve all U.S. federal investigations into the firm in connection with the sales and marketing
of Suboxone Film by its former prescription pharma business Indivior. Reckitt had set aside just
$400 million relating to the issue.
U.S. criminal charges accused Indivior, formerly owned by Reckitt, of illegally increasing
prescriptions for its opioid addiction treatment Suboxone.
In latest Deutsche Bank news, the U.S. Justice Department is investigating if the German
lender violated foreign corruption or anti-money-laundering laws in its work for state fund
1Malaysia Development Berhad (1MDB), the Wall Street Journal reported.
Dialysis machine maker Fresenius Medical Care FMEG.DE shares are up in premarket trade
after the U.S. announced plans to change kidney disease treatment.
Key corporate headlines:
Suedzucker quarterly earnings slump after sugar price collapse urn:newsml:reuters.com:*:nL8N24C0DR
Swiss Re suspends ReAssure IPO amid weak demand urn:newsml:reuters.com:*:nL8N24C0IW
Barry Callebaut confirms guidance as sales growth picks up urn:newsml:reuters.com:*:nL8N24C0IC
U.S. probes Deutsche Bank's dealings with Malaysia's 1MDB - WSJ urn:newsml:reuters.com:*:nL4N24C0QO
UK's Reckitt to pay up to $1.4 bln to resolve Indivior probe urn:newsml:reuters.com:*:nL8N24C0XD
Ryanair sees risk to 2020 growth if 737 MAX grounded beyond November urn:newsml:reuters.com:*:nL2N24B1P3
Norwegian Air CEO Bjoern Kjos steps down urn:newsml:reuters.com:*:nASP00148Z
(Thyagaraju Adinarayan)
*****
EUROPE SEEN HIGHER ON STRONG HINTS OF RATE CUT BY FED (0530 GMT)
European stocks are expected to open higher this morning as U.S. Fed Chairman Jerome
Powell's testimony before Congress reinforced expectations of a rate cut later this month.
The commentary drove U.S. stocks to fresh record highs last evening. urn:newsml:reuters.com:*:nL2N24B1QQ
Financial spreadbetters IG expect London's FTSE to open 26 points higher at 7,557,
Frankfurt's DAX to open 47 points higher at 12,421, and Paris' CAC to open 27 points higher at
5,595.
Oil & gas stocks in focus after crude prices soared 4.5% last night after U.S. crude
inventories shrank and as major producers cut nearly a third of offshore Gulf of Mexico
production ahead of an expected storm. O/R
(Thyagaraju Adinarayan)
*****
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futures-snapshot https://tmsnrt.rs/2NMCSaB
opening-snapshot https://tmsnrt.rs/2NNhHVM
Autos cheap https://tmsnrt.rs/32oXf0P
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(Reporting by Danilo Masoni, Helen Reid, Josephine Mason and Thyagaraju Adinarayan)