The ECB’s policy announcement and tensions in Catalonia were the major events dominating the European landscape last week. However, investors chose to focus on earnings numbers on several occasions though the ECB’s dovish stance gladdened them. Japan’s markets received a boost after prime minister Abe’s ruling coalition secured an even larger majority after a snap election. Other Asian markets were guided by earnings and the fortunes of the euro. Meanwhile, political events continued to guide Latin America’s stocks.
ECB’s Dovish Stance, Strong Earnings Negate Catalonia Tensions
Stocks across Europe gained moderately last Monday after earnings results were able to deflect the attention of investors from the Catalonia crisis. The STOXX 600 lost out on some of its early gains to increase by 0.2%. The CAC 40, DAX, and FTSE 100 gained 0.3%, 0.1% and 0.02%, respectively. Tech stocks were the leading gainers for the day, having increased by 1.3%.
The STOXX 600 increased 0.4% last Tuesday with nearly all the industrial sectors closing in the red. Travel and leisure and healthcare stocks declined more than 1%, emerging as the biggest losers of the day. Corporate earnings continued to dominate market proceedings. Meanwhile, Spain’s government dismissed the government of Catalonia in an attempt to clamp down on the demand for independence. Despite this decision, the country’s benchmark IBEX index gained 0.4%.
Disappointing earnings reports led to losses for Europe’s stocks last Wednesday. The STOXX 600 closed in the red with nearly all industrial sectors closing the day with losses. Strong earnings numbers helped Lufthansa DLAKY gain more than 3% to emerge as the biggest gainer for the DAX. Share of Heineken HEINY lost more than 3% after it reported strong third quarter sales in all of its markets except Europe.
The STOXX 600 finished in the green last Thursday after the ECB said that it will be slashing the level of bond purchases every month, but will extend the duration of the stimulus program. The central bank has also promised to buy €30 billion in bonds instead of €60 billion beginning January 2018, and intends to extend its monetary stimulus program till September 2018 at least. (Read: ECB Reveals Dovish QE Plan: 4 Top European Stocks to Buy Now)
Stocks across Europe closed with gains on last Friday after investors ignored political tensions in Spain and chose to focus on earnings and the ECB’s decision to extend its stimulus program. The STOXX 600 ended the session with gains even as the CAC 40 hit its highest level in a decade.
The DAX also achieved yet another milestone following the ECB’s dovish stance. Auto stocks also boosted Germany’s benchmark index with Volkswagen posting strong earnings numbers. However, the IBEX 35 lost more than 1% after Catalonia declared itself as an independent state with Spain’s banking stocks emerging as the worst sufferers.
Wall Street, Earnings Guide Asia Stocks; Nikkei Snaps Winning Streak
Last Monday, Japan’s stocks closed with gains for the 15th successive session following the results of the country’s snap election. Prime Minister Abe’s ruling coalition secured a two-third majority in the Lower House post the election, securing the future of his economic stimulus policies. The Nikkei 225 increased by 1.1while the Kospi ended the day nearly unchanged while the S&P/ASX 200 lost out on early gains to close 0.2% lower. However, the Shanghai Composite and the Shenzhen Composite gained 0.1% and 0.6%, respectively.
A fall in the dollar and losses for Wall Street meant that Asia’s stocks were mostly unchanged last Tuesday. However, the Nikkei 225 gained 0.5% to close in the green for the 16th consecutive session. The Kospi and the S&P/ASX 200 ended the session marginally higher. The Shanghai Composite increased by 0.2% while the Shenzhen Composite ended the day 0.1% lower.
Stocks across Asia notched up gains last Wednesday after the Australian dollar plummeted to a three-month low, dragged down by below par inflation numbers. However, the Nikkei snapped its winning streak to close 0.5% lower. The Kospi and the S&P/ASX 200 each gained 0.1%. The Shanghai Composite and the Shenzhen Composite advanced by 0.3% and 0.8%, respectively.
Investors focused on earnings numbers and smaller gains from U.S. stocks on last Thursday even as Asia’s stocks closed mostly mixed. The Nikkei 225 rebounded, gaining 0.2%, the Kospi lost 0.5% but the S&P/ASX 200 recovered from early reverses to end the day 0.2% higher. The Shanghai Composite and the Shenzhen Composite increased by 0.3% and 0.2%, respectively.
A decline in the euro following ECB’s announcement on last Thursday led to most of Asia’s indexes closing with gains on last Friday. The Nikkei 225 increased 1.3% while the Kospi gained 0.6%. The S&P/ASX 200 lost 0.2% while China’s CSI 300 gained 0.7% to hit a two-year high. The Shanghai Composite gained 0.3% while the Shenzhen Composite lost 0.3%.
Political Factors, Earnings Guide Latin America’s Stocks
On Monday, stocks in Argentina soared following speculation that a strong showing at the elections by President’s Macri’s ruling coalition would help to further his market friendly reforms agenda. Consequently, the country’s benchmark index, the Merval, gained 3.3% to hit its highest ever level. However, the Brazil’s Bovespa lost 1% as investors remained wary before a crucial Congressional vote on corruption charges against President Temer. Uncertainty over who will succeed Janet Yellen as the Fed Chair pushed Mexico’s IPC exchange 0.8% lower.
The Bovespa rebounded on Tuesday, gaining 1% following encouraging third quarter earnings from wood pulp producer Fibria Celulose SA FBR. A 6.9% decline in shares of America Movil AMX led to Mexico’s IPC exchange closing 2.6% lower on Wednesday. The Bovespa gained 0.4% even as investor’s remained wary before a crucial legislative vote on Temer’s corruption charges.
Ultimately, Brazil’s benchmark index lost 1% on Thursday even as he was exonerated from corruption charges in a crucial legislative vote. This event would likely delay much awaited pension reforms. Encouraging corporate earnings result helped the Bovespa gain 0.3% on Friday. Stocks in Mexico moved higher for the second successive day with the IPC exchange gaining 0.5%.
Stocks in the News
Barclays PLC’s BCS third-quarter 2017 net income attributable to ordinary equity holders was £583 million ($763.1 million), reflecting a significant improvement from £190 million in the prior-year quarter. Net operating income was £4.46 billion ($5.84 billion), down 4.1% year over year.
Operating expenses (excluding U.K. bank levy and litigation and conduct) totaled £3.27 billion ($4.28 billion), declining 8.6% from the year-ago quarter. Zacks Rank #2 (Buy) Barclays targets to achieve ROTE (Return on Tangible Equity) of greater than 9% in 2019 and more than 10% in 2020. (Read: Barclays Stock Falls 7% Despite Rise in Q3 Earnings)
Bayer AG’s BAYRY third-quarter 2017 core earnings per share from continuing operations were 43 cents per American Depository Receipt (ADR), which topped the Zacks Consensus Estimate of 29 cents. Total sales in the quarter were approximately $9.47 billion, down 27.2% year over year.
For 2017, Bayer expects sales to be in the range of of €35 billion to €36 billion. This continues to correspond to a low-single-digit percentage increase on a currency- and portfolio-adjusted basis. Moreover, the company anticipates core earnings per share from continuing operations to be in a low-single-digit percentage decrease. The stock has a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Koninklijke Philips N.V. PHG posted third-quarter net income of €423 million ($497 million), an increase of 10.4% compared with the prior-year quarter’s figure of €383 million. Total sales in the quarter came in at €4,148 million ($4,875 million), relatively flat (inching down 0.2%) from the year-ago tally.
Based on the present market scenario and accounting for the macroeconomic headwinds, Zacks Rank #4 (Sell) Philips continues to project full-year sales growth of 4-6%. The company also anticipates its Adjusted EBITA margin to improve around 100 basis points this year. (Read: Philips Q3 Earnings Increase Y/Y, Order Intake Strong)
Novartis AG’s NVS third-quarter 2017 core earnings of $1.29 per share beat the Zacks Consensus Estimate of $1.25 and were up from $1.23 recorded in the year-ago quarter. Novartis has a Zacks Rank #3 (Hold).
Revenues increased 2% to $12.4 billion as volume growth driven by Cosentyx and Entresto was partially offset by the negative impact of generic competition and pricing. Revenues also beat the Zacks Consensus Estimate of $12.2 billion. (Read: Novartis Q3 Earnings & Sales Top on New Drugs Strength)
Anheuser-Busch InBev SA/NV’s BUD third quarter normalized earnings per share of $1.31 rose 57.8% from 83 cents earned in the year-ago quarter on the back of higher profits. However, earnings fell short of the Zacks Consensus Estimate of $1.50.Revenues advanced 32.7% to $14,740 million but missed the Zacks Consensus Estimate of $15,398 million. Anheuser-Busch has a Zacks Rank #3.
Following the quarter, management reiterated previously issued outlook for 2017. As the company remains well on track with the SABMiller integration, it raised the synergy and cost savings guidance by $400 million to $3.2 billion. (Read: AB InBev Earnings Miss Again in Q3, Ups Synergy View)
GlaxoSmithKline plc GSK reported core earnings of 85 cents per American depositary share in the third quarter of 2017, surpassing the Zacks Consensus Estimate of 84 cents. Quarterly revenues were up 2% at CER to $10.2 billion (£7.8 billion) on the back of strong performances mainly in the Pharmaceuticals segments. However, revenues were in line with the Zacks Consensus Estimate.
Zacks Rank #3 GlaxoSmithKline expects to face a generic competition for Advair in the United States next year, which will affect the top line. However, there is uncertainty regarding the timing of launch of a generic version of the drug. With no generic version of Advair expected to be unveiled in 2017, the company continues to expect core 2017 earnings growth in the range of 3-5% at CER. (Read: Glaxo Q3 Earnings Beat, Revenues In Line, Shares Down)
TOTAL S.A. TOT reported third-quarter 2017 operating earnings of $1.04 per share (€0.88 per share), beating the Zacks Consensus Estimate of 99 cents by 5%. Total revenues in the reported quarter came in at $43.04 billion, up 15.1% from $37.41 billion in the year-ago quarter.
Zacks Rank #3 TOTAL expects production from the upstream segment to improve 5% year over year. The company continues to work on cost management initiatives and expects to generate cost savings of $3.6 billion in 2017. (Read: TOTAL Beats Q3 Earnings, to Lower 2017 Costs by $3.6B)
Performance of Leading Foreign Stocks
The table given below shows the price movements of 10 of the largest stocks listed on indexes worldwide, over the last five days and during the last six months.
Last 5 Day’s Performance
Next Week’s Outlook
Europe’s markets continue to remain largely unaffected by the political crisis in Spain. However, Catalonia’s desire for independence is hurting the country’s benchmark IBEX index significantly. Meanwhile, Abe’s victory has provided new impetus to Japan’s stocks even as the rest of Asia’s markets focuses on the fortunes of the euro and earnings numbers. Political events have guided Latin America’s stocks as well during this period. Such developments are likely to have a major bearing on the direction of stocks across these regions in the week ahead as well.
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Deutsche Lufthansa AG (DLAKY) : Free Stock Analysis Report
Novartis AG (NVS) : Free Stock Analysis Report
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Bayer AG (BAYRY) : Free Stock Analysis Report
Barclays PLC (BCS) : Free Stock Analysis Report
Anheuser-Busch Inbev SA (BUD) : Free Stock Analysis Report
Heineken NV (HEINY) : Free Stock Analysis Report
Koninklijke Philips N.V. (PHG) : Free Stock Analysis Report
TotalFinaElf, S.A. (TOT) : Free Stock Analysis Report
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