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Foreign Stock Roundup: Vale, AB InBev Impress, Royal Bank of Scotland Disappoints

Swarup Gupta
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Global stocks traversed another turbulent week marked by President Trump’s surprise tariff announcement. The upcoming imposition of tariffs on U.S. steel and aluminum imports led to losses on Wall Street as well as across the world. Additionally, the new Fed Chair indicated that the pace of rate hikes would likely be quickened, dampening investor sentiment further. Stocks in Asia were also weighed down by dismal China manufacturing PMI data.

STOXX Suffers on Powell’s Comments, U.S. Trade Tariffs

Markets across Europe closed in the black last Monday. The STOXX 600 gained 0.6% with all major sectors and exchanges finishing in the green. The FTSE 100 was the highest gainer, increasing 0.6%. Basic resources stocks advanced 1.4% with Anglo American NGLOY gaining more than 3%. Tech stocks were among the region’s leading performers gaining around 1% by the close.

The STOXX 600 declined 0.2% last Tuesday following a volatile trading session. Corporate developments dominated proceedings even as investors keenly awaited new Fed Chair Jerome Powell’s testimony to Congress. The FTSE 100, DAX and CAC 40 declined 0.1%, 0.3% and 0.01%, respectively. Media stocks were the day’s top performers following reports that Comcast CMCSA was aiming to acquire Sky.

Stocks across Europe finished in the red last Wednesday after Fed Chair Powell stated that an increase in the pace of rate hikes was increasingly likely. The STOXX declined 0.7% with all major sectors and exchanges closing in the red. Only media and tech stocks notched up gains, increasing by 0.05% and 0.07%, respectively. Basic resources suffered the worst losses, ending the day 2.3% lower.

The STOXX 600 declined 1.3% last Thursday with nearly all major sectors experiencing significant losses. Europe’s stocks plummeted to a two-week low in intra-day trade. The DAX, CAC 50 and FTSE 100 declined 2%, 1% and 0.8%, respectively. Among the worst losers for the day were media stocks which declined more than 2% following dismal earnings numbers. 

On last Friday, President Trump’s decision to impose tariffs on steel and aluminum sparked fears of a possible trade war. This development weighed on Europe’s stocks with the STOXX 60 losing 2.1%. Over last week, the benchmark index declined 3.7%. Nearly all major sectors finished in the red with many of them losing more than 2%.  The FTSE 100, CAC 40 and DAX lost 1.5%, 2.4% and 2.3%, respectively.

Asia’s Stocks Lose on Dismal China PMI, U.S. Tariffs

Asia’s stocks finished in the green on last Monday after Wall Street notched up gains even as bond yields declined from recently experienced four-year highs. The Nikkei 225 advanced 1.2%. The Kospi gained 0.3% while the ASX 200 increased 0.7% to end the day above the 6,000 mark. The Shanghai Composite and the Shenzhen Composite gained 1.3% and 2.3%, respectively. The CSI 300 added 1.2%.

Stocks listed on mainland China ended in the red last Tuesday. The Shanghai Composite and the Shenzhen Composite declined 1.1% and 0.3%, respectively. The blue-chip heavy CSI 300 lost 1.5%. However, the tech heavy Chi-Next index added around 1%. The Nikkei gained 1.1% while the Kospi lost out on early gains to close 0.1% lower. The ASX 200 inched up 0.2% by the close.

Dismal manufacturing data from China led to Asia’s stocks closing lower last Wednesday. Fed Chair’s Powell’s comments also weighed on the region’s bourses. The Nikkei lost 1.4%, curbing recent advances. The Kospi and the ASX 200 declined 1.2% and 0.7%, respectively. The Shanghai Composite moved nearly 1% lower but the Shenzhen Composite overcame early losses to gain 0.2%. The Chi-Next added 0.4%.

Stocks across Asia ended mixed last Thursday after ending February with losses. Loss on Wall Street triggered declines in Australia and Japan even as China stocks gained. The Nikkei 226 declined 1.6% to hit its lowest point since mid-February. The ASX 200 lost 0.7%. The Shanghai Composite and the Shenzhen Composite gained 0.4% and 1.2%, respectively. The CSI 300 advanced 0.6%.

President Trump’s decision to impose tariffs on steel and aluminum imports weighed on Asia’s stocks last Friday. The Nikkei 225 lost 2.5% even as the yen gained. Japan’s steel and auto stocks suffered heavy losses with Honda HMC and Toyota TM losing 3.8% and 2.4%, respectively. The Kospi and the ASX 200 lost 1% and 0.7%, respectively. The Shanghai Composite and the Shenzhen Composite declined 0.6%.

U.S. Tariffs, Powell’s Comments, NAFTA Fears Weigh on Bovespa

Chile’s large-cap IPSA index was the heaviest loser among Latin America’s equity gauges last Monday. The index lost 1.3% after shares of lithium miner Sociedad Quimica y Minera de Chile S.A. SQM declined by nearly 3% after Morgan Stanley MS lowered the stock’s rating. The Bovespa gained 0.4%.

Latin America’s stocks suffered losses on last Tuesday after the new Fed Chair Jerome Powell also said that U.S. inflation would increase prompting investors to predict that four rate hikes were increasingly possible in 2018. Consequently, Mexico’s IPC index and the Bovespa lost 0.9% and 0.7%, respectively.

The IPC index lost 1.3% last Wednesday even as Mexico’s stocks declined 6% over February. This was their worst monthly performance since September 2011. Disappointing earnings releases came to a close amid tense discussions aimed at saving NAFTA. The Bovespa lost 1.7% but managed to record a monthly increase of around 1%.

The Bovespa and the IPC index each gained 0.3% last Thursday. Investors across the region remained nervous following Powell’s hawkish comments. Brazil’s benchmark index lost 0.9% on last Friday after President Trump’s tariff plan triggered profit taking among investors. Shares of Vale declined more than 3%.

Stocks in the News

Vale S.A.’s VALE  fourth-quarter 2017 adjusted earnings of 36 cents per share surpassed the Zacks Consensus Estimate of 23 cents. However, the bottom line came in lower than the year-ago tally of 52 cents per share.

For 2017, adjusted earnings came in at $1.35 per share, outpacing the Zacks Consensus Estimate of $1.22. The bottom line came in higher than the year-ago tally of 96 cents per share.

Net operating revenues edged down 1.1% year over year to $9,167 million. Net operating revenues for 2017 came in at $33,967 million, up from $27,488 million recorded in the year-ago period.

In the fourth quarter, cost of goods sold totaled $5,791 million, up 13.5% year over year. Gross profit margin came in at 36.8%, contracting 810 basis points (bps) year over year. The stock has a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Anheuser-Busch InBev SA/NV’s BUD, fourth-quarter 2017 results normalized earnings per share of $1.04 increased substantially from 43 cents in the year-ago quarter backed by higher operating profits. Also, the bottom line came ahead the Zacks Consensus Estimate of 98 cents.

Revenues were up 2.8% to $14,600 million, surpassing the Zacks Consensus Estimate of $14,508 million. The company registered organic revenue growth of 8.2% courtesy of a 6.7% rise in revenues per hectoliter (hl) on a constant geographic basis.

Zacks Rank #3 (Hold) AB InBev issued guidance for 2018. The company reiterated the synergy and cost-savings guidance of $3.2 billion. It expects to achieve synergies of more than $1 billion in the next 2-3 years.

For 2018, management anticipates normalized effective tax rate in the range of 24-26%. Net capital expenditures are projected between $4 billion and $4.5 billion. AB InBev envisions dividend growth to be modest in the future. (Read: AB InBev Q4 Earnings and Revenues Surpass Estimates)

Fomento Economico Mexicano S.A.B. de C.V. FMX, alias FEMSA, reported lower-than-expected results for fourth-quarter 2017 with both the top and the bottom lines lagging estimates. Net majority income of 26 cents per ADS (Ps. 0.51 per FEMSA unit) in the fourth quarter was significantly below the Zacks Consensus Estimate of $1.08. FEMSA has a Zacks Rank 3.

Total revenues increased 11.5% year over year to Ps. 122,502 million (US$6,471.3 million). On an organic basis, total revenues increased 3.5% year over year. However, the company’s total revenues in dollar terms lagged the Zacks Consensus Estimate of $6,552 million. (Read: FEMSA Lags Q4 Earnings & Sales Estimates, Stock Falls)

The Royal Bank of Scotland Group plc RBS reported fourth-quarter 2017 loss attributable to its shareholders of £579 million ($768.5 million) as compared with the loss of £4.44 billion ($5.67 billion) witnessed in the prior-year quarter. Royal Bank of Scotland has a Zacks Rank #3.

Operating loss totaled £583 million ($773.8 million), as compared with the loss of £4.1 billion ($5.2 billion) incurred in the year-ago quarter. Adjusted operating profit, excluding certain items, came in at £512 million ($679.6 million), tanking 56.8% on a year-over-year basis.

For 2018, a set of targets has been committed by the bank. Management maintains the Common Equity Tier 1 ratio projection at 13%, including certain factors. In the medium term, management retains the target of achieving a sub 50% cost to income ratio and above 12% return on equity by 2020. (Read: Royal Bank of Scotland Stock Down 3.7% on Q4 Loss)

Nokia Corporation NOK has announced plans to acquire Unium, a U.S.-based software company, specialized in providing solutions to complex wireless networking problems for use in mission-critical and residential Wi-Fi networks. The deal is expected to close by Mar 31, 2018.

Following the acquisition, Nokia is likely to benefit from Unium’s software and intelligent mesh wireless technology, which has capacity to bolster Zacks Rank #3 Nokia’s end-to-end, whole-home Wi-Fi solution. Also, the technology will support its objective of offering solutions to Wi-Fi related problems at home. (Read: Nokia to Buy Unium for Whole-Home Wi-Fi Network Enhancement)

Toyota recalled around 64,900 units of Toyota Tundra and Sequoia, per Associated Press. This recently made safety-related announcement is due to the unexpected closing down of electronic stability control systems, which will put the vehicles in danger. Toyota has a Zacks Rank #3.

The latest recall includes 2018 models of Tundra and Sequoia, which were unveiled in 2017. The former is a pick-up truck, while the latter is a full-size SUV. (Read: Toyota Motor Recalls 64,900 Units of Tundra and Sequoia)

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.

Next Week’s Outlook

February was a difficult month for global markets with yield spikes and inflationary fears have a significant impact on stock movement. It seems now that last month’s volatility had seeped into March and is likely to persist in the weeks ahead. Trump’s recent tariff announcement has only served to dampen investor sentiment further. Given this backdrop, investors will look toward economic data to fuel gains in the weeks ahead.

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Nokia Corporation (NOK) : Free Stock Analysis Report
 
Honda Motor Company, Ltd. (HMC) : Free Stock Analysis Report
 
Toyota Motor Corp Ltd Ord (TM) : Free Stock Analysis Report
 
Royal Bank Scotland PLC (The) (RBS) : Free Stock Analysis Report
 
Anheuser-Busch Inbev SA (BUD) : Free Stock Analysis Report
 
Fomento Economico Mexicano S.A.B. de C.V. (FMX) : Free Stock Analysis Report
 
Comcast Corporation (CMCSA) : Free Stock Analysis Report
 
Sociedad Quimica y Minera S.A. (SQM) : Free Stock Analysis Report
 
Morgan Stanley (MS) : Free Stock Analysis Report
 
VALE S.A. (VALE) : Free Stock Analysis Report
 
ANGLO AMER ADR (NGLOY) : Free Stock Analysis Report
 
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