Key European stock markets were up in the week from the 3rd to the 7th of September 2012 (Milan +6.7%, London +1.5%, Frankfurt +3.5%, Paris +3.1%, Madrid +6.2%) thanks to the announcement of an unlimited government bond buying program by the ECB, welcomed by investors. Important indicators of economic activity, however, continued to disappoint: US manufacturing contracted in August for the third month in a row and job growth slowed more than expected adding only 96,000 jobs (forecast was 130,000 units); this fueled expectations of a stimulus intervention by the FED.
Auto & Parts stocks performed in line with the market (+1.9% in the week vs. European index Stoxx 600 +2.6%). New car registrations for the month of August showed a negative trend for the major markets: Italy -20%, France -11% and Germany -5%.
Pirelli shares ended the week at €8.96, up 2.3%, with limited trading volume (2.6 mln shares traded on average per day, lower than three month average at 4 mln shares). In a report on the tyre sector, French broker Cheuvreux confirmed the appeal of the industry thanks to the current discount on historical multiples and the positive earnings momentum. According to the analyst, Pirelli stock should continue to outperform on the back of the company’s right strategy and excellent execution; “Buy” rating confirmed, as well as the €11Target Price.