PEERS & MARKETS

The main European stock markets were mixed in the week from the 7th to the 11th of January 2013 (Milan +3.2%, London +0.5%, Frankfurt -0.8%, Paris -0.6%). In its Thursday meeting the European Central Bank, as expected, left its benchmark rate unchanged at 0.75%, commenting that the economy is still weak and a recovery is expected only in the second half of 2013. Concerns arose, moreover, from the increase in Chinese inflation over the month of December (+2.5%, more than expected) which could limit the scope for monetary easing.

Auto & Parts stocks retreated in the week (Stoxx A&P was down 1%); European car registration data for the month of December showed that the five largest markets (France, Spain, Italy, Germany and UK) contracted 14% on a yearly basis. Valuations near to 10-month lows and upside in case of an improvement in consumer confidence led Goldman Sachs analyst to reiterate its attractive stance on Auto & Parts stocks in 2013. The broker is however more cautious on tyre stocks given their strong performance in 2012 (+44% on average) and possible pricing pressure ahead; accordingly, all stock recommendations and target prices were revised down.

Pirelli stock was up +1.8% in the week, closing at €9.11 with an average daily traded volume of 3.2 million shares. Bank of America – Merril Lynch initiated the coverage on the stock with a “Buy” recommendation and an €11.5 target price. As a result, Pirelli average target price stood at €9.9 with 79% of analysts recommending to “Buy” or “Hold” the stock.

PEERS & MARKETS

European stock markets started 2013 on a positive note and were up between January 2 and 4 (Milan +4.2%, London +2.8, Frankfurt +2.2%, Paris +3.0%).

Investors welcomed the US budget agreement which reduced the possibility of a “fiscal cliff”; global rating agencies, however, highlighted the limited impact of the new policies on the country’s deficit. Good news, moreover, came from the German labor market (unemployment rate at 6.9% in December) and from the US manufacturing industry (ISM manufacturing index).

Auto & Parts stocks performed in line with market and posted a 3% gain in the week. According to broker CITI, the best performing stocks of 2012 – Premium OEMs and tyre makers – are likely to continue on their path and could lead gains in 2013.

Pirelli closed the week at €8.95, up 3.4%, with an average daily volume of 1.5 million shares (3 month average is 3 million shares traded per day). Target price is at €9.9 with 83% of analysts recommending to Buy or Hold the stock.

PEERS & MARKETS

European stock markets were down in the week from the 22nd to the 26th of October 2012 (Milan -1.7%, London -1.5%, Frankfurt -2%, Paris -2%, Madrid -1.7%). Market sentiment weakened due to poor EU manufacturing data – PMI Euro area contracted, as well as Germany IFO, down for 6 straight months – as well as Q3 results below expectations for a number of global Blue Chip companies; Chemical stocks (-2.2%) and Telecoms (-3%) lagged other sectors during the week.

Auto & Parts stocks edged down as well (-2.2% in the week) following disappointing Q3 results and lowered 2012 targets for several Auto and Component makers; broker Goldman Sachs, moreover, lowered its global light vehicle production estimates for the years 2012-2014 (new estimates: +4.9% in 2012, +2.8% in 2013, +5% in 2014).

European tyre stocks advanced in the week, outperforming the overall market. Pirelli ended the week at €8.53, up 1.5 percentage points with a daily average traded volume of approximately 2.6 million shares. Average Target Price was unchanged in the week at €10.3 (20% above Friday’s close price), as well as the percentage of analysts with a positive recommendation on the stock, 92% of total.