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Main European stock markets were down for the second consecutive week, (Milan -1.4%, London -2.8%, Paris -3.4%, -3.1% Frankfurt, Madrid -3.5%) suffering from the weak macroeconomic newsflow and the continuing political tensions between Russia and Ukraine.
Fears over a slowdown in the Chinese economy, as confirmed by the February data to the lowest level since 2009 (industrial production +8.6% compared to 2013 against a consensus of +9.5%) together with the data on declining industrial production in the euro area in January (-0.2% yoY vs. +0.5% expected) prompted the sell-off on the markets.
In line with the market sector also the European Auto&Parts sector which was dow 4.4%.
Pirelli ended the week at € 12.04 (-5.3%) with an average daily trading volume around 3 million pieces.
The main European stock markets were down in the week from the 3rd to the 7th of March 2014 (London -1.4%, Frankfurt -3.5%, Paris -0.9%, Milan +0.9%). Rising tension between Ukraine and Russia led investors to reduce exposure to equity, causing higher volatility and the appreciation of safer assets (gold and oil hit weekly highs at +1.8% and +2.3% on Friday’s close, respectively). On the macro front, the central bankers of England and the EU kept benchmark rates unchanged (ECB at 0.5%, BOE at 0.25%).
Auto & Parts stocks were slightly down in the week (sector index -0.8% vs Stoxx 600 -1.5%); OEMs benefited from the many new product launches at Geneva motor show, in addition to growth in February car registrations in Europe (Germany +4.3%, Spain +17.8% due to government incentives, Italy +8.6%).
Pirelli shares ended the week up one percent at 12.72€, with an average daily trading volume of 2.4 million shares (in line with the previous 4 weeks). The financial market reacted positively to the placement of the 1.5% shareholding (7 million shares) by Intesa SanPaolo at a price in line with current trading (removing stock overhang worries), whereas Brazilian tyre market data (car replacement +18% yoy in January) confirmed the positive trend of the South American market. Today’s Mediobanca valuation upgrade (TP +1€ at 14€) brings consensus Target Price to 12.1€.
The main European stock markets were slightly up in the week from the 24th to the 28th of February, 2014 (Milan +0.2%, Frankfurt +0.4%, London -0.4%, Paris +0.6%, Madrid +0.4%). On a positive note, the EU revised its 2014 Eurozone GDP growth estimates: +1.2% yoy vs +1.1% forecasted in November; improved outlook for Germany (+1.8% vs +1.7%), France (+1% vs +0.9%) and Spain (+1% vs +0.5%), whereas Italy’s growth is expected down to +0.6% (+0.7% previously). European unemployment in January was in line with expectations at 12% (stable vs December), and the US purchasing manager confidence surprised on the upside. Volatility was up sharply towards the end of the week, as political tension kept rising in Ukraine causing today’s sell-off in equity markets.
Auto & Parts stocks were down in the week (-1% vs Stoxx 600 +0.6%), weighted down by large-cap VW (-6%): the shares factor in the dilutive impact of the preference shares issued to finance the acquisition of Scania (6%/7% dilution according to broker Cheuvreux). Moreover, investors reduced exposure to those stocks most exposed to the Russian market (Renault -2.5%, Nokian -4.9%).
Pirelli shares were up 0.6% in the week, closing at 12.6€ with an average daily trading volume of 2 million shares (-20% vs 4-week average). The deal reached with Bekaert (disposal of steel cord business and long term supply agreement) was already discounted by the market; sector analysts viewed the deal positively, as it increases Pirelli’s focus on Premium tyres, with higher profitability, it reduces exposure to a volatile business (steelcord is mainly a truck tyre component), and it has a positive impact on net debt. Consensus target price stood at 12.04€ with 74% of analysts advising to buy or hold the shares.