Fears about the debt of Eurozone countries and the difficulties about the agreement on US government borrowing (agreed on Sunday 31 July) dominated stock markets in the week 25-29 July. On the main financial markets prices fell by an average of 3%, with a fall of 5.3% in Milan due to the high incidence of bank shares: this was also the worse-performing sector in Europe as a whole (-5%).
Sales in the auto&parts sector (-4.8%) despite the good results in the 2Q reporting season, already anticipated in full by stock markets.
Pirelli closed the week at € 7.24 outperforming the Milan stock market (+5pp), the sector index (+4.7pp) and its main peers (+7.6pp v. Michelin, +3.9pp v. Continental, +6.2pp v. Nokian). The share price was sustained by the agreement on Russia and the results of 2Q 2011, which exceeded market expectations. According to Intermonte, the agreement reached on 25 July between Pirelli, Russian Technology and Sibur will allow Pirelli to immediately enter a high profitability market. The analysts comments about Pirelli’s results were positive: “an excellent quarter” demonstrating the solid positioning of the business and high pricing power. There were six upgrades in the TP for the share: Banca IMI (€8.92 to €9.7), Banca Aletti (from €8.50 to €9.50), Exane (from €9.70 to €10), Banca Leonardo (from €8.2 to €10.1), Axia (from €8.2 to €9.0) and Chevreux (€8.0 to €8.20). The mean consensus TP is 8.80€ with BUY recommendations from 92% of brokers.