PEERS & MARKETS

European equity indices recorded gains in the week from the 8th to the 12th of April, 2013 (Milan +3.5%, London +2.2%, Frankfurt +1.1%, Paris +1.8%, Madrid +3.1%). Investor sentiment was fuelled by the intention of the Bank of Japan to continue the monetary easing “beyond a 2-year period” until the target inflation rate of 2% is reached. In addition, the increase in Chinese imports (+14% in March), signaled the well-being of the country’s internal demand. Following 5 consecutive days of gains, European equities retreated on Friday due to disappointing US retail sales data (-0.4% in March) and fears that the Cyprus government might need more financial help than initially anticipated.

Auto & Parts stocks were in negative territory, with investors tactically reducing their exposure to the sector after poor auto sales in March and following comments from key automakers pointing at a difficult market environment in Europe, with an impact on Q1 2013 results.

Pirelli stock was down in the week and closed at 7.34€, with daily average volume traded of approximately 4.5 million shares. JP Morgan initiated coverage of the stock with a “Neutral” recommendation and a 9.5€ Target Price. According to the analyst, Pirelli and the sector currently discount short term fears on European volume and pricing trends. The broker agrees with the decision to postpone the presentation of the Industrial Plan, now scheduled for November in order to provide better visibility on the medium-long term context of reference.

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.