PEERS & MARKETS

The main European stock markets were down in the week from the 10th to the 14th of June 2013 (Milan -3.2%, London -1.6%, Frankfurt -1.5%, Paris -1.7%), bringing year-to-date performance to +4.1% (Stoxx 600 Europe index). Investor sentiment was affected by the Central Bank of Japan unexpectedly deciding to not strengthen the liquidity injection in the market ($620 bln per year), failing also to introduce new instruments to limit government bonds’ volatility. During the week, moreover, the World Bank downgraded its global outlook bringing 2013 growth to +2.2% (January estimate was +2.4%), lower than the 2.3% achieved in 2012. Expectations on emerging markets were lowered (China +7.7% vs previous 8.4%, Brazil +2.9% vs 3.4%, India +5.7% vs +6.1%), and the Eurozone is now expected to contract by 0.6%.

Auto & Parts stock retreated (sector index -2.8%), with the main auto OEMs down by more than 4% on average. At +8.3%, the sector is still the third best performer among European equities in 2013.

Tyre stocks outperformed the sector, thanks to May market data pointing to a possible recovery in the European replacement market and a still buoyant South American market.
Pirelli closes the week up +3.2% at 9.27€, with average daily volumes at 3.2 million shares (approximately +20% vs 1 month average). Consensus target price stood at 9.4€ with 82% of analysts with a positive view on the stock (“Buy” and “Hold”).

PEERS & MARKETS

The main European stock markets were down from the 3rd to the 7th of June 2013, for the third consecutive week (Milan -3%, London -2.6%, Frankfurt -1.1%, Paris -1.9%, Madrid -0.6%). Concerns continued that the Federal Reserve might soon scale back its bond-buying program and the ECB governor confirmed that no unconventional stimulus measures are in the agenda for Europe. According to the European Central Bank, moreover, growth in the region is expected to return no earlier than year-end 2013; the benchmark interest rate was kept at 0.5%.

Auto & Parts stocks retreated by approximately one percentage point (Stoxx Auto & Parts -0.9%). German automakers underperformed the index, on the news that Chinese authorities could impose duties on imports of large cars (engines above 2 liters). Additionally, after having recorded growth in April (+4% yoy) the German car market contracted in May (-9.9% yoy).

Pirelli shares were up 0.4% in the week, closing at 8.98€ thereby making up for the dividend payment (0.32€ per share). Daily average trading volume was at 3.2 million shares, or 20% above the average of the last 30 days. Broker Intermonte published an update on the stock and upgraded the recommendation on from “Hold” to “Buy”. According to the analyst, the new shareholder structure marks the beginning of a new phase of the equity story, and the stock should benefit in the short term from a recovery of the European tyre market as well as stabilizing consensus estimates. Additional valuation upgrades came from HSBC (Buy, TP from 10€ to 11€) and KeplerCheuvreux (Hold, TP from 8.5€ to 9€). Pirelli Target Price stood at 9.4€ (+15% vs market price) with 83% of analysts advising to “Buy” or “Hold” the stock.

PEERS & MARKETS

The main European stock markets were down in the week from the 20th to the 24th of May, 2013 (Milan -4%, London -1%, Frankfurt -1.1%, Paris -1.1%, Madrid -3.7%), after more than a month of gains brought indices to their highest levels since June 2008. Concerns mounted that the Federal Reserve may scale back Quantitative Easing in one of its next meetings and preliminary Chinese PMI data disappointed, showing that manufacturing activity contracted during the month of May.

Auto & Parts stocks were in negative territory in line with overall equity markets; sector index posted a -2.4% decline during the week but is still up 9.1% in 2013, mostly thanks to mass OEMs stocks recovering from their 2012 lows.

Pirelli closed the week at 8.53€, down 1.6% before dividend payment, with an average daily volume of 1.7 million shares (monthly average is 2.7 million).
In its London roadshow feedback report, Bank of America – Merril Lynch analyst confirmed Target Price (9.7€) and rating (“Buy”) on the stock. Societe Generale revised down its recommendation to “Neutral”, given Pirelli’s recent stock outperformance (+19% over the last month) which limited upside potential. According to both analysts, improving market volumes and supporting raw material input prices should positively impact 2013 targets achievement.

Target Price is slightly up at 9.18€, with 78% of analysts advising to “Buy” or “Hold” Pirelli shares.