The main European stock markets were up in the first week of September (Milan +4.6%, London +0.5%, Frankfurt +2.9%, Paris +2.4%). Positive investor mood was sustained by the cease fire between Russia and Ukraine as well as action by the European Central Bank which reduced benchmark interest rates to 0.05% and announced the intention to buy Asset Backed Securities with the aim to stimulate economic growth and fight deflation. Currency markets reacted strongly, pushing the Euro below the 1.3 mark against the US dollar.
The Auto & Parts sector was the best performer in Europe with a +3.8% gain led by automakers.
According to broker Exane BNP Paribas, despite 2015 expectations looking too high (global auto market growth revised down from +5.5% to +3.5%), the positive recovery cycle is not over yet. The analyst estimates European sector earnings to grow by 13% per annum between 2015 and 2016.
Pirelli shares closed the week at 12.2€, up 4.9%, with an average daily trading volume of 2.3 million shares (3 month average: 2 million).
Goldman Sachs published an update report on the stock confirming the Neutral rating and upping the valuation to a Target Price of 14.1€ (+0.5€): 2014 estimates are in line with targets, as improving price/mix and efficiencies will compensate for short term risks linked to the difficult market scenario in South America and Russia; the analyst confirmed the positive view on the execution of the Premium Strategy.
Consensus Target Price stood at 12.97€ with more than 85% of analysts advising to Buy or Hold the shares.