Earnings results largely guided stocks across Europe and China over last week. Investors in Europe also remained focused on the fallout of the crisis in Catalonia and bank of England’s decision to raise rates. In Asia, investors digested crucial manufacturing and services PMI data from China. Strong earnings powered stocks in Chile to their highest level in six months. Meanwhile, investors in Brazil remained weary even as prospects for President Temer’s fiscal austerity reforms looked extremely dim.
Earnings Power Europe’s Stocks, Bank of England Hikes Rates
Stocks across Europe ended mixed last Monday as investors digested earnings numbers and remained focused on developments in Spain and the U.S. The STOXX 600 closed the day 0.1% higher. However, the FTSE 10 lost 0.2% while the CAC 40 ended the day virtually unchanged. In contrast, the DAX and Spain’s IBEX 35 increased by 0.1% and 2.4%, respectively.
The STOXX 600 gained 0.3% last Tuesday with nearly all sectors and major exchanges finishing in the green. Investors continued to monitor quarterly earnings numbers and the political implications of the Catalonia crisis. Travel and leisure stocks emerged as the strongest performers with Ryanair Holdings plc RYAAY jumping 7% to emerge as the strongest performer for the pan-European index. The IBEX gained 0.7%.
Encouraging earnings results boosted Europe’s stocks on Wednesday. The STOXX 600 increased 0.5% with Germany’s DAX advancing by 1.8% to emerge as the largest gainer amongst the region’s indexes. Stocks of basic resources companies were the day’s largest gainers, moving up by 2.7% following encouraging Chinese manufacturing numbers. Stocks of retailers declined by 1% following the release of dismal outlooks for the sector.
The STOXX 600 declined 0.5% last Thursday with nearly all of its sectors closing with losses even though the index managed to recoup from some of its initial reverses. The CAC 40 and the DAX declined by 0.1% and 0.2%, respectively. The FTSE 100 advanced 0.9% after the Bank of England modified its strategy on monetary policy. The Bank of England increased rates for the first time in more than 10 years but indicated that a more dovish approach was likely in the future.
Europe’s stocks notched up gains last Friday, powered by strong earnings performances. The STOXX 600 gained nearly 3% with the majority of its sectors finishing the day in the green. Food and beverage stocks were the strongest performers of the day, closing 1% higher. The pound sterling gained marginally after declining the night before following the Bank of England’s decision to hike rates.
Nikkei Hits Fresh 21-Yr High, Earnings Guide Asia’s Markets
Stocks across Asia ended mixed on last Monday as investors continued to receive quarterly earnings numbers from regional companies. The Nikkei recovered from early reverses to end higher even as financials declined. In September, Japan’s retail sales posted a year over year increase of 2.2%. The Kospi and the S&P/ASX 200 increased by 0.2% and 0.3%, respectively. The Shanghai Composite and the Shenzhen Composite lost 0.8% and 1.7%, respectively following a slump in China’s bonds and consolidation on the part of equity traders.
Asia’s investors remained focused on China’s official PMI numbers and the Bank of Japan’s reluctance to raise rates as markets closed mixed last Tuesday. The Nikkei 225 recovered from losses to end the day virtually unchanged. The Kospi gained 0.9% while the S&P/ASX 200 slipped 0.2% lower. China’s manufacturing PMI reading came in below most estimates while the services PMI declined from last month. The Shanghai Composite and the Shenzhen Composite advanced by 0.1% and 0.7%, respectively.
Markets across Asia gained on last Wednesday with South Korea and Japan stocks emerging as the largest gainers. Meanwhile, oil prices moved higher while China’s Caixin manufacturing PMI numbers matched most estimates. The Nikkei and the Kospi increased by 1.9% and 1.3%, respectively. Energy stocks helped the S&P/ASX 200 gain 0.5%. The Shanghai Composite and the Shenzhen Composite each inched up by 0.1%.
The Nikkei 225 hit a new 21-year high last Thursday following gains made by energy and auto stocks. However, most of Asia’s other benchmarks closed with losses even as the Fed kept rates unchanged. The Kospi and the S&P/ASX 200 lost 0.4% and 0.1%, respectively. The Shanghai Composite and the Shenzhen Composite declined 0.4% and 0.7%, respectively. However, the MSCI’s broad gauge of Asia Pacific equities managed to close the day with gains.
Asia’s stocks closed mixed last Friday as investors digested key developments in the United States. This included the release of Trump’s tax proposals and the nomination of Jerome Powell as the next Fed Chair. The Kospi lost out on early gains to close 0.5% lower. Gains from mining stocks helped the S&P/ASX 200 advance 0.5%. China’s Caixin services PMI came in under official data. The Shanghai Composite and the Shenzhen Composite ended the day 0.4% and 0.7% lower.
Chile’s Stocks Jump to 6-Month High, Temer Worries Drag Bovespa Lower
Chile’s stocks jumped to their highest level in six months last Monday, powered by a bunch of strong earnings results. However, nearly all other Latin American markets suffered losses as traders remained wary of making large bets ahead of the naming of the next Fed Chair. The country’s blue-chip index gained 1.7% to break the 5,600 barrier. The Bovespa lost 1.6% as investors remained worried about President Temer’s ability to press forward with his reforms agenda.
The Bovespa lost 0.1% last Tuesday on concerns about whether Temer would be able to push through expense reduction measures needed to slash mounting public debt. Brazil’s benchmark gained 0.8% on last Wednesday with Vale SA VALE adding the highest number of points to the index, following an increase in prices of iron ore. On Thursday, Brazil and Mexico’s capital markets remained closed because of local holidays. The Bovespa closed 0.6% lower last Friday.
Stocks in the News
Alibaba Group Holding Limited BABA reported second-quarter fiscal 2018 (ended Sep 30, 2017) earnings of $1.29 per share, surpassing the Zacks Consensus of $1.04. Earnings were driven by solid growth in the company’s core e-commerce business, strong growth in metrics, international strength and growing cloud-computing services.
Zacks Rank #3 (Hold) Alibaba reported revenues of RMB55.12 billion (US$8.29 billion), increasing 9.8% sequentially and 60.7% year over year. Also, revenues came in above the Zacks Consensus Estimate of US$7.78 billion. The increase was driven by continued revenue growth in the China and International commerce retail business and strong improvement in Alibaba’s cloud business. (Read: Alibaba Beats on Q2 Earnings, Revenues Increase Y/Y)
PetroChina Company Limited PTR announced third-quarter 2017 earnings of RMB 4,690 million or RMB 0.03 per diluted share, compared with RMB 1,200 million or RMB 0.01 per diluted share a year earlier. China’s dominant oil and gas producer’s total revenues for the three months under consideration rose 17.1% from the year-ago period to RMB 481,795 million.
However, Zacks Rank #3 PetroChina’s earnings per ADR of 45 cents missed the Zacks Consensus Estimate by a penny on deteriorating results at its refining unit. PetroChina posted disappointing upstream output for the nine months ended Sep 30, 2017. In particular, crude oil output, accounting for 61% of the total, fell 5.2% from the year-ago period to 660.1 million barrels (MMBbl).
The Beijing-based company’s Refining & Chemicals business generated an operating income of RMB 27,732 million. This is down 19.2% from the year-earlier period’s earnings of RMB 34,311 million. (Read: PetroChina Q3 Earnings Jump on Oil Rebound, Cost Cuts)
China Petroleum and Chemical CorporationSNP, also known as Sinopec, reported third-quarter 2017 earnings per American Depositary Receipt (ADR) of $1.31, beating the Zacks Consensus Estimate of 97 cents and the year-ago quarter figure of $1.26. Also, revenues increased 19.5% year over year to 579,118 million yuan.
During the nine-month period ending Sep 30, 2017, Sinopec’s crude oil production decreased 4% year over year to 220.21 million barrels. The company’s Refining business recorded refinery throughput of 177.46 million tons (up 1.3% year over year).The stock has a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
HSBC Holdings plc HSBC reported third-quarter 2017 results wherein it recorded net profit attributable to shareholders of $3 billion, which improved from a loss of $617 million in the year-ago quarter. HSBC has a Zacks Rank #3.
Adjusted total revenues of $13 billion grew 3% year over year. Rise in net interest income and other income was partially offset by a decline in net fee income and lower net trading income. (Read: HSBC Swings to Earnings in Q3 on Higher Revenues, Costs Rise)
BP plc BP reported third-quarter adjusted earnings of 57 cents per American Depositary Share (ADS) on a replacement cost basis, excluding non-operating items. The bottom line surpassed the Zacks Consensus Estimate of 50 cents and the year-ago earnings of 30 cents. Total revenues were $60,808 million in the quarter, up from $48,043 million in the year-ago quarter. BP has a Zacks Rank #3.
In the third quarter, total production inched up 16.4% year over year to 2.462 million barrels of oil equivalent per day (MMBoe/d). Key project ramp ups primarily drove the upside. Segmental profits improved to $2,338 million from $1,431 million in the year-ago quarter, courtesy of higher refinery throughput. (Read: BP Surpasses Q3 Earnings Estimates on Higher Production)
Novo Nordisk A/S NVO reported third-quarter 2017 earnings of 63 cents per American Depositary Receipt (ADR) beating the Zacks Consensus Estimate of 58 cents. In fact, the reported figure was ahead of 57 cents earned a year ago. Quarterly revenues were up 1.6% year over year (up 2% in local currency) to $4.2 billion. However, the top line missed the Zacks Consensus Estimate of $4.30 billion.
Novo Nordisk updated its guidance for 2017. The company tightened its sales guidance and expects sales growth (in local currencies) to be in the range of 2% to 3% compared with 1% to 3%, projected earlier. A negative currency impact of 2 percentage points is also expected. (Read: Novo Nordisk Tops Q3 Earnings Estimates, Lags Sales)
Performance of Leading Foreign Stocks
The table given below shows the price movements of 10 of the largest stocks listed on indexes worldwide, over the last five days and during the last six months.
|
Ticker |
Last 5 Day’s Performance |
6-Month Performance |
|
SNY |
-3.8% |
-6.9% |
|
E |
+4.8% |
+3.5% |
|
SAP |
+0.7% |
+10.6% |
|
IDEXY |
-0.6% |
-10.0% |
|
BABA |
+4.0% |
+57.9% |
|
CHL |
+0.4% |
-6.8% |
|
KEP |
+0.8% |
-10.3% |
|
TM |
+1.1% |
+14.3% |
|
ABEV |
-3.6% |
+4.2% |
|
MELI |
+13.3% |
-2.8% |
Next Week’s Outlook
Earnings numbers are likely to power stocks over the current week as well. Meanwhile, the crisis in Catalonia will impede gains for Europe’s stocks in the days ahead. The Bank of England’s stance on monetary policy will possibly continue to have an impact on the country’s bourses. Meanwhile, investors in Brazil will likely remain circumspect even as President Temer’s reform push seems increasingly difficult.
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