IBERIAN DAILY 08 OCTOBER (ANÁLISIS BANCO SABADELL)
NEWS SUMMARY: SANTANDER, STEEL SECTOR.France weathering the selling storm
With most European stock markets falling, the stability of the French CAC was surprising, despite the fact that no solution to the political crisis in the country is in sight. Meanwhile, the US was dragged down by another day of shutdown and the news from Oracle regarding deteriorating margins in data centres with Nvidia chips. In the STOXX 600, the best-performing sectors were Consumer Goods and defensive ones like Food, whereas Media, Technology and Banks ended with the biggest losses. On the macro side, in Germany industrial orders once again fell unexpectedly in August. In France, the resigning PM, S. Lecornu, began talks with members of several parties for 48 hours in an effort to find a solution to the country’s political crisis. From the Fed, R. Bostic warned of the risks of acting reactively and N. Kashkari warned on the dangers of pushing inflation upwards due to cutting interest rates excessively. The WTO warned that international trade will increase more than expected in 2025 due to AI-linked products. The International Energy Agency (IEA) raised its forecast for crude oil production for 2025 and warned of falling prices due to oversupply.
What we expect for today
European stock markets would trade again with a slightly bearish bias. Currently, S&P futures are up +0.10% (yesterday the S&P 500 ended -0.11% lower vs. the European closing bell). Asian markets are falling (China’s CSI 300 closed and Japan’s Nikkei -0.40%).
Today in Germany we will learn August’s industrial output and in the US August’s construction spending and the minutes from the last Fed meeting.
COMPANY NEWS
STEEL SECTOR
The European Commission has made public a proposal to protect steel manufacturers in the EU in view of the current overcapacity based on the following factors: (i) Curbing tariff-free steel imports to 18.3 M ton annually (this entails a 47% reduction vs. the 2024 steel quota). (ii) Doubling the out-of-quota duty to 50% (vs. 25% in the current safeguard measures).(iii) Reinforcing the traceability of steel markets by implementing a melted and pour requirement to avoid elusion.
These measures would replace the safeguards that will still be in place through June’26.
Net positive news for the sector, and if it is approved in the end (and diligently executed) it should lead not only to improved prices in Europe, but also an increase in occupancy rates (currently at 67%).
In our coverage universe, for ArcelorMittal, at first glance the impact may mean an improvement of more than +10%/+15% in EBITDA (we assume 35% recurring EBITDA in Europe for MTS). For Acerinox, the impact could even be greater, given that currently the company’s operations in Europe would be generating negative EBITDA, and thus these measures could mean more than +20% EBITDA’25.
Banco Santander is a holding company, providing a range of financial products. Co.'s products and services include: retail banking business that covers all customer banking businesses; wholesale banking business; as well as asset management and insurance business. Co.'s principal operations are in Spain, the U.K., Portugal, Germany, Italy and Latin America. As of Dec 31 2014, Co.'s total assets amounted to Euro1,266,296,000,000 and total customer deposits amounted to Euro647,627,000,000.
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