IBERIAN DAILY 05 OCTOBER (ANÁLISIS BANCO SABADELL)
NEWS SUMMARY: ACS, INDRA, INSURANCE SECTOR, PROSEGUR.MARKETS YESTERDAY AND TODAY
Energy crisis deepens as crude oil prices increase
European stocks suffered yet another session of corrections amid fears on supply problems and rising energy prices and their impact on inflation. Within the Euro STOXX, the best-performing sectors were Energy (the Brent oil price exceeded US$ 80.00/barrel) and Telecoms, whereas Technology and Banks saw the biggest losses. On the macro side, in the Euro zone, the Eurogroup believes that the rise in inflation will be temporary and that rising energy prices will not hinder the transition towards renewables. Meanwhile, October’s Sentix investor confidence index fell more than expected. From the ECB, L. de Guindos warned that the second-round effects from price hikes on inflation will be monitored. In Spain, September’s unemployment data showed the largest decline of the historical series (-13.7% YoY), with the number of employed rising significantly to 19.5 M. In the US, the Govt. mulls the possibility of imposing new tariffs and restrictions on Chinese products in view of China’s non-compliance with Phase 1. Lastly, the OPEC+ meeting stuck to August’s plan to increase production levels by 400,000 barrels/day on a monthly basis, in line with the recommendations issued by the technical panel.
What we expect for today
European stock markets would open with a slight rally, led by technology groups.
Currently, S&P futures are up +0.15% (the S&P 500 ended up +0.13% vs. its price at the closing bell in Europe). Volatility in the US rose (VIX 22.96). Asian markets are falling (China’s CSI closed and Japan’s Nikkei -2.5%).
Today, in the Euro zone we will learn September’s final Services PMI, and in the US August’s trade balance. In debt auctions: Spain (€ 4.5 Bn in 6M & 12M T-bills) and Germany (€ 700 M in inflation-linked bonds due 2033 and 2046).
COMPANY NEWS
INSURANCE SECTOR
Swiss RE outlined this morning the impact from IDA hurricane on its 3Q’21 accounts, estimated at US$ 750 M (around € 640 M) with a total estimated cost for the industry of US$ 28-30 Bn (€ 24-26 Bn). Ida has been the second most intense hurricane in the state of Louisiana, which has also led to floods and heavy rains in the northwest of the US. Among the insurers in our coverage universe, none of them has announced the potential impact thus far, which we estimate could be relevant for Mapfre. In the case of Mapfre, the company has no relevant exposure to Louisiana but to the northwest regions, and we estimate that the impact could range between around € 30 M and 35 M in gross terms (around -15% of the quarterly Net Profit of ~ € 180-190 M). However, the company has a nil impact from catastrophes in 1H’21 (vs. our estimate of ~ € 100 M in gross terms for FY2021 and > 140 M on average annually in 2017-2020).The amount outlined by Swiss RE confirms to some extent that the impact from Ida will be relevant but feasible for European insurers. However, we do not see risks in dividends, meaning a 7% yield for Mapfre.
ACS Actividades de Construccion y Servicios is a holding company. Through its subsidiaries, Co.'s activities are divided into the following areas: Construction, engaged in the construction of civil works, and residential and non-residential building construction; industrial services, engaged in the development of applied engineering services, installations and the maintenance of industrial infrastructures in the energy, communications and control systems sectors; services, groups together environmental services, the outsourcing of building maintenance services, logistics and transport services; and concessions, mainly engaged in transport infrastructure concessions.
Indra Sistemas is engaged in the design, development, manufacture, assembly, repair, and installation of computer software and applications. Through its subsidiaries, Co. is engaged in consulting, graphic design and multimedia, web design and marketing, internet development and electronic trade, systems integration and hosting geared business to business and business to consumer, as well as in internet financing and electronic marketing. Co. serves defense and security, transport and traffic, energy and industry, telecom and media, finance and insurance, and public administration and healthcare markets. Co. operates primarily in Europe, the United States, Canada, and Latin America.
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