EUR 100.00 For Business Accounts Only

IBERIAN DAILY 16 OCTOBER (ANÁLISIS BANCO SABADELL)

NEWS SUMMARY: ACS, GRIFOLS, RESULTS HIGHLIGHTS.

MARKETS YESTERDAY AND TODAY

Covid-19 triggers fears on the market, especially with no fiscal package
The delay in a fiscal stimulus package in the US (Mnuchin confirmed that an agreement is still being worked on ahead of the election, and Trump announced that he would be willing to exceed the US$ 1.8 Tn initially proposed) and the new restrictions due to the Covid-19 pandemic in cities like Paris and London have led to a wave of sell-offs in Europe that came close to -3%. The IBEX only fell -1.5% with Grifols soaring more than +8.5% after benefiting from the failure of one of its competitors in the development of a product in which the company was competing, and in the US value, led by financials and energy stocks, outperformed growth, where tech stocks were bringing up the rear. Meanwhile, in the Euro STOXX, all the sectors closed in the red, with Insurance and Energy leading the drops, and with Real Estate and Travel & Leisure the best relative performers. In the euro zone, the European Council has not yet solved the Brexit problem, and Boris Johnson will have to decide today whether to continue with negotiations. In the US, weekly jobless claims rose more than expected, setting off alarms that new fiscal stimulus is needed, whereas October’s leading indicators were a mixed bag (Empire index falling more than expected and Philadelphia Fed rising unexpectedly). Meanwhile, tension between the US and China has increased, with the US trying to blacklist he Chinese firm Ant (and penalise its IPO) and China approving a law to restrict sensitive exports. In Spain the Govt. sent Brussels a series of proposals including a tax hike (on plastics, sugary foods, digital tax, Tobin tax) totaling € 9 Bn. In US business results, Morgan Stanley and Walgreens beat expectations.
What we expect for today
European markets would rise more than +0.5% as a rally against yesterday’s drops, with the luxury sector boosted by the solid results from LVMH. Currently, S&P futures are up +0.1% (the S&P 500 closed up +0.6% vs. its price at the closing bell in Europe). Volatility in the US increased (VIX 26.97). Asian markets are trading with mixed results (Hong Kong +0.8%, Japan -0.4%).
Today in the Euro zone we will learn September’s final inflation figure and the European Council will meet for the second day and in the US September’s industrial output and retail sales as well as October’s U. of Michigan sentiment index. In US business results, State Street, Bank of NY and Citizens, among others, will release their earnings.


COMPANY NEWS

Results highlights next week.
The 3Q’20 results season kicks off with four companies: Atresmedia, Bankinter, Enagás and Iberdrola. We expect a positive impact in Atresmedia, where we expect to see substantial improvement vs. the sharp drops seen in 2Q’20 thanks not only to a better performance of the advertising market (with a drop of -5.5% in 3Q’20e vs. -32% in 1H’20) but also to a significant increase in revenues stemming from content sales to third-parties and further cost-control measures. In the case of Bankinter, we expect a slightly negative performance, not so much on the side of operating trends, which would be maintained, but as a result of the uncertainty in the face of NPL increases. As for the CoR, we expect it to stand at 65bps, which would be compatible with reaching 85bps BS(e) in 2020, which stands slightly above the guidance of 70bps.

GRIFOLS. Vertex stops phase II trial for the treatment of Alpha-1 Antitrypsin deficiency. BUY.
The US laboratory Vertex announced the day before yesterday that it abandons its phase II trial VX-814 for the treatment of alpha 1 antitrypsin deficiency for safety reasons (elevated liver enzimes in patients). The alpha 1 antitrypsin deficit is one of the main causes of Chronic obstructive pulmonary disease (COPD). Very positive news, as shown by the positive share price reaction (+7% vs. IBEX). We recall that VX-814 was the main competitive threat for GRF, as alpha 1 antitrypsin sales account for 15%-16% of its total sales BS(e) and, probably, an even larger portion of its EBITDA. GRF is a market leader in this segment thanks to Prolastin, and we estimate it has a global market share of ~67%.