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IBERIAN DAILY 20 SEPTEMBER (ANÁLISIS BANCO SABADELL)

NEWS SUMMARY: ARCELOR MITTAL, MEDIASET ESPAÑA.

MARKETS YESTERDAY AND TODAY


The Fed wins over the market
European markets, and especially banks, welcomed the Fed’s decision to cut rates, even though the cuts were not aggressive. In the Euro Stoxx, the best-performing sectors were financials (Banks and Insurance) vs. the drops in Basic Materials and Food (the only sectors in the red). On the macro side, the OECD cut its growth outlook to the lowest level since the financial crisis. Thus, in the euro zone it expects a GDP of 1.1% (-0.1pp) for 2019 and 1.0% (-0.4pp) for 2020. In the ECB, O. Rehn urged substantial stimuli be maintained, whereas B. Coeure called for support from fiscal policies. In the UK, the BoE left rates unchanged at 0.75% in its meeting, warning that the uncertainty surrounding Brexit will force rates to remain low for quite some time. Separately, J. C. Juncker expressed his optimism that a Brexit deal could be reached before the 31st of October. In the US, the Philadelphia Fed index for September fell less than expected, weekly jobless claims rose slightly less than expected and second-hand home sales (August) slowed less than expected. In Japan, August’s inflation slowed in line with expectations, while core inflation confirmed July’s 0.6% YoY. In India, the Government cut the corporate tax to 25.2% from 30% previously (which means a loss of 1.45 Bn rupees in tax collection), encouraging market gains. In China, the reference 1Y interest rate for loans was cut to 4.2% from 4.25% previously.
What we expect for today
European markets would open with profit taking following the rises from the last few days, where the FTSE 100 would be the hardest hit in view of the appreciation of the pound.
Currently, S&P futures are sliding -0.10% (the S&P 500 closed -0.33% lower vs. its price at the closing bell in Europe). Volatility in the US rose (VIX 16.23%). The Asian markets that are open are climbing (Hong Kong +0.07% and Japan +0.25%).
Today in the euro zone we will learn September’s preliminary consumer confidence. In credit ratings, S&P will review that of Spain (A-, positive)


COMPANY NEWS

MEDIASET ESPAÑA, SELL
According to Reuters, Mediaset Italia would have reached an agreement with the fund Peninsula Holding whereby the latter could buy up to € 335 M of shares in the merged company MFE (Mediaset Italia and Mediaset España; ~23.5% of total) at a discount (unspecified) vs. the refund price ensured for shareholders against the merger having demanded economic compensation (€ 6.54/sh. for TL5’s shareholders and € 2.77/sh. for Mediaset Italia’s).
With this measure, Mediaset Italia tries to ensure the success of the deal. Note that according to the information made public, 23.2% of Mediaset España’s shareholders voted against and around 20% of Mediaset Italia’s (excluding the 19.9% stake held by Simon Fiduciaria in Vivendi that cannot exercise his voting right). If all these shareholders were to request the refund, they would total around 500 M MFE shares (34% of the total, where Vivendi represents 21.7%), and thus even with the incorporation of Peninsula with the acquisition of 355 M shares, there would be still around 160 M MFE shares requesting the refund, which would imply more than € 440 M. As this amount is higher the € 180 M limit imposed to ensure the success of the transaction, it would not go through.
The key to the success of the merger continues to lie in the position to be adopted by Vivendi (holding 29.9% of Mediaset Italia), which opposed the deal.