EUR 100.00 For Business Accounts Only

IBERIAN DAILY 15 OCTOBER (ANÁLISIS BANCO SABADELL)

NEWS SUMMARY: CAF, CELLNEX, COLONIAL, ENAGÁS, IAG, SANTANDER.

MARKETS YESTERDAY AND TODAY

Mixed results, with value stocks falling
It was a session without big surprises, with the Ibex outperforming the rest of European indices, as the number of Covid-19 infections increase (Italy reported 7,300 new cases) and Governments are considering implementing new restrictions. The negotiation of the fiscal stimulus package is still up in the air, although Pelosi admitted fruitful talks with Mnuchin. Thus, within the Euro STOXX, Basic Resources and Utilities led gains, with Pharma and Retail (dragged down by ASOS, which lowered expectations with its results presentation) being the worst relative performers. In the Euro zone, August’s industrial output recovered less than expected. From the ECB, F. Villeroy warned that the institution still has enough “ammunition” if necessary. From the Fed, R. Clarida claimed that stimulus measures will continue to bolster recovery, and warned, along with T. Barkin, that recovery will take some time to materialise. In US business results, banks showed NII under pressure (Wells Fargo released worse results than expected, and Goldman Sachs better) and United Airlines released disappointing earnings. In China, September’s inflation slowed more than expected.
What we expect for today
European stock markets would open with losses of around -0.5%, with banks hit by doubts surrounding 3Q’20 results and with the IMF warning of the need for greater fiscal stimuli. Currently, S&P futures are down -0.28% (the S&P 500 closed flat vs. its price at the closing bell in Europe). Volatility in the US increased (VIX 26.40). Asian markets are falling (Hong Kong -1.1%, Japan -0.5%).
Today, in the Euro zone, the European Council will hold its meeting. Also we will learn in the US the weekly jobless claims data, the Empire manufacturing index and the Philadelphia Fed Index for October. In US business results, Morgan Stanley, Walgreens and Omnicom, among others will release their earnings. In debt auctions, Ireland (€ 750 M in 6M T-bills), Spain (€ 3 Bn in bonds due 2026) and France (€ 8.5 Bn in bonds due 2025, 2026 and 2027 and I/L bonds due 2030 and 2036).


COMPANY NEWS

COLONIAL. Low rates and resilient rents validate our change to BUY.
We change our recommendation on COL from SELL to BUY after the stock’s poor performance (-33% in 2020; -6% vs. IBEX35) and set our T.P. at € 9.04/sh. Although we are aware that investor sentiment towards the sector may still be negative, we think the stock is well underpinned thanks to a scenario of ultra-low rates (with spreads vs. the sovereign bond at their highs), contract rents below market prices (which provides resilience to the portfolio) and a limited supply of prime assets. Its exposure to the office market in Paris (which is quite stable) is also welcome at this time of weakness in the Spanish economy.