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IBERIAN DAILY 08 JULY (ANÁLISIS BANCO SABADELL)

NEWS SUMMARY: BANKINTER, BBVA, REPSOL, SANTANDER.

MARKETS YESTERDAY AND TODAY

Profit taking on the markets
There were losses on European stock markets after the previous day’s rally, with the worse outlook from the EC for 2020 not helping (it expects the Spanish economy to fall -10.9% this year vs. .9.4% two months ago). In the entire EU, the EC expects a -8.7% drop in 2020 (vs. -7.7% previously), followed by a +6.1% rally in 2021 (vs. 6.3% previously). Inflation would be close to negative this year (0.3% in 2020 vs. 0.2% previously), with slight recovery in 2021 to 1.1%. Thus, in the Euro STOXX, all the sectors except Utilities and Chemicals closed in negative numbers, with Real Estate and Insurance the worst relative performers. On the macro side, in Germany May’s industrial output improved less than expected, although it beat April’s data. The Spanish Government announced that it will extend the moratorium for mortgages and rents, as well as € 1.8 Bn of aid for the transport sector. In the UK, Boris Johnson warned that he was ready to leave the EU without a deal if the latter was not more willing to compromise on key issues. From the ECB, I. Schnabel stated that the recession in the euro zone could be less than expected, also urging the Netherlands to reconsider its negative stance on the European Reconstruction Fund.
What we expect for today
Profit-taking might continue on the European stock markets, which would open with drops of less than -1%. Currently, S&P futures are up +0.04% (the S&P 500 was down -0.85% vs. its price at the closing bell in Europe). Volatility in the US rose (VIX 29.43%). Asian markets are trading with mixed results (Japan -0.62% and Hong Kong +0.34%).
Today in the European Union there will be a debate on the Reconstruction Fund and in Brazil we will learn May’s retail sales. Debt auctions: Germany (€ 5 Bn in bonds due 2025) and Greece (€ 625 M in 3M t-bills).


COMPANY NEWS

REPSOL. We expect poor 2Q’20 results that are already priced in. The key will be the guidance for 2H’20. BUY.
The 2Q’20 trading statement (results to be released on 23/07) should not be a surprise in crude prices (-41% vs. 1Q’20 to US$ 29.60 vs. US$ 29 BS(e) in 2020), in production (-10% to 640 kboe vs. 650 kboe BS(e) in 2020) or in refining margin (-36% to US$ 3/barrel vs. US$ 4 BS(e) in 2020 and US$ 3.90 average in 1H’20). We estimate € -311 M of Net Profit in 2Q’20, leaving the 1H’20 figure at € 136 M vs. € 757 M BS(e) in 2020 and € 695 M consensus). We do not expect a reaction to the results, but rather the guidance to be given in the conference call. We think REP has room to rise if the guidance is slightly positive, as since March lows the stock has only recovered 37% of the drop vs. 45% in its sector and 60% in crude oil. The share price is factoring in a long-term oil price slightly above US$ 40/barrel vs. our estimate of US$ 53.