EUR 100.00 For Business Accounts Only

IBERIAN DAILY 16 JUNE (ANÁLISIS BANCO SABADELL)

NEWS SUMMARY: ENDESA, GRUPO CATALANA OCCIDENTE, MELIÁ HOTELS.

MARKETS YESTERDAY AND TODAY

Recovery on the market
The strong losses at the beginning of the session (around -2%) were reduced from intraday lows after it was learned that the ECB increased its purchases through the PEPP (€ 27.13 Bn), +6.5% more than the previous week. Within the Euro STOXX, the best-performing sectors were Construction and Industrials, with Retail and Food posting the biggest losses. On the macro side, in the US, June’s Empire index recovered much more than expected, closing in on positive territory. From the Fed, J. Kaplan was willing to discuss controlling the rate curve, although he warned that it could generate distortions. Meanwhile, today the Fed will begin its corporate debt purchase programme on the secondary market (SMCCF), which is to be indexed, and it expects the purchase programme on the primary market (PMCCF) to be initiated in the short term. Separately, according to Bloomberg, Trump’s Govt. would be studying a multiannual infrastructure plan worth US$ 1 Tn. In Japan, the BoJ kept its monetary policy unchanged, although it increased the size of its package of facilities for corporate loans to US$ 1 Tn, up from the US$ 700 Bn expected initially.
What we expect for today
European stock markets would open with gains >+3.0%, fuelled by cyclical stocks. Currently, S&P futures are up +1.33% (the S&P 500 closed +2.0% higher vs. its price at the closing bell in Europe). Volatility in the US fell (VIX 34.40%). Asian markets are rising sharply (Japan +4.44% and Hong Kong +2.89%).
Today, the BoJ will meet. In the UK we will learn April’s unemployment rate, in Germany June’s ZEW index and May’s inflation and in the US retail sales, industrial output for May, June’s NAHB real estate sector confidence index, and J. Powell will appear before the Senate. Debt auctions: Spain (€ 3.5 Bn in 3M and 9M t-bills).


COMPANY NEWS

GRUPO CATALANA OCCIDENTE. Neutralizing defaults. BUY.
Once most of the doubts surrounding default in Credit Insurance are over, the downward risks in the share price are limited, in our view. GCO has signed (for 50% of premiums) quota share reinsurance contracts, neutralising the effects of a 130% CR BS(e). With this in mind, we do not believe that the business profitability will return to 2019 levels until after 2022 BS(e). However, it is not a S-II event (in a stressed scenario >170%), not jeopardising the dividend. Furthermore, GCO will keep its M&A DNA under control, being accretive for shareholders. Our new T.P. with our recently revised estimates in a V-shaped scenario stands at around € 27.00/sh. +30% upside) and we reiterate BUY.