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IBERIAN DAILY 29 JUNE (ANÁLISIS BANCO SABADELL)

NEWS SUMMARY: ELECTRICITY SECTOR, FCC, NATURGY.

Insistence from Central Banks
European indices continued to rise to yearly highs (IBEX at 9,480), despite the tougher speeches from the Sintra forum on the need to continue raising interest rates. In the Euro STOXX, most sectors closed with gains, led by Technology and Real Estate, with Basic Materials and Retail the worst relative performers. On the macro side, in Spain May’s retail sales rose more than expected. In Germany, June’s consumer confidence fell more than expected. In Italy, as expected June’s inflation fell to a 14-month low. In the US, May’s wholesale inventories fell in line with expectations. On the geopolitical side, new tensions between China and the US, where new restrictions on chip exports to China would be on the table. From the Fed, J. Powell was confident in a soft landing for the economy and considered rate hikes in the two upcoming meetings. From the BoE, A. Bailey reiterated his aim to lower inflation. From the BoJ, K. Ueda maintained a more dovish tone in the monetary forecasts for the short term, although leaving the door open to normalising the policy if inflation shows signs of speeding up next year. In Japan, retail sales rose more than expected in May, suggesting private consumption contributing positively in 2Q’23
What we expect for today
European stock markets would open with slight drops, amid greater concerns about the geopolitical situation than about the monetary tightening. Currently, S&P futures are up +0.18% (the S&P 500 ended unchanged vs. the European closing bell). Volatility in the US fell (VIX 15.15). Asian stock markets are mixed (China’s CSI 300 -0.30%, Japan’s Nikkei +0.43%).
Today in the euro zone we will learn the ECB’s meeting minutes and June’s economic climate indicator, in Spain and Germany June’s inflation and in the US weekly jobless claims, the second reading of the 1Q’23 GDP and May’s pending home sales.


COMPANY NEWS

FCC. TOB for 7% of its own shares at € 12.50/sh. BUY.
The company has called an AGM to approve a TOB for 32.03 M shares maximum (~7.3% capital) at € 12.50/sh., meaning a +35% premium vs. yesterday’s close (although clearly below our € 16.0/sh. T.P) and € ~400 M, which will be financed with the liquidity raised through the sale of 25% of FCC Services. The company confirmed that Inversora Carso (77% capital) will not subscribe the TOB and that it does not plan to launch an exclusion TOB. After the TOB, the free float will be reduced to around 6.3% BS(e) (vs. 13.2% currently), but FCC is entitled to adopt measures to bolster the stock liquidity. Since this is a partial TOB and does not cover 100% of theoretical free-float (in theory 23% of those shareholders that have not expressed their intention to subscribe to the deal could accept the bid), we expect the market price to be proportionally adjusted to the free-float and to the premium offered (€ 11.00/sh. if 13% of the shareholding structure accepts the TOB and € 10.30/sh. if 23% accepts (all of them with the exception of Slim).