EUR 100.00 For Business Accounts Only

IBERIAN DAILY 02 OCTOBER (ANÁLISIS BANCO SABADELL)

NEWS SUMMARY: ELECTRICITY/GAS SECTOR, FERROVIAL, MÁSMÓVIL, MEDIASET ESPAÑA, NATURGY.

MARKETS YESTERDAY AND TODAY


Weakness in the US manufacturing sector
The poor manufacturing ISM data released hurt European markets, which fell almost -1.5% from highs over the past 12 months. In the Euro Stoxx, all the sectors ended in the red, with Pharma and Food leading the way, with the best performers being Travel & Leisure and Telecoms. On the macro side, in the euro zone September’s final manufacturing PMI was very much in line with the preliminary data, where the most noteworthy aspect was the slight improvement in Germany (41.7 vs. the previous 41.4). Meanwhile, September’s inflation was disappointing after falling -0.1%, now below the core figure (0.9% and 1.0%, respectively). In Spain, the manufacturing PMI fell more than expected to 47.7 from 48.5, supporting a recession in the industry. In the UK, B. Johnson will present a new Brexit proposal with 2 borders for 4 years, but in the absence of more details it has already been described as unsatisfactory. In the US, the manufacturing ISM for September was a surprise, falling to levels from June’09 with the weakest orders since March’09. The data would suggest 3Q’19 GDP growth of -0.8% QoQ vs. 1.9% consensus. Separately, Trump once again criticised the Fed after the dollar hit a new 29-month high, calling for new interest rate cuts. By contrast, C. Evans of the Fed reiterated that rates are at appropriate levels, expecting inflation to be above the 2021 target, although he admitted that too strong a dollar could change expectations. In Brazil, industrial output rose more than expected in August.
What we expect for today
Currently, S&P futures are up +0.33% (the S&P 500 was down -0.50% vs. its price at the closing bell in Europe). Volatility in the US rose (VIX 18.56%). The Asian markets that are open are falling (Hong Kong -0.09% and Japan -0.38%).
Today in the US we will learn September’s ADP employment survey. In debt auctions: Germany (up to € 3 Bn in 5Y bonds).


COMPANY NEWS

MÁSMÓVIL. New agreement with Orange (mobile and FttH networks) and improved guidance. BUY.
We welcome the extension of the agreement with Orange, not only for the economic benefits (€ 40 M of OPEX savings), but also because it eliminates the uncertainties regarding the deployment of 5G and the company’s dealings against a much more predictable investment/expense backdrop. Moreover, the improved estimates stress the company’s confidence in the project (they have provided figures for 2021), and should dispel the doubts surrounding the market environment and MAS’s capacity to sustain its growth. The new guidance would have an impact on our valuation of ~+8%. For the time being we do not include this revision, waiting until we can see the trends in 3Q’19 results (which should be good), and we think the stock will continue to rally (yesterday it rose +21%).