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IBERIAN DAILY 24 MAY (ANÁLISIS BANCO SABADELL)

NEWS SUMMARY: ALMIRALL, GRIFOLS, INDRA.

MARKETS YESTERDAY AND TODAY

Markets consolidate below highs over the week
It was a week of consolidation for indices on both sides of the Atlantic, with the European stock markets posting slight gains after assimilating an initial increase in debt yields but fuelled by positive activity indicators towards the end of the week. Thus, within the Euro STOXX, the best-performing sectors were Household Goods and Autos, whereas Basic Resources and Construction Materials were the worst relative performers. On the macro side, in the Euro zone, the Services PMI climbed above expectations in May (best reading in almost three years) whereas the Manufacturing PMI contracted slightly less than expected. On another note, the UK would be about to agree on a tax on aircraft fuel to tackle the emission problem in the sector. In the US, Second-Hand Home sales fell more than expected in April whereas May’s PMIs came in above expectations, with the Services PMI standing out. Lastly, the Republicans were against many of the main features of Biden’s US$ 1.7 Trillion infrastructure plan.
What we expect for today
European stock markets would trade flat, with airlines and tourism hit by Germany’s announcement of new restrictions to the access of UK tourists (quarantine even with negative PCR) due to fears about the Indian strain and with the oil sector benefiting from the recovery of Brent crude. Currently, S&P futures are up +0.3% (the S&P 500 ended practically unchanged vs. its price at the closing bell in Europe). Volatility in the US fell (VIX 20.15). Asian markets are rising (China’s CSI +0.1% and Japan’s Nikkei +0.2%).
Today we will learn in the US April’s Chicago Fed activity index. Also, the European Council will hold its extraordinary meeting.

COMPANY NEWS

INDRA. Possible replacement of chairman encouraged by the SEPI, which will propose Marc Murtra. BUY.
At Friday’s closing bell, and after media reports, IDR issued a communiqué in which it confirmed the SEPI’s (largest shareholder in the company with a 18.75% stake) intention to replace the chairman (Fernando Abril-Martorell), although no decision has yet been made by the board. Today’s press mentions that his replacement (which should be appointed in the board’s meeting to be held today) will be Marc Murtra. This is negative news, as the current chairman had left the company on track, with a very strong backlog and low debt levels. The stock fell -7.96% on Friday (vs. +0.9% IBEX) as a result of the uncertainties weighing on the company with the possible change of manager and the possibility of an acquisition of ITP, for which a rights issuance would be needed (the press hints at valuations of €~1.5 Bn, vs. IDR’s market cap of € 1.32 Bn). In view of these uncertainties, we remove the company from our Mid&Small Portfolio.