EUR 100.00 For Business Accounts Only

IBERIAN DAILY 10 SEPTEMBER (ANÁLISIS BANCO SABADELL)

NEWS SUMMARY: IAG, REPSOL, TELEFÓNICA

MARKETS YESTERDAY AND TODAY

A week of important events
European stock markets remained flat, awaiting the ECB meeting and important macro data like inflation data in the US. In the Euro Stoxx, the best-performing sectors were the most cyclical, such as Banks and Autos, with drops in defensive sectors like Pharma and Utilities. On the macro side, in Germany exports beat expectations, rising unexpectedly in July, whereas the press is once again stating it is possible that the Govt. aims to raise public spending above restrictions, although the minister of finance, B. Hagendorn, stated that the budget will remain balanced. In the euro zone, September’s business confidence (SENTIX) rose more than expected, but it remains in negative territory. In the UK, industrial output recovered unexpectedly in July, whereas July’s GDP (3M moving average) beat expectations, recording zero growth. In the US, consumer credit rose more than expected in July. In Mexico, August’s inflation slowed in line with expectations. In Japan, the M3 was no surprise and maintained the growth pace of 2.0% YoY. In China, inflation for August remained at the 2.8% YoY from the previous month (upward pressure from food), whereas production prices fell further, although less than expected. In India, vehicle sales fell -41.0% in August.
What we expect for today
The markets would open with a slightly bearish slant and a somewhat stronger USD once again. Currently, S&P futures are up +0.41% (the S&P 500 closed down -0.12% vs. its price at the closing bell in Europe). Volatility in the US rose (VIX 15.27%). The Asian markets that are open are climbing (Hong Kong +0.15% and Japan +0.27%).
Today in the UK we will learn July’s ILO unemployment rate. In debt auctions: Spain (€ 5 Bn in 6M and 12M t-bills), Netherlands (€ 2 Bn in bonds due 2029) and Germany (€ 500 M in I/L bonds due 2046).


COMPANY NEWS

TELEFÓNICA, BUY
According to the press, TEF could consider a new voluntary redundancy plan in Spain that would affect up to 5,000 employees (19.7% of the workforce in Spain and 4.1% of the group’s total personnel) over 53 years that could receive (as in the previous plan) 68% of their wages. In order to implement this plan, it could make a provision of around € 1.5 Bn (~50% of Net Profit). This news is released as a result of the Board meeting to be held today by the company, moved forward two weeks due to the poor share price performance (-9% in August and -7% in 2019 vs. +8% IBEX). If the voluntary redundancy plan is confirmed and if conducted at the same terms as the previous plan, it would mean around -6% cost cutting in Spain, with a positive impact on the EBITDA of Spain of +9% (with an improvement of margins of ~340bps) and a +3% increase in the company’s total EBITDA (improvement of margins of ~90bps). The impact on cash would be lower (given the payments pledged to employees) and the group’s FCF would improve by +4%.