EUR 100.00 For Business Accounts Only

IBERIAN DAILY 08 OCTOBER (ANÁLISIS BANCO SABADELL)

NEWS SUMMARY: CHANGES IBEX, LIBERBANK, REPSOL, SIEMENS GAMESA, UNICAJA.

MARKETS YESTERDAY AND TODAY

Profit taking in Europe
Slight profit taking in Europe after the good session seen the day before where only the UK’s FTSE avoided being in the red despite the fact that B. Johnson threatened to withdraw from the negotiation table if the guidelines of the agreement are not clear next week. The US, fuelled by cyclical sectors, recovered from the past days drops after the announcement of the aid package to airlines, SMEs and households by Trump, who indicated that talks on a fiscal stimulus package could resume (there does not appear to be enough time). In the Euro STOXX Basic Resources and Utilities saw the highest gains while Financial Services and Telecommunications were the worst relative performers. In Germany, industrial output rose less than expected while in Spain the recovery provided a positive surprise. Separately, P. Sánchez presented the recovery plan that will mean € 72 Bn to create 800,000 jobs and the Tobin Tax (on financial transactions) and Google tax (on technology) were approved. From the ECB, C. Lagarde insisted on the banking mergers in the euro zone. In the US, the Fed’s minutes demanded new fiscal stimuli to back the economic recovery, which is still uncertain, with Congress urging a legal reform be carried out to allow tech companies to be able to be split up in order to limit their power (accused of monopoly).
What we expect for today
The European stock markets would open with gains led by cyclical and financial stocks amid good news from the Pharmaceutical company Eli Lilly as regards a Covid-19 treatment. Currently, S&P futures are up +0.33% (the S&P 500 was up +0.42% vs. its price at the closing bell in Europe). Volatility in the US decreased (VIX 28.06). Asian markets are trading with mixed results (Japan +1%, Hong Kong -0.62%).
Today in the euro zone we will learn the ECB’s minutes, and in the US weekly jobless claims. Debt auctions: Ireland (€ 1.5 Bn in bonds due 2027, 2030 and 2035).


COMPANY NEWS

CHANGES IBEX 35. Solaria’s inclusion.
As expected, the IBEX 35 Technical Advisory Committee yesterday decided to add Solaria (with a 100% weighting vs. free float), taking MásMóvil’s position. Its inclusion will be effective on the 19th of October (index adjustment on 16/10 close).

REPSOL. 3Q’20 trading statement with negative refining margin (US$ -0.10/barrel). BUY
In 3Q’20 REP shows a -4% drop in production, but what has caught our attention is the negative refining margin (despite standing at US$ 1-2 in October). We believe that with the stock trading at lows (vs. +24% recovery for the sector and +57% for crude oil prices), we should not see negative reactions. Assuming that 3Q’20 Net Profit will come in at € -36 M (vs. € -258 M in Q2 and € 447 M in Q1), we expect € 336 M of Net Profit in Q4 (vs. € 251 M consensus), which is attainable with the current crude price, and refining margins improving slightly vs. 3Q’20. Even if this were not to occur, and despite the fact that we are more pessimistic in NFD than the consensus (€ 4.86 Bn vs. € 4.52 Bn consensus), we do not expect any cuts to DPS’20 (15% yield) that REP conditions to NFD performance (not Net Profit). The driver for the stock will be the reactivation of demand: the market is overly penalising the current environment, pricing in a drop of more than -60% in recurring volumes, with no recovery in the long term.