Stock Market News (European Open) – Spanish stocks underperform; Nikkei longest streak of gains on Abe landslide


Andreas Georgiou, XM Investment Research Desk

In Japanese equities, the Nikkei 225 and the broader Topix once again finished the day in the green, extending their multi-year high closes; the Nikkei added 1.1% and the Topix rose by 0.8%, closing at their highest since 1996 and 2007 respectively. Hong Kong’s Hang Seng declined by 0.6%, while the Shanghai Composite added 0.1%. Australia’s S&P/ASX 200 fell 0.2%. 

The Nikkei recorded its longest streak of gains – 15 consecutive days – as it finished in positive territory today. Japanese PM Shinzo Abe’s bet when he called snap elections has paid off with him coming strong out of yesterday’s vote. Reports are also saying that Abe’s party-led coalition maintained its two-thirds super-majority in the parliament’s lower house. Abe’s victory is expected to result in a continuation of Abenomics with a reflationary economic agenda remaining on the table, while this is also seen as increasing the odds of Haruhiko Kuroda being reappointed as BoJ governor, translating to a continuation of ultra-loose monetary policies. As a result, the yen has been losing ground relative to other majors including the dollar, with dollar/yen currently standing at a more than three-month high and piercing the 114 level at its highest. Exporter-heavy benchmarks, such as the Nikkei and the Topix, are benefitting on the back of weakness in the Japanese currency.

In Europe, the pan-European Stoxx 600 was 0.1% higher and the blue-chip Euro Stoxx 50 was up by the same proportion at 0943 GMT. The UK’s FTSE 100 was marginally higher, with the German DAX and the CAC 40 up by 0.3% and 0.2% respectively. The Spanish IBEX 35 (down 0.5%) was once again the lead underperformer out of major blue-chip European benchmarks as the Catalan “saga” continues. During the weekend, the Spanish government triggered Article 155 of the constitution to impose direct rule over Catalonia with the Catalan President subsequently rejecting Madrid’s decision. According to Cresit Suisse “At this moment you don’t have contagion from Spain to the broader European market”.

Siemens Gamesa Renewable Energy, Banco Bilbao Vizcaya Argentaria (BBVA), Bankia and Mediaset Espana Comunicacion weighed the most on the IBEX, with losses ranging from 2.3% to 1.4% (in the order written). Mediaset Espana Comunicacion’s price target was also cut by Deutsche Bank on Friday to 7 from 8 euros. The television network and media production company’s stock price last traded at 9.24 euros.

The weakening euro relative to other major counterparts is seen as supporting export-reliant benchmarks such as the German DAX. The ECB will be completing its meeting on monetary policy on Thursday with volatility in euro pairs likely to increase in the immediate aftermath of the central bank’s decision, but potentially before the event as well as speculation rises ahead of the meeting.

Swedish-based Securitas AB (up 3.4%) led gains within the Stoxx 600 after reporting positive Q3 earnings.

British car dealership chain Pendragon (down 15.5%) suffered after issuing a full-year profit warning. Fellow British-based and larger peer Inchcape was down by 3.1% as demand for new cars is expected to decline throughout the year as well as during 2018. Inchcape was the worst performer within the Stoxx 600.

The Dow Jones, S&P 500 and Nasdaq Composite all closed at record highs on Friday with hopes for tax reform remaining firmly on the table. Dow, S&P and Nasdaq 100 future contracts were last 0.1% higher, up on the margin and 0.1% up respectively.

Alphabet (Google’s parent), Amazon, Facebook, Microsoft and Twitter will be among the big tech firms reporting quarterly results in the US this week. Releases by Boeing, Ford, General Motors, Coca-Cola and McDonald’s will also be closely watched.