Proactive Investors -
- FTSE 100 falls, banks and mining stocks weigh
- NatWest slides, margins and deposits disappoint
- German economy grinds to a halt in first quarter
German economy stalls in first quarter
A raft of economic data over in Europe and it is a mixed bag.
In Germany, economic growth stalled in the first three months of the year as increased exports and investment offset weaker domestic demand.
First-quarter GDP in the eurozone’s largest economy was unchanged from the previous quarter, the federal statistical agency said, this was better than the 0.5% fall in the fourth quarter but weaker than the 0.2% growth predicted by economists.
However, Italy’s economy, grew by a stronger than expected 0.5% in the first quarter (estimate 0.2%) while Spain’s economy also grew 0.5% in the period ahead of an expected 0.3% jump.
There was mixed news on inflation. In Spain, inflation rose to 3.8% in the year to April, below forecasts of 4.4% annual growth but in France consumer prices accelerated with a rise of 6.9% on an EU harmonised basis in the year to April, compared with an increase of 6.7% the previous month. Economists had expected growth of 6.6%.
Back in London and the FTSE 100 is down 27 points at its worst levels for the day. In Europe, the CAC 40 in Paris has fallen 0.4% while the Dax is little changed after opening higher.
US markets also look set to give up a chunk of yesterday's gains with futures pointing to a weak start on Wall Street.
Smurfit Kappa climbs on positive outlook
Shares in Smurfit Kappa PLC (LON:SKG) climbed 2.7% after the packaging firm reported in line EBITDA but was positive on the year ahead.
Jefferies thinks the 2023 consensus for EBITDA of €2,050mln will be broadly unchanged but expect the shares to be higher today given the expectations had moderated ahead of the results following updates from US peers.
The broker noted positively the company “expect the demand environment to improve as the year progresses."
“With a quality asset base and strong balance sheet”, Jefferies sees the firm as a “relative winner in the fragmented EU containerboard & box market, with its scale, customer & end market mix advantages.”
Jefferies reiterated a buy rating.
Pearson rises after upbeat trading, buyback
Pearson (LON:PSON) shares remain well supported, up 2.9% after its trading update and news of a £300mln share buyback.
Shore Capital analyst Roddy Davidson said: “We are pleased to note the continued progress and momentum highlighted in today’s statement and remain fundamentally positive on Pearon’s suitability to capitalise on the strong growth potential across the global learning market.”
He noted his current forecasts suggest three-year aggregate adjusted EPS and DPS advances of 31% and 23%, respectively accompanied by strong cash generation which he pointed out was evidenced in the buyback plans.
He thinks the current valuation is “undemanding” relative to the growth prospects.
Reiterating a buy on the stock, Davidson said he sees 26% upside potential from current levels.
“We also view Pearson as a highly attractive strategic asset which could attract external interest.”
Miners weigh on FTSE
The FTSE 100 remains the wrong side of the line with mining stocks weaker after the weak US GDP figures yesterday added to concerns of slowing economic growth.
The sector was not helped by cautious comments by JP Morgan. Shares in Antofagasta (LON:ANTO) fell 2.9% as the broker downgraded the stock to underweight with a December 2024 price target of 1,230p while Rio Tinto (LON:RIO) fell 1.1% as the broker reiterated an underweight call.
The US investment bank prefers Glencore (LON:GLEN) and Anglo American (LON:AAL) in the sector – both rated overweight although shares in both were lower alongside others in the sector.
The US investment bank thinks pivotal changes are underway in the directional drivers of global miners’ share prices.
It notes evidence that four years of iron ore supply constraints are easing and exports are expected to surge in the second quarter just as China is likely to impose restrictions on steel production.
The broker also expects free cash flow yields and shareholder distributions to decline in 2023 as capex increases.
The FTSE 100 is now down 11 points.