European Markets Edged Higher, Euro Area Growth Estimated Lowered

European markets traded higher on Monday and investors looked for bargains beaten down tech and China-exposed stocks. 

Market indexes in London, Paris and Frankfurt gained after eight days of decline in a row after China reported a slight rise in inflation in August after prices fell in the previous month. 

The European Central Bank is set to lift its three policy rates higher by at least 25 basis points on Thursday as policymakers battle persistent inflation. 

The Euro Area economic growth was revised lower to 0.8% from the previous estimate of 1.1%, the European Commission's Summer 2023 Economic Forecast noted. 

The commission also lowered its 2024 economic growth outlook to 1.3% from the earlier estimate of 1.6%. 

Economy in Germany is expected to contract 0.4% in the current year and recover by 1.1% in 2024 and France slow to 1% and rebound to 1.2% in 2024. 

The commission also lowered its 2023 inflation estimate to 5.6% from the previous estimate of 5.8% but revised higher its 2024 estimate to 2.9% from 2.8%. 

Industrial Production in Italy fell 0.70% in July from the previous month, the National Institute of Statistics or ISTAT reported Monday. 

The annual inflation rate in Norway eased to 4.8% in August from 5.4% in the previous month, Statistics Norway reported Monday.  

This was the slowest increase since March 2022, with housing & utilities costs falling 1% after rising 2.7% in July.  

In Asian markets, the yen rebounded to 146.23 against the U.S. dollar but traded near a 25-year low after the Bank of Japan's Governor Kazuo Ueda left door open to lift rates higher if inflation rebounds to 2% level on a sustained basis. 

The People's Bank of China warned currency speculators and said that the central bank is ready to defend the yuan after the currency dropped to a 16-year low of 7.35 in Friday's trading.  

Europe Indexes & Yields

The DAX index increased 0.6% to 15,832.29, the CAC-40 index advanced 0.6% to 7,284.62 and the FTSE 100 index inched up 0.1% to 7,487.49.

For the week, the DAX declined 1.6%, the CAC 40 fell 2.0% and the FTSE index dropped 0.3%. 

The yield on 10-year German bonds increased to 2.63%, French bonds traded lower to 3.17%, the UK gilts edged up to 4.48% and Italian bonds rose to 4.39%.

The euro edged lower to $1.071, the British pound to $1.250 and the U.S. dollar fetched 89.20 Swiss cents.

Brent crude decreased $0.34 to $90.30 a barrel and the Dutch TTF natural gas increased €1.94 to €36.47 per MWh.

Europe Stock Movers

Societe Generale SA increased 1.3% to €25.62 after the French bank struck announced a strategic partnership with Brookfield Asset Management to originate and distribute private credit investments through a private investment grade debt fund. 

Hannover Re added 1.3% to €204.90 after the company forecasted increase in premium rates in reinsurance market citing rising frequency and severity of natural catastrophe losses and elevated inflation. 

Restaurant Group PLC gained 2.8% to 48.83 pence after the company said it signed an agreement to sell its leisure business including trading sites and associated restaurants to Big Table Group. 

Covestro AG increased 4.5% to €53.86 after the maker of advanced polymer said it has entered into merger talks with Abu Dhabi National Oil Company which may lead to an offer. 

AstraZeneca declined 4.3% to 10,406.0 despite the company reporting encouraging  preliminary results from the TROPION-Lung04 Phase Ib study evaluating datopotamab deruxtecan plus Imfinzi for the treatment of advanced non-small cell lung cancer.

Asian Markets Extended Previous Week Losses, Yuan and Yen In Focus

Markets in Asia traded mixed and the Japanese yen and China's inflation data dominated market sentiment. 

The Nikkei index in Tokyo traded down and extended losses of the last two sessions after a weakness in tech stocks overwhelmed  strength in financial stocks. 

SoftBank, Screen Holdings, Advantest, Tokyo Electron and Mitsubishi Electric declined between 1% and 3% but Sumitomo Mitsui Financial, UFJ Financial and Mizuho Financial advanced between 1% and 2%.  

M2 money stock in Japan was up 2.5% from a year ago to 1,238.6 trillion yen in August, the Bank of Japan said on Monday.

That was steady from the July level following an upward revision from 2.4%. 

The M3 money stock increased at an annual 1.9% rate for the second month in a row at 1,594.7 trillion yen, while the L money stock increased 2.2% on year to 2,121.1 trillion yen. 

The adjusted money stock was up 1.6% from a year ago at 2,114.6 trillion yen.

The yen jumped to a one-week high and traded at 146.23 against the U.S. dollar after the Bank of Japan Governor Kazuo Ueda said that Japan could end its negative interest rate policy after sustainable inflation rate of 2% is reached. 

China's consumer price inflation rebounded to 0.1% from a year ago in August, the National Bureau of Statistics reported Monday. 

Inflation rebounded from a decline of 0.3% in July, the first negative inflation in over two years. 

But the market weakness persisted in mainland China and Hong Kong index traded at two-week low after Alibaba cloud unit chief Daniel Zhang surprisingly resigned amid leadership shakeup.

Alibaba Group declined 2.8% to HK$88.25 after the Zhang's resignation. 

China's central bank warned currency speculators that it will defend its currency after the yuan dropped to a 16-year low of 7.351 in Friday's trading. 

“We will not hesitate on taking actions when necessary to firmly correct the one-sided and pro-cyclical market moves, to resolutely address the actions which disturb market order, and to unswervingly avoid the overshooting risks in the exchange rate," said the People's Bank of China in a statement released after a meeting with the foreign exchange regulatory body. 

Asia Market Indexes 

In Monday's trading, the Nikkei index decreased 0.4% to 32,467.7, the Shanghai SSE Composite index jumped 0.8% to 3,142.78, the Hang Seng index declined 0.6% to 18,092.55 and the KOSPI index increased 0.4% to 2,556.88

Stocks in Mumbai advanced in a broad market advance as investors hunt for bargains ahead of  the earnings season in three weeks.

The Sensex index increased 333.33 points to 66,932.24 and the Nifty index rose 110.45 points to 19,930.40. 

On the Mumbai stock exchange, 311 stocks traded at their 52-week highs and 12 traded at their 52-week lows. 

In August, the Nikkei index fell 0.6%, the SSE Composite index declined 5.2%, the Hang Seng index fell 8.2% and the KOSPI index decreased 4.2%. 

Gitlab Inc increased 0.7% to $50.10 after the database platform developer reported better-than-expected second quarter results.

Second quarter revenue increased 38% to $139.6 million from $101 million and net loss shrank to $51.2 million from $61.5 million and diluted loss per share decreased to 33 cents from 40 cents.

The company guided third quarter revenue between $140 million and $141 million and fiscal year 2024 revenue between $555 million and  $557 million. 

 

Roku Inc soared 6.8% to $88.86 after the company lifted its third quarter revenue to a new range between $835 million and $875 million from the previous estimate of $815 million. 

The company also announced its plan to lay off 10% of its staff and review its aggregated content to trim costs and consolidate its office space. 

Southwest Airlines Co declined 3.2% to $29.82 after the regional airline estimated August bookings were near the "lower-end" of the company's expectations. 

The airline also added third quarter revenue per seat mile is likely to be near the low end of its previous estimate.  

Asana Inc declined 12.4% to $18.94 despite the work management reporting strong quarterly results and revised higher its full-year outlook. 

Revenue in the second quarter increased 20% to $162.5 million from $134.9 million and net loss shrank to $71.4 million from $113 million and diluted loss per share declined to 33 cents from 55 cents a year earlier. 

The company revised higher its third quarter revenue to between $163.5 million and $164.5 million, an increase of 16% and full-year 2024 revenue between $642 million to $648 million, an increase of 17% from a year ago. 

Warner Bros Discovery Inc decreased 0.5% to $11.52 after the company said that the current strikes from writers and actors could negatively impact adjusted operating earnings between $300 million and $500 million. 

The company provided the latest projections in a filing with the SEC. 

The movie studio operator is expecting lower adjusted operating earnings for the full year in the range of $10.5 to $11 billion, reflecting impact from strikes. 

The company revised higher its full-year free cash flow expectations to at least $5 billion and third quarter free cash flow of $1.7 billion, in part due to strong performance of Barbie. 

Brady Corp soared 11.1% to $56.48 after the company posted quarterly results and reported adjusted earnings per share of $1.04. 

Sales in the fiscal fourth quarter ending in July increased 6.8% to $345 .9 million from $324 million and net income rose to $49.4 million from $41 million and diluted earnings per share advanced to $1.0 from 81 cents a year ago. 

During the quarter and year ended July 31, the company returned $56.4 million and $120.4 million, respectively, to shareholders in the form of dividends and share repurchases. 

On August 30, the Board of Directors authorized an additional $100 million of shares for repurchase, about 2 million shares based on current share price and approximately 4.4% of total outstanding shares.

The industrial printer maker forecasted diluted earnings per share in the fiscal 2024 to range between $3.70 and $3.95. 

Airbnb Inc jumped 6.3% to $140.81 after the S&P Dow Jones Indices announced Friday that the short term rental platform operator will be included in the S&P 500 index from Sep 18. 

Blackstone and Airbnb will replace Newell Brands and Deere & Company. 

Victoria's Secret & Company declined 4.9% to $17.06 after the lingerie retailer reported disappointing second quarter results. 

The specialty retailer reported revenue declined 6% to $1.43 billion from $1.52 billion and comparable store sales decline accelerated to 14% from 7% a year ago. 

Net income attributable to shareholders swung to a loss of  ($1.4 million) from a profit of $69.9 million and diluted earnings per share plunged to (2 cents) from 83 cents year ago. 

The company is forecasting third quarter net sales to decline in low- to mid-single digit from the last year's sales of $1.32  billion and adjusted operating loss in the range of $45 million and $75 million and adjusted net loss per share in the range of 70 cents to $1.0. 

The company added full-year 2023 net sales to decrease in the "low-single digit range" compared to last year and estimated adjusted operating income in the range of 5% to 6% of net sales. 

Chewy Inc dropped 15.1% to $23.12 after the online pet food retailer said second quarter sales of $2.78 billion and diluted earnings per share of 4 cents. 

The company said in a conference call with investors that active customers declined 0.6% to 20.4 million and customers are trading down amid high inflation.

Net sales for active customer increased 14.7% to $530 and auto customers sales increased 240 basis points to 75.5%. 

Despite the customers substituting lower priced treats for pets, gross margin increased 20 basis points to 28.3%, indicating prudent promotional activities. 

Net sales increased 14.3% to $2.78 billion and net income declined to $18.9 million from $22.3 million and diluted earnings per share fell to 4 cents from 5 cents a year ago. 

Five Below Inc declined 4.5% to $174.88 after the deep discount retailer forecasted weak third quarter results. 

The retailer estimated third quarter revenue to fall between $715 million and $730 million and earnings per share between 17 cents and 25 cents, sharply lower than estimates set by some analysts. 

Revenue in the second quarter increased 13.5% to $758.9 million from $668.9 million, reflecting comparable sales increase of 2.7% and comparable transactions advanced 4.5%. 

Net income advanced to $48.6 million from $41.3 million and diluted earnings per share rose to 84 cents from 74 cents a year ago. 

In the quarter, the company opened 43 new stores and ended the quarter with 1,407 stores, representing 12.4% increase in store count from a year ago. 

The discount retailer forecasted full-year revenue in the range of $3.50 billion to $3.57 billion based on opening over 200 new stores and assuming an approximate 1% to 3% increase in comparable sales.  

Net income is expected to be in the range of $295 million to $311 million and  diluted income per common share in the range of $5.27 to $5.55 on approximately 55.9  million outstanding shares.  

Signet Jewelers Ltd increased 5.3% to $75.27 after the retailer reported better-than-expected quarterly results. 

Sales in the second quarter ending in July declined 8.1% to $1.6 billion and same store sales plunged 12% from a year ago. 

Same store sales in North America declined 12.2% and nonstore sales, which includes online sales, rose 5.2%, resulting in a decline of 7.1% to $1.5 billion. 

Net income attributable to common shareholders plunged to $66.5 million from $136.8 million and diluted earnings per share fell to $1.38 from $2.56 a year ago. 

The retailer guided third quarter sales to decline to between $1.36 billion and $1.41 billion and full-year revenue between $7.1 billion and $7.3 billion and diluted earnings per share between $9.55 and $10.64. 

PVH Corp rose 1% to $80.99 after the owner of several apparel brands including Calvin Klein reported strong quarterly results. 

The apparel maker reported quarterly revenue increased 2.2% to $2.21 billion and net income declined to $94.2 million from $115.3 million and diluted earnings per share fell to $1.50 from $1.72 a a year ago. 

The company also lifted its full-year earnings per share and revenue outlook.  

The company forecasted 2023 revenue to increase between 3% and 4% compared to 2022 and diluted earnings per share to be $9.60 compared to $3.03 respectively. 

In the third quarter, the company forecasted revenue to increase in "mid-single" digits and GAAP earnings per share of $2.43 compared to a loss of $2.88 a year ago. 

Best Buy Co Inc fell 5.6% to $78.28 after the electronics retailer reported fiscal second quarter results ahead of market expectations. 

Revenue in the second quarter declined to $9.6 billion from $10.3 billion and net income dropped to $274 million from $306 million and diluted earnings per share fell to $1.25 from $1.32 a year ago. 

The company also tightened its upper end of its full-year revenue outlook. 

The company estimated full-year revenue between $43.8 billion to $44.5 billion compared to its previous estimate between $43.8 billion and $45.2 billion. 

The electronics retailer forecasted comparable sales to decline between 4.5% and 6%, which compares to prior guidance of a decline of 3% to 6%.