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Foreign Stock Roundup: PHG Acquires Health & Parenting; ABB to Buy Data Transmission Business

Global markets endured a less than favorable week as geopolitical concerns took center stage. Both European and Asian markets bore the brunt of North Korea’s missile test on Tuesday, with stocks ending lower. Markets in Europe also suffered losses on Thursday following Trump’s comments on the North Korean issue. A decision on extending sanctions against concerns also weighed on investor sentiment through the week.

Asian markets were also riled by lower oil prices and a surge in bond yields. The prospect of a more hawkish stance from the world’s central banks sent stocks lower on the region’s bourses. Meanwhile, Latin American markets were riled by falling commodity prices.

North Korea’s Missile Launch Weighs on European Markets

European stocks began the second half of the year on a strong note. On Monday, the continent spanning STOXX 600 index, which represents nearly 90% of Europe’s market capitalization, gained more than 1%. This was its largest increase in percentage terms in more than two months. All major sectors and exchanges in the region closed the day in the green. Banks and oil stocks were the day’s leading performers.  

Geopolitical concerns led to losses for European stocks on Tuesday with the STOXX 600 closing 0.3% lower. North Korea’s ballistic missile test weighed on investors even as France’s Prime Minister prepared for a confidence vote. The events in France come on the back of reform proposals introduced by newly elected President Emmanuel Macron.

The STOXX 600 inched up by 0.2% on Wednesday as investors evaluated the impact of geopolitical concerns. Market watchers also remained focused on an upcoming decision on sanctions on Qatar. Logging an increase of more than 1%, financial services emerged as the leading gainers for the day. Banks closed in the Green following the European Commission’s approval for a 5.4 billion euro bailout for Italian bank Monte dei Paschi di Siena.

Comments from President Trump sent the STOXX 600 0.7% lower on Thursday even as exchanges across the region closed in the red. Trump stated that steps needed to be taken following North Korea’s “very, very bad behavior.” Meanwhile, key Middle Eastern countries decided on continuing with sanctions against Qatar. Disappointing sales results ensured that travel and leisure stocks were the worst sufferers for the day.

On Friday, the STOXX 600 slipped by 0.1% with stocks ending nearly unchanged. Investors assessed the impact of economic reports and the prospect of an end to monetary stimulus. Meanwhile, they also remained focused on a G-20 meeting to be held in Hamburg. A series of ratings downgrades ensured that media stocks were the worst performers for the day.

Among notable economic reports, housing prices declined in U.K., France’s deficit expanded marginally while Germany’s industrial production increased by 1.2% in May. Over the week, the STOXX 600 and other key exchanges remained nearly unchanged.

Asian Stocks Endure Difficult Week

On Monday, the majority of Asian markets closed in the green following the release of Caixin PMI on China and the Tankan survey issued by Bank of Japan. China’s Caixin PMI came in at 50.4, exceeding most estimates. Meanwhile, the quarterly Tankan survey showed that business confidence has improved in Japan. The Nikkei 225 and South Korea’s Kospi ended 0.1% higher. The Shanghai Composite and Hong Kong’s Hang Seng index also advanced 0.1%. 

North Korea’s long range missile test sent Asian stocks lower on Tuesday. The Kospi ended 0.6% lower while the Nikkei 225 lost out on early gains to end 0.1% lower. The Shanghai Composite moved down 0.4% while the Hang Seng lost 1.5%.

However, Asian markets were able to overcome the specter of North Korea’s missile test to end higher on Wednesday. The Nikkei shook off early losses to end 0.5% higher, as did the Kospi, which ultimately gained 0.3%. The Shanghai Composite added 0.8% while the Hang Seng advanced 0.3%. China’s Caixin services PMI declined from 52.8 to 51.6 in June. Meanwhile, South Korean defense stocks ended the day mixed.

Asian markets mostly ended lower on Thursday even though U.S. markets posted a strong close. Oil prices ended higher but were unable to recover from losses incurred overnight. The Nikkei 225 ended 0.4% lower while the Kospi slipped 0.02%. Even though the Hang Seng declined 0.1%, the Shanghai Composite managed to end the day with a gain of 0.2%.

Surging global bond yields and losses incurred by U.S. markets sent Asian markets lower on Friday. A bond market selloff was triggered by heightened expectations of tighter monetary policy from the world’s central banks. Both the Kospi and the Nikkei 225 lost 0.3%. A session of cautious trading in greater China resulted in a mixed finish for the region’s indexes. While the Hang Seng declined by 0.5%, the Shanghai Composite gained 0.2%.

Latin America’s Markets Dragged Lower by Commodities

Mexico’s benchmark index hit an all-time high on Monday, gaining 0.5%. Meanwhile, Brazil’s real gained marginally after concerns surrounding a corruption investigation, which threatens to derail President Temer’s reforms program receded. The country’s benchmark Bovespa index gained 0.4% after an increase in iron ore prices boosted shares of Vale SA VALE.

Stocks in Latin America closed nearly flat on Tuesday even as U.S. markets were closed for the 4th of July holiday. This resulted in lower volumes as traders avoided the bourses even as falling prices of commodities led to a reduction in demand for riskier assets. Mining stocks such as Vale SA moved lower as a result, leading to Brazil’s benchmark Bovespa index closing in the red. The Bovespa ended Wednesday mostly unchanged even as falling iron ore prices once again led to losses for Vale SA

On Thursday, Brazil’s Bovespa index declined 0.7% as concerns over a developing political crisis heightened. President Michael Temer’s ambitious structural reforms are likely to be impeded by the fallout of a corruption scandal. The country’s benchmark index was weighed down by large stocks such as Ambev SA ABEV, Itaú Unibanco Holding SA ITUB and Vale SA.

However, the prospect of regulatory changes led to gains for stocks of power utility companies. The Bovespa ended Friday 0.2% lower, dragged down by financials, basic materials and public utilities stocks.

Stocks in the News

HSBC Holdings plc HSBC finally received approval from the China Securities Regulatory Commission to set up majority-owned joint venture (JV) in China. The company had announced its plan to establish a JV in China in Nov 2015, with an aim to improve profits in the fast growing southern Chinese region.

HSBC’s partner in the JV is a local government-backed firm, Qianhai Financial Holdings. The company will hold 51% interest in the JV, HSBC Qianhai Securities Limited. Based in the Qianhai special economic zone in the city of Shenzhen, the JV is expected to be launched by the end of 2017.

HSBC will be investing 918 million yuan ($135 million) for its 51% stake in HSBC Qianhai. The JV will be providing equity and debt underwriting as well as M&A advisory services. Also, it will be conducting equity research and brokerage activities on the local firms. The stock has a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

TOTAL S.A. TOT announced that it has signed an agreement with the National Iranian Oil Company (NIOC) for the development and production of phase 11 of South Pars (SP11). This project will have a capacity to produce 2 billion cubic feet of gas per day or 400,000 barrels of oil equivalent per day including condensate.

Zacks Rank #3 (Hold) rated TOTAL is the operator of the SP11 project with a 50.1% interest. The Chinese state-owned oil and gas company, CNPC (30%), and Petropars (19.9%), a wholly owned subsidiary of NIOC, are the other partners.

SP11 project will be developed in two phases. In the first phase, nearly $2 billion will be invested to develop 30 wells and two wellhead platforms connected to existing onshore treatment facilities by two subsea pipelines. In the second phase, an offshore compression facility will be developed on the South Pars field.

This project is scheduled to start commercial operation from 2021 and to supply natural gas for the Iranian domestic market under a 20-year contract. (Read: TOTAL Signs Deal to Develop South Pars Gas Field)

ABB Ltd ABB, which carries a Zacks Rank #3, recently announced that it has agreed to acquire data transmission business of the KEYMILE Group. This acquisition will add reliable communications technology offerings to diverse portfolio, helping it boost its foothold in digital electrical grids. The KEYMILE buyout is a part of its strategy to boost the IIOT (Industrial Internet of Things) digital offering.

Germany-based KEYMILE, which was formed through a merger of three technology companies in Austria, Germany and Switzerland, has about 350 employees. With installations in 100 countries, the company is one of the leading global providers of mission-critical and broadband telecommunication solutions. (Read: ABB Set to Buy Keymile's Business Unit, Eyes IIOT Growth)

Koninklijke Philips N.V. PHG continued its impressive acquisition spree, as it announced the buyout of Health & Parenting Ltd — a London-based developer of healthcare and family-related mobile applications for expectant and new parents. Financial details of the transaction were kept under wraps.

Health & Parenting's applications will be integrated into Zacks Rank #2 (Buy) rated Philips' uGrow digital parenting platform, and will serve to strengthen Philips’ offerings in pregnancy and parenting. The uGrow digital parenting platform captures data from connected devices, like Philips Avent smart baby monitor and Philips Avent smart ear thermometer, and offers personalized feedback and advice. (Read: Philips Buys Health & Parenting to Boost Parenting Platform)

Eni SpA E has made an oil discovery in the PL532 license, southwest of the Johan Castberg field. Drilled in 336 meters of WD in the Kayak prospect of the Barents Sea PL532 license, the new discovery has been made through the well 7219/9-2. Partners of PL532 license include Statoil ASA STO, Eni and Petoro, holding 50%, 30% and 20%, respectively. Eni has a Zacks Rank #3.

Located about 23 kilometers southwest of Johan Castberg, the well lies 226 kilometers North West of Hammerfest. Per the initial estimates, the discovery is estimated to hold between 100 and 180 million barrels of oil in place (25–50 million barrels of oil recoverable), which has potential to be assessed, further. (Read: Eni Finds Oil in PL532 License Near Johan Castberg Field)

Performance of Leading Foreign Stocks

The table given below shows the price movements of 10 of the largest stocks listed on indexes worldwide, over the last five days and during the last six months.

 

Ticker

 

Last 5 Day’s Performance

 

6-Month Performance

SNY

-0.5%

+20.8%

E

-2.1%

-5.9%

SAP

-1.6%

+17.1%

IDEXY

-1.5%

+15.6%

BABA

+1.6%

+50.4%

CHL

-2.6%

-3%

KEP

+2.2%

+3.4%

TM

+3.2%

-9.4%

ABEV

-0.7%

+7.6%

MELI

+1.7%

+47%

Next Week’s Outlook

A wealth of economic reports is scheduled to be released from the Eurozone next week. Data on trade will be received from Germany even as Italy releases industrial production figures. Stocks have already gained in the aftermath of the G20 meeting and investors will now focus on the meeting of the economic bloc’s finance ministers.

Meanwhile, China will receive data on Inflation, trade, lending and money supply. Developments surrounding North Korea are likely to take a backseat in such an environment and the nature of economic data is likely to guide stocks. Meanwhile, commodity prices and political developments will continue to weigh on Latin America’s indexes in the week ahead.

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Itau Unibanco Banco Holding SA (ITUB): Free Stock Analysis Report
 
HSBC Holdings PLC (HSBC): Free Stock Analysis Report
 
Ambev S.A. (ABEV): Free Stock Analysis Report
 
Koninklijke Philips N.V. (PHG): Free Stock Analysis Report
 
ABB Ltd (ABB): Free Stock Analysis Report
 
VALE S.A. (VALE): Free Stock Analysis Report
 
TotalFinaElf, S.A. (TOT): Free Stock Analysis Report
 
Statoil ASA (STO): Free Stock Analysis Report
 
ENI S.p.A. (E): Free Stock Analysis Report
 
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