Мы продолжаем весеннюю серию рейтингов акций, которые сильнее всего подорожали за год. Наш сегодняшний обзор посвящен акциям из Евросоюза. Мы включили в него только компании с капитализацией от €4B и коэффициентом оцененности P/E (отношение капитализации к годовой прибыли) не выше 61. Таким образом, все эти акции довольно известны на фондовом рынке и при этом не являются откровенными пузырями.Первое место. WirecardБанковская карта WirecardТикер: WDIБиржа: XETRAСтрана: ГерманияВалюта торгов: евроКапитализация: €12BГодовой оборот: €1,0BP/E: 56Дивиденды за год: 0,2%Изменение котировок за год: +115%О компании. Изготовитель приложений для электронных платежей и управления финансовыми рисками. Имеет собственный банк Wirecard Bank, выпускающий кредитные карты, оптимизированные под работу с программными продуктами компании. На графике. Котировки компании доступны с 2011 года, и почти все это время наблюдается явный положительный тренд. Общий рост за это время — примерно в 10 раз. В 2018 году котировки установили новый исторический рекорд. Дивиденды компания выплачивает раз в год, но размер их крайне мал.Плюсы для инвестора. Рекордный годовой рост котировок, отличный многолетний тренд котировок.Минусы для инвестора. Относительно высокий P/E (дальнейший рост котировок под сомнением), крайне низкие дивиденды, невысокий оборот в сравнении с капитализацией.Второе место. Deutsche LufthansaСамолет LufthansaТикер: LHAБиржа: XETRAСтрана: ГерманияВалюта торгов: евроКапитализация: €13BГодовой оборот: €32BP/E: 7,3Дивиденды за год: 1,8%Изменение котировок за год: +105%О компании. Знаменитая немецкая авиакомпания, крупнейший авиаперевозчик в Европе. Была основана в 1926 году, быстро собрала парк из 162 самолетов и прославилась первым трансконтинентальным перелётом в Китай. В 1940-х годах большинство самолетов Lufthansa были задействованы на военные нужды, а после войны деятельность компании была вовсе приостановлена. Работа Lufthansa была возобновлена в 1950-х годах. В 1960-х годах она почти целиком перешла на реактивную тягу. До 1994 года Lufthansa была полностью государственным предприятием, но к 1997 приватизирована. Сегодня она выполняет рейсы в 78 стран, владеет парком из 620 самолетов, а годовой пассажиропоток превышает 100 миллионов.На графике. Deutsche Lufthansa торгуется на бирже давно. В течение многих лет котировки компании были довольно стабильны и почти не выходили за рамки коридора 10-20 евро. Но в 2017 году они далеко пробили верхнюю планку, установив рекорд в 31 евро. Дивиденды компания платит раз в год, но делает это нерегулярно.Плюсы для инвестора. Отличный годовой рост котировок, невысокий P/E (что делает весьма вероятным продолжение роста).Минусы для инвестора. Существенных минусов выделить не удалось.Третье место. Ubisoft EntertainmentИгра Rayman OriginsТикер: UBIБиржа: Euronext ParisСтрана: ФранцияВалюта торгов: евроКапитализация: €7,5BГодовой оборот: €1,5BP/E: 57Дивиденды за год: —Изменение котировок за год: +95%О компании. Разработчик и издатель компьютерных игр, один из крупнейших в Европе. Был основан в 1986 году преимущественно как издатель. С 1994 года стал разрабатывать собственные игры. Первой и одной из самых известных стала серия Rayman. Широкую известность также получили серии Assassin’s Creed, Prince of Persia, Tom Clancy’s и др. У Ubisoft офисы в 20 странах, включая США, Канаду, Испанию, Китай, Германию, Россию.На графике. Ubisoft торгуется на бирже с 1999 года, и ее котировки в основном следовали мировым экономическим трендам: пузырь в 2000 году, глубокое снижение к 2003, новый пузырь в 2008, новое снижение до 2011. С 2012 года котировки компании стабильно растут. В 2016 году они побили рекорд 2008 года, а в 2017 — превысили его вдвое.Плюсы для инвестора. Многолетний положительный тренд котировок.Минусы для инвестора. Относительно высокий P/E (вероятна глубокая коррекция после недавнего рекорда), отсутствие дивидендов.Четвёртое место. UniperСотрудники UniperТикер: UN01Биржа: XETRAСтрана: ГерманияВалюта торгов: евроКапитализация: €8,8BГодовой оборот: €67BP/E: 5,4Дивиденды за год: 2,3%Изменение котировок за год: +93%О компании. Энергетическая компания, работающая как в Европе, так и на внешнем рынке. Является подразделением более крупной немецкой компании E.ON. В Европе владеет электростанциями множества типов — тепловых, гидроэнергетических, атомных (Швеция), биотопливных (Франция), солнечных, ветровых. Внутри Евросоюза основные инвестиции осуществляет в Чехии, а за его пределами — в России и Бразилии.На графике. Информация о котировках компании доступна лишь с 2016 года. Все это время наблюдается положительный тренд, общий рост составил 2,5 раза. Дивиденды компания выплачивала пока лишь один раз — в 2017 году.Плюсы для инвестора. Положительный тренд котировок с 2016 года, относительно приемлемые дивиденды и низкий P/E. Огромный оборот компании в сравнении с капитализацией говорит о том, что этим акциям явно есть куда дорожать.Минусы для инвестора. Существенных минусов выделить не удалось.Пятое место. NMC HealthБольница NMCТикер: NMCБиржа: London Stock ExchangeСтрана: Великобритания, ОАЭ, ИспанияВалюта торгов: фунт стерлинговКапитализация: €8,3BГодовой оборот: €993MP/E: 61Дивиденды за год: 0,5%Изменение котировок за год: +92%О компании. Британская медицинская компания, предоставляющая услуги преимущественно в Объединенных Арабских Эмиратах, а также в Испании. Основные направления деятельности — диагностика, исследования в области гинекологии и репродукции, аптечная торговля, управление медучреждениями. Владеет больницами, поликлиниками, аптеками. Также осуществляет оптовую торговлю лекарствами, медицинским оборудованием, косметикой и продуктами питания.На графике. Информация о котировках компании доступна с 2011 года, и все это время наблюдается положительный тренд. Общий рост — почти в 16 раз. Каждый год происходило почти двукратное удорожание компании. Дивиденды NMC Health платит раз в год, но размер из крайне мал.Плюсы для инвестора. Отличный многолетний рост котировок.Минусы для инвестора. Крайне низкие дивиденды, высокий P/E и низкий оборот в сравнении с капитализацией. Возможно, компания переоценена.Шестое место. Banco Comercial PortuguesОтделение Banco Comercial PortuguesТикер: BCPБиржа: Euronext LisbonСтрана: ПортугалияВалюта торгов: евроКапитализация: €4,4BГодовой оборот: €1,9BP/E: 24Дивиденды за год: —Изменение котировок за год: +92%О компании. Крупнейший коммерческий банк Португалии с широким спектром финансовых услуг для частных лиц и компаний. Занимается инвестиционной деятельностью, в том числе в недвижимость. У компании филиалы в Польше, Португалии, Мозамбике, Анголе, Швейцарии.На графике. Этот банк существует давно, но информация о его котировках в начале 2017 года содержит ошибку, поэтому мы приводим лишь дальнейшие данные. Долгое время до 2017 котировки банка падали, но сейчас активно восстанавливаются.Плюсы для инвестора. Хороший годовой рост котировок при умеренном P/E.Минусы для инвестора. Отсутствие дивидендов.Седьмое место. FinecoBankЛоготип FinecoBankТикер: FBKБиржа: Borsa ItalianaСтрана: ИталияВалюта торгов: евроКапитализация: €6,0BГодовой оборот: €265MP/E: 28Дивиденды за год: 2,9%Изменение котировок за год: +83%О компании. Коммерческий банк, подразделение знаменитой банковской группы UniCredit. Фокусируется на внутреннем рынке Италии. Помимо традиционных банковских услуг, предоставляет брокерские услуги, торгует финансовыми инструментами, оказывает услуги по управлению активами.На графике. С 2014 года котировки банка выросли в 2,5 раза, хотя этот рост не был равномерным: большой подъем в 2015, спад в 2016, еще более быстрый подъем в 2017, исторический рекорд в 2018. Дивиденды банк платит раз в год, и размер их относительно велик по меркам этого обзора.Плюсы для инвестора. Хороший годовой рост котировок, рекордные в обзоре дивиденды.Минусы для инвестора. Крайне низкий оборот в сравнении с капитализацией.При составлении обзора мы использовали данные с сайта finance.google.com. Буква «M» означает миллионы, «B» — миллиарды. Котировки даны в валютах торгов, остальные данные — в пересчете на евро.
Delta (DAL) posts a substantial rise in February traffic owing to higher demand for air travel. Load factor in the month increases on the back of traffic growth outpacing capacity expansion.
Spirit Airlines' (SAVE) pilots ratify a five-year contract related to pay hikes. It remains to be seen how this affects the company's bottom line going forward.
C.H. Robinson's (CHRW) growth by acquisition strategy and shareholder-friendly moves hold promise. The company's impressive earnings history is a further positive.
Persistent high labor and fuel costs affect bottom-line growth at Alaska Air Group (ALK). Declining passenger unit revenues and capacity overexpansion also raise concerns.
Spirit Airlines (SAVE) expands its Caribbean footprint with a new service to St. Croix from Fort Lauderdale.
Ryder (R) buoys optimism via an encouraging track record of dividend payments. The new tax law is a huge positive for transportation stocks.
Spirit Airlines (SAVE) benefits from increased demand for air travel in Q4. Revenues in the period rise on the back of flight volume expansion.
Global markets were routed for the second day in a row on Monday, with Asian and European indexes opening lower and bond yields rising as resurgent U.S. inflation raised the possibility central banks would tighten policy more aggressively than had been expected. Asian stocks suffered broad losses, with the MSCI Asia-Pacific index ex-Japan plunging as much as 2%, its largest daily drop since late 2016, while S&P futures extended Friday’s decline; the Nikkei dropped 2.6% while Hang Seng plunged as much as 2.7% before rebounding. The selling fed through into Europe, however without heavy continuing momentum. Meanwhile, U.S. equity futures are above initial lows printed straight from Globex electronic re-open, helped in part by reports that China's regulator would act to "mitigate" the equity selloff, which helped Chinese indices to rally into close, and close green. Friday’s payrolls report showed wages growing at their fastest pace in more than eight years, fuelling expectations for both inflation and interest rates would rise more than previously forecast. That sparked a global sell-off that continued on Monday. Futures markets priced in the risk of three, or even more, rate rises by the Federal Reserve this year. “This added fuel to a bond market sell-off, pushing US 10 year Treasury bond yields closer to the magic 3 percent level, which will only increase borrowing costs for corporates following years of cheap financing, thus ushering equities further from recent highs,” said Mike van Dulken, head of research at Accendo Markets. As a result, all eyes remain on the 10Y US Treasury for indication if last week's rout would continue, and while treasuries remain under pressure, with the yield briefly touching 2.885%, the selloff appears to have since moderated. Elsewhere, Aussie bonds were sharply lower aided by soft 15-year auction, while the 10Y JGB was trading comfortably below the BOJ's 0.11% redline, at 0.084%. German 10-year yields rose to 0.774%, their highest since September 2015. German 30-year yields rose to two-year highs at 1.429%. The Bloomberg Dollar Index was little changed, modestly lower from the Friday close; yen marginally firmer. The Norwegian crown, a key commodity currency, was one of the biggest losers in Europe on Monday, down 0.3 percent against the U.S. dollar. In emerging markets, the South African rand fell 0.7 percent and the Chinese yuan and Polish zloty 0.2 percent. The yen gained against all its major peers as shares slumped across Asia following a rout in U.S. equities and Treasuries on Friday. Japan’s currency gained for the first time in four days against the dollar as the Nikkei 225 Stock Average headed for its biggest slide since November 2016. "“Higher U.S. yields are weighing on risk assets, exerting upward pressure on the yen from risk aversion,” said Minori Uchida, Tokyo head of global market research at Bank of Tokyo- Mitsubishi UFJ Ltd. “Nikkei’s big drop is behind the yen’s strength today,” says Masakazu Satou, currency adviser in Tokyo at Gaitame Online, retail FX brokerage. “While U.S. stocks are likely undergoing a temporary adjustment, today’s performance is important. If U.S. stocks fall further significantly, they will likely enter a full-blown correction phase.” In China, the PBOC weakened the daily CNY fixing and drained a net 40b yuan of liquidity after the 8th consecutive day of no open market reverse-repo operations; Shanghai Composite pares early losses after Caixin services PMI beats estimates and following reports of possible regulatory intervention to prop up stocks. Dalian iron 1.2% stronger. Europe’s benchmark Stoxx 600 index fell 0.9%, its sixth consecutive day of losses totaling 4.1%, the biggest decline since Brexit and the longest rout since November; more importantly, the Stoxx 600 dipped below its 200-DMA for first time since early December and is now at two-month lows. As a reminder, European stocks suffered their biggest weekly selloff since November 2016 last week amid rising bond yields. The Stoxx 600 is now down 1.3% in 2018. All major indexes in Europe fell: the UK's FTSE 100 dropped 1 percent, France's CAC 40 0.8 percent and Germany's DAX 0.6 percent. In terms of sector specifics, losses have been relatively broad-based thus far with all ten sectors in the red. Airline names have been suffering this morning with RyanAir (-3%) softer in the wake of a disappointing earnings update, subsequently dragging easyJet (-2.3%) lower. Deutsche Lufthansa (-1.6%) were seen lower at the open amid reports that German coalition negotiators could drop proposal to abolish air transport tax. Elsewhere, markets will be looking out for any follow up to Friday’s reports that US regulators are seeking major fines for Fiat Chrysler as part of its motor settlement. As we reported on Friday night, the Federal Reserve sanctioned Wells Frago after the fake accounts scandal. Wells Fargo said it could reduce profits by as much as USD 400mln this year, and the stock was down over 9% in the premarket. Meanwhile, according to Bloomberg, investors are watching closely for clues on the direction of the rout that started in U.S. Treasuries and spread across global markets last week, with some pointing to synchronized economic growth as a reason to remain optimistic. European Central Bank President Mario Draghi could help stem further losses when he delivers an annual report to the European Parliament on Monday. In the commodities complex, WTI and Brent crude futures pared earlier losses after hitting a one-month low in early European trade. Friday’s rig count saw oil drillers add rigs for the second consecutive week, a sign that US oil production could soon exceed 10mln bpd. The Iranian Oil Minister Zanganeh stated that OPEC’s step to push up oil prices is short-lived and that any country that builds oil output capacity will ultimately win, while he also suggested to wait until the June meeting for a decision regarding an extension of cuts. In metals markets, spot gold trades higher, benefiting from its safe-haven status, albeit gains are relatively modest thus far with reports suggesting that Indian gold imports fell to a 17-month low in Jan. Elsewhere, Chinese steel futures were seen lower in quiet trading conditions while nickel prices in London have recovered from recent losses. In other news, UK PM May will face a coup that would install Boris Johnson, Jacob Rees-Mogg and Michael Gove if she persists with plans to keep Britain in a customs union with the European Union, Tory MPs warned according to the Sunday Times. Downing Street has since ruled out joining a customs union with the EU, while EU and UK said to seek quick Brexit agreement on defence and security. The Bank of England is expected to raise interest rates twice this year after a surprisingly strong showing from the economy at the end of last year and a brightening outlook in 2018, leading economists say. Germany's CDU, CSU, and SPD want to present a coalition agreement by Tuesday. Reports stated that Italian election polls could be downplaying possibility that centre-right coalition backed by Berlusconi could be closer to a majority victory at election next month. Outgoing Fed Chair Yellen stated that asset valuations are generally elevated but added that she doesn’t want to call it a bubble. Economic data include Markit PMIs. Bristol-Myers Squibb, Sysco, Skyworks are among companies reporting earnings. Bulletin Headline Summary from RanSquawk European equities join the global sell-off as markets reassess their Fed outlook for 2018 UK PM May rules out staying in the Customs Union post-Brexit amid reports that she faces a coup from pro- Brexit MPs Looking ahead, highlights today include: US Markit Services PMI, ISM Non-Manufacturing and ECB’s Draghi speaks Top Overnight News from BBG: Chancellor Angela Merkel and party leaders of SPD, CSU want to present a final grand coalition agreement on Tuesday, Rheinische Post reports, citing an internal SPD planning paper U.K. Prime Minister Theresa May has ruled out staying in the EU’s customs union after Brexit, a government official said, adding it isn’t government policy to stay in "a" customs union either Tory MPs earlier said May would face a coup to install three pro-Brexit leaders if she continues with plans to keep Britain in a customs union with the EU Investors have ramped up bets that the follow- up to BOE’s November’s tightening -- the first in a decade -- will come as soon as May Maintaining QE and 2% inflation target are still important, BOJ Governor Haruhiko Kuroda says in Japan’s parliament on Monday; PM Abe says that while Japan hasn’t escaped from deflation yet, momentum toward 2% inflation is still maintained China composite PMI rose to 53.7 in January, up from 53 in December and to the highest reading since January 2011 ellen: Wages are beginning to rise at a faster pace; asset values are high but would not say they are too high; a drop in asset values would not unduly damage core financial system Fed’s Williams: no need to change path of gradual hikes; not too bothered by inflation overshooting target for a time European Jan. Service PMIs: Spain 56.9 vs 55.0 est; Italy 57.7 vs 55.9 est; France 59.2 vs 59.3 est; Germany 57.3 vs 57.0 est; Eurozone 58.0 vs 57.6 est; Markit note first concurrent rise in selling prices across survey nations since July 2008 U.K. Jan. Services PMI: 53.0 vs 54.1 est; slowest upturn in services output for 16 months German Coalition: parties want to present final grand coalition agreement on Tuesday: Rheinische Post China regulator (CSRC) is urging domestic brokerages to ask investors to add to their collateral when share prices drop instead of closing out the positions according to people familiar Market Snapshot S&P 500 futures down 0.1% at 2,752.90 STOXX Europe 600 down 0.9% to 384.54 MSCI Asia Pacific down 1.4% to 179.82 MSCI Asia Pacific ex Japan down 1.3% to 590.34 Nikkei down 2.6% to 22,682.08 Topix down 2.2% to 1,823.74 Hang Seng Index down 1.1% to 32,245.22 Shanghai Composite up 0.7% to 3,487.50 Sensex down 1.1% to 34,692.40 Australia S&P/ASX 200 down 1.6% to 6,026.23 Kospi down 1.3% to 2,491.75 German 10Y yield fell 2.9 bps to 0.738% Euro up 0.09% to $1.2474 Brent Futures down 0.6% to $68.16/bbl Italian 10Y yield rose 8.4 bps to 1.781% Spanish 10Y yield fell 3.9 bps to 1.433% Brent Futures down 0.5% to $68.25/bbl Gold spot up 0.2% to $1,335.43 U.S. Dollar Index down 0.2% to 89.06 A bloodbath was seen across equity markets in Asia trade as most major bourses suffered deep losses after Friday’s slump on Wall St, where stocks failed to benefit from the better than expected NFP jobs data and sold-off on the bond market weakness as markets reprice expectations for the Fed’s tightening cycle. ASX 200 (-1.6%) and Nikkei 225 (-2.6%) opened with firm losses amid a continued rout in US equity futures, while mining and oil-related sectors were the worst performers following weakness in the commodities complex. Hang Seng (-1.1%) conformed to the downbeat tone with notable pressure in the energy giants, while Macau gambling stocks also racked up losses on competition concerns after reports that China is drafting a proposal to permit gambling on Hainan Island. Conversely, Shanghai Comp (+0.7%) pared opening losses and outperformed the region after encouraging Chinese Caixin Services and Composite PMI data releases, in which the former posted its highest since May 2012. Finally, 10yr JGBs were relatively flat and held on to Friday’s BoJ-induced gains, with only brief support seen amid a wide-spread risk-averse tone. Top Asian News Chinese Funds Buy Record $1.6 Billion of Hong Kong Stocks Today China Is Said to Ask Brokerages to Help Avert Stock Declines Indonesia’s Economy Grows Faster Than Estimated in 4th Quarter Samsung’s Jay Y. Lee Set Free in Unexpected Seoul Court Reversal Value Stocks Are Still Unloved Everywhere Except for China China Regulator Is Said to Allow Rollover of Share Pledged Loans European equities have very much kicked the week off on the back-foot as Friday’s sell off in US equities has spread into Asia-Pac and European trade (Eurostoxx 50 -0.7%) as markets re-price expectations of the Fed’s tightening cycle. In terms of sector specifics, losses have been relatively broad-based thus far with all ten sectors in the red. Airline names have been suffering this morning with RyanAir (-3%) softer in the wake of a disappointing earnings update, subsequently dragging easyJet (-2.3%) lower. Deutsche Lufthansa (-1.6%) were seen lower at the open amid reports that German coalition negotiators could drop proposal to abolish air transport tax. Elsewhere, markets will be looking out for any follow up to Friday’s reports that US regulators are seeking major fines for Fiat Chrysler as part of its motor settlement. Wells Fargo (WFC) – The Federal Reserve has sanctioned the bank after the fake accounts scandal. Wells Fargo said it could reduce profits by as much as USD 400mln this year. Broadcom (AVGO)/Qualcomm (QCOM) – Broadcom is set to raise its bid for Qualcomm to about USD 145bln or USD 80/share, according to sources. Top European News May Under Fire as Brexit Reality Sparks Conservative Civil War Prudential Financial Agrees $1.8b Reinsurence Deal With Lloyds Bund Futures Are Underpinned as Small Dovish Repricing Supports German CDU, CSU, SPD Want to Present Coalition Deal Tuesday: RP Bayer, Monsanto Submit Concessions in EU Deal Review In FX, the Dollar index has consolidated post-NFP recovery gains above the 89.000 level, despite losing some ground against the traditional safe-haven currencies amidst the ongoing pull-back in global equities (in part triggered by higher bond yields and Fed tightening perceptions in wake of Friday’s US jobs report). Eur/Usd is back down around 1.2450 vs last week’s 1.2500+ peaks, as specs increased long positions yet again (to fresh record highs), while Cable is pivoting around 1.4100 amidst more UK/Brexit-related claims and denials (latest concerning a plot against PM May on EU customs union issues). Usd/Cad has rebounded above 1.2400 with the Loonie undermined by reports that Canada could walk away from NAFTA, while Aud/Usd and Nzd/Usd are both sitting just above recent lows and round numbers (0.7900 and 0.7300) awaiting this week’s RBA and RBNZ policy meetings). Conversely, Usd/Jpy has retreated from Friday’s US labour data inspired highs and back below 110.00, with resistance seen ahead of the 110.37 Fib (38.2%) and 110.50 offers, but 109.79 and 109.83 MAs (ascending 55 hourly and descending 100 weekly respectively) providing support. Usd/Chf is hovering just under 0.9300 within a tight range up to around 0.9325. In commodities, WTI and Brent crude futures have pared earlier losses after hitting a one-month low in early European trade. Friday’s rig count saw oil drillers add rigs for the second consecutive week, a sign that US oil production could soon exceed 10mln bpd. The Iranian Oil Minister Zanganeh stated that OPEC’s step to push up oil prices is short-lived and that any country that builds oil output capacity will ultimately win, while he also suggested to wait until the June meeting for a decision regarding an extension of cuts. In metals markets, spot gold trades higher, benefiting from its safe-haven status, albeit gains are relatively modest thus far with reports suggesting that Indian gold imports fell to a 17-month low in Jan. Elsewhere, Chinese steel futures were seen lower in quiet trading conditions while nickel prices in London have recovered from recent losses. On today's calendar, we will see the remaining January services and composite PMIs released in Europe and the US. Also due in the US is the January ISM non-manufacturing while in Europe the February Sentix investor confidence reading and December retail sales data for the Euro area will be due. Of most interest however will likely be ECB President Draghi's comments in front of the European Parliament. US Event Calendar Feb. 5-Feb. 9: MBA Mortgage Foreclosures, prior 1.23%; Mortgage Delinquencies, prior 4.88% 9:45am: Markit US Services PMI, est. 53.3, prior 53.3; Markit US Composite PMI, prior 53.8 10am: ISM Non-Manf. Composite, est. 56.7, prior 55.9 DB's Jim Reid concludes the overnight wrap I’ve had plenty of time to contemplate last week’s price action as my late flight home last night from Geneva was cancelled after several hours hanging about. We were left stranded after midnight looking for a hotel. Given I do an annual mapping the world’s prices document that shows Switzerland has the most expensive hotels in the world this was a little suboptimal. It’s slightly ruined a great weekend skiing. Fantastic conditions but very cold. So good morning from the Holiday Inn Express Geneva Airport where I’m about to see how good the all inclusive breakfast is. Anyway, bond markets. If you thought last week was a shock in fixed income, just imagine what would happen if we actually saw CPI numbers consistently beat expectations on either/both sides of the Atlantic. Global bond markets are still set up for a long period of low inflation ahead, in our view. In our global 2018 outlook tour, the biggest push back to our view was that most didn’t believe inflation would misbehave as much on the upside in 2018 as we did, so I don’t think markets will be well prepared if it does. One higher average US hourly earnings print (2.9% yoy vs 2.6% expected) doesn’t make a trend but as we’ve been saying for several months now, in our view, everything is set up for higher US inflation this year (eg labour market tightness, late cycle tax cut boost, traditional lag between growth and inflation etc.). If it doesn’t happen this year with all the forces present you’d have to tear up all your textbooks really. In terms of what impact higher inflation would have. You only have to see last week’s price actions for some clues. 10yr Treasuries moved 19bps higher (+5.1bps Friday), the S&P 500 -3.85% (-2.12% Friday) and the VIX (from 11.08 to 17.31 on the week, 3.8 points higher Friday). In the process, 10yr Treasuries hit their highest yield since January 2014, the S&P500 had its worst day since September 2016 and the VIX climbed to its highest level since the week of the Trump election victory 15 months ago. So for equity vol we’ve already bypassed the whole of the 2017 levels now in early 2018. This move to higher inflation and higher yields probably won’t be a straight line but the risks are building that 2018 could have moments of big adjustments and spikes in vol. A reminder that our credit forecasts for 2018 are for IG to widen 25bps and HY c.100bps due to higher inflation and yields. On this, our colleagues in rates and economics have raised their end-2019 Fed Terminal rates to 2.75% (from 2.45%) and year-end 2018 10yr US yield forecast to 3.25% (from 2.95% prior). The post payroll week is typical pretty light on data so perhaps the shutdown risks towards the end of the week (Thursday 8th Feb.) will come into view. The number two US Senate Democrat Mr Durbin does not believe a deal to protect the c700k of undocumented immigrants brought to the US as children can be reached by this Thursday, but at the same time “don’t see a government shutdown coming”, in part as he expects Senator McConnell to bring the DACA issue “….to a full debate in the Senate” later on. Elsewhere, Bloomberg has noted Republicans are looking at extending the government funding till 23 March. This is broadly consistent with our US economist’s view where they expect another 3-4 week continuing resolution as the most likely outcome. They note the risk of a shutdown this week is not negligible, in part as it would begin to bring the debt ceiling into the mix as the Congressional Budget Office has recently estimated that the Treasury will run out of cash in the first half of March. Though our economists think the probability of a debt ceiling breach is extremely remote, the mid-March deadline adds pressure to already complicated funding negotiations. Staying with politics, in Germany, Ms Merkel’s bloc and the SPD will resume talks this morning to potentially form the next coalition government. Talks over the weekend were “very constructive” and achieved agreement on many topics, but some topics are still far apart which both parties want to discuss “thoroughly and with focus” on Monday morning. Elsewhere, the Handelsblatt reported that the EU commission may scrap structural fund payments to relatively wealthier countries such as Germany, France, Netherlands and Sweden. The change could save about €100bn over the next seven years. This morning in Asia, markets are extending the selloff. The Nikkei (-2.13%), Hang Seng (-1.36%), Kospi (-1.19%) and China’s CSI 300 (-0.49%) are all down and UST 10y yields are up c2bp as we type. Datawise, both China’s January Caixin and Japan’s Nikkei composite PMI were modestly above last month’s readings, at 53.7 (vs. 53) and 52.8 (52.2) respectively. After the bell on Friday, Wells Fargo was down c6% after the Fed banned the bank from increasing its total assets beyond their size at the end of 2017 (US$1.95trn) until it cleans up its consumer and compliance issues. Elsewhere, the WSJ reported the CEO of JP Morgan has called some of the bank’s clients to assuage concerns and emphasis the bank’s plans to start a new healthcare company was only for its own staff. Now recapping other markets performance from Friday. Key US bourses dropped 2%-2.5%, with all sectors in the S&P in the red, weighted down by softer results from energy companies and increased concerns from rising yields. Notably, the S&P was up 5.6% in January and +19.4% in CY17 so this is a small dent for now. In Europe, the FTSE (-0.63%), Stoxx 600 (-1.38%) and DAX (-1.68%) were all down, with the latter down the most since June 17 and erasing all YTD gains for this year. In government bonds, both Bunds and Gilt 10y yields rose c4.7bp while peripherals rose 6-8bp. The US 5y breakeven rose to 2.04% (the highest since March last year) and the 2-10s curve steepened 7bps to 69.9bps (the highest since November). In currencies, the US dollar index rose for the first time in four days (+0.59%) while the Euro and Sterling fell 0.38% and 1.02% respectively. In commodities, WTI oil fell 0.53% on Friday and is down further this morning. Elsewhere, Gold weakened 1.14% and Silver dropped 3.75% while other base metals were little changed (Copper -0.43%; Zinc flat; Aluminium +0.17%). Following on the strength of the USD, DB’s Alan Ruskin has looked back at history and noted that in an environment where 10y yields go up and equities go down, the USD tends to go up sharply versus the AUD and up substantially versus the JPY, but mixed to near flat versus the EUR. To summarize, past history does tend to support the thesis that when it feels like there is nowhere to hide between poor simultaneous trading conditions in the equity and fixed income markets, the USD and more recently the EUR have been the currencies to shelter in. Refer to his note for more details. Away from markets and onto central bankers commentaries. Before we do this, it’s worth noting that Mr Powell will be sworn in at the Fed today. We hope he’s fresh from his 65th birthday celebrations from yesterday. On Friday, the Fed’s Kaplan’s hawkish comments partly accelerated the selloff in bonds after he noted “I think the base case for 2018 should be three (rate hikes) - it could be more than that, we’ll have to see”. Conversely, the Fed’s Williams has maintained his moderately dovish views. He noted that recent price data have been encouraging and that “we’ll continue to see inflation pick up this year and next”, but “given the economy is performing almost exactly as expected, you can expect policy makers to do the same”. Overall, he does not “...see an economy that’s fundamentally shifted gear” and that either three or four rate hikes are “both possibilities (that) are reasonable to think about, at this point, as options”. Later on Sunday, former Fed Chair Mrs Yellen noted valuation in US equities were “high...but I don’t want to say too high”. Similarly, commercial real estate prices are now “quite high relative to rents”, but “it’s very hard to tell” whether it’s a bubble or not, although it is a source of some concern that asset valuations are so high. Overall she believes that if there were a decline in asset valuations, “it would not damage unduly the core of our financial system”, in part as the financial system is now “much better capitalised”. In the UK, the BOE’s Deputy Governor Woods warned against loosening regulations post Brexit. He noted the Prudential regulation authority will “maintain standards of resilient in the financial sector at least as high as those we have today” and that “the idea that we would want to be sub-EU standard doesn’t bear scrutiny”. We wrap up with other data releases from Friday. In the US, the January change in nonfarm payrolls was above market at 200k (vs. 180k expected), with the average payroll gains over the pastt hree months outpacing the last six months (192k vs. 180k). The average hourly earnings growth also beat at 2.9% yoy (vs. 2.6% expected) – marking the highest annual pace since May 2009. The unemployment rate was in line and steady for the fourth consecutive month at 4.1%. Elsewhere, December factory orders was above expectations at 1.7% mom (vs. 1.5%) while the final reading of the January Uni. of Michigan consumer sentiment was revised slightly higher at 95.7 (vs. 95 expected). The Eurozone’s December PPI was in line at 0.2% mom while prior revisions lowered the annual growth to 2.2% yoy (vs. 2.3% expected). Italy’s January CPI fell less than expected at -1.6% mom (vs. -1.7%) and 1.1% yoy (vs. 0.8%). The start of the week will see the remaining January services and composite PMIs released in Europe and the US. Also due in the US is the January ISM non-manufacturing while in Europe the February Sentix investor confidence reading and December retail sales data for the Euro area will be due. Of most interest however will likely be ECB President Draghi's comments in front of the European Parliament.
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