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Patris Daily - 12 October 2018 - Part 2

12 Oct 2018

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OUR TAKE ON THE LATEST MACRO DATA:

Portugal: August International Trade Statistics

Exports and imports of goods recorded nominal growth rates of +2.6%y/y and +8.6%y/y respectively, both decelerating when compared with the previous month (+13.8%y/y and 11.9%y/y in the same order, in July 2018). Excluding fuels and lubricants, exports increased by 1.7%y/y and imports grew by 1.9%y/y (+11.8%y/y and +12.5%y/y respectively in July 2018). The deficit of trade balance amounted to €1,709mn in August 2018, increasing by €351mn when compared with the same month of 2017. Excluding Fuels and lubricants, the trade balance stood at -€1,124mn, corresponding to an increase of €28mn in the trade deficit when compared with August 2017. In the quarter ended in August 2018, exports and imports of goods grew by 8.9%y/y and 12.6%y/y respectively.

The trade balance path since the beginning of 2018 remains weaker when compared to last year.

US: September CPI inflation

Headline CPI inflation stood at 0.1%m/m in September (vs. consensus +0.2%m/m), or +0.059% with 3 decimals), consistent with an annual rate of change of 2.3%y/y (vs. consensus 2.4%), a slowdown compared to August’s reading (2.7%y/y).

Core CPI inflation stood at 0.1%m/m (vs. consensus +0.2%m/m), or +0.116% with three decimals. The annual rate of change remained unchanged at 2.2%y/y (vs. consensus 2.3%y/y). The 3-month annualised rate of change slowed to 1.8% in September, from 2.0% in August, suggesting weaker inflation pressures over recent months (see chart).

Core goods fell by 0.3%m/m in September (vs. -0.3%m/m in August). Services ex. Energy prices increased by 0.2%m/m, with the shelter index also up by 0.2%m/m (medical care +0.2%m/m).

US: Initial Jobless Claims

Initial jobless claims increased by 7k to 214k during the week ending on 6 October (vs consensus 207k), while continuing claims rose by 4k during the week ending on 29 September to 1660k (vs consensus 1660k).

Brazil: August Retail Sales

The core retail sales measure (i.e. excluding autos and building materials) increased by 1.3%m/m in August vs market expectations of an increase of 0.2%m/m. The reading of July was revised upwards from -0.5%m/m to -0.1%m/m. In annual terms, core retail sales increased by 4.1%y/y, above consensus of 1.4%y/y and the July reading of -1.0% y/y.

Broad retail sales increased 4.2%m/m in August (vs consensus of 2.4%m/m). The annual rate of growth increased from 3.0%y/y in July to 6.9%y/y in August (vs consensus of 5%y/y).

GLOBAL HIGHLIGHTS:

CTT: The group said it will analyse a decision by Portuguese regulator ANACOM that is likely to result in changes to the way the quality of service is measured (Bloomberg)

Sonae: The group decided that it will not carry out the IPO of retail unit Sonae MC, reflecting current adverse conditions in international markets (Bloomberg)

Sonae Capital: The Company studies entry into the Mexican market in the energy area (Bloomberg)

Portugal: Portuguese Prime Minister António Costa said in parliament yesterday that the 2019 budget will include measures that will continue to improve household income. Budget will also include incentives for some emigrants who might want to return to Portugal. The 2019 budget proposal will be handed to parliament on October 15 (Bloomberg)

Portugal: Portugal’s Secretary of State for Finance Ricard Felix said in parliament that “new early payments of the IMF loan are a realistic possibility”. Felix also said that 83% of the IMF loan has been paid, and that the Government wants to continue reducing Portugal’s interest costs. Felix also said that the Portuguese Government has high expectation that soon Portuguese debt may deserve an investment grade rating from all the main credit rating companies (Bloomberg)

CTT: Capital Fund Management reduced its net short position in CTT by 14.71% to 870,000 shares, or 0.58% of the company’s stock as of 10 October (Bloomberg)

Merlin: “The information published today in EI Confidential is completely unfounded”, Merlin said in a regulatory filing on Thursday. Merlin and El Corte Ingles have held very preliminary discussions on certain logistics assets or joint transactions in the logistics segment, without having reached any agreements as of the date of this communication. Merlin also said that it has acquired the Almada shopping center in Lisbon for €406.7mn (Bloomberg)

BBVA: The bank sold 80% of Divarian Propiedad to an entity managed by Cerberus, according to regulatory filing. Final price paid by Cerberus will depend on the volume of real estate assets. The bank sees no significant impact on its fully loaded CET1 ratio (Bloomberg)

Melia: Melia Chairman ceased to hold control of the company, as shares go to the family. Gabriel Escarrer Julia transfers part of his holdings in commercial companies that are shareholders in Melia in favor of family. Escarrer Julia, his wife and six children continue to own combined 46.972% of Melia through 3 companies, while Escarrer Julia owns an additional 5.025% of Melia through a 4th company. Family members have signed shareholder’s agreement to have a majority in shareholding decisions (Bloomberg)

Natixis: Natixis confirmed interest in exploring combination with Ingenico, and will inform the market if and when necessary. The company will further develop and invest in payment operations, and remains committed to strong financial discipline (Bloomberg)

Eurozone: S&P sees the ECB raising rates gradually from 3Q19. S&P also said that global trade tensions are rising rapidly, with a danger of escalating much further. S&P also considers that the potential fallout from unsuccessful BREXIT negotiations between the UK and the EU remains a concern (Bloomberg)

Fitch: Fitch Ratings has upgraded Banco BPI Long-Term Issuer Default Rating (IDR) to “BBB” from “BBB-” and Short-Term IDR to “F2” from “F3”. Banco BPI’s “bb+” Viability Rating is unaffected by today’s rating action. The upgrades follow a similar action of Banco BPI’s parent bank, CaixaBank (Bloomberg)

Italy: Deputy Premier Di Maio said the 2019 budget law will include a reduction of tax deductions on the lender’s interest expenses. Budget also to include €500mn defence cuts (Bloomberg)

Italy: Treasury and state lender Cassa Depositi e Prestiti may take a 15% stake in a new company aimed at relaunching Italy’s airline Alitalia, according to Il Sole 24 Ore, citing an interview with Deputy Premier Luigi Di Maio (Bloomberg)

WHAT TO WATCH TODAY:

On the data front, all eyes will be on the Eurozone Industrial Production data for August, as well as on the preliminary reading for October of the University of Michigan’s measure of consumer confidence.

Moody’s may update its credit rating for Portugal (Ba1/Positive), Czech Republic, Saudi Arabia and South Africa. Moody’s is the only one from the four main rating agencies that still keeps Portugal in junk. Poland is in the calendar of Fitch and Standard & Poor’s. Finally, DBRS may also review its credit rating for Portugal (BBB/Stable) and Slovak Republic.

JP Morgan Chase and Citigroup will announce today its quarterly earnings, before market opens. Galp Energia released its 3Q18 trading update on Monday, before the market opening.

In Germany, the Bavarian state elections take place on Sunday with increasing risks of political fragmentation.

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Disclaimer

The information and opinion contained in this report was prepared by PATRIS - SOCIEDADE CORRETORA, SA ("Patris"), which is part of the group of companies whose holding is PATRIS INVESTIMENTOS, SGPS, SA (Patris Group), listed in Alternext, which holds 100% of the share capital and voting rights of REAL VIDA SEGUROS SA which, in turn, holds 100% of the share capital and voting rights of Patris.

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