Consumer Staples (XLP): The index continues to find support at its 21-DMA. A strong bounce from its 21-DMA will be bullish for the
index. RS line has started to trend downwards with deterioration in technical ratings. A/D Rating has deteriorated significantly in the
last few weeks.
Author: Tristan d'Aboville
Tristan d’Aboville is an Executive Director, Research Analyst, managing the European Research Product.
Mr. d’Aboville has more than 16 years of experience in equity research and sales. Since joining the firm in 2012, he has applied his client-centric style with analysts and portfolio managers, anticipating and exceeding their needs. He writes the well-received weekly European commentary, and follows it with a client conference call to discuss findings.
Prior to William O’Neil + Co., Mr. d’Aboville was a top-producing salesperson at Kepler Capital Markets, formerly known as Julius Baer, and at Natixis Bleichroeder, covering European equities for large U.S. institutional clients. He started his career as an equity analyst at Aurel-BGC, later moving to Natixis Bleichroeder, where he became the lead analyst for the European Hotels, Leisure and Catering Sector. He was recognized as a Top Analyst for Predictability & Recommendations by AQ Publications in 2003. Extel named him one of the top three European analysts covering the business services and hotel & leisure industries. Prior to the securities industry, Mr. D’Aboville was an auditor with Arthur Anderson.
Mr. d’Aboville earned a Master of Science in Managerial and Financial Economics from ISC Paris School of Management. Later, he studied Global Affairs at New York University. He is a Certified International Investment Analyst (CIIA).
A sportif, Mr. d’Aboville enjoys kite surfing, sailing, skiing, tennis, chess, and spending as much of his free time as possible with his wife, young daughter, and son.
European Weekly Summary
Key points from this week’s report:
Please refer to the attached PDF for the full report.
- European equities tested new record highs last week, supported by a rally in China-exposed stocks and signs that the U.S. economy is heading for a soft landing. The Stoxx 600 rose 2.7%, reclaiming its previous rally highs, and consequently, it shifted to a Confirmed Uptrend. Finland, Germany, Belgium, Sweden, Italy, and Spain reached fresh 52-week highs. France continues to maintain its upward momentum from its August low and regained its 200-DMA, now 6% below its 52-week high. Meanwhile, Denmark lagged its European peers, falling below its 200-DMA and remaining 15% off its 52-week high. Refer to pages 5 and 6.
- Sector Rotation: On our rotation graph, Health Care, Financial, Retail, Staple, and Transportation remain in the leading quadrant (outperforming with positive momentum). However, short-term momentum in Financial and Health Care is fading at an accelerated pace. Refer to page 7.
- Risks of the recent rally fading rapidly still exist as earnings recovery continues to face challenges. Ahead of Q3, consensus has reduced its 2024 earnings outlook for the Stoxx 600 by an average of 0.7% over the past eight weeks. Poor earnings momentum continues to concentrate in cyclical and consumer-related names. Conversely, earnings expectations from sectors sensitive to lower interest rates (e.g., Real Estate, Utility, Financial) have seen significant upgrades. Refer to page 2.
- Sector Scorecards: With the market rally, over 1,000 stocks in the region have broken out of consolidation in recent weeks (refer to page 7). Last week’s breakouts occurred among Consumer/Retail names and Capital Equipment, including leaders such as Schindler (SCHN.CH), Cargotec (CGCB.FI), and Adidas (ADSX.DE, a FL constituent). Refer to pages 10 to 20.
- European Focus List Update – Refer to page 3.
O’Neil Consumer/Retail Weekly
Consumer Staples (XLP): The index has traced back to its 21-DMA as the market has favored growth sectors in the last few weeks.
A strong bounce from its 21-DMA should be bullish for the index. The RS line has also started to trend downwards in the last couple of
weeks.
European Weekly Summary
Key points from this week’s report:
Please refer to the attached PDF for the full report.
European indices paused last week, with the Stoxx 600 losing 33 bps, finding support at the 10-DMA. The index now has additional support at the 50-DMA (52 bps below) and the 200-DMA (2.1% below). However, it faces resistance at the 100-DMA (12 bps higher) and 21-DMA (36 bps higher) and is currently trading 2.4% off its recent highs. While most markets are in consolidation mode, Spain, Belgium, and Germany are making or trading near highs, while Denmark remains below its 200-DMA.
European investors weighed a mix of earnings and economic data. The central banks of the U.K. and Norway held rates steady, while Mercedes-Benz issued a profit warning due to weakened spending from affluent Chinese consumers, affecting both the auto and luxury apparel sectors. Over the past week, Capital Equipment, Financial, and Retail sectors led gains, while defensive sectors such as Utilities, Staples, and Health Care lagged.
Rotation charts show Transportation, Retail, Finance, Staples, and Health Care currently in the leading quadrant based on momentum over both 26-week and four-week periods. However, while Retail and Transportation have maintained their momentum in recent weeks, Staples and Health Care are starting to lose ground, with these sectors declining by 1.8% and 3.5%, respectively, over the past four weeks.
Sector Scorecards – Top-rated stocks with the best technical setups include:
- Capital Equipment / Building Materials: Holcim (HOLN.CH), Sweco (SWEB.SE), Prysmian (PRY.IT), Saint Gobain (SGO.FR)
- Financial: Unicredit (UCG.IT), Caixabank (CABK.ES)
- Healthcare: Virbac (VIRB.FR)
- Technology: Esker (ALEK.FR)
European Focus List Update: There were no new additions or removals this week. Actionable ideas include Swedish Orphan Biovitrum (SOBI.SE), Schneider Electric (QT@F.FR), Swissquote ‘R’ (SQN.CH), Vitrolife (VITR.SE), Galderma (GALD.CH), Ferrari (RACE.IT), 3i Group (III.GB), Nkt (NKT.DK), Eqt (EQT.SE), Premier Foods (PFD.GB), and Novozymes B (NZY.DK).
European Weekly Summary
Key points from this week’s report:
Please refer to the attached PDF for the full report.
- European indices showed strength last week, with several markets approaching or reaching new highs. Belgium and Spain hit fresh 52-week highs, while Germany, Italy, Sweden, Portugal, and the U.K. are trading just 1–3% off their 52-week highs. Of the 16 indices tracked, 10 are currently trading above their 50-DMA. France, however, is underperforming its peers, trading 10% below its recent highs and facing resistance at the 50-DMA.
- The Stoxx 600 remains in a consolidation zone as investors await the Federal Reserve’s interest rate decision, which could introduce some volatility. Despite this, all sectors ended last week in positive territory. Technology, Transportation, Capital Equipment, and Materials led the gains, rising 3–4%. Health Care and Consumer Staple trailed but recorded slight gains of 0.1–0.2%.
- On our rotation chart, Health Care, Financial, Retail, and Consumer Staple continue to outperform over the long term (26 weeks), with strong momentum. However, the short-term momentum (four weeks) in Retail and Health Care is beginning to fade, suggesting a shift away from defensive sectors. Cyclical sectors, on the other hand, continue to show weak momentum. Meanwhile, Technology, Materials, and Energy are starting to exhibit positive short-term momentum.
- European Focus List update: No additions or removals last week. Actionable names include Inditex (IND.ES), Premier Foods (PFD.GB), Galderma (GALD.CH), Ferrari (RACE.IT), Rolls-Royce Holdings (RR.GB), 3i Group (III.GB), Nkt (NKT.DK), Vitrolife (VITR.SE), and Novozymes B (NZY.DK).
- Watchlist (Stocks of interests that are well-rated through our lens, exhibiting technical improvement, and trading at a buy point) – Refer to pages 9–19: Imcd (IMCD.NL), Siemens Energy (ENRX.DE), Orsted (DEN.DK), Axa (MIDI.FR), and Wallenius Wilhelmsen (WWL.NO).
O’Neil Consumer/Retail Weekly
Consumer Staples (XLP): The index continues to trade constructively along its rising 21-DMA. RS line is trending upward with strong
technical ratings as the market has pivoted towards defensive sectors. A/D Rating has also improved significantly in the last few
weeks.
European Weekly Summary
Key points from this week’s report:
Please refer to the attached PDF for the full report.
- The Stoxx 600 declined 3% last week. The index breached its key near- and mid-term support levels before finding support near the range of 500–515, where it had consolidated between mid-March and early-May. European shares declined for five straight sessions on high volume on growing concerns over a sluggish GDP growth in France and a recession in Germany, two of the largest economies in the region. The Eurozone’s GDP growth estimate was revised downward to 0.2% q/q in Q2 from prior estimate of 0.3% q/q.
- We recommend that investors adopt a cautious approach and await markets to stabilize here before recording a follow-through day. With the upcoming week packed with key events such as the European Central Bank (ECB) meeting (second rate cut of 25 bps expected), the U.S. inflation data on Wednesday, and the U.S. presidential debate scheduled on Tuesday, markets could turn volatile this week. The Stoxx 600 is now trading 50 bps below its 50-DMA and 89 bps below its converging 21- and 100-DMA. Next support is at its 200-DMA, 160 bps lower.
- Leadership has narrowed again, with the number of stocks breaking out slipping back to 175 from 491 in the prior week and now its mid-August low. Similarly, the number of stocks trading near their pivot dropped to 2,609 from 4,756 a week prior and is now near its early-August low of 2,596. If the ECB signals a dovish approach with a third rate cut expected in the next month, we could see leadership starting to re-emerge.
O’Neil Consumer/Retail Weekly
Consumer Staples (XLP): The index is making a new 52-week high on strong volume and is trading constructively above its key
moving averages. RS line is also trending upward with RS Rating of 76 and A/D Rating of B. There has been significant improvement
in A/D Rating in the last few weeks which indicates accumulation.
Conferences for Consumer Stocks
This week, multiple consumer-focused conferences will be held, and in this report, we highlight key participating companies. The 12 names highlighted below are either Focus Listed rated or industry leaders. We denote the following characteristics for these select names:
- Technical trends, including important support/resistance moving averages.
- Fundamental and quantitative O’Neil metrics.
- Market estimates for future sales and earnings growth.
European Weekly Summary
Key points from this week’s report:
Please refer to the attached PDF for the full report.
- European indices staged a v-shaped recovery, maintaining its upward momentum following a sharp decline in early August. Belgium, Germany and Switzerland clocked fresh 52-week highs and thus, were moved recently to a Confirmed Uptrend. The U.K., Spain, Finland, Austria, Italy, Sweden, and Norway are trading 1–2% off 52-week highs. All indices except France are now trading above 50- and 200-DMA. France’s CAC also made a strong recovery, retaking its 50-DMA but the index is still trading below its 200-DMA, 8% off 52-week highs.
- We recommend adding risks as the indices continue to remain constructive above key moving averages and nearing 52-week highs. Focus on quality ideas with good O’Neil quantitative metrics and strong industry groups emerging out from proper bases or bouncing off key support levels.
- Sectors closed positive last week except Energy (-0.1%) and Retail (-0.1%). Health Care, Staples, Utility, Capital Equipment, Basic Material, and Financial closed 1–2% higher. Technology was up 0.6% while Cyclicals closed flat. On our rotation graph, Health Care, Financial, and Retail remained in the best quadrant, exhibiting positive momentum. Staple, Utility, and Transportation also showed positive short-term momentum. Technology, Cyclicals, Materials, and Energy showed negative short-term momentum and remained in the worst quadrant.
- Market breadth continued to improve last week reflected by the rising number of stocks basing, forming the right side of a consolidation on improving technical or breaking out of consolidation (refer from Sector Score Cards from page 9 to 20). Stocks of interests include: Oci (OCIO.NL), Elis (ELIS.FR), Lifco (LIFC.SE), Novartis (NOVN.CH), Pandora (PND.DK), and Auto Trader (AUTO.GB).
- From our Focus List, actionable ideas include Biotage (BIOT.SE), Inditex (IND.ES), Lonza Group (LONN.CH), Premier Foods (PFD.GB), Nkt (NKT.DK), Relx (REL.GB), Swedish Orphan Biovitrum (SOBI.SE), 3i Group (III.GB), Galderma (GALD.CH), and recent addition Novozymes (NZY.DK).
