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Today's edition of the Saxo Morning Call features the SaxoStrats team discussing the continuing weakness of the US dollar as commodity prices recover ground and in the wake of key US equity indices hitting all-time highs Thursday.
Article / 02 September 2014 at 8:16 GMT

EU carmakers driven to distraction by Ukraine struggle, French data

Head of Equity Strategy / Saxo Bank
Denmark
  • European equity picks continue to struggle
  • Carmakers´ fortunes hinge on Ukraine resolution
  • French decline in light-vehicle registration his Renault hard

By Peter Garnry

Our portfolio of top equity picks in Europe continues to struggle, and is down 0.7% compared to MSCI Europe ( which is up 0.9% over the same period). The primary driver of last week's underperformance was the strategy's exposure to the carmarker & auto parts industry. The Euro STOXX 600 Automobiles & Parts Index is down 2.4% in the past week following a 7% climb after Russian president Vladimir Putin commented on easing the situation in Ukraine, thus boosting investor sentiment.

French carmakers struggle
The French auto industry remains stranded at the back of the Eurozone pack. Photo: iStock

The three biggest decliners in the industry were Renault (-6.3%), Continental (-3.4%) and Daimler (-1.8%). Yesterday was especially tough for Renault shares as France's light-vehicle registrations fell 3.2% year-over-year in August, with Renault seeing a 11% y/y decline. Europe's new passenger car registrations were up 4.5% y/y in June, so France is among the weakest areas of the industry. This means that French carmakers continue to be hit hard by disappointing data.

Europe equities top picks performance



















Following last week's performance, the portfolio is down 3% since its inception with the MSCI Europe Index up 2.6% in the same period. The primary driver behind this underperformance is the portfolio´s overweight in financials during its first two months.

Europe equities top picks performance



















This week's conviction buy list is still topped by Daimler. The general theme in the portfolio is exposure to cyclical stocks across multiple sectors from materials, industrials, financials and consumer discretionary equities.

Europe equities top picks















Edited by Michael McKenna

Peter Garnry is head of equity strategy at Saxo Bank
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Quant Corner - Europe equities

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