Following a week of positive earnings in Europe, the Stoxx 600 Europe reached the highest level since 2008, according to Bloomberg. This week continues with European companies reporting quarterly and full year earnings. We look at investor sentiment in UK, French and German stocks which are due to update the market this week including; Pennon Group (LON:PNN), Intercontinental Hotels Group (LON:IHG), Millennium and Copthorne Hotels (LON:MLC), Ladbrokes Plc (LON:LAD), BAE Systems Plc (LON:BA), Ubisoft Entertainment SA (EPA:UBI), Danone SA (EPA:BN), Atos Origin (EPA:ATO) and Daimler Ag (ETR:DAI).
UK water utilities company, Pennon Group, is due to release its interim management statement on Tuesday. There is a growing interest in UK water stocks in the markets as they received upgrades last week from the market including Merrill Lynch, which reported a change in stance in this industry to reflect higher UK inflation trends. The stock, which is usually thinly traded in securities lending ,has seen a gradual increase in short interest from 2% to 4% of total shares outstanding on loan since October. However, the holdings of large funds who lend, which can also be used as a proxy for institutional ownership has increased by 20% to 55 million shares over the same time period.
Hoteliers, Intercontinental Hotels and Millennium and Copthorne Hotels, are reported to release preliminary 2010 earnings this week. Leading hotel groups continue to perform better than expected in the aftermath of the financial crisis. These UK hoteliers are of no exception as their share prices have been increasing exponentially over the past year. Barrons, on Intercontinental Hotels, has recently reported that “while the long term outlook is excellent, the stock could come under near-term pressure if the company’s earnings…are anything but stellar”. Investor sentiment is highly positive as short interest stands at an all time low of 0.75% of total shares outstanding and institutional ownership continues to increase to 65 million shares since March. Millennium and Copthorne Hotels is not a stock popular amongst short sellers as short interest remains flat at 0.7%.
Ladbrokes is expected to report preliminary 2010 earning on Thursday. The high street betting group is exploring opportunities to grow the company organically. It is rumoured to be exploring a possible merger with online gambling company Playtech Ltd. Continued short covering in this stock, over the last two quarters of 2010, has led to short interest falling from an annual high of 8% to 3.2% of total shares outstanding on loan. Institutional ownership has also increased over the past year by almost 40% and currently stands at 212 million shares.
Defence giant, BAE Systems, will report full year earnings this week which will also provide indication of the impact of the first year of the UK spending cuts on the company. Short interest currently stands at an annual low of 0.3% of total shares outstanding, whilst there has been a recent surge in institutional ownership over the January from 800 million to 900 million shares.
French gaming company, Ubisoft Entertainment is due to update the market with its sales release. Short sellers have been covering their positions in this stock, decreasing short interest from 12% to 8% of total shares outstanding on loan, since January.
Danone SA and Atos Origin SA will report full year earnings this week. Short interest in these stocks stands at 1.5% and 2% of total shares outstanding on loan respectively.
Daimler AG
is expected to update the market with fourth quarter earnings. It has recently confirmed that it is not in talk with Fiat Industrial SPA about taking a possible stake in the company. Short covering in the auto group has decreased short interest from 5% to 4% since January.
