European stocks, Oracle, China rally on strong M&A and services despite negative news from China

11/28 European stocks, Oracle, China rally on strong M&A and services despite negative news from China

Amid a sharp drop in trading volume due to the closure of the U.S. stock market, there was a strong wait-and-see stance due to the coexistence of vigilance in the peace negotiations in Ukraine and Oracle credit risk, but individual good news supported the index. In particular, economic sensitive stocks such as finance, consumer goods, and automobiles led the rise on the back of M&A issues such as Allfunds (+22.14%) and Puma (+18.91%) and strong indicators in the Eurozone service sector. On the other hand, semiconductor and technology stocks shrank due to Oracle’s concerns over a surge in CDS, while materials and energy industries such as steel are sluggish in the wake of China’s industrial profit shock. U.S. after-hours futures fell slightly in the wake of Oracle, with technology-oriented sales opening (+0.18% in Germany, +0.02% in the U.K., +0.02% in France, +0.04% in Eurostocks 50 -0.04% in Europe).

*Variants: Oracle, Ukraine-Russia, Economic Indicators

Oracle: Credit Crisis Warning Due to AI Overinvestment
Morgan Stanley warned that the CDS (Credit Default Swap) premium risks soaring to the highest level since the 2008 financial crisis, pointing out that aggressive expansion of AI data centers such as the “Stargate Project” being pursued by Oracle is causing enormous debt. Oracle continues its so-called “borrowing feast” of large-scale financing, but claims it will face severe funding shortages in 2026 if this does not lead to immediate monetization. The concerns have led Oracle to fall more than 2% in U.S. after-hours trading and some companies, including Nvidia, are sluggish. In European stocks, semiconductor companies such as ASML (-1.33%) are also sluggish.

Ukraine-Russia war: Peace deal discussion based on Trump mediation
While discussions on a peace treaty are gaining momentum ahead of the U.S. delegation’s visit to Moscow next week, discussions are intensifying over how to end the war and the burden of costs. Putin seriously discussed the U.S. peace plan and mentioned an appeasement gesture promising an inviolable European policy. In addition, he proposed the withdrawal of Ukrainian troops from Crimea and the Donbas as key conditions. In response, the European Commission sticks to the principle that no decision can exclude Europe and Ukraine, and is preparing a revision bill to prevent the U.S.-led end-of-war proposal from flowing in Russia’s favor. In particular, the EU and Ukraine are strongly opposed to the provision that the U.S. will take 50 percent of the profits from Russia’s frozen assets. Still, there are concerns over the conclusion of the negotiations

Economic Indicators: Causes of Differentiation by Industry
Weakness in European manufacturing and commodity companies was attributed to weak industrial data in China and the eurozone. China’s year-on-year growth in industrial profits in October fell sharply to 1.9 percent from 3.2 percent in the previous month, a “profit shock” suggesting that its performance in the month had actually recorded severe negative growth, stoking fears of a collapse in demand for steel and raw materials in China, causing steel companies to fall in Europe. On top of that, the eurozone’s industrial outlook index was -9.3, worse than expected (-8.0), showing continued slowdown in manufacturing, leading to a forecast of a drop in electricity demand due to lower plant utilization rates, which also affected the fall in share prices of some utility companies

On the other hand, the strength of the financial and consumer goods sectors is driven by the service sector’s resilience and strong loan indicators. The Eurozone’s service sentiment index exceeded expectations at 5.7 and the German GfK consumer trend also improved to -23.2, indicating that the service industry is defending against the sluggish manufacturing industry. In particular, the eurozone private loan growth rate rose to 2.8%, and consumer inflation expectations rebounded to 23.1, creating an environment favorable to banks’ loan-to-deposit margins along with economic recovery expectations. As a result, it supports a sector rotation in which funds are concentrated in financial stocks and consumer goods industries. Of course, M&A for financial and consumer goods companies is also affected.

*Featured stocks: ASML down Vs. differential, financial gains

European Semiconductors: Oracle Aftermath Vs. Impact Of Auto Sector Rebound
ASML (-1.33%), a Dutch semiconductor equipment company, fell due to concerns over a reduction in AI-related infrastructure investment by big tech companies as rumors of a credit crisis by Oracle in the U.S. were raised. Infineon Tech (+2.64%), a German power-related semiconductor company, rose in tandem with expectations of a recovery in demand for automotive semiconductors as the auto sector rebounded overall

Automobiles: Ferrari Target Shares Up, Low-Buy Inflow
Automakers Mercedes-Benz (+1.10%), Renault (+1.22%) and Stellantis (+0.97%) saw low-priced buying and Ferrari (+1.47%)’s upward target price also improved sentiment across the sector. German tire maker Continental (+1.12%) was also strong. Aston Martin (+4.73 percent), a British luxury car company, rose as the possibility of turning into a private company was highlighted by expectations for M&A in the market such as Puma and Allfunds.

Software: M&A Expectations and Undervalued Issues Inflated
German portfolio management software company Deutsche Börje (+1.81%) has entered into exclusive negotiations to acquire Dutch fund platform company Allfunds (+22.14%), rising on expectations of business expansion. Allfunds surged. German IT company Bertle (+8.89%) showed its undervalued charm within the German small and medium-sized stock index and surged, reflecting expectations for public sector IT orders. French digital payment solution company Eden Red (+0.98%) rebounded on the analysis that consumer spending in Europe was stronger than feared due to strong service sentiment indicators in the Eurozone. Swedish game company Embracer (+5.56%) rose as expectations for new IP-related works and cost-cutting effects through restructuring were positively evaluated. On the other hand, Prosus (-2.92%), a Dutch IT platform company, is a major shareholder of Tencent, falling due to concerns over a slowdown in the Chinese economy and shrinking investment sentiment in technology stocks

Bank: M&A and Earnings Expectations
BNP Paribas (+1.99%), Barclays (+1.66%) and UBS (+0.91%) rose due to expectations of improved loan-to-deposit margins due to strong indicators such as increased private loans and M&A issues following the news of Allfunds’ negotiations to acquire Deutsche Börje. This rises due to the spread of the perception that European financial stocks are cheap. Lloyds Banking (+2.99%), a British bank, rose on the expectation of increased demand for loans following the recovery of the UK housing market. On the other hand,