European stocks fall as November momentum stalls; Ubisoft down 9%, Rolls-Royce up 6%

Consumer sentiment held steady in Germany this month, according to the monthly GfK survey, while figures from French statistics agency Insee showed households were slightly more optimistic.

In recession-hit Germany, “willingness to buy is growing slightly, while income expectations have experienced a slight decline,” GfK said. Overall sentiment was unchanged after three months of decline, but remained at a low level with few signs of improvement on the horizon.

French consumer confidence improved but remained “relatively sluggish,” Insee said, and households had a brighter outlook on their financial situation.

— Jenni Reid

Rolls-Royce topped morning stock gains, trading 6.7% higher at 10:15 a.m. U.K. time.

The engine-maker announced plans to increase operating profit to between £2.5 billion ($3.155 billion) to £2.8 billion in the medium term, up from £652 million in the full-year 2022, in part by improving margins in its civil aerospace business from 2.5% to 15%-17%.

It is also targeting free cashflow of £2.8-£3.1 billion and return on capital of 16-18%, and for margins in its defense division to rise from 11.8% to 14-16%.

CEO Tufan Erginbilgic said Rolls-Royce had a “clear and granular plan” to deliver the targets.

Erginbilgic joined the company at the start of 2023 to oversee a large-scale restructuring program that has seen thousands of jobs cut as it streamlines operations.

Rolls-Royce shares have taken a battering in recent years as it was hit hard by the aviation industry slowdown during the pandemic, but have soared more than 190% over the last year.

French video games developer Ubisoft was down 9% at 8:36 a.m. London time after announcing on Tuesday that it had placed convertible bonds worth 494.5 million euros ($541.2 million).

The company said that net proceeds would be used to increase financial flexibility and to refinance existing debt.

“The success of this convertible bond, with a maturity of 8 years, a first ever for Ubisoft and a first since May 2019 for a non-rated European issuer, together with a 2.875% coupon and a 47.5% conversion premium, underlines investors’ confidence in Ubisoft’s credit standing as well as its long-term value creation potential,” Ubisoft CFO Frédérick Duguet said in a statement.

Ubisoft shares have seen a mixed performance over the last year, as investors have balked at several delays to the release of major games, but eyed potential opportunity in the new rights it is set to acquire as part of Microsoft’s takeover Activision Blizzard.

EasyJet rose 4.5% at the trade open, as the company confirmed plans to reinstate its dividend after a three-year halt.

It came as the low-cost airline reported full-year pre-tax profits of £455 million ($574 million), up from a £178 million loss the previous year. Revenue hiked by 42%, as the company raised prices and increased passenger numbers by 19% on the year.

The dividend was announced at 4.5p per share payable in early 2024.

EasyJet flagged headwinds for its winter season from the conflict in the Middle East, which has impacted flights to Israel, Jordan and Egypt and which it said had impacted near-term flight searches and bookings across the industry.

German companies’ willingness to hire new staff declined slightly in November, the Ifo Institute said Tuesday.

Klaus Wohlrabe, head of surveys at the Ifo, said that German companies were putting off recruitment with “a solid foundation for recovery still not in sight,” as they continue to experience a lack of new orders.

The research group found that manufacturing firms were making do with fewer employees, particularly in energy-intensive industries, while retailers and construction firms were being even more cautious. Service providers reported a more positive picture in terms of growing headcount.

— Jenni Reid

Barclays has identified European stocks that are most at risk of taking a hit to profits over rising interest payments for debt over the next two years.

During the coronavirus pandemic, central banks cut interest rates to historic lows, enabling companies to borrow debt at very favorable rates. Many firms took advantage of low rates to push out maturities of their bonds to lower interest expenses and strengthen balance sheets.

However, refinancing has now become far more difficult as rates have surged and are expected to stay elevated through 2025.

The Wall Street bank believes refinancing debt at higher rates could dent earnings by 3% to 5% over the next two years, impacting stocks.

CNBC Pro subscribers can read more about the stocks identified here.

— Ganesh Rao

Tesla is a hot favorite when it comes to investing in the electric vehicle market.

But rising competition is bringing the company’s continued dominance into question.

Brian Arcese, portfolio manager at investment firm Foord Asset Management, CNBC Pro Talks last week that he’s taken two “slightly untraditional” approaches to investing in that space.

CNBC Pro subscribers can read more here.

— Weizhen Tan

The investment case for India is hard to argue with, according to analysts at Morgan Stanley — but they warn that upcoming elections with “potential binary outcomes sets the market up for volatility.”

India goes to the polls between April and May next year. Its last election in 2019 saw Prime Minister Narendra Modi win a second term by a landslide.

some of Morgan Stanley’s “focus list” of overweight stocks.

— Amala Balakrishner

European markets are heading for a flat open Tuesday.

The U.K.’s FTSE 100 index is expected to open 3 points lower at 7,459, Germany’s DAX down 21 points at 15,953, France’s CAC down 1 point at 7,269 and Italy’s FTSE MIB down 5 points at 29,377, according to data from IG. 

EasyJet releases earnings and data includes Germany’s GfK consumer sentiment survey for December and consumer confidence figures for France.

— Holly Ellyatt