Before the bell: Look at the Bigger Picture

Beyond corporate earnings, a wave of macro-economic data also shaped investor sentiment yesterday. Ford faces pressure, while Ontex continues its transformation program.

While earnings season is in full swing, investors sometimes overlook the steady stream of economic data released daily. Especially in times of trade tariffs, the U.S. trade balance has regained importance. Trump is highly allergic to countries that export heavily to the U.S. while importing little in return. In December, the European Union recorded a trade deficit of 20.4 billion dollars, which won’t sit well with Trump—nor will the 25.3 billion dollar deficit with China. The U.S. president would prefer those products to be manufactured domestically and finds support from the ISM Purchasing Managers’ Index (PMI), which indicates slowing growth in the U.S. services sector. Yesterday, the S&P 500 gained 0.4%, while the Euro Stoxx 50 edged up 0.1%. In Asia, the Hang Seng Index rose 0.9% this morning.

On the corporate front, Belgian radiation equipment specialist IBA announced the sale of a proton therapy system to India—the first Proteus One order in South Asia. Meanwhile, French bank Société Générale reported a revenue increase to 6.62 billion euros, exceeding expectations by 200 million euros, while net profit doubled to 1 billion euros. The bank credited higher earnings from stock trading and retail banking. Later today, Yum! Brands, owner of KFC and Pizza Hut, will release earnings, followed by oil producer ConocoPhillips and Amazon after market close.

Headwinds for the Auto Sector

These are tough times for the automotive industry. In the U.S., car prices are under pressure, competition in electric vehicles (EVs) is fierce, and many legacy carmakers are losing money. Ford is no exception, reporting a 5.5 billion dollar loss in its EV division this year. No surprise then that the company sounded pessimistic when announcing its latest figures. Adding to the headwinds is the looming trade war, which could further increase Ford’s costs due to its production in Mexico. Even though Ford’s Q4 earnings per share (0.39 dollars) beat expectations by 6 cents, investors are likely to ignore that when U.S. markets open today. Given weaker-than-expected guidance, a lower opening is expected.

A Global Sell-Off

What do Pakistan, Turkey, Mexico, Algeria, and Brazil have in common? These are all markets that Belgian diaper manufacturer Ontex has exited since 2023. The company has been undergoing a strategic reorganization, aiming to reduce debt and refocus on Europe and the U.S. Recently, Ontex sold its Brazilian division for 110 million euros, and now its Turkish division as well. The sale price is still undisclosed, but it appears that Ontex’s divestment program is nearly complete. While revenue will shrink in the short term, selling low-margin divisions should improve profitability and reduce risk exposure over time. This could eventually lead to a revaluation of the stock.

Did You Know…

that Belgian-listed investment holding GBL is Ontex’s largest shareholder? GBL owns around 20% of Ontex but has seen little joy since investing in 2015—the stock has fallen 70% since then.

This article was translated from Dutch and was originally published on Spaarvarkens.be.