European Equity Capital Markets Update

This publication reviews European equity capital markets activity, including commentary on equity markets performance from the start of the year until mid November and an overview of equity issuance so far in 2019. Also included is a guide to selecting your advisers for an IPO, as well as a summary of our most recent European CFO Survey, which shows CFOs continue to operate prudently on account of persistently high levels of perceived uncertainty. Finally we are pleased to include an Italian case study of Carel Industries’ listing on the Italian stock exchanges.

From a geopolitical and macroeconomic perspective, investors have been focused on three main topics:

1. Trade tensions between the US and China remain. Although a deal seems to be closer with the US recently delaying further scheduled tariff increases, the decision of a withdrawal is still pending
2. Former ECB President Mario Draghi and the US counterpart, Jerome Powell, reacting to political and economic uncertainty by pushing forward further decreases in interest rates. Furthermore, the European Central Bank has resumed its quantitative easing programme
3. Brexit continuing to be on the agenda and acting as a distraction in Europe both politically and commercially While a ‘no deal’ scenario appears to be off the table, a December general election in the UK and a revised exit date of 31 January 2020 mean further market focus can be expected

Despite the focus of equity markets on prevailing risk factors, volatility has remained broadly under control. Excluding a slight rise in volatility in August driven by geopolitical tensions between the US and China, the VIX Index, a market gauge of volatility, dropped throughout 2019 and is currently at 13,0 which is significantly lower than the December 2018 high of 36,2.

For global and European stock markets 2019 has broadly been a bullish year so far. US stock markets have been driven by accommodative policy decisions and a resilient economy, driving US indices close to all-time highs. The S&P 500 is currently 23,4% higher since the start of the year and the Nasdaq Composite has risen by 27,8%. European stock markets have also achieved significant positive returns during 2019, with the Stoxx Europe 600 rising by 20,2%. Major country indices were also trading well with the Italian FTSE MIB up 28,7% the German DAX 30 up 25,3%, the French CAC 40 up 24,9%, the OMX Nordic 40 up 18,2% the FTSE 100 up 9,3% and the Spanish IBEX 35 up 7,7%. The FTSE MIB increased by 28,7% since the start of 2019. Overall, global stock markets performance, based on year-to-date performance, has been one of the best in the last ten years.

Despite strong performance of European indices, equity capital markets activity during 2019 has been muted. European equity issuance volumes amounted to €85bn in 2019, which represents a 23,6% fall versus 2018. Focusing on IPOs, the number of European IPOs and related issuance volumes have fallen by around 50% compared to 2018. In what has been a challenging market largely on account of the aforementioned three concerns, investors have been highly selective in deploying capital into the strongest IPO candidates which have typically exhibited above market growth potential. In Italy, there have been three IPOs in the Main Market (MTA).