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Auto & Transport Roundup: Market Talk

6 Jan 2018 9:20 am

The latest Market Talks covering the Auto and Transport sector. Published exclusively on Dow Jones Newswires at 4:20 ET, 12:20 ET and 16:50 ET. 1858 EST -- The long-suffering market for freight railcars is improving. Car manufacturer Greenbrier says about 90% of its expected production volume during its fiscal 2018 is already locked in after a strong December for orders. The company says it's received orders for about 1,000 intermodal freight cars and is noticing more activity in the tank car market related to recent increases in crude oil shipments in North America. Stephens reports that the industry-wide backlog of car orders fell by just 4% last year from the end of 2016, a sign of market stabilization. But about 20% of the North American railcar fleet remains idle in storage yards. "We are taking baby steps in the right direction," Stephens says in a note to investors. "The key to a sustainable market recovery is absorbing the oversupply of railcars in the market." (robert.tita@wsj.com; @bob_tita)

1451 GMT - Norwegian Air Shuttle gains 20% after December traffic report and upgraded 2018 capacity guidance. The shares are up almost a third from their December low, weighed by concerns over liquidity and profitability at the big Airbus and Boeing customer. Norwegian now expects capacity to grow 40% next year versus its prior 35% guide, and will have 32 Boeing 787s in service by the end of this year. (doug.cameron@wsj.com; @dougcameron)

1423 GMT - Average fuel economy of 25.2 miles a gallon for new cars and trucks sold in the US in 2017 is unchanged from a year ago, according to University of Michigan Transportation Research Institute, even as auto makers strive to boost mileage in their lineups. For December, the window-sticker mileage value dropped to 25 mpg from a revised November figure of 25.2 mpg, researchers found. They attribute the recent drop to a greater share of pickup trucks and SUVs driving off dealer lots as opposed to smaller and more-efficient sedans and compact cars. Consumers are choosing larger vehicles amid low gasoline prices and loan rates just as looming regulations call for auto makers to sell vehicles with ever higher mileage and lower emissions. (mike.spector@wsj.com; @MikeSpectorWSJ)

1306 GMT - The fuel economy of new vehicles sold rose steadily between 2007 and 2014 -- to 25 miles a gallon from 20 -- but have been stuck in neutral at 25 mpg ever since. New data from the University of Michigan Transportation Research Institute puts the 2017 average fuel of economy at 25.2 mpg, virtually unchanged since 2014 when the price of oil collapsed, sending gasoline prices with it. Analysts say lower pump prices are driving heightened interest in full-size pickup trucks and SUVs, that guzzle more gas. Even Subaru, a carmaker known for its efficient wagons and popular among green-conscious consumers, is launching a roomy, 8-seater SUV with 19 cup holders. (dan.molinski@wsj.com)

1250 GMT - Healthy consumer demand in the US pushes up container freight rates and the trend is likely to continue over the next month ahead of the Chinese New Year on Feb. 16. Freight rates this week from Asia to the West Coast were up 29.4% per container compared to last week and 22.6% to the US East Coast. The boost comes on the back of general rate increases by a number of carriers on Jan. 2 that are expected to hold firm as Chinese factories ship out more exports ahead of the Lunar New Year holiday. (costas.paris@wsj.com)

1226 GMT - The FTSE 100 hits all-time highs as upgrades for utility stocks help offset a downgrade for insurer Admiral Group PLC. The index last trades up 0.3% at 7719.79, having reached a high of 7727.73. Leading gainers is British Gas owner Centrica PLC, up 3%, after Credit Suisse upgraded the stock to outperform from neutral. The Swiss bank also raised United Utilities from underperform to neutral, and these shares gain 2.2%. At the other end of the scale, car insurer Admiral Group PLC drops 4.7% after a reported downgrade by J.P. Morgan and following downbeat U.K. new car sales data. Other insurers also drop. (philip.waller@wsj.com)

1202 GMT - HSBC raises the target price on British budget airline easyJet to GBP17 from GBP15.50 on the assumption that improving sales will offset higher fuel costs. Consolidation of Europe's discount airline sector is also a tailwind, HSBC says. Shares in easyJet up 1.36% to GBP15.31. (robert.wall@wsj.com)

1117 GMT - The downward spiral in U.K. new car sales fuelled by consumer spending weakness and fears about the U.K.'s plan to leave the EU shows no sign of ending, say analysts. Private car sales fell 15.9% in December from a year earlier, marking the ninth consecutive month of declines, Society of Motor Manufacturers & Traders figures show. Total sales fell 14.4%. Samuel Tombs at Pantheon Macroeconomics points to evidence of falling consumer confidence and fewer households planning major purchases. Alex Buttle of car-buying comparison website Motorway.co.uk says: "2018 could be just as tough as 2017."(philip.waller@wsj.com)

1054 GMT - Volkswagen's major SUV product offensive may give its free cash flow a substantial boost and--together with a recovery of emerging markets--may help offset flattening sales in Europe, Deutsche Bank analysts say. "The world is running on SUVs," the analysts say. They believe the sports-utility-vehicle class could in the future achieve 50% of global market share, while also selling at a neat premium compared with other vehicle types. Deutsche Bank raises its rating for VW stock to buy from hold and increases the target price to EUR210 from EUR170. Volkswagen shares are up 2.5% at EUR178.76. (Max.Bernhard@dowjones.com; @mxbernhard)

1047 GMT - Following Ryanair's decision to recognize unions, HSBC cuts its target price on the airline stock to EUR13.50 from EUR14.50. Labor costs will rise and flexibility in how staff are used will be reduced, says analyst Andrew Lobbenberg, who has a reduce rating on the stock. Ryanair shares are down 0.3% mid-morning to EUR15.31. (robert.wall@wsj.com)

0926 GMT - Continental "should remain one of the fastest-growing European auto suppliers" in 4Q, UBS analysts say, expecting accelerated organic growth in the German company's auto division and a sharp spike in the profitability of its tire business in 2018. Given its strong order intake and growth, Continental's auto business trades at an unjustified discount to other European car suppliers, they say. UBS raises its target price for the stock to EUR253 from EUR230. Continental shares trade up 0.9% at EUR234.30. (max.bernhard@dowjones.com, @mxbernhard)

(END) Dow Jones Newswires

January 06, 2018 04:20 ET (09:20 GMT)

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