LIVE MARKETS-Happy hour is over: sin stocks face refinancing headwinds

Welcome to the home for real-time coverage of markets brought to you by Reuters reporters. You can share your thoughts with us at markets.research@thomsonreuters.com

HAPPY HOUR IS OVER: SIN STOCKS FACE REFINANCING HEADWINDS

Higher-for-longer rates, rising bond yields and wider credit spreads pose a refinancing risk for Europe's alcohol and tobacco stocks, threatening to weigh on earnings in the coming years, according to Citi.

Simon Hales, Citi's head of European consumer staples, beverages and global tobacco research, believes that refinancing maturing bonds represents the primary earnings headwinds.

"While most names carry predominantly fixed-rate debt (80% for Beverages, 94% for Tobacco), limiting direct floating-rate exposure, the key risk lies in replacing low-coupon maturing bonds at materially higher rates," Hales notes.

Combining the refinancing and floating-rate pressures, Hales sees a sector-wide adverse EPS impact of 0.9% in FY27 and 1.8% in FY28.

On a company level, Citi sees CCEP, Pernod Ricard, Campari, AB InBev and Diageo as the most likely to face the headwind from financing pressures over the next two years.

Conversely, Imperial Brands, CCH and Carlsberg appear least impacted in 2027, Citi says.

(Samuel Indyk)

EARLIER ON LIVE MARKETS:

ELECTION OPPORTUNITY FOR SPANISH BONDS CLICK HERE

EUROPEAN SHARES FALL, FRANCE UNDERPERFORMS CLICK HERE

EUROPE BEFORE THE BELL: ELEVATED OIL PRICES, RIOTING LEAVE FUTURES IN THE RED CLICK HERE

MARKETS LEFT TO FIGURE OUT SANCTIONS CLICK HERE