Monday Report 15 December 2014 Economy Markets Swiss Market Recommended Stock Watch Confidence among US SMEs continued to improve in November, up from 96.1 to 98.1. Retail sales were also up more than expected (+0.7%), buoyed by household confidence (University of Michigan), which climbed to 93.6 (vs. 88.8 in October), its highest level since the end of the great recession. Finally, inflationary pressures remained weak, import prices fell 1.5% in November (down 2.3% YoY) and producer prices rose 0.2% (up 1.4% YoY). In the eurozone, industrial production was disappointing in October (up 0.1%). In China, official statistics were in line with expectations, with investment up 15.8% YoY, retail sales up 11.7% and industrial production up 7.2%. To be monitored this week: OFS November producer and import prices, KOF winter 2014 forecasts, December ZEW indicator, SECO updated economic forecasts, AFD November foreign trade, FH November watch exports and OFS October construction price index. Company news: 2013/14 results from Intersport PSC and Axpo and H1 2014/15 results from Perrot Duval. NOVARTIS (PLUS) on Friday released positive data on Cosentyx for psoriasis vs. J&J’s Stelara, confirming its positioning as the future benchmark treatment for this indication. SWISSCOM (PLUS) has acquired Veltigroup, one of French-speaking Switzerland’s leading IT services companies alongside IBM and HP. The company, which has 480 employees, will allow Swisscom to offer a full range of IT services to medium-sized business customers. Sentiment of traders Stock market Oil and Greece have spoilt the party, sending govt. bond yields, which seemed to be perking up last Monday, through the floor. Equity indices are testing key support levels and caution is required. Note the FOMC meeting this Wednesday and futures and options maturities on Friday. Low visibility: we are going neutral in the short term. Currencies The SNB would like a weaker CHF, but the EUR/CHF pair remains in the range 1.20-1.2055. This is not surprising in a very worried market (oil at $61; Ukraine). We expect the USD to be stable or slightly bullish this week, with support at around USD/CHF 0.953 and resistance at 0.9815. We are more cautious on the euro (EU unemployment; strikes in Italy/Belgium), which could see a return to around EUR/USD 1.225. Note also that the AUD has fallen sharply to $0.824 (terrorist activity in Sydney). Today’s graph Consumer Confidence (Conference Board & University of Michigan) 160 140 140 120 120 100 100 80 80 60 60 40 40 20 20 1990 1995 2000 Consumer Confidence (Conference Board) Consumer Sentiment (Univ. of Michigan) ACCOR (Satellite recommendation) has signed a strategic agreement with Huazhu (China’s leading hotel group) in the budget and midscale segments. Accor will receive a 10% shareholding in Huazhu in exchange for 10% of its upscale offering in China. The deal will give Accor access to China’s biggest hotel pipeline (2,000 hotels) and Huazhu’s 47 million members: a growth accelerator! ERICSSON (PLUS) has had imports into India of smartphones made by Chinese player Xiaomi blocked after filing a complaint in India for non-payment of royalties. Ericsson is becoming more aggressive in this area as it seeks to more effectively monetise its patent portfolio. PRO7SAT1 (Satellite recommendation) has announced that its SVoD (subscription video on demand) subsidiary Maxdome has signed an agreement with Spiegel TV to supply local documentaries and reports. In the face of international players (like Netflix and its ilk), local content acts as a differentiating factor and thus a foundation for success. ENERGY SECTOR (negative view): the International Energy Agency has further cut its global oil demand forecasts for 2015, to 93.3m barrels a day – below current production levels – vs. 93.5m previously and 92.4m for 2014e. Russian consumption, in particular, is expected to decline. WIENERBERGER (newly rated MINUS): a robust recovery in activity remains a distant prospect, and tension in Eastern Europe is a risk factor. The share is still undervalued, but no longer as glaringly as it was in 2013. Performances United States 160 The fall in oil prices accelerated further (down 9.5%). The resulting volatility contaminated other asset classes: equities lost 3.6% (MSCI World) and Europe was hit harder (down 5.8% because of the risk of early elections in Greece), while yields on high-yield bonds rose 45 bps and those on sovereign emerging debt rose 102 bps (in local currency), mainly because of weaker currencies (RUB: -4%; BRL, MXN and ZAR: -2.5%). Fortunately, yields on dollar-denominated emerging sovereign debt did not rise. To be monitored this week: industrial production, NAHB index of confidence among homebuilders, housing starts, building permits, CPI and FOMC meeting in the US; manufacturing and services PMI in the eurozone; Ifo index in Germany; and HSBC manufacturing PMI in China. 2005 2010 2015 Switzerland Since SMI Europe Europe Stoxx 600 -5.82% 0.70% USA S&P 500 -3.52% 8.33% Emerging countries MSCI Emerging -4.80% -6.41% Japan Nikkei 225 -3.06% 6.63% 05.12.2014 -3.45% 01.01.2014 8.44% As at 12.12.2014 CHF vs. USD 0.9638 1.45% -7.72% EUR vs. USD 1.2462 1.34% -9.56% 10-year yield CHF (level) 0.27% 0.30% 1.09% 10-year yield EUR (level) 0.63% 0.78% 1.94% 10-year yield USD (level) 2.10% 2.31% 3.01% Gold (USD/per once) 1 222.88 2.33% 1.24% Brent (USD/bl) 62.08 -9.53% -44.27% Source: Datastream Source: Thomson Reuters Datastream, 15.12.2014 This document has been issued for information purposes. The views and opinions contained in it are those of Bordier & Cie. 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