Monday Report 05 January 2015 Economy Markets Swiss Market Recommended Stock Watch Statistics released over the past two weeks confirm the positive momentum in the US economy. GDP growth in Q3 was once again revised upwards, bringing it to 5%, mainly driven by 3.2% growth in consumer spending relative to Q2. While housing sector figures were slightly disappointing (with existing home sales down 6.1% and new home sales down 1.6% in November), consumer confidence continued to improve (up from 91 to 92.6). The January ISM manufacturing PMI fell to 55.5 (from 58.7) but remains compatible with sustained growth over the next few months. In the eurozone, M3 growth accelerated by more than expected in November (up 3.1% YoY). Finally, in China, the official manufacturing and services PMIs stabilised in December (at 50.1 and 54.1 respectively). To be monitored this week: December PMI, SNB end December currency reserves, Ernst & Young 2015 banking barometer, initial SNB data on 2014, SECO December unemployment statistics and OFS December and 2014 CPI. Towards the end of last week, NOVARTIS (PLUS) finalised the sale of its Animal Health division to Eli Lilly for $5.4bn, as announced at end April 2014 as part of the transformation of its business portfolio. SGS (NR) has announced that it has completed the share buyback programme that began in March 2012. The company has bought back a total of 25,080 shares, equivalent to 0.32% of capital. Rather than being cancelled, these shares will be used for the employee share ownership scheme and for bond conversions. The buyback is thus ultimately of no benefit to existing shareholders. Sentiment of traders Stock market The week got off to a quiet and uncertain start as operators digested contradictory comments from Angela Merkel and the German government on Greece and the recapitalisation of Russian banks. These uncertainties are helping government bonds, yields on which were once again heading through the floor. Buy on any decline. Oil prices continued to fall last week (down 6.5%). Asian equities (up 1.5%) were the only ones to really benefit: European and US equities lost 0.7% and 1.5% respectively. Peripheral eurozone yields remained buoyed by expectations of ECB intervention (with Italian and Spanish 10-year yields down 17 bps and 18 bps respectively). Political tension in Greece remained confined to the country. The dollar continued to appreciate (with the dollar index up 1.2%). To be monitored this week: company orders, ISM services PMI, trade balance, FOMC minutes and employment report in the US; consumer price index and EC confidence indicators for economic agents in the eurozone; HSBC services PMI, producer and consumer price indices and monetary aggregates in China. Best wishes for 2015! ALLIANZ (PLUS): the total return fund that Bill Gross managed at PIMCO before he left last year once again registered outflows of around $20bn in December. While this is a lot, it remains largely offset by bullish markets and the rising dollar. ASML (PLUS-R): global semiconductor sales slowed slightly in November 2014 (up 0.2% MoM and up 9.1% YoY, vs. 9.3% growth in October). This figure (a lagging indicator) indicates a very brief correction. Average expected growth in semiconductor sales is 8% in 2014 and 5% in 2015. This will not weigh on capital expenditure in H1 2015, and neither therefore on ASML. MARKS & SPENCER (Satellite Recommendation): the Q3 trading statement (8 January) should show a further uplift in the gross margin on General Merchandise, in spite of moderate growth in sales (policy of carrying less inventory + unfavourable weather). Growth should also be evident in Food sales. Thanks to productivity gains in its supply chain and fewer promotions, combined with long-term shareholder cash returns, M&S is a margin uplift story. SIEMENS (Satellite Recommendation): China’s top two train manufacturers, CNR – which recently won a contract for the Boston subway network – and CSR, yesterday announced their merger. The new group, CRRC, intends to compete internationally with groups like Siemens, Bombardier and Alstom and to promote Chinese high-speed technology. Currencies Our currency remains firm (EUR/CHF: 1.2017) in spite of the SNB announcing negative interest rates. The pair will have to permanently break through 1.2065 to reach the target of 1.214. The bullish trend in the USD remains intact, at USD/CHF 1.008 this morning, its highest since 1 Dec 2010; target = USD/CHF 1.0275; support at 0.992. Note the sharp fall in the EUR/USD rate to 1.194; next major support: 1.164; profit-taking is possible up to 1.211. Today’s graph Performances United States 160 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) 2005 2010 2015 Switzerland Since SMI Europe Europe Stoxx 600 -0.74% -0.35% USA S&P 500 -1.46% -0.03% Emerging countries MSCI Emerging 0.13% -0.27% Japan Nikkei 225 -2.07% 0.00% 26.12.2014 -0.42% 01.01.2015 0.00% As at 02.01.2015 CHF vs. USD 0.9992 -1.10% -0.55% EUR vs. USD 1.2031 -1.15% -0.58% 10-year yield CHF (level) 0.31% 0.32% 0.31% 10-year yield EUR (level) 0.50% 0.60% 0.54% 2.17% 10-year yield USD (level) 2.12% 2.25% Gold (USD/per once) 1 188.85 -0.39% 0.21% Brent (USD/bl) 56.01 -6.46% -1.56% Source: Datastream Source: Thomson Reuters Datastream, 05.01.2015 This document has been issued for information purposes. The views and opinions contained in it are those of Bordier & Cie. Its contents may not be reproduced or redistributed. 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