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Monday Report 16 February 2015
Economy
Markets
Swiss Market
Recommended Stock Watch
US statistics were slightly poorer than expected. The Fed’s Labor
Market Conditions Index fell slightly in January, down from 7.3 to
6.1, as did the NFIB Small Business Optimism Index, down from
100.4 to 97.9. While retail sales were also disappointing, rising by
only 0.2% (excluding autos and fuel), the 0.3% contraction initially
estimated for the previous month has been subsequently revised
to zero. The good news comes from the eurozone, where GDP
grew by 0.3% in Q4, stronger than expected in spite of stagnating
industrial production in December. China’s trade surplus was larger
than expected in January as a result of imports declining (-19.9%)
more quickly than exports (-3.3%). Note also a sharp deceleration
in the money supply, in line with the authorities’ goals.
Greek assets remain highly volatile, with prices fluctuating in response to press releases from the current negotiations. Overall, risk
appetite remains high: equities (MSCI World) are up 1.9% on the
week and high-yield bond yields are down 6 bps, while US 10-year
sovereign yields are up 9 bps (Swiss yields have regained 10 bps,
bringing them to zero…). The price of oil continues to recover (up
5.7%!) and the US dollar continues to consolidate (with the dollar
index down 0.5%). To be monitored this week: confidence among
homebuilders (NAHB), housing starts, building permits, industrial
production, existing home sales, producer prices and minutes of
the last FOMC meeting in the US; trade balance, new vehicle registrations and preliminary PMI figures in the eurozone; and the Ifo
index in Germany.
Currencies
The strengthening of the dollar is being slowed by the rapid rise in
oil (USD/CHF: 0.93; $60/barrel). Note the drop in gold ($1,234/oz);
target: $1,245/oz; support: $1,216/oz. We expect the EUR/USD
and EUR/CHF pairs, which have failed to break through resistance
at EUR/USD 1.1535 and EUR/CHF 1.0645, to consolidate, returning towards support at EUR/USD 1.12 and EUR/CHF 1.0535. If the
USD/CHF rate fails to break through the 200-day moving average
of 0.9315, it will test 0.91-0.92.
DEUTSCHE BANK: the unveiling of a business plan implying a farreaching restructure is looking more and more likely. Management
could announce it as early as late March after the annual report
comes out on 24 March.
ENEL: (1) according to Bloomberg, the group could soon set up
a “yieldco” – an entity housing businesses with predictable cash
flows – to lower their funding costs. (2) Enel has announced that it
has renegotiated a €9.4bn revolving credit facility at 80 bps over
Euribor (previously 190 bps over Euribor).
PRO7SAT.1 has been removed from our Satellite Recommendations having almost completed its re-rating.
PUBLICIS has been added to our Satellite Recommendations. After
a challenging 2014 (marked in particular by the failed merger with
Omnicom), the French ad agency has returned to growth thanks
to its exposure to the US market, the acquisition of Sapient (digital
marketing) and improvements in margins and FCF. With a reasonable valuation, the group is well placed to benefit from favourable
momentum in 2015.
SAINT-GOBAIN has announced the sale of two non-core businesses in its Building Distribution division: Meyer Decorative
Services (US) and Ashworth (UK). The two entities together have
335 employees and generate annual sales of around €100m. The
Swiss Takeover Board has also launched an administrative investigation at the request of the Schenker-Winkler holding company
(SWH – Burkard family), with the aim of confirming that the sale to
Saint-Gobain of its shares in Sika does not entail any obligation to
buy out minority interests.
WPP has acquired an equity stake in Commscore. The move will
bring WPP subsidiary Kantar (market research) and Commscore,
which specialises in audience measurement, closer together. The
ability to develop in the proprietary data arena will enable WPP to
regain ground in this area from the leading players, Nielsen in the
US and GFK in Europe.
Today’s graph
Performances
To be monitored this week: February ZEW indicator and AFD
January foreign trade. In company news: 2014 results from Also,
Basilea, Lem (Q3), Clariant, BCV, Bell, Kudelski, Swiss Re, Nestlé
and BB Biotech.
Transocean last night announced the immediate departure of its
chief executive Steven Newman, together with a significant cut in
its dividend. The share price has fallen sharply since the price of
oil has declined, rallying slightly in recent weeks as oil prices have
picked up again. Actelion has released poorer than expected annual results (with net profit up 27% in 2014 but down 7% in Q4) due
to lower sales growth and higher operating costs. The company
has announced an 8% increase in its dividend to CHF 1.30 per
share and a buyback programme of 10m shares over three years.
In 2015, profits are expected to grow by between 1% and 4% at
constant exchange rates.
Sentiment of traders
Stock market
The Greek situation will take centre stage and could spoil the current optimism, as could Ukraine, especially with the results season
drawing to a close. US markets continue to rise in spite of rising
yields (10-year yields @ 2.05%, up 45 bps in two weeks) and show
the path: we remain positive.
United States
10
Retail sales YoY
10
5
5
Switzerland
Since
SMI
Europe
USA
Emerging countries
Japan
0
0
-5
-5
-10
-15
-10
2006
2007
2008
Total ex-autos
2009
2010
Total nominal
2011
2012
2013
2014
-15
06.02.2015
0.75%
01.01.2015
-3.69%
Europe Stoxx 600
1.01%
10.08%
S&P 500
2.02%
1.85%
MSCI Emerging
0.83%
3.17%
Nikkei 225
1.50%
2.65%
As at 13.02.2015
CHF vs. USD
0.9307
-0.61%
6.76%
EUR vs. USD
1.1403
0.51%
-5.77%
10-year yield CHF (level)
-0.03%
-0.13%
0.31%
10-year yield EUR (level)
0.34%
0.37%
0.54%
2.17%
10-year yield USD (level)
2.03%
1.94%
Gold (USD/per once)
1'232.54
-0.09%
3.90%
Brent (USD/bl)
60.67
5.73%
8.65%
Source: Datastream
Total ex-autos and gasoline
Source: Thomson Reuters Datastream, 16/02/2015
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