Monday Report 20 October 2014 Economy Markets Swiss Market Recommended Stock Watch US macroeconomic statistics confirm the cyclical upturn already observed. SME confidence remained high in September (down from 96.1 to 95.3). Industrial production bounced back 1%, more than expected, in September, as did housing starts, which climbed back above a million units, making up for a dip in confidence among home builders (with the NAHB index down from 59 to 55). The only real disappointment was the sharper than expected fall in retail sales (down 0.3% after rising by 0.6% in August). Fortunately, consumer confidence (Michigan) climbed back up from 84.6 to 86.4. In the eurozone, industrial production fell 1.8% in August, while the trade surplus reached €15.8bn. New vehicle registrations accelerated by 6.4% in September. In China, monetary aggregates dipped slightly in September (with M0 growth at 4.2% and M2 growth stable at 12.9%). To be monitored this week: AFD September/Q3 2014 foreign trade and FH September watch exports. The following companies are due to release Q3 results: AMS, Schindler, Actelion, GAM (interim statement), Gottex Fund (trading update), Micronas, Panalpina, Temenos, ABB, Inficon, Logitech (Q2), Credit Suisse and Straumann. Autoneum and SGS are due to hold investor days. Geberit (NR) has announced a takeover bid for Finnish bathroom equipment specialist Sanitec (listed in Stockholm). The group generates annual sales of approximately €700m and an operating margin of around 10%. The bid values Sanitec at CHF 1.3bn, to be paid for with existing cash and debt, giving a P/E of 20x and a 54% premium to the latest closing price. Sentiment of traders Stock market Another most dangerous week (Chinese GDP + German PMI), but the market tone will mainly be set by Q3 company results. After last week’s rollercoaster ride, we expect volatility to return to normal and remain on the lookout for falls as buying opportunities. Currencies After a volatile week (EUR/USD: 1.2885-1.2623), the dollar appears to be consolidating against the CHF and the euro (USD/ CHF: 0.9456; EUR/USD 1.2750); uncertainty surrounding the Fed’s upcoming decisions could trigger a prolonged period of high currency volatility. Investors will be paying particular attention this week to Chinese growth figures. Gold has risen to $1,242/oz. Our ranges: EUR/USD: supp. 1.2653, res. 1.2995; USD/CHF: supp. 0.9301, res. 0.9592; GBP/USD: supp. 1.5855, res. 1.6333. Today’s graph Consumer Confidence (Conference Board & University of Michigan) 25 20 140 15 120 10 100 5 80 0 60 -5 40 20 -10 00 02 04 06 08 Consumer Confidence (Conference Board) Consumer Sentiment (Univ. of Michigan) Retail Sales (YoY), rhs ERICSSON (PLUS) has won two contracts. The first is an €80m five-year contract with Irish operator Eircom to extend the group’s 4G network. The second relates to the creation of a 4G network for Pakistani operator Warid Telecom. PEUGEOT (NR) is expected to report decent Q3 sales this Wednesday (global vehicle sales up 5.4% + positive effect of Faurecia – unfavourable forex effect), including confirmation of the group’s full-year guidance and a positive message on cash generation. REED ELSEVIER (PLUS) is to acquire, via its Exhibitions division, Mexican player Grupo Fidalex, which owns 15 exhibition brands in Mexico. The deal will strengthen Reed Elsevier’s portfolio (which already includes five brands) in an important emerging region. For reference, Reed Exhibitions is the world’s leading exhibition organiser. SAP (PLUS) has this morning released its Q3 results. Its figures are robust in the cloud segment (with sales up 41%) but slightly off in licence sales (with sales down 3%). To reflect the shift in the product mix towards the cloud, SAP has cut its 2014 operating profit guidance slightly, triggering a fall in the share price. SWISSCOM (PLUS): for the time being, Vodafone has denied wanting to acquire Fastweb, Swisscom’s Italian broadband internet subsidiary. Rumours of too high a price tag (€5bn), putting the company’s valuation closer to that of a cable operator, explain Vodafone’s attitude. Fastweb is valued at around CHF 2.7bn (€2.2bn). Performances United States 160 The wave of panic clearly triggered by uncertainties over activity growth, particularly in Europe, continued before finally calming down on Friday. Equities fell sharply before ending the week down 0.9% (in Europe), while US 10-year yields hit 2% before climbing back to 2.2%. Oil prices slumped 7% to end the week down 4.3% (Brent), lowering inflation expectations but also acting as a support for growth (by boosting both household purchasing power and company margins). Gold (up 1.2%) benefited only very slightly from the rise in risk aversion, as did the dollar, which fell 0.9% (dollar index). To be monitored this week: new and existing home sales, CPI and manufacturing PMI in the US; manufacturing and services PMI and consumer confidence in the eurozone; and retail sales, industrial production and Q3 GDP in China. 10 12 14 Source: Thomson Reuters Datastream, 20/10/2014 -15 Switzerland Europe USA Emerging countries Japan CHF vs. USD EUR vs. USD 10-year yield CHF (level) 10-year yield EUR (level) 10-year yield USD (level) Gold (USD/per once) Brent (USD/bl) Since SMI Europe Stoxx 600 S&P 500 MSCI Emerging Nikkei 225 As at 17.10.2014 0.9458 1.2768 0.45% 0.82% 2.20% 1'233.27 85.42 10.10.2014 -1.49% -0.91% -1.02% -1.32% -5.02% 01.01.2014 0.57% -2.92% 2.08% -2.59% -10.80% 1.31% 1.12% 0.45% 0.85% 2.30% 0.95% -4.27% -5.96% -7.34% 1.09% 1.94% 3.01% 2.10% -23.31% Source: Datastream This document has been issued for information purposes. 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