20 October 2014 Monday Report Economy Markets

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
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