24/07/2017
Flash boursier
Key data
USD/CHF | EUR/CHF | SMI | EURO STOXX 50 | DAX 30 | CAC 40 | FTSE 100 | S&P 500 | NASDAQ | NIKKEI | MSCI Emerging markets | |
---|---|---|---|---|---|---|---|---|---|---|---|
Latest | 0.95 | 1.10 | 8'938.68 | 3'451.71 | 12'240.06 | 5'117.66 | 7'452.91 | 2'472.54 | 6'387.75 | 20'099.75 | 1'060.18 |
Trend | |||||||||||
%YTD | -7.29% | 2.89% | 8.74% | 4.90% | 6.61% | 5.25% | 4.34% | 10.44% | 18.66% | 5.16% | 22.95% |
Highlights:
1° Financial market volatility
2° Euro heading higher
Monetary policy normalisation in sight
Wrapping up its latest meeting on Thursday, the ECB arrived at the very same conclusion as the Fed did four years ago, namely that with economic conditions turning the corner, a move away from unorthodox monetary policy is in sight. For investors on both sides of the Atlantic, the ever-nearing prospect of a more conventional, i.e. a normalised, monetary policy will not be without its ramifications.
Although Mario Draghi clearly maintained a dovish stance, his remarks did result in some confusion among investors worldwide. As with the ECB Sintra conference last month, the lack of clarity from this former Goldman Sachs executive (who is seemingly wanting to ride out the low inflation data) led to some faulty interpretations from economic agents.
The Governing Council said that it was happy with the state of economic activity in the Eurozone but maintained that monetary stimulus was still necessary. This apparent contradiction between firmer economic trends and ultra-loose monetary policy led to an upsurge in volatility on leading equity marketplaces. In the end, however, positive sentiment prevailed in regard to Europe, leading to strong appreciation by the euro.
The IMF has nudged down its growth outlook for the US, ahead of the Fed’s fifth meeting of the year on Wednesday. We expect the Fed to leave rates unchanged. The probability of a third rate cut in the current sequence has dropped below 50%, in response to the slew of downbeat stats reported in recent months. The Fed is expected to supply more details about how and when it will slim down its balance sheet. It may even announce a specific date on which it will stop rolling maturing assets over.
This week, tech majors Google, Facebook and Amazon will report results. Doubtless the numbers will point to the continued dominance of this key US industry. Tech currently weighs in with a market capitalisation of USD 1.600 trillion, which is USD 450 billion higher than last year. Some are talking of a speculative bubble but most concur that the higher market value represents an underlying shift in the economy.
Credit Suisse Group AG (ISIN: CH0012138530, price: CHF 14.24)
The group hopes that, by 2018, its restructuring drive – beginning last year – will have run its course. Conducted by CEO Tidjane Thiam, this clean sweep is aimed at strengthening the capital base, settling arrears carried over the previous regime and scaling back the investment bank.
In its 2018-2020 business plan, management is focusing on value creation by centring on its most profitable lines of business, one of which is wealth management. More information will be given at the fourth-quarter investor conference.
Business conditions are improving for banks. Interest rates are rising, and this will automatically feed into margins. For Credit Suisse specifically, the outlook is improving in tandem with progress made in its business refocusing. Less haze probably means less uncertainty, leading in turn to share price appreciation. The bank will report its latest quarterly results on Friday.
Buy with a target price of CHF 16.50.
Microsoft (ISIN: US5949181045, price: USD 73.79)
Innovation using virtualised platforms has sent Microsoft’s results for its fourth quarter (2016-17) above consensus estimates in several divisions. Revenue surged by 13% to USD 23.4 billion, with social media site LinkedIn, acquired in late 2016, accounting for USD 1.1 billion. Net profit increased more than two-fold, rising to USD 6.5 billion, equating to 98 cents per share – which was far higher than projected.
Sales of the Office 365 suite shot up by 43%. Cloud revenues, especially the Azure enterprise platform for data storage, climbed by 97%. Azure is smaller than Amazon’s rival service and market leader, AWS, but is growing strongly.
Forecasts for higher capital expenditure and thinner margins may disappointing here and now. But we remain buyers, considering the potential for profit growth and higher free cash flow in the longer run.
Buy with a target price of USD 80.
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