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Research Market strategy
by Swissquote Analysts
Morning News

Auto CEOs Seek to Dodge Tariffs Threat at a White-House Meeting

Topic of the day

German auto executives outlined plans for U.S. investments Tuesday during meetings with President Trump and top White House officials, a strategy aimed at easing U.S. threats of auto tariffs. The senior executives of Germany's biggest auto makers laid out proposals for financing new vehicles, plant expansions and cooperation with U.S. manufacturers to stress their commitment to continued investment and job creation in the U.S. Most of what they presented involved existing plans and projects that aren't a direct response to President Trump's efforts to pressure foreign auto makers to boost manufacturing in the U.S. The White House said Mr. Trump "shared his vision of all auto makers producing in the United States and creating a more friendly business environment." Volkswagen Chief Executive Herbert Diess, who is aiming to double his company's market share in the U.S. over the next few years, said after the meetings that VW is prepared to invest more in the U.S. and had made a big step forward to avoid the tariffs. Daimler Chief Executive Dieter Zetsche said the White House had a very positive reaction to the company's investment plans, adding that while trade wasn't the focus of the meetings, "I would say this implicit potential threat was reduced."

Swiss stocks

The SMI closed 0.2 percent lower on 9,085 points Tuesday, but performed better than many European neighbours thanks to support from its heavyweights. After the previous day’s euphoria about the agreement reached by the United States and China in the trade conflict, market participants said investors were now disillusioned, with the 90-day deferral of new tariffs seen as a ceasefire, rather than a resolution. Banks came under pressure as 10-year US Treasury bond yields fell below 3 percent again for the first time since September. UBS fell 2.5 percent, Credit Suisse 2 percent and Julius Baer 1.8 percent. Cyclical stocks were not in demand because of investor caution. ABB fell 1.1 percent. Lafargeholcim slumped 3.2 percent, under pressure along with other European construction industry stocks from the declining growth of UK building supplier Ferguson. Defensive heavyweights Nestle and Novartis were in demand, they climbed 0.9 percent and 0.6 percent respectively. However, the third heavyweight, Roche, closed down 0.3 percent.

International markets

Europe

The Stoxx Europe 600 fell 0.7% to 358.43 as concerns about U.S.-China trade tensions resumed, with the more positive sentiment at the start of the week proving short-lived. "The U.S. and China have called a truce to the trade dispute, but that just means the problem has been put on hold until the New Year," said David Madden at CMC Markets. Germany's DAX fell 1.1%, with auto makers broadly lower. France's CAC 40 lost 0.8% and the U.K.'s FTSE 100 ended down 0.6%. Concerns about Italy's proposed budget deficit and continued opposition to it from the EU continued to play on investors' minds, too, with Italy's FTSE MIB closing down 1.4%. Spain's Ibex 35 ended down 1.3%.

United States

The Dow Jones Industrial Average fell more than 600 points intraday and bond yields plummeted, as investors' doubts over the trade truce struck between the U.S. and China renewed anxieties around the pace of economic growth. Investors broadly retreated from stocks, with industrial stalwarts like Boeing and Caterpillar suffering steep losses. Apple and other technology companies also slid, pulling the Nasdaq Composite back more than 10% below its August high. Waning enthusiasm for the 90-day tariff cease-fire struck over the weekend fueled the losses, several investors said, stirring worries that ongoing spat between the world's two biggest economies could unravel economic growth in the U.S. and put additional pressure on Europe and Asia, which are already struggling. Those growth fears pushed investors into assets that tend to be safer stores of value during periods of economic instability, including U.S. government bonds and shares of utility companies, which typically pay hefty dividends. The flight from stocks to bonds sent several warning signals of an economic slowdown reverberating through markets

Asia

Waning enthusiasm for the 90-day tariff cease-fire struck over the weekend by China and the U.S. fueled the losses, several investors said, stirring worries the disagreement between the world's two biggest economies could unravel U.S. growth and put more pressure on struggling Europe and Asia. "People are taking equity off the table and it's accelerating," said Matt Peden, chief investment officer of GuideStone Capital Management, which manages $13.2 billion. "That's probably wise where we are in the cycle." The tumble spilled into Asia on Wednesday, sending markets down by more than 1% in Australia, Hong Kong and Taiwan. Taiwan's index was one of the worst hit, down 1.4%, while the Shanghai Composite lost 0.6%. Japan's Nikkei fell 0.4%.

Bonds

U.S. government bond prices rose intraday, pushing the yield on 10-year Treasury notes further below 3%, as some investors reassessed their expectations for how fast the economy will grow in coming years. The yield on the benchmark 10-year Treasury note fell to a recent 2.948%, according to Tradeweb, from 2.990% Monday. The yield has fallen from a seven-year high of 3.232% reached Nov. 8. Yields, which fall when bond prices rise, continued Monday's decline.

Analysis

HSBC lowers Apple to Hold (Buy)
Barclays lowers the Glencore target 370 (400) p - Overweight
Dt. Bank lowers target Rocket Internet to 28 (32) EUR - Buy


Produced by MBI Martin Brückner Infosource GmbH & Co. KG on behalf of Swissquote. All news is acquired with journalistic accuracy. No liability is assumed for delays or errors.

 
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