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Research Market strategy
by Swissquote Analysts
Morning News

Fiat Chrysler 4Q Net Profit Jumps, Revenue Higher

Topic of the day

Fiat Chrysler Automobiles NV said Thursday that fourth-quarter net profit jumped and it grew revenue. Net profit in the period was 1.29 billion euros ($1.47 billion), up 61% from EUR804 million in the same period a year ago. Revenue rose 6% to EUR30.62 billion, the Italian-American car maker said. Adjusted operating profit rose 7% to EUR2.02 billion. Net industrial cash stood at EUR1.87 billion as of Dec 31, the company said. Fiat said the results include contributions from Magneti Marelli, whose sale it announced in October. The transaction is expected to close in the second quarter of 2019, it said. Looking to the year ahead, Fiat forecast adjusted operating profit of at least EUR6.7 billion and industrial free cash flow of at least EUR1.5 billion. The cash-flow expectations are lower due to higher capital expenditures and "cash payments for fines and other costs in connection with the U.S. diesel emissions settlement" Fiat said.

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Swiss stocks

The SMI reacted with losses to new growth worries Thursday and closed down 1.2 percent on 9,036 points. The EU Commission had revised its forecasts for Eurozone economic growth downwards. Earlier, the German manufacturing industry had delivered disappointing figures and the Bank of England had revised its growth forecast downwards. On the SMI, Zurich Insurance rose 0.6 percent on positively received financials, including good profits and an increase in the dividend, but Swisscom slumped 4 percent after releasing financials, particularly because of its cautious outlook. Julius Baer gained 1.6 percent. After slumping Monday on disappointing financials, it has recouped those losses with strong gains every day since then. However, competitors UBS and Credit Suisse both slid more than 2 percent. Lafargeholcim slumped 2.5 percent and Swatch fell 3 percent. Defensive heavyweights Nestle, Novartis and Roche buoyed the market, only falling by between 0.7 percent and 1.1 percent.

International markets

Europe

The Stoxx Europe 600 dropped 1.5%, or 5.44 points, to 360.08 after European economic-growth forecasts were revised down, not helped by a profit warning from tour operator TUI. The DAX dropped 2.7%, the CAC 40 was off 1.8% and the euro retreats 0.04% against the dollar to $1.1358. "With 2019 growth forecasts in both the eurozone -- 1.3% from 1.9% -- and Germany -- 1.1% from 1.8% -- taking a substantial hit, it comes as no surprise to see both stocks and the euro declining sharply in response," said IG's Joshua Mahony. Shares in TUI backtracked 19% after the tour operator cut its underlying earnings guidance for the year ahead.

United States

The Dow Jones Industrial Average slumped more than 250 points intraday as U.S.-China trade tensions and a bleaker outlook from the Bank of England renewed fears of a slowdown in global growth. Investors have grappled with conflicting signals about the durability of the global economic expansion this year, something that has kept enthusiasm for risk-taking contained even after markets rallied in January. The losses accelerated after White House economic adviser Larry Kudlow said China and the U.S. were still far away on striking a trade deal in an interview with Fox Business Network. A White House official later said President Trump is "highly unlikely" to meet with Chinese President Xi Jinping ahead of the March 1 deadline for a resolution. Trade-sensitive stocks, including machinery giant Caterpillar , aerospace company Boeing and tool maker Stanley Black & Decker, each shed at least 1%. Those losses weighed on the Dow industrials, which slid 286 points, or 1.1%, to 25106, on pace for their biggest percentage drop since Jan. 22. The S&P 500 lost 1.4%, after snapping a five-day winning streak Wednesday. The Nasdaq Composite shed 1.4%.

Asia

In Asia, equities tracked U.S. losses. A Wall Street tech selloff helped pressure stocks in Seoul and Tokyo, with the Nikkei one of the worst performers. Holiday closures still affected indexes in China and Taiwan.

Bonds

U.S. government bonds strengthened intraday as investors favored safer assets amid growing concerns about Europe's economy. In recent trading, the yield on the benchmark 10-year U.S. Treasury note was at 2.666%, according to Tradeweb, compared with 2.702% Wednesday. Yields, which fall when bond prices rise, dropped along with stocks after the European Union cut its forecast for eurozone economic growth to 1.3% in 2019 from its earlier estimate of 1.9%. The forecast came shortly after new data showed that German industrial production unexpectedly dropped in December - falling 0.4% from a month earlier, while economists had predicted a 0.8% gain.

Analysis

CS lowers the BNP Paribas target to 48 (50) EUR – Neutral
IR lowers the Vinci target to 92 (97) EUR – Buy
CS rises the ING target to 12 (11,50) EUR – Neutral

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