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Research Market strategy
by Swissquote Analysts
Morning News

UniCredit Seeks Out Advisors for Possible Commerzbank Bid

Topic of the day

Italy's UniCredit has approached investment bankers and other advisors for advice on a potential takeover bid of Commerzbank, Reuters reports, citing unnamed sources. The Italian lender has engaged the investment bank Lazard including its banker Joerg Asmussen, a former German deputy finance minister, as well as JPMorgan on the matter, Reuters says, noting the timing of a potential bid remains unclear. UniCredit's management has "long been interested" in expanding its operations in Germany, Reuters reports, citing the sources. The market is likely to give a cool response to a potential takeover of Germany's Commerzbank by Italy's UniCredit, says Citigroup. A deal could result in cost savings, though they might be difficult to extract. "We expect the market to have a negative initial reaction to the news if confirmed," Citi analysts say. "A deal between Unicredit and Commerzbank could face some resistance in realizing cost synergies, given some German (labor) union comment."

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Swiss stocks

The SMI managed a slender 0.4 percent recovery to 9,404 points Tuesday, but investors remained cautious, with the US-China trade talks still the dominant negative factor for markets. Some relief came from reports that US President Donald Trump had expressed confidence about the talks and had not yet decided whether to impose tariffs on the remaining $ 325 billion worth of Chinese imports to the US. Lafargeholcim rose 3.2 percent on hopes of good quarterly figures Wednesday. Alcon fell 2 percent in the run-up to releasing quarterly financials Wednesday. Roche closed virtually unchanged on news that it is extending the timeframe of its acquisition offer for US biopharmaceuticals company Spark Therapeutics to give the US government more time to review the takeover. Competitor Novartis rose 0.9 percent. Duty-free shop operator Dufry slid 1.9 percent or CHF 1.76, but the stock was trading ex dividend at CHF 4 and was thus strong. Dufry had posted first-quarter organic growth of 2.0 percent.

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International markets

Europe

The Stoxx Europe 600 index finished the day up 3.77 points, or 1.01%, to 376.34 -- the largest one-day point gain since April 3. The U.K.'s FTSE 100 index was up 77.92 points, or 1.09%, to 7241.60. It was the index's largest one-day point-and-percentage gain since Feb. 5. In France, the CAC-40 index was up 78.78 points, or 1.50%, to 5341.35 -- its largest one-day point-and-percentage gain since Feb 15. The index now has been up two of the past three trading days. And in Germany, the DAX was up 114.97 points, or 0.97%, to 11991.62. Shares of German online market-place Scout24 fell Tuesday after a private-equity takeover bid failed to attract enough shareholder acceptances. Allianz released a decent set of results for the first three months of the year but its solvency ratio missed expectations, Citi says. The ratio, a key measure of balance-sheet strength, was 218%. "The solvency miss, nuanced change on [capital generation] and higher expenses in asset management are probably enough to negate an otherwise solid operational performance," it says. Allianz gained 1.9 percent.

United States

Major U.S. stock indexes rose intraday after President Trump further signaled that U.S. and Chinese officials could still strike a trade deal, alleviating some of the pressure that had knocked stocks down in recent sessions. Shares of technology companies led a broad market rally that has put the S&P 500 on pace for its biggest daily gain in more than a month. Ten of the 11 major S&P 500 sectors advanced in recent trading, with technology companies, among the hardest hit during the trade-fueled selloff, rising nearly 2%. Trade tensions diminished somewhat ahead of the open, helping to rejuvenate a stock market that has been struggling amid the latest economic clash between the U.S. and China. In a series of tweets early in the morning, President Trump continued to suggest the two countries could reach a truce in the near future, possibly avoiding any further escalation in tariffs. The Dow industrials added 305 points, or 1.2%, to 25632, as 28 of its 30 components notched gains in recent trading. The S&P 500 was also trading higher, gaining 1.2% - on track for its biggest daily gain since March 11 - while the Nasdaq Composite rose 1.5%.

Asia

In Asia, there are broad gains for equities, following the rebounds seen in Europe and the U.S. China was leading the way with roughly 1% advances despite some weaker-than-expected April economic data. Many other markets are at least 0.5% higher. Laggards include Japan, where the Nikkei fell for an 8th-straight day and posts its longest losing streak in a decade. That index is little changed while Singapore's benchmark is slightly lower amid some downbeat domestic earnings news.

Bonds

U.S. government bond prices rose intraday after the price of goods imported to the U.S. rose less in April than many investors expected, highlighting concerns about the slowing pace of U.S. inflation.

Analysis

Warburg downgrades Stemmer Imaging target to 45 (47) EUR - Buy
Investec upgrades Airbus to Buy (Hold)
Warburg raises Wacker Neuson target to 28,80 (28) EUR - Buy
IR raises Merck target to 106 (103) EUR - Hold

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