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Research Market strategy
by Swissquote Analysts
Morning News

Blocks Merger of Steelmaking Units of Tata, Thyssenkrupp

Topic of the day

The European Union's antitrust enforcer on Tuesday blocked the planned merger of two steelmaking businesses, India's Tata Steel Ltd. and Germany's Thyssenkrupp AG, saying the resulting company would have reduced competition in the supply of special steel for the car and packaging industries. Competition commissioner Margrethe Vestager said the two companies failed to propose sufficient remedies to address the EU's concerns. "We prohibited the merger to avoid serious harm to European industrial customers and consumers," Ms. Vestager said. The planned merger, announced in 2017, would have created Europe's second-largest steel producer after ArcelorMittal SA. The blocked merger marks another defeat for executives and politicians who have been pushing for the formation of more European giants to counter competition from the U.S. and China. In February, the European Commission, the antitrust body, stopped plans to merge the train-making operations of Germany's Siemens AG with France's Alstom SA, a deal the companies said was necessary to be able to competition in the future with Chinese rail giant CRRC Corp., the world's largest rail supplier. The European Commission said the Franco-German merger would have harmed competition in the markets for high-speed trains and signaling systems.

Swiss stocks

The SMI climbed to an all-time high of 9,871 points in Tuesday trading, closing up 0.9 percent on 9,836 points. Markets worldwide rose on hopes of US interest-rate cuts after Friday’s disappointing labour market data and ongoing low inflation, the US deferral of punitive Mexican import tariffs, China’s plans for economy-boosting measures, and new optimism in the US-China trade dispute as US President Donald Trump and China’s premier Xi Jinping plan to meet at the G20 Summit. A slightly weaker Swiss franc also buoyed Swiss stocks. Bank stocks UBS surged 1.9 percent and Credit Suisse 2.7 percent. Lafargeholcim rose 1.6 percent after analysts no longer recommended selling the stock. Roche climbed 1.4 percent on gaining US Food and Drug Administration accelerated approval for a combined drug therapy. Swatch rose 0.9 percent and Richemont 1.6 percent on hopes of a Chinese economic uptick. Investor favourite Lonza was up 2.3 percent. It has risen some 30 percent since the start of the year.

International markets

Europe

In Europe, the Stoxx Europe 600 Index rose 0.7%, or 2.62 points, to 380.89. Most European indexes ended the day in positive territory despite lingering trade tensions, David Madden of CMC Markets said. Germany's DAX led the way, finishing 0.9% higher. Italy's FTSE MIB closed up 0.6%, France's CAC 40 closed 0.5% higher, with Spain's IBEX 35 was the odd one out, ending the day 0.1% lower. The FTSE was up 22.91 points, or 0.31%, to 7398.45. "Investors are happy to jump on the bullish bandwagon for now, but the optimism might fade as the G20 meeting nears," Madden said. In declining to back Fiat Chrysler Automobiles's plan to merge with Renault SA, the French government risks weakening its chief negotiator in any future talks, Renault Chairman Jean-Dominique Senard. Renault shareholders are expected to vote in favor of Mr. Senard on Wednesday, when they hold their first annual meeting since the executive was appointed in January to succeed Carlos Ghosn. Renault's biggest shareholder, the French government, has said Mr. Senard has its full confidence.

United States

U.S. equity markets flipped between slight gains and losses intraday as investors wavered between fears of rising trade tensions and hopes that policy makers will bolster markets with fresh stimulus measures. The Dow Jones Industrial Average, S&P 500 and the tech-heavy Nasdaq Composite each gained 0.2% in recent trading. For the past week, markets have been spurred higher by hints that the Federal Reserve may lower interest rates. The S&P has rebounded 5% since Fed Chairman Jerome Powell said June 4 that the central bank is monitoring the impact of trade tensions on the economy and would respond if necessary. The Federal Reserve set to meet next week, and investors are looking for any clues as to whether rate cuts lie ahead for the world's largest economy. Despite the gains of the past week, U.S. equities have been whipsawed by headlines in recent weeks, said Jack Ablin, founding partner and chief executive officer of Cresset Capital, a Chicago firm that manages $4.7 billion.

Asia

Asian markets were mostly lower in early trading Wednesday. Japan's Nikkei was mostly unchanged. Hong Kong's Hang Seng Index slid 1.5% as protesters again swarmed the streets in opposition to a possible new extradition law with mainland China. The Shanghai Composite retreated 0.6% and the smaller-cap Shenzhen Composite fell 0.3% as May data showed China's consumer inflation hit a 15-month high, in line with forecasts.

Bonds

The yield on the benchmark 10-year Treasury note settled at 2.140%, down from 2.143% Monday. The yield has rebounded this week after falling to a 20-month low Friday, but has declined sharply since hitting multiyear highs late last year amid concerns about slowing growth.

Analysis

UBS rises Lafargeholcim to Neutral (Sell) – Target 48 CHF
Barclays lowers the Thomas Cook target to 17 (46) p – Equalweight
CS rises the Akzo Nobel target to 85,30 (85,08) EUR – Outperform

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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