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Research Market strategy
by Swissquote Analysts
Morning News

Branson's Space Unit to Go Public

Topic of the day

Virgin Galactic, Richard Branson's space-tourism venture, is preparing for liftoff as a publicly traded company. Social Capital Hedosophia Holdings Corp., a special-purpose acquisition company, or SPAC, is planning to invest roughly $800 million in Virgin Galactic for a 49% stake, according to people familiar with the matter. As part of the deal with Social Capital Hedosophia, a publicly traded shell, Virgin Galactic later this year would become the first publicly listed human spaceflight company. Virgin Galactic expects that this deal will give it enough capital to fund the business until its spaceships can commercially operate and turn a profit. It is in a race with companies including Jeff Bezos' Blue Origin and Elon Musk's Space Exploration Technologies Corp., or SpaceX, which are also working on ways to send tourists into space. Virgin Galactic years ago led the way in sparking interest in blasting tourists and small satellites into space using cheap rockets and various other unconventional launch systems. Experts consider it the fastest-growing segment in commercial space. But a December 2014 fatal accident set back the company's plans.

Swiss stocks

The SMI slipped 0.3 percent to 9,961 points Tuesday after a profit warning from German chemical giant BASF and an analyst commentary painting a bleak picture of the European staffing sector’s earnings outlook. Adecco slumped 5.3 percent after the analysts downgraded it to sell from buy, saying the economic downturn could cut organic growth. Chemical companies Sika and Clariant slid 1.7 percent and 2 percent in BASF’s wake. ABB sank 2.3 percent on news it is selling its solar inverter business to Italy’s FIMER, and will take a non-operational charge of $430 million after tax in the second quarter of 2019 to divest the business. Richemont and Swatch slid 1.8 percent and 1.3 percent on fears the economic downturn could curb demand for luxury goods. Credit Suisse slid 0.9 percent and UBS 0.8 percent in a low-interest environment. Defensive heavyweight Nestle slid 0.2 percent, but had surged Monday. Pharma heavyweight Novartis rose 0.7 percent, while Roche closed down just 0.1 percent.

International markets

Europe

European markets are in the red as investors continued to weigh up the chances of a U.S. interest-rate cut this month. The FTSE 100 Index is down 0.1% at 7539.38, the DAX is off 0.9% and the CAC-40 falls 0.3%. BASF and Deutsche Bank are among the fallers, down 3.3% and 4.1% respectively after the former warned on profit and the latter remained the subject of market speculation about its turnaround plan. The Italian Treasury benefited from the recent slide in eurozone government bond yields by reopening its longest-dated government bond to meet investors' appetite for relatively higher-yielding debt on Tuesday. German chemicals giant BASF warned of a slew of issues that took a toll on its second-quarter results, including slowing auto sales and North American farming woes. The concerns it raised are hardly unique to BASF. Many can be traced back to trade tensions. BASF released preliminary figures showing that earnings before interest, taxes, and other special items likely fell by nearly 50% in the second quarter.

United States

U.S. stocks wavered, pulled by enthusiasm for hot tech stocks, anxiety about trade dispute fallout and speculation that central bankers will do their best to keep the global economy growing. The Dow Jones Industrial Average fell 0.3%, dragged lower by chemicals companies that fell after German chemicals giant BASF cut profit forecasts because of tariff battles between the U.S. and China. By contrast, the tech-heavy Nasdaq Composite was up 0.3%, buoyed by merger news. The S&P 500 index was little changed after paring earlier losses. The three main U.S. equity benchmarks, while still hovering near record highs, have fallen since better-than-expected jobs data on Friday led investors to speculate that the Federal Reserve may take it slow in easing key interest rates. U.S. Federal Reserve Chairman Jerome Powell is scheduled to testify before Congress on Wednesday.. Traders have been treating good news as bad news while they wait on the Fed's decision. Investors globally are poised for fresh commentary from Mr. Powell and his deputy, Randal Quarles, that may provide important signals on the chances of rate cuts as early as the end of this month.

Asia

Most Asian shares turned mildly positive, although Japan's Nikkei lagged, after Wall Street posted mixed results Tuesday. Major U.S. stock indexes were pulled back and forth by enthusiasm for hot tech stocks, anxiety about trade-dispute fallout and speculation that central bankers will do their best to keep the global economy growing.

Bonds

U.S. government bond prices fell, pushing the yield on the benchmark 10-year Treasury note further above 2% as investors reassessed the potential for the Federal Reserve to cut interest rates at its meeting later this month. The strong June jobs report, which showed the U.S. economy added more jobs than economists had expected, is leading some investors to rethink how much willingness Fed officials have to reduce rates to sustain the expansion, analysts said.

Analysis

CS lowers the Covestro target to 48 (53) EUR – Neutral
GS lowers Adecco to Sell (Buy) – Target 51 (76) CHF
UBS rises the Safran target to 128 (121,50) EUR – Neutral
UBS rises the Airbus target to 141 (136) 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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