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Research Market strategy
by Swissquote Analysts
Morning News

U.S. Investigating Deutsche Bank's Dealings With Malaysian Fund

Topic of the day

The sprawling, multibillion-dollar Malaysian development fraud scandal that has toppled a prime minister and stretched from Hollywood to Wall Street is threatening to implicate another major global financial institution: Deutsche Bank AG. The U.S. Justice Department is investigating whether the German lender violated foreign corruption or anti-money-laundering laws in its work for the 1Malaysia Development Bhd. fund, which included helping the fund raise $1.2 billion in 2014 as concerns about the fund’s management and financials had begun to circulate, according to people familiar with the matter. The investigation into Deutsche Bank has been helped in part by a former Goldman Sachs Group Inc. executive, Tim Leissner, who is cooperating with authorities, according to the people familiar with the matter. Prosecutors have been investigating similar issues at Goldman, where Mr. Leissner, a former managing director, pleaded guilty last year and admitted to earlier helping siphon off billions of dollars from the fund. A state economic-development fund, 1MDB turned into a major global scandal after billions of dollars were drained from it between 2009 and 2014, leading to multiple government investigations and the downfall of former Malaysian Prime Minister Najib Razak

Swiss stocks

Economic scepticism drove the SMI down 0.6 percent to 9,880 points Thursday as profit warnings made investors cautious in the run-up to the reporting season. Good omens from the US vanished after the Dow Jones Index hit a record high in early trading. Cyclical stocks ABB fell 0.6 percent and Adecco 0.8 percent. Sika slumped 4 percent to CHF 154 after analysts downgraded it to sell from neutral and revised the target down to CHF 135 from CHF 140. After profit warnings from sector heavyweights like BASF, Fuchs Petrolub and Elkem, the experts expect a weak second quarter. Swiss Re (-0.1 percent) stabilised on confirming it was postponing the London IPO of subsidiary Reassure. Heavyweight pharma companies Novartis and Roche slid 0.9 percent and 1.8 percent, with observers pointing to US Administration plans to slash US drug prices. Defensive heavyweight Nestle fell 0.8 percent. The slight rise in market rates pushed Credit Suisse up 1 percent and UBS 0.1 percent. Richemont was up 1.5 percent, with observers noting speculation about an end to the US-China trade dispute.

International markets

Europe

European stocks fell as economic and trade caution offset hopes for a potential double rate-cut from the U.S. Federal Reserve. The FTSE 100 dropped 0.2%, the DAX was off 0.3% and the CAC-40 fell 0.2%. The International Monetary Fund reportedly said the eurozone faces a period of anemic growth, while risks from Brexit and trade tensions with the U.S. are rising. "Hopes of a double rate cut from the Fed are helping drive U.S. market outperformance once again today, with [Fed chief] Jerome Powell's two-day testimony driving expectations of a 50-basis-point move," Joshua Mahony at IG said. European Central Bank officials signaled at their June policy meeting that they will consider injecting fresh stimulus into the eurozone economy amid deep concerns over slowing global growth and trade disputes. Volkswagen has agreed to invest around $2.6 billion in Ford's autonomous-vehicle partner, Argo AI, in a deal that values the startup at $7 billion, according to people familiar with the matter.

United States

A rally in health-care stocks pushed the Dow Jones Industrial Average over 27000 for the first time after the Trump administration abandoned a plan to curb drug rebates. The decision canceled a proposal that would have eliminated rebates from government drug plans, easing concerns of a massive disruption to the U.S. pharmaceutical industry. Shares of UnitedHealth jumped 5%, leading the Dow industrials 166 points higher to 27027 in afternoon trading. Broader stock indexes gave back some of their earlier gains in the afternoon following a jump in bond yields, which rise as bond prices fall. The Dow fell off its highs, the S&P 500 toed the flat line and the Nasdaq Composite declined 0.2%. At the same time, the yield on the benchmark 10-year U.S. Treasury note climbed to 2.113% from 2.061% a day earlier. Stocks have been supported this week as Federal Reserve Chairman Jerome Powell has doubled down on signaling the central bank could cut interest rates later this month. Speaking during a second day of congressional testimony, Mr. Powell reiterated the Fed's intention to "act as appropriate to sustain the expansion."

Asia

Asia struggled for direction Friday, with investors seeking further clarity over Fed rate cuts, with U.S. producer price index data due later in the day.

Bonds

U.S. government bonds pulled back after new data showed consumer prices rose more than expected in June. In recent trading, the yield on the benchmark 10-year U.S. Treasury note was 2.089%, according to Tradeweb, compared with 2.061% Wednesday.

Analysis

CS rises the Air-Liquide target to 116 (100) EUR – Underp.
CS lowers the Endesa and Naturgy to Underperform (Neutral)
CS rises the Enel target to 7 (6,50) EUR – Outperform
UBS lowers the Nokia target to 5,50 (5,90) 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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