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Research Market strategy
by Swissquote Analysts
Morning News

Airbus: WTO Rules US Should Reduce Tariffs by About $2 Billion

Topic of the day

Airbus SE (AIR.FR) said that the World Trade Organization ruled the U.S. should immediately reduce the $7.5 billion tariffs authorized in October by around $2 billion. The France-based plane maker said the WTO found "the loans for the development of the A380 no longer have an impact on Boeing sales and that therefore the value of the lost sales no longer exists." However, the WTO found that the European Union "maintained illegal subsidies" for Airbus, rejecting for a second time the bloc's claim that it has complied with the trade body's rules. In October, the WTO authorized the U.S. to slap duties on $7.5 billion worth of European exports annually, until the EU complies with its rulings.

Swiss stocks

The SMI closed down 1.4 percent on 10,348 points and thus just above its day’s low Monday, with all 20 stocks lower. After surprisingly good economic data from China propelled the SMI to a new all-time high of 10,552 points, a midday tweet from US President Donald Trump sent markets plummeting. He accused Brazil and Argentina of profiting from the strong dollar, reinstating import tariffs for steel and aluminium from both countries. Meanwhile, in the US-China trade dispute, there is no sign that a phase 1 agreement is nearly ready for sign-off. The market downturn accelerated in the afternoon when the US ISM manufacturing index fell in November to 48.1. Analysts had expected a rise to 49.4. US construction expenditure also fell unexpectedly in October. Swatch fell 2.9 percent to bring up the rear of the SMI. UBS slid 0.9 percent, ABB 0.9 percent and Zurich Insurance 1.2 percent. Even defensive heavyweights Novartis, Roche and Nestle closed down by between 1.3 percent and 1.8 percent.

International markets

Europe

European markets followed American stocks lower after fresh trade concerns and U.S. manufacturing figures sparked an equity retreat, IG analysts said. Monday's ISM reading was disappointing, and President Trump's decision to reimpose tariffs on Brazil echo the "tariff man" fears felt by traders earlier this year, the Swiss bank said. U.S. Secretary of Commerce Wilbur Ross's comments probably also compounded the bear sentiment, IG said. Mr. Ross told Fox News that President Trump will impose increased tariffs on China if the two countries don't reach a trade deal before Dec. 15. The Stoxx Europe 600 fell 1.6%, Germany's DAX dropped 2.1% and France's CAC retreated 2%. Deutsche Lufthansa AG (LHA.XE) (-1,3%) gave rival Qatar Airways the cold shoulder on Monday, responding to the state-owned carrier's reported interest in taking a stake in the German airline. "We did not privatize Lufthansa in Germany to have it renationalized in Qatar," Lufthansa said in an emailed statement. The statement followed a report by German news agency DPA saying Qatar Airways was open to buying a stake. Ocado Group PLC (OCDO.LN) (-7,4%) said Monday that it expects retail revenue growth of 10% to 11% in the 13 weeks to Dec. 1, and that it will launch a 500 million-pound ($646.4 million) bond offering.

United States

U.S. stocks fell intraday, hit by a downbeat report on the manufacturing sector and a fresh flare-up in trade tensions. The Dow Jones Industrial Average declined 182 points, or 0.7%, to 27868. The S&P 500 fell 0.6%, and the Nasdaq Composite dropped 0.9%. The moves were a step back for stocks after they closed out their best month since June. The market has climbed to fresh highs in recent weeks, buoyed by data showing the U.S. service sector on solid footing. But lingering uncertainty over trade policy and signs of weakening in the industrial sector have kept many investors cautious. U.S. stock futures pared gains early Monday after President Trump said on Twitter that he would restore tariffs on steel and aluminum imports from Brazil and Argentina. He also accused the two countries of devaluing their currencies. Stock declines then accelerated after a gauge of U.S. factory activity came in weaker than economists had expected. The Institute for Supply Management's manufacturing index decreased to 48.1 in November from 48.3 in October, marking the fourth straight sub-50 reading. Even with Monday's declines, stocks are still up double-digit percentages in 2019 and headed for their best year since 2013. U.S. stocks are also continuing to outperform indexes around the world, with the S&P 500's 2019 gains outpacing that of the Shanghai Composite, Japan's Nikkei Stock Average and the Stoxx Europe 600. Nvidia slipped 2.8%, while Lam Research fell 1%. Streaming media platform Roku fell 14% after Morgan Stanley lowered its rating for the company to "underperform" from "equal weight," warning investors that revenue and profit growth would likely slow significantly in 2020.

Asia

Asian markets, which had opened sharply lower as global trade tensions rose, pared losses slightly on Tuesday. However, caution is likely to dominate in global markets after the Trump administration revived trade fears in a series of unexpected moves Monday.

Bonds

U.S. government bonds pulled back intraday, reflecting better-than-expected economic data out of China and the eurozone that outweighed a disappointing report on the U.S. manufacturing sector. In recent trading, the yield on the 10-year U.S. Treasury note was 1.831%, according to Tradeweb, compared with 1.778% Friday.

Analysis

CS rises the Zurich Insurance target to 440 (385) CHF – Outperform
CS rises the Glencore target to 310 (275) p – Outperform
Citi lowers Philip Morris to Neutral (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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