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Research Market strategy
by Swissquote Analysts
Morning News

Solvay Shares Tumble on 4Q Results; Warns of 1Q Coronavirus Headwinds

Topic of the day

Solvay SA's shares fell Wednesday after the company reported its results for the fourth quarter of 2019, saying it expects the coronavirus epidemic to harm its first quarter of 2020. "Solvay already flagged a soft 2020 at the 3Q update but now sees the impact of Covid-19 as an additional headwind," said an analyst. The Belgian chemical company said it also expects the production halt of Boeing Co.'s 737 MAX and challenges in the oil-and-gas market to affect its first quarter of 2020. "The impact from coronavirus is estimated to be around 25 million euros ($32.3 million) in 1Q with further updates should the impacts last longer than expected," said analysts at U.S. bank Citi. Solvay's net profit for the quarter fell to EUR163 million from EUR208 million the previous fourth quarter, with net sales declining to EUR2.4 billion from EUR2.57 billion. Earnings before interest, taxes, depreciation, and amortization decreased slightly to EUR525 million from EUR531 million, with earnings before interest and taxes falling to EUR306 million from EUR325 million.

Swiss stocks

After four days of losses, the SMI closed up 0.3 percent on 10,512 points Wednesday, tracking Wall Street higher. Trading was dominated by the coronavirus as it continues to spread in Europe and US health authority CDC issued a warning about the spread of the virus and considerable impact on public life. Alcon surged on releasing financials, climbing more than 8 percent at times to close 7.0 percent firmer. The company increased profits in Q4 adjusted for extraordinary expenses like the cost of its spin-off from parent Novartis and Alcon’s outlook foresees further growth and a higher margin for 2020. Adecco gained 2.1 percent on reporting figures, with traders saying Q4 figures were “very respectable” in light of the economic slowdown and praising a EUR 600 million share buyback programme. Credit Suisse fell 1.4 percent, Swiss Life shed 0.8 percent. UBS closed virtually unchanged. Index heavyweight Nestle slid 0.1 percent. Novartis fell 0.4 percent; Roche closed 0.3 percent firmer.

International markets

Europe

European stocks were mixed as traders weigh corporate earnings and reports of increased coronavirus cases outside of China. The pan-European Stoxx 600 and CAC-40 were flat, the DAX fell 0.1% and the FTSE 100 rose 0.4%. ISS A/S shares fell 14.7% after it said the coronavirus and a recent malware attack create uncertainty for the Danish facility-management firm's outlook. French biotech company bioMerieux declined 5.8% after poorly-received 2019 results. Peugeot maker Groupe PSA rose 5.5%, leading auto stocks higher, after raising its dividend and posting record annual profit for 2019. Europcar Mobility Group SA (+14,3%) said that its net profit for 2019 fell, but that it should sharply improve in 2020 despite continuing challenges in its trading environment. The car-rental company reported net profit of 38 million euros ($41.2 million), down sharply from EUR139.4 million in 2018. In 2018, the company's net profit was boosted by a EUR65.9 million gain from the sale of its stake in Car2Go, contributing to the big year-on-year difference.

United States

The Dow Jones Industrial Average turned lower, giving up a strong early advance, as investors continued to assess the economic impact of the coronavirus epidemic. The blue-chip index opened sharply higher and climbed as much as 461 points before turning negative in afternoon trading. It was down 86 points, or 0.3%, in recent trading. The S&P 500 fell 0.1%, while the Nasdaq Composite added 0.3%. Investors were hoping for markets to stabilize after the Dow fell more than 1,900 points Monday and Tuesday in its largest two-day point decline on record. Markets were spooked this week by a growing number of coronavirus cases outside China and fears that the epidemic would dent corporate earnings and global growth. Volatility in U.S. equity markets remained high. The Cboe Volatility Index, a closely watched measure of market turbulence known as VIX, gained 1.5%, a day after hitting its highest levels in more than a year.

Asia

In Asia, Japanese stocks were down broadly with electronics, auto and retail stocks falling especially sharply as concerns persist about economic disruption caused by the coronavirus epidemic. Hong Kong stocks slipped in early trade as energy and tech stocks weigh.

Bonds

U.S. Treasury bonds rallied as the accelerating spread of COVID-19 outsid e of China kept investors on edge, preventing a selloff in government bonds even as stocks looked to claw back from their worst back-to-back losses in several years. The 10-year Treasury note yield was virtually unchanged at 1.332%, after climbing as high as 1.382% earlier in the day. The 2-year note rate was down 2.2 basis points to 1.169%, while the 30-year bond yield rose 1.5 basis points to 1.181%.

Analysis

IR rises the Zurich Insurance target to 435 (390) CHF – Hold
IR lowers the Danone target to 75 (78) EUR – Hold
HSBC lowers Nike to Hold (Buy) – Target 112 USD


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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