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Research Market strategy
by Swissquote Analysts
Morning News

Verizon to Buy TracFone in Deal Worth Up to $7 Billion

Topic of the day

Verizon Communications Inc. said it has agreed to buy prepaid wireless reseller TracFone for up to $7 billion in cash and stock, bringing the country's largest reseller of cellphone services under the wing of the country's biggest wireless provider. TracFone, a unit of Mexico's América Móvil SAB, operates in the U.S. under its namesake brand as well as StraightTalk and Net10. The company doesn't run its own physical network in the U.S. and instead rides on other cellphone carriers' systems for a fee. About 13 million of TracFone's 21 millions subscribers already use Verizon's network through an existing agreement. Verizon said the deal will include about $3.125 billion of cash and $3.125 billion in Verizon shares. TracFone could get an additional $650 million cash payment tied to some performance measures and other commercial arrangements.


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Swiss stocks

The SMI closed up 0.2 percent on 10,457 points Monday, unable to maintain higher gains from earlier in the day. Market participants pointed to investor reticence in the run-up to Wednesday’s US Federal Reserve meeting and a lack of upside or downside news. Speculation again ran rife about a Credit Suisse-UBS merger after Swiss online newspaper "Inside Paradeplatz" reported citing insiders that UBS Chairman Axel Weber is working towards a fusion of the two major banks. This topic has arisen repeatedly since the financial crisis, traders noted. Accordingly, Credit Suisse surged 4.3 percent and UBS 2.5 percent to lead the index. Cyclical stocks were in demand, partly due to renewed hopes of a coronavirus vaccine, observers said. Temping company Adecco rose 1.4 percent. Luxury goods stocks Swatch climbed 1.7 percent and Richemont 0.8 percent. Defensive heavyweight Nestle slid 0.3 percent. At the back of the index was Swiss Re, down 1.3 percent, followed by Swisscom, down 1.2 percent

International markets

Europe

European stocks closed higher on Monday but gave back earlier gains driven by vaccine hopes and a flurry of M&A activity. The Stoxx Europe 600 index rose 0.2% after ending last week nearly 1.7% higher, the best weekly return since the week ending August 7. The French CAC 40 FR:PX1 rose 0.4%, but the German DAX and the FTSE 100 index fell 0.1%. Metro AG soared Monday following the news that its shareholder EP Global Commerce plans to launch a new takeover offer for the German retailer. At the closing, shares trade 7,7% higher at 8.91 euros ($10.57). EP Global Commerce--which is controlled by Czech billionaire Daniel Kretinsky and owns 29.99% of ordinary shares and voting rights in Metro--said over the weekend that it aims to increase its investment above 30%, but doesn't expect to hold more than 50% of voting rights after the offer. Greece's intention to purchase Rafale fighter jets from Dassault Aviation (+9,1%) is seen as a vote of confidence and contributes to strengthening the company's defense division, Berenberg says. "If we assume the new aircraft are delivered in 2021 and 2022, in line with press report indications for delivery timing of the entire contract, we estimate the deal would be 7% to 12% accretive to sales in 2021 and 2022," according to the bank.

United States

A rebound in technology shares lifted U.S. stocks, helping major indexes recover after last week's pullback. The tech-heavy Nasdaq Composite jumped 1.9% after last week suffering its biggest one-week decline since the March market crisis. The Dow Jones Industrial Average climbed 327 points, or 1.2%, and the S&P 500 advanced 1.3%.Monday's advance extends a spell of outsize moves in both directions for U.S. stock indexes, much of it driven by shares of large technology companies that have powered the market's recovery since the spring. The Federal Reserve kicks off its two-day policy meeting later Tuesday. The central bank isn't expected to change interest rates at the end of a two-day meeting, its first since forging a new framework governing how to conduct policy over the long run. Oracle Corp. won the bidding for the U.S. operations of the video-sharing app TikTok, people familiar with the matter said, beating out Microsoft Corp. in a high-profile deal to salvage a social-media sensation that has been caught in the middle of a geopolitical standoff. Oracle is set to be announced as TikTok's "trusted tech partner" in the U.S., and the deal is likely not to be structured as an outright sale, the people said. Amazon, which has seen a jump in online shopping during the Covid-19 pandemic, said the new jobs pay at least $15 an hour and include benefits and signing bonuses of as much as $1,000 in some cities. Nvidia confirmed it would pay $40 billion to acquire Arm Holdings from SoftBank. That will buy the chip maker a world-class semiconductor research and licensing business. It might also buy a new kind of trouble.

Asia

Japanese stocks were broadly lower as the yen strengthened amid continuing uncertainty over the pace of any global economic recovery from the Covid-19 pandemic. Railway, steel and telecom stocks were leading the declines. Credit growth in China is likely higher at 13.5% this year based on the unused annual quota for government-bond issuance, which means liquidity expansion could continue for longer than expected, Soochow Securities said.

Bonds

U.S. Treasury yields struggled for direction Monday as investors looked past the buoyant tone in risk assets and waited for the Federal Reserve meeting this week. The 10-year Treasury note yield was virtually unchanged at 0.669%, while the 2-year note rate edged 0.6 basis point higher to 0.135%. The 30-year bond yield fell 0.9 basis point to 1.409%. Bond prices move in the opposite direction of yields.

Analysis

UBS rises Nordea to Buy (Neutral) – Target 78 (76) SEK
UBS lowers Commerzbank to Sell (Neutral) – Target 4,60 (4,10) EUR
CS lowers Eni to Underperform (Neutral)


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