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Research Market strategy
by Swissquote Analysts
Morning News

LafargeHolcim to acquire Firestone Building Products for $3.4 billion

Topic of the day

Swiss cement manufacturer Lafarge-Holcim announced Thursday that it has reached an agreement to acquire U.S. roofing solutions specialist Firestone Building Products (FSBP) from Bridgestone Americas, a subsidiary of Japanese tire maker Bridgestone Corporation, for $3.4 billion. The transaction, which is expected to close in the second quarter of this year, will be settled in cash and through debt, LafargeHolcim said in a release, with a net debt to EBITDA ratio of no more than 2. Last year FSBP is expected to have achieved sales of $1.8 billion and EBITDA of $270 million. LafargeHolcim expects that the acquisition of this business will enable it to achieve $110 million in annual synergies within two years of the closing of the acquisition. The transaction will have a positive impact on its net earnings per share from the first year, the cement company said.


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Swiss stocks

The SMI closed 0.5 percent firmer on 10,747 points Wednesday, led by bank stocks. However, it lagged its European neighbours as defensive heavyweights like Roche and Nestle fell by up to 1.3 percent. Novartis closed down slightly. Economic optimism came from the US, where the Democrats will likely regain control of the US Senate after two runoffs in Georgia. Markets were thus hoping for further US economic stimuli with positive effects for the global economy. The approval of the Moderna coronavirus vaccine in Europe gave further cause for optimism. Cyclical stocks led the SMI, with Credit Suisse heading the pack, up 5.5 percent. UBS gained 4 percent. Swiss Life and Swiss Re saw similar gains. Financial stocks also benefited from hopes that the higher debt expected under a Democrat US Administration will see interest rates rise. Cyclicals Lafargeholcim rose 5.1 percent and ABB 3.8 percent. At the rear was Alcon, down 1.4 percent. Alcon too is a more defensive and less cyclical stock.

International markets

Europe

European stocks rise as oil, mining and banking stocks gain on news of a Saudi Arabian oil production cut and on hopes of increased US political certainty. The Stoxx Europe 600, DAX and CAC are all up more than 1% and the FTSE 100 advances 3.5%. "The outcome of the OPEC+ meeting was a welcome surprise for the oil markets, with Russia and Kazakhstan sharing a small increase in production of 75,000, but Saudi Arabia committing to a one million barrel per day cut," Craig Erlam at Oanda says. Compagnie Generale des Etablissements Michelin said Wednesday that is launching a plan aimed at simplifying its business and boosting competitiveness which could include up to 2,300 job losses over the next three years. The French tire maker said the majority of job losses would comprise voluntary early retirements and the remainder would be voluntary severances. Around 1,100 of the positions lost will be in offices and the rest in plants, Michelin said, adding that the plan envisages no plant closures. The plan comes in response to structural shifts in the tire market over the last 10 years, the company said, especially a "massive influx" of low-cost products. Greggs PLC said Wednesday that the coronavirus pandemic has hurt fourth-quarter and full-year sales, and that it expects a return to pre-coronavirus levels of profitability no earlier than 2022.

United States

Investors piled into shares of economically sensitive companies and dumped big technology stocks, betting Democrats are poised to take control of the Senate and usher in another round of stimulus. The Dow Jones Industrial Average, composed mostly of cyclical stocks, jumped 1.4%, led by shares of banks and manufacturers. Earlier in the afternoon, the Dow had briefly crossed the 31000 threshold for the first time on record. The index fell from its highs as the U.S. Capitol was placed on lockdown and multiple congressional buildings were evacuated amid protests outside. The S&P 500 rose 0.6%. Meanwhile, the tech-heavy Nasdaq Composite lost 0.6% as some investors worried that a Democrat-controlled Congress would lead to higher taxes and tighter regulations on tech giants. Protesters breached the Capitol on Wednesday afternoon as both the House and Senate were meeting inside after President Trump urged demonstrators to march there and pressure Congress to overturn President-elect Joe Biden's win. Hundreds of people protesting Mr. Trump's loss in the November election could be seen walking through the building's famous Statuary Hall after pushing aside barricades and shoving police out of the way, waving Trump and American flags and cheering from the balconies of the Capitol building. The COVID-19 vaccine developed by Moderna has been approved by the European Union's medical regulator, paving the way for the vaccine to be rolled out in the 27-member bloc. The European Medicines Agency said on Jan. 6 that it was recommending that the vaccine be granted authorization in the EU by the European Commission, the bloc's executive branch. Shares in Cambridge, Massachusetts-based biotech Moderna (MRNA) rose more than 3% in New York premarket trading on Wednesday. The U.K. Competition and Markets Authority on Wednesday invited interested parties to offer their comments on NVIDIA Corp.'s $40 billion acquisition of chip-designer Arm Ltd. ahead of its own formal investigation into the deal later this year.

Asia

The record at Wall Street and hopes for a new US economic stimulus package are driving the stock markets in East Asia and Australia on Thursday. On the other hand, the stock exchanges in Shanghai and Hong Kong are down with the further regulation of Chinese companies.

Bonds

U.S. Treasury yields remained above 1% in Asia, extending their push higher on increased bets on additional fiscal stimulus after Georgia's runoff Senate elections.

Analysis

CS rises the Royal Mail target to 284 (267) p – Neutral
HSBC rises the Next target to 8.400 (7.010) p – Buy
DT. Bank lowers Coca-Cola to Hold (Buy) – Target 55 USD


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