Caterpillar Flags Signs of Recovery Amid Slack Demand
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A construction slowdown during the coronavirus pandemic is hurting demand for Caterpillar Inc.'s heavy machinery, but the manufacturer said dealers and customers expect a turnaround this year. The Deerfield, Ill., company said Friday that revenue fell 15% in its fourth quarter due to lower volumes and less demand from customers and dealers. Revenue declined in each of Caterpillar's main businesses: construction, mining, and energy and transportation. Andrew Bonfield, Caterpillar's financial chief, said in an interview that while a rebound in home construction was boosting purchases for some machinery, spending cuts by local and state governments was weighing on road construction. "People in an uncertain time are just not necessarily sanctioning new projects," Mr. Bonfield said. Still, Caterpillar said it sees signs of a turnaround. Its order backlog increased in its fourth quarter compared with the previous three months and a year earlier as dealers ordered new machines ahead of the traditionally busy spring season. For the current first quarter Caterpillar said it expects stronger sales of construction equipment in particular. "Customers are starting to feel a bit more confident," Mr. Bonfield said.
The SMI closed down sharply Friday, falling 2.4 percent to 10,591 points as investors engaged in pre-weekend profit-taking across the board. Market participants pointed to ongoing uncertainty surrounding the coronavirus pandemic and the sluggish progress of vaccine campaigns. Swatch was the sole gainer on the SMI, rising 2.5 percent after positive analyst comments about the financials it had released Thursday. Even defensive heavyweights were not left unscathed by the profit-taking. Nestle slid 2.6 percent, Novartis 2.8 percent and Roche 3.1 percent. Novartis was unable to profit from news that it will provide production capacity to Biontech to manufacture its Covid-19 vaccine. Givaudan slumped 3.5 percent to bring up the rear of the index, despite posting good financials and a dividend increase. Financial stocks also tanked, although bond yields had risen. CS Group fell 2.0 percent, UBS 3.1 percent. Insurers Swiss Life, Swiss Re and Zurich slid by between 2.1 percent and 3.2 percent.
European stocks drop along with US equities as coronavirus concerns and a scrap between retail investors and hedge funds over shorted stocks weigh on market sentiment. The Stoxx Europe 600 declines 1.9%, the FTSE 100 falls 1.8%, the DAX slips 1.7% and the CAC-40 sheds 2.0%. "Fear is running through the equity markets again as some trading apps have relaxed restrictions on certain stocks that have experienced colossal volatility recently, like GameStop," CMC Markets analyst David Madden says. "There are concerns that we could see frenzied trading again by retail players in selected stocks and that could renew fears that some hedge funds might adopt a cut and run policy, hence why equity markets are lower across the board." The European Union's drug regulator recommended the use of AstraZeneca PLC's Covid-19 vaccine in people 18 and older, clearing the way for a shot that EU officials have considered critical in turning the tide of the pandemic in the region. But Friday's announcement, from the European Medicines Agency, came with a warning that the shot hasn't been tested enough in people over 55 to be certain the shot works in those age groups. And while it was welcome in a region grappling with high levels of infections, thousands of deaths a day and extensive lockdowns, it was tempered by the serious challenges AstraZeneca is encountering in producing the two-dose shot. Bombardier (TSX: BBD.B) confirmed today the closing of the previously announced sale of its Transportation business to Alstom. Total proceeds to the vendors after the deduction of debt-like items and transferred liabilities are $6.0 billion . After deducting la Caisse de dépôt et placement du Québec equity position of $2.5 billion, transaction costs, and including the impact from closing adjustments and obligations related to achieving a minimum cash balance at Bombardier Transportation at the end of 2020, Bombardier expects net proceeds of approximately $3.6 billion.
U.S. stocks fell sharply Friday in their worst week since October, reflecting concern over the lingering economic impact of the coronavirus and ripples from the trading frenzy that has swept Wall Street this month. It was the second time in three days that broad market indexes fell sharply, including some big daily drops in companies that have recently powered the market higher such as Tesla and Amazon.com. For the third straight day, the stocks at the center of a social media frenzy— led by GameStop and AMC Entertainment — did the opposite of the Dow industrials. On Friday, GameStop rose 68% and AMC jumped 54%. The Dow Jones Industrial Average fell 2%, or 620.74 points, to 29982.62, and the S&P 500 declined 1.9%, or 73.14 points, to 3714.24, a day after both gained roughly 1%. The tech-heavy Nasdaq Composite lost 2%, or 266.46 points, to 13070.69. Facebook Inc. said it would soon begin building and testing new controls to let marketers keep their ads away from topics they want to avoid. The plan comes as the company continues to follow up on promises that it made following last summer's temporary boycott by some advertisers over the way it has handled objectionable content on its platforms. Chevron Corp. posted its third consecutive quarterly loss Friday to close its worst year since 2016, as the global pandemic continues to weigh on the oil-and-gas industry and cloud hopes for renewed economic growth in 2021. Chevron is looking to turn the corner on one of the most painful years in modern history for oil-and-gas companies. For the fourth quarter, it posted $665 million in losses. For all of 2020, it lost $5.5 billion as the coronavirus sapped global demand for fossil fuels. Chevron reported nearly $3 billion in profits in 2019.
After the downturn at the end of the previous week and a subdued start to the new week and month, stock markets in East Asia and Australia rebounded in trading on Monday. Meanwhile, signals are coming from China that the economic recovery there is losing some steam, as the Caixin manufacturing purchasing managers' index fell slightly. In Tokyo, the Nikkei index recovered 1.3 per cent to 28,034 points after two sessions of losses.
U.S. Treasury yields dipped slightly in Asia, while the 10-year bond yield remained around the negative 0.501% level.
Dt. Bank rises the Diageo target to 4.000 (3.850) p - Buy
JPM rises the Sartorius target to 455 (390) EUR - Overweight
IR rises the Siemens Healthineers target to 47 (40) EUR - Hold
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