Research Market strategy
By Swissquote Analysts
Published on 08.03.2021
Morning news

Brent over 70 Dollars after Attack on Oil Facility

Topic of the day

On the oil market prices rise, Brent oil now costs over 70 dollars, after Saudi Arabia confirmed an attack on an oil facility in the east of the kingdom. Yemeni Huthi rebels claimed responsibility for the attacks, which were aimed at military targets as well as the plant belonging to energy giant Aramco. Oil on the futures market is rising sharply. While a barrel of Brent crude cost 63.50 dollars on Thursday afternoon, the current price is 70.75 dollars. In the previous week, the price was initially driven up by the confirmation of the Opec+ production cut, and now by confirmed reports of an attack on an oil facility in eastern Saudi Arabia. The Yemeni Huthi rebels claimed responsibility for the attacks on Twitter, which they said were aimed at military targets in the town of Damman near Dharhan as well as the plant of energy giant Aramco. On the stock exchanges, it is to be expected that the sector of European oil stocks will benefit from the rising prices and perform better than the overall market. On the other hand, rising oil prices will lead to an ongoing discussion about a further increase in inflation, which in turn is likely to have an impact on yields.

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Swiss stocks

At the end of the week, the Swiss stock market was caught between a significantly better-than-expected U.S. labor market report and further rising yields. In the end, the renewed rise in yields pushed the SMI sharply into the red. The index lost 1.3 percent to 10,608 points, closing at its low for the day. Among the 20 SMI stocks, there were 18 price losers and two price winners. 45.38 (previously: 43.97) million shares were traded. Among the individual stocks, shares from the technology sector were again under pressure. Logitech shares fell by 2.4 percent and AMS lost 0.7 percent. Technology stocks are sensitive to rising yields due to high leverage. With a mixed picture showed the index heavyweights. While Roche and Novartis were down 2.0 and 1.7 percent, respectively, Nestle was up 0.1 percent. Credit Suisse (-1.7%) liquidated the supply chain fund it operated with Greensill Capital. The priority now is to ensure a balance between liquidating the funds in a timely manner and preserving as much value as possible for investors, the bank said. Greensill Capital had previously run into trouble. UBS shares fell 0.7 percent. The bank had to make small changes to its preliminary profit figures.

International markets

Europe

European equity markets closed in the red on Friday as US and European government bond yields remained at high levels following the monthly US employment report. Higher than expected job creation in February in the US fuelled expectations of inflationary pressures in the coming months that could lead to tighter monetary conditions by central banks. The Stoxx Europe 600 index fell 0.8% to 408.7 points. In Paris, the CAC 40 and the SBF 120 dropped 0.8% and 0.9%, respectively. In Frankfurt, the DAX 30 fell 1% while the FTSE 100 in London fell 0.3%. The entire oil sector was supported Friday by the rise in crude oil prices, like Total (+1%), BP (+1.8% in London) and Shell (+1.7% in Amsterdam). CGG (+3.9%) is betting on a rebound of its results in 2021 after a year 2020 leaded by the health and economic crisis. In 2020, CGG posted a net loss of $438 million, compared with a loss of $61 million a year earlier. Dassault Aviation (-3%) forecasts an increase in its turnover in 2021, after having seen its results fall in 2020, penalized by the repercussions of the pandemic. While Oddo BHF's analysts emphasise that the 2020 results are better than expected, they describe the 2021 objectives as "mixed.

United States

The New York Stock Exchange finished up sharply on Friday at the end of a volatile session, ending a week of contrasts, torn between the improvement of the economy and fears of inflation and a rise in bond rates. The Dow Jones Industrial Average (DJIA) ended the week with a gain of 1.9% to 31,496.30 points. The broad S&P 500 index rose by 2% to 3,841 points. The Nasdaq Composite gained 1.6% to 12,920.1 points. With these increases, the Dow Jones and the S&P 500 indices gained 1.5% and 0.8% respectively over the week, but the Nasdaq Composite fell by 2%. The announcement by the Labor Department on Friday of the creation of 379,000 net jobs in February in the United States, well above the 210,000 new jobs expected by economists, has reinforced hopes for a recovery of the economy while the vaccination campaign against coronavirus is progressing in the country and the Senate adopted a recovery plan of 1,900 billion dollars. The Oracle share jumped by 6.6% to 69.93 dollars, supported by an increase in the recommendation of Barclays, which bets on the growth potential of the software publisher in cloud computing. The American real estate data provider CoStar (+5.3%) announced Thursday that it was withdrawing its bid for CoreLogic (-3.3%), citing rising interest rates to justify its withdrawal from the battle to acquire its competitor. The Gap share gained 7% as the clothing chain reported better than expected results in the last quarter and said it expected sales to accelerate in the second half of the year with the expected reopening of the economy.

Asia

The East Asian stock markets are trading lower on Monday, well below the early highs of the day. Tokyo's Nikkei index is down 0.5 per cent at 28,733 points, around 500 points below the day's high. In Seoul and Shanghai, the losses are similarly large, and in Hong Kong the index is down by as much as 1.2 per cent.

Bonds

Evolving to its highest level since February 2020, the yield on the 10-year US Treasury bond finished the week slightly higher at 1.595%, after briefly crossing the 1.6% threshold. The 30-year rate, for its part, eased slightly to 2.287% after returning this week to a peak since the beginning of 2020.

Analysis

Berenberg raises Alcon target to CHF 74 (70) - Buy
H&A raises Nfon target to EUR 30 (22) - Buy
Dt. Bank raises Dt. Lufthansa target to EUR 7.20 (7) – Sell

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