Research Market strategy
By Swissquote Analysts
Published on 05.07.2021
Morning news

SoftBank-Backed Fortress Investment Strikes $8.7 Billion Deal to Buy Morrisons U.K. Grocery Chain

Topic of the day

A group of investors led by SoftBank Group Corp.’s Fortress Investment Group LLC agreed Saturday to acquire U.K. grocery chain WM Morrison Supermarkets PLC for more than $8.7 billion, a bet that the retailer can thrive in a hypercompetitive industry grappling with the shift to online commerce. That sets up a potential bidding war for the U.K.’s fourth-largest grocery-chain operator after it rejected a £5.5 billion takeover proposal last month from U.S. private-equity firm Clayton, Dubilier & Rice. The Fortress-led deal is worth roughly 42% more than Morrisons’s trading price in mid-June, before Clayton, Dubilier & Rice’s interest in the grocery chain became public. Based in northern England, Morrisons operates 497 supermarkets along with a network of cafes, gas stations and convenience-store outlets. The retailer also has a wholesale operation that includes supplying groceries to Inc.’s Prime Now and other online delivery services available in Britain. Morrisons eked out a small year-over-year revenue gain of 0.4% to £17.6 billion while operating profit sunk 51% to £254 million over the same period. Still, the Fortress group’s bet on Morrisons is risky. The U.K. is considered one of the world’s most competitive grocery store markets, where Morrisons competes with three bigger operators and two established German discounters Aldi and Lidl. Acquired by Japan’s SoftBank in 2017, Fortress has about $53 billion in assets under management, investing in areas such as private equity, credit, and real estate.

Swiss stocks

The Swiss stock market went into the weekend with small losses. The SMI lost 0.1 percent to 11,965 points. Among the 20 SMI stocks, there were 13 price losers and seven price winners. 26.96 (previously: 26.03) million shares were traded. The eagerly awaited U.S. labor market data were mixed. Although more jobs were created in June than expected, the unemployment rate was surprisingly high. It was received with relief that hourly wages had risen only moderately and in line with expectations. Overall, the data did not give rise to any pressure on the U.S. Federal Reserve to tighten the monetary reins, market participants judged. This conclusion was received positively on the stock market, but depressed yields on the bond market and subsequently also shares in the financial sector. Banks led the losers across Europe in the wake of falling interest rates. Low interest rates make it difficult for financial institutions to engage in traditional lending business. In Switzerland, the share price of UBS fell 0.8 percent. Credit Suisse (-1.8%) did not benefit from the fact that the Qatar Investment Authority increased its stake in the bank. The insurance sector also suffers from low interest rates, which reduce the investment results of insurance companies. While Swiss Life (little changed) and Swiss Re (-0.1%) held up relatively well, Zurich lost 1.2 percent. ABB stood out with a gain of 1.2 percent. According to information from the trade, analysts at Kepler recommended the stock as a buy.

International markets


European equity markets closed slightly higher on Friday after the release of better-than-expected U.S. job creation numbers in May. The Stoxx Europe 600 index rose 0.3% to 456.8 points. In Paris, the CAC 40 and the SBF 120 were flat. In Frankfurt, the DAX 30 gained 0.3%, while in London, the FTSE 100 finished almost flat. The major European stock indexes have had a turbulent week, as the region has been shaken by mounting concerns over the more infectious delta variant of coronavirus, which has led to the imposition of new travel restrictions across the region. New restrictions include those from Spain, Portugal, and Malta on travelers from the U.K., where the variant is prevalent. The share-price moves of Neles and Valmet diverged significantly after the two Finnish industrial firms said that they have agreed to merge. Shares in Neles, which offers flow-control products such as valves used in the oil-and-gas-refinement process, rose near 7%, while shares in Valmet - which provides technology and automation systems to industry - dropped 6%. Shares of EQT added more than 2% in Swedish trading. The Wall Street Journal reported that the private-equity firm and Goldman Sachs Group's investment arm are in advanced talks to buy contract-research organization Parexel International for nearly $9 billion including debt. Dutch semiconductor companies added buoyancy to European stocks, with ASML stock rising 1% and shares in ASM rising 1.5%. ASML, which supplies critical equipment to chip makers, got a boost as Micron Technology said it would begin using its machines from 2024. Fellow industry supplier ASM announced that orders in the second quarter of the year were much higher than previously guided, expected to exceed EUR500 million ($591 million). Shares in European airlines also rose, with International Airlines Group - the owner of British Airways - Air France-KLM, Lufthansa, Ryanair, Wizz Air WIZZ, and easyJet higher.

United States

Major U.S. stock indexes climbed Friday, notching a trio of fresh highs as an early summer rally picked up steam. After the monthly employment report confirmed that the U.S. economy continued to recover at a healthy clip, the S&P 500 added 32.40 points, or 0.8%, to 4352.34, setting a seventh consecutive record, its longest watermark streak since mid-1997. Technology stocks led the gains, pushing the Nasdaq up 116.95 points, or 0.8%, to 14639.33, also setting a record. As Friday’s upswing broadened out, the Dow joined the rally, advancing 152.82 points, or 0.4%, to 34786.35, hitting its first closing high since early May. The action wrapped up another solid week of gains. The Nasdaq rose 1.9% over the last five trading days, posting its sixth weekly advance out of the last seven. The S&P 500’s historic run added 1.7% this week, and the Dow gained 1%. Friday’s jobs report added to the good news cheering on markets. Employers added 850,000 jobs last month, topping expectations and showing a pickup in labor market activity after it appeared to somewhat cool in previous months. For investors, the gains were further evidence the economic recovery remains intact and doesn’t currently warrant a tightening of fiscal stimulus, so far fulfilling predictions by Federal Reserve Chairman Jerome Powell. Among the gainers, Alphabet shares climbed $56.26, or 2.3%, to $2,505.15, while Apple rose $2.69, or 2%, to $139.96. Meanwhile, energy and financial stocks in the broad index lagged 0.2% each. Meme stocks also traded lower, with AMC Entertainment Holdings slipping $2.26, or 4.2%, to $51.96. Also shares of ride-hailing giant Didi Global fell 87 cents, or 5.3%, to $15.53 after reports that it was blocked from adding new users as China’s internet regulator reviews its cybersecurity.


The East Asian stock markets show no consistent direction in the course of trading on Monday. The most action in Tokyo and Hong Kong: In Tokyo, the Nikkei-225 falls by 0.6 percent to 28,615 points and in Hong Kong, the HSI loses 0.5 percent. In the other places, however, the indices gain slightly. Alibaba, Meituan and Tencent lose between 2.5 and 5.5 percent.


U.S. government bonds held onto overnight gains Friday after Labor Department data showed the unemployment rate rising despite the labor market adding the most jobs in 10 months. The yield on the benchmark 10-year Treasury note finished Friday’s session at 1.434%, according to Tradeweb, down from 1.479% at Thursday’s close. The 30-year bond yield fell to 2.050% from 2.086% Thursday. However, only a shortened session was held on the bond market due to the upcoming long weekend - with correspondingly thin turnover.


Equita raises Unicredit target to EUR 11.50 (10.60) - Hold
Raiffeisen increases Voestalpine target to EUR 38.50 (32.50) - Hold
JPM raises Adidas target to EUR 320 (285) - Neutral

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