Research Market strategy
By Swissquote Analysts
Published on 15.07.2021
Morning news

Wells Fargo Posts Profit as Economy Grows

Topic of the day

Wells Fargo & Co. said Wednesday that it earned $6.04 billion in the second quarter, its fortunes reviving along with the U.S. economy. The San Francisco-based lender's profit is a reversal from a year earlier, when it posted its first quarterly loss in a decade. The bank posted per-share earnings of $1.38, beating the 98 cents predicted by analysts polled by FactSet. During the year-ago period, Wells Fargo was stowing away money to prepare for large amounts of its loans to go bad. But those defaults have so far failed to materialize, and lately banks have been releasing their reserves. With the economic outlook brightening, Wells Fargo said that it released $1.64 billion of that stockpile, boosting its bottom line. Those releases also lifted profits at JPMorgan Chase & Co. and Bank of America Corp. "While we expect charge-offs will increase at some point, we continue to see strong trends in all of our businesses," said Chief Executive Charles Scharf in a statement. The stock has climbed 43% this year, the biggest rise among the six largest U.S. banks. Its stock declined roughly the same amount last year.

Swiss stocks

The Swiss stock market declined moderately on Wednesday. Overall, there was no new momentum, even though the environment remains favorable with low interest rates and a U.S. Federal Reserve that, according to its chief Jerome Powell, continues to assume that rising inflation is temporary in nature, which is why a tightening of monetary policy would be premature. The SMI lost 0.2 percent to 12,043 points. Among the 20 stocks in the SMI, there were 16 price losses and four price gains. 25.77 (Tuesday: 27.46) million shares were traded. As on the previous day, Swatch shares were the winners of the day, but this time with a significantly larger gain of 2.8%. After Monday night's good sales figures, further positive comments from analysts ensured buying. In the wake of Swatch, Richemont (+1.9%) was second on the day's list of top stocks. Roche (-0.2%), meanwhile, failed to benefit from the fact that Jefferies now recommends buying the stock.

International markets


European stock indices ended Wednesday's session almost flat after Federal Reserve (Fed) Chairman Jerome Powell's remarks on inflation. According to the text of his speech to Congress on Wednesday, the official believes that the central bank would act if necessary to curb inflation. But the central banker expects price pressures to ease later this year. The Stoxx Europe 600 index lost 0.09% to 460.6 points. In Paris, the CAC 40 ended unchanged and the SBF 120 was down 0.06%, in thin trading as the day was a public holiday in France. In Frankfurt, the DAX 30 ended flat, while in London, the FTSE 100 lost 0.5%.Annual inflation in the U.K. accelerated in June, further evidence that price pressures are building world-wide as the global economy edges out of the pandemic. Consumer prices rose 2.5% on the year in June, the fastest rate of growth since summer 2018, the Office for National Statistics said Wednesday. Hugo Boss AG’s revenue and earnings recovered in the second quarter, according to preliminary figures, leading the German premium-apparel company to guide for a swing to an operating profit for the full year. Sales more than doubled on year at constant currency to 629 million euros ($740.7 million), slightly below the same period of 2019, Hugo Boss said late Tuesday.

United States

U.S. stock indexes closed near record territory after Powell kicked off two days of testimony in which a sharp rise in inflation has been a key focus. The Fed chief said the labor market, although improving, has a long way to go toward recovering from the pandemic, despite recent record high job openings. He stressed that inflation will moderate and that the central bank plans to maintain its current monetary policies. All three major indexes were higher in mid-afternoon trading, after wobbling between small gains and losses earlier in the session. As of the 4 p.m. close of trading in New York, the S&P 500 was up 0.1%. The Dow Jones Industrial Average gained 0.1%, while the Nasdaq Composite fell 0.2%.Citigroup Inc. said Wednesday its second-quarter profit soared thanks to an increasingly bright view of consumer health. The bank posted a profit of $6.19 billion, or $2.85 per share, compared with $1.06 billion, or $0.38 per share a year earlier. That topped the $1.97 per share that analysts had expected, according to FactSet. Revenue fell 12% to $17.47 billion. That still topped analysts’ expectations of $17.22 billion. A year ago, Citigroup and other big banks were socking away funds to prepare for huge losses on loans to consumers and businesses. Bank of America Corp. said the economic rebound helped to more than double its profit, but low rates weighed on its revenue. The nation’s second-largest bank by assets posted earnings Wednesday of $9.22 billion in the second quarter, up from $3.53 billion a year earlier. The bank earned $1.03 per share, beating the 77 cents forecast by analysts polled by FactSet.


The stock markets in East Asia and Australia show a mixed trend on Thursday. Shanghai and Hong Kong are showing price increases after the latest Chinese economic data. The gross domestic product (GDP) increased by 7.9 per cent in the second quarter and thus met the economists' forecast. However, a plus of 18.3 per cent had been recorded in the first quarter. In contrast, Chinese industrial production for June was somewhat better.


Yields on the US bond market fell significantly – in the ten-year range by 8 basis points to 1.34 per cent. This completely made up for the rise that had caused uncertainty on the previous day.


IR rises the Porsche target to 93 (90) EUR – Hold
UBS lowers the Fuchs Petrolub target to 39 (41) EUR – Sell
UBS rises the Swatch target to 318 (310) CHF – Neutral

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