Square Acquires Payment Firm for $29 Billion
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Square Inc. has agreed to acquire Afterpay Ltd. in an all-stock deal worth around $29 billion, illustrating how financial technology companies are seeking scale to challenge banks for a bigger slice of the payments industry. Square said a key attraction of the deal was a growing wariness toward traditional credit among younger consumers, a group particularly hard hit by the Covid-19 pandemic, as lockdowns crushed many hospitality and casual jobs. Afterpay's technology allows users to pay for goods in four, interest-free installments while receiving the goods immediately. Customers pay a fee only if they miss an automated payment, a transgression that also locks their account until the balance is repaid. Australia-based Afterpay, which has yet to turn a profit, says this limits bad debts, particularly in a downturn when job security is shaky and household finances are stretched. Most of Afterpay's revenue comes from retail merchants, which pay a percentage of the value of each order placed by customers, plus a fixed fee.
The stock market in Switzerland climbed to new highs on Monday. On the first day of August, which historically tends to be rather weak, the SMI closed at an all-time high. It was supported by strong reports from Asia and the USA. The SMI gained 0.4 per cent to 12,171 points. Among the 20 SMI stocks, there were 17 price winners and three price losers. 31.3 (previously: 36.61) million shares were traded. Financial stocks were among the favourites after having been sold off recently. Credit Suisse gained 2.5 per cent and UBS 1 per cent. Insurers were also sought after. The Chinese government's pro-business turn improved sentiment for luxury goods stocks Richemont (+1.8 per cent) and Swatch (+1 per cent). Pharmaceutical stocks, on the other hand, were less in demand. Novartis fell 0.1 per cent, while Roche gained 0.4 per cent.
Europe's major equity markets closed in the green on Monday, taking advantage of lower volumes in the first session of August to continue their hunt for records. The rise was fueled by strong indicators in the European manufacturing sector and progress in the US towards a new infrastructure plan. The Stoxx Europe 600 index gained 0.6% to 464.5 points. In Paris, the CAC 40 and SBF 120 gained 1% and 0.9%, respectively. In Frankfurt, the DAX 30 rose 0.2% and the FTSE 100 in London gained 0.7%. Retail sales in Germany increased in June beating forecasts thanks to the easing of coronavirus-related lockdown restrictions. Retail sales increased 4.2% on month in June in calendar and seasonally-adjusted terms, data from the country’s statistics agency Destatis showed Monday. AXA SA said Monday that net profit and revenue increased in the first half thanks to growth in all business lines, particularly improved property and casualty claims and a strong underwriting result at AXA XL, the company’s property and casualty and specialty risk division. The French insurance company said net profit rose to 4 billion euros ($4.75 billion) from EUR1.43 billion in the first half of 2020. Underlying earnings for the period climbed to EUR3.64 billion from EUR1.89 billion. Revenue increased to EUR53.87 billion from EUR52.39 billion. Shares in Meggitt PLC rose on Monday after the company said that it has agreed to a 6.3 billion pounds ($8.76 billion) takeover by Parker Hannifin Corp. , a deal that is expected to double the size of Parker’s Aerospace Systems segment. Shares in Meggitt at 0820 GMT were up 273.70 pence, or 58%, at 742 pence. Parker Hannifin said that Meggitt is well aligned with its global business system--The Win Strategy--and that it believed the acquisition wouldn’t just be strategically and culturally compelling, but that it would also enhance the combined group’s future prospects within global aerospace and defense industries.
The S&P 500 gave up its early gains and slipped to start August as investors weighed a strong earnings season with growing uncertainty about the Delta variant and economic outlook. The S&P 500 retreated 0.2% and the Dow Jones Industrial Average lost 0.3%. The tech-heavy Nasdaq Composite gained 0.1%. Earnings and economic data have led investors to keep piling into stocks, putting major indexes within striking distance of records. Still, some are cautious that the highly contagious Delta strain of coronavirus, a prolonged spell of inflation and China's efforts to rein in tech firms could lead to bouts of volatility. Foot Locker Inc. is buying two smaller retailers for a total of approximately $1.1 billion in separate cash deals, as the company looks to expand its reach beyond U.S. shopping malls. The New York-based company Monday announced the acquisitions of athletic retailer WSS for $750 million and Atmos, a Japan-based streetwear and sneaker shop, for $360 million. The Wall Street Journal earlier reported Foot Locker was close to making both deals. The acquisition of Los Angeles-based WSS, which generated $425 million in revenue in 2020, gives Foot Locker access to a large Latino customer base, an important and fast-growing demographic, Foot Locker executives said. Carnival added 1.5% premarket after the cruisen operator said over the weekend that its Princess Cruises had completed. its first voyage following an extended pause in operations.
Economic concerns dominate the stock markets in East Asia and Australia on Tuesday. Uncertainty prevails over whether China could follow up its recent regulatory interventions against the technology and education sectors with further measures against other industries. In Tokyo, the Nikkei 225 index lost 0.8 per cent. The yen, which has risen again against the US dollar, is also weighing on the index. The Japanese currency is considered a safe haven in times of crisis.
The Treasury rally picked up speed, sending the 10-year yield as low as 1.146%, its lowest level since February, ahead of July employment report coming up Friday and as the Delta variant raises the prospect of new sanitary restrictions for business around the globe. The yield is now off the day's low, trading at 1.162%. Both the Fed and the ECB have pledged to keep an easy monetary policy for now, busting demand for government debt.
Citi rises Nestle target to 130 (114) CHF – Buy
CS rises Puma target to 102 (95) EUR – Neutral
IR lowers CS target to 9,50 (10) CHF – Hold
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