Research Market strategy
By Swissquote Analysts
Published on 04.11.2021
Morning news

Fed Dials Back Bond Purchases, Plots End to Stimulus by June

Topic of the day

The Federal Reserve approved plans to begin scaling back its bond-buying stimulus program this month and end it by June, a major step toward withdrawing its aggressive, pandemic-driven economic support amid a recent inflation surge. The Fed cut its short-term benchmark rate to near zero when the coronavirus pandemic hit the U.S. economy in March 2020. It held rates at that level on Wednesday. It also has been buying at least $120 billion a month in Treasury and mortgage securities - initially to stabilize financial markets and later to hold down longer-term interest rates. The Fed’s holdings of those securities have more than doubled since March 2020 to around $8 trillion. The Fed will reduce its bond purchases by $15 billion a month in November and by a further $15 billion in December, the central bank said Wednesday. Fed officials are reluctant to lift rates until after they have ended the bond purchases. Brisk demand for goods, disrupted supply chains, temporary shortages and a rebound in travel have pushed 12-month inflation to its highest readings in decades. Core inflation, which excludes volatile food and energy prices, rose 3.6% in September from a year earlier, according to the Fed’s preferred gauge. Meanwhile, the European Central Bank's Christine Lagarde said it was "very unlikely" conditions would be met by next year that would allow for an interest-rate hike.

Swiss stocks

The Swiss stock market closed on a friendly note on Wednesday, extending the upward trend to the third day in a row. The SMI gained 0.5 percent to 12,383 points. Among the 20 SMI stocks, there were 14 price gainers and six losers. A total of 38.2 (previously: 29.66) million shares were traded. ABB was at the top of the list with a gain of 2.2 percent. Geberit (-1.2%) turned down after initial premiums. The heavyweights Nestle (+1.5%), Roche (+0.3%) and Novartis (-0.5%) were mixed. Among the second-line stocks, Schindler (+2.4%) presented itself conspicuously. Stifel had upgraded the shares to "buy". The recent decline in the share price was exaggerated despite the negative headlines, according to analysts. Among others, Oerlikon (+3.5%) and Vontobel (-0.3%) also presented business figures.

International markets


European equity markets ended higher overall on Wednesday, with the Paris stock market setting a new all-time high. The Stoxx Europe 600 index closed up 0.3%. In Paris, the CAC 40 surpassed its record high set the previous day, ending up 0.3% at 6,950.65 points. The SBF 120 also gained 0.3% to 5,429.86 points. In Frankfurt, the DAX 40 nibbled 0.03% and the FTSE 100 in London gave up 0.4%. Worldine (+4.6%, at 52 euros) was the biggest riser on the CAC 40 after a positive opinion from JPMorgan Cazenove, which still recommends the share at "overweight". The intermediary lowered its target price from 91 to 73 euros. CGG shares rose 2.7% before the publication of the oilfield services group's annual results on Wednesday after the close. Verallia (-2.1%) has bought out the remaining stake in its capital held by the investment fund Apollo Global Management. This transaction, involving 3.7 million shares, was carried out at a price of 30.50 euros per share, a discount of 5% compared to the closing price of Verallia on Tuesday. Lufthansa (+7% in Frankfurt) sharply narrowed its third-quarter net loss and posted a positive adjusted operating profit for the first time since the Covid-19 pandemic began, thanks to a rebound in bookings. German automaker BMW (+1.5% in Frankfurt) confirmed its full-year 2021 guidance after seeing its profit jump in the third quarter thanks to favorable price and product mixes. Raiffeisen posted strong 3Q results that should drive upgrades to consensus forecasts on earnings, Citi analysts said. The Austrian bank's 3Q net profit almost doubled on year, beating a company-compiled consensus by 35%. The result was driven by lower provisions and better core revenue, Citi said. Raiffeisen posted strong net interest income--a key metric for retail banks--thanks to higher volumes, mainly in Russia, Romania and the Czech Republic, rate increases in Russia, the Czech Republic and Hungary, and favorable foreign-exchange rates, Citi said. Shares rose 5.3%.

United States

Major U.S. stock indexes hit concurrent records for a fourth consecutive session after the Federal Reserve approved plans to start scaling back its bond-buying stimulus program. The S&P 500 hit session highs after Chairman Jerome Powell’s postmeeting press conference. The broad stock-market gauge rose 29.92 points, or 0.6%, to 4660.57. The Dow Jones Industrial Average added 104.95 points, or 0.3%, to 36157.58. The technology-heavy Nasdaq Composite Index gained 161.98 points, or 1%, to 15811.58, rising for an eighth consecutive session. Though the broader market was calm, companies popular with traders on Reddit’s WallStreetBets recorded big swings while options activity heated up. Bed Bath & Beyond surged 15%. The company, which on Tuesday announced a partnership with grocery chain Kroger, was among the most discussed companies on the forum, according to sites that track mentions of ticker symbols. Meanwhile, Activision Blizzard fell $10.92, or 14%, to $66.75. after the videogame maker said the release of two of its titles would be delayed. Ride-hailing firm Lyft jumped 8.2% after saying revenue climbed in the latest quarter as demand for its services returned. Avis Budget Group fell 17% after more than doubling in the prior session. The company reported better-than-expected profit and announced plans to add more electric vehicles to its rental fleet.


The stock markets in East Asia close with smaller gains on Thursday. The most significant increase takes place in Tokyo, where the Nikkei-225 increases by 0.8 percent. Shanghai (+0.6%) and Hong Kong (+0.3%) also report profits. In Seoul, Samsung Electronics gains 0.4 percent and shares of Apple supplier LG Innotek are up by 2.1 percent. In Hong Kong, Tencent and Alibaba advance 1.8 and 2.1 percent, respectively. Toyota Motor rises 0.4 percent. The Kospi in Seoul records a plus of 0.2 percent.


Long-end Treasury yields climbed to their highest levels in more than week after Federal Reserve officials announced their intent to begin winding down bond purchases and to be patient about future policy interest rate hikes. The Treasury yield curve flattened as the differential between 5- and 30-year yields narrowed, in what can be a harbinger of a slowdown in economic growth. The yield on the 10-year Treasury note climbed 3.1 basis points to 1.577%, compared with 1.546% at 3 p.m. Eastern on Tuesday.


Deutsche Bank lowers target AMS Osram to CHF 18 (20) - Hold
Jefferies raises Adecco to Hold (Underperform) - Target 47 CHF
Citi increases Ströer target to EUR 80 (71) - Neutral

Produced by MBI Martin Brückner Infosource GmbH & Co. KG on behalf of Swissquote. All news is acquired with journalistic accuracy. No liability is assumed for delays or errors.