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By Swissquote Analysts
Published on 17.05.2022
Morning news

McDonald's to Exit From Russia After Three Decades

Topic of the day

McDonald’s shares slipped $1, or 0.4%, to $244.04 after the company said it would quit Russia and sell its business there, ending more than three decades in the country over its invasion of Ukraine. In deciding to sell up, the fast-food giant joins a raft of Western companies, from auto makers to brewers, in exiting Russia having initially opted to pause its operations in the country. McDonald's had in March said it would temporarily close its 847 restaurants in Russia while continuing to pay the 62,000 people it employs there. Since then, pressure has mounted on Western companies -- particularly from the Ukrainian government -- to pull the plug on their Russian operations. Moscow has also pressured companies, threatening legislation to nationalize assets and compel executives to resist Western sanctions. On Monday, McDonald's said that continued ownership of its business in Russia was no longer tenable nor consistent with its values, as well as posing practical and commercial challenges. McDonald's said it would now pursue the sale of its entire portfolio of restaurants in Russia to a local buyer. In connection with the exit, McDonald's said it expects to record an accounting charge of between $1.2 billion and $1.4 billion, and recognize a significant foreign currency translation loss. Russia and Ukraine accounted for around 9% of McDonald's revenue last year, given the high percentage of company-owned restaurants in those markets. McDonald's owns around 100 restaurants in Ukraine that remain closed. The decision from McDonald's came the same day another big Western company, French auto maker Renault SA, reached a deal to cede its 68% stake in Russia's biggest car maker, AvtoVAZ, to a state-backed entity. Unlike McDonald's, though, Renault has kept an option to take back some of its assets in a few years, a potentially valuable hedge on the Russian market stabilizing in the medium term.

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Swiss stocks

The stock market in Switzerland continued its positive trend from Friday at the beginning of the week. The SMI improved by 0.2 per cent to 11,672 points. Among the 20 SMI stocks, there were 14 price losers and six price winners. 34.57 (previously: 34.25) million shares were traded. The list of winners was headed by the defensive index heavyweights Novartis (+1.4%) and Roche (+1.1%). Nestle shares went up by 0.6 per cent. In contrast, the shares of cement manufacturer Holcim lost 0.8 per cent. Analysts at UBS rated the exit in India as strategically relevant for the company. The sale of participations for a total of 6.4 billion Swiss francs had been expected. Berenberg took a critical view of Holcim's change in strategy with its departure from India.

International markets


European stocks rebopunded from opening losses Monday despite mounting concerns about rising inflation and interest rates. The Stoxx Europe 600 index ended almost flat at 433.7 points. In Paris, the CAC 40 and SBF 120 indexes were down 0.2 percent each. In Frankfurt, the DAX 40 lost 0.5% while the FTSE 100 in London gained 0.6%. The European Commission on Monday lowered its growth forecast for the euro zone, expecting gross domestic product to rise by 2.7% in 2022 instead of the 4% initially forecast. The inflation forecast for the current year was raised to 6.1% from 3.5%. Biotech company Valneva (-19.1%) received a notice of intent from the European Commission to terminate the supply agreement for its Covid-19 vaccine, VLA2001. Retailer Casino (+4.8%) confirmed that it has launched a process to sell GreenYellow, its subsidiary specialising in renewable energy production. Tyre manufacturer Michelin (+0.4%) will divide its share nominal value by four from 16 June. As a result, the maximum unit purchase price under the group's share buyback programme will be reduced from €220 to €55 per share, the company added. Emirates Telecommunications acquired a 9.8% stake in UK telecoms operator Vodafone (up 1.9% in London), worth £3.26 billion (€3.8 billion) on the stock exchange. Irish airline Ryanair (-0.2% in Dublin) is hoping for a return to profitability in its 2022-2023 financial year, after reducing its net loss in 2021-2022. In the year to 31 March 2022, the low-cost airline's net loss was €240.8m, compared with a net loss of €1.01bn in the previous year.

United States

U.S. stocks finished mostly lower Monday, extending the market’s recent selloff. The S&P 500 fell 15.88 points, or 0.4%, to 4008.01 and the technology-heavy Nasdaq Composite Index dropped 142.21 points, or 1.2%, to 11662.79. The Dow Jones Industrial Average, however, rose 26.76 points, or 0.1%, to 32223.42. Even after rallying Friday, the S&P 500 has dropped for six consecutive weeks, its longest weekly losing streak since June 2011. The index is down 16% this year. Investors, worried that the Federal Reserve has been too late to spot the risks from soaring inflation, fear the central bank will move too aggressively to fight it, a mistake that could tip the economy into a recession. The resulting selloff, which has been compounded by the war in Ukraine and Covid-19 lockdowns in China, has been broad, affecting most assets from cryptocurrencies and stocks to government bonds, leaving investors unsure of where to seek safety. Among Monday’s biggest decliners were shares of travel and casino companies. Expedia Group, Caesars Entertainment and Penn National Gaming all dropped 5% or more. The consumer discretionary and technology sectors led the index lower. Among individual stocks, Twitter shares fell $3.33, or 8.2%, to $37.39 on Monday after Elon Musk on Saturday said the company’s legal team accused him of violating a nondisclosure agreement. Mr. Musk Friday said that his $44 billion acquisition of the social-media company was “on hold,” sending the company’s shares down nearly 10%. Spirit Airlines jumped $2.29, or 13.5%, to $19.27 after The Wall Street Journal reported that JetBlue Airways plans to launch a hostile takeover attempt of the discount carrier. JetBlue shares lost 61 cents, or 6.1%, to $9.45.


In Asia, major indexes broadly closed with gains. The HSI in Hong Kong increased by more than 2 per cent, with tech stocks leading the upward movement with a gain of more than 4 per cent. Shanghai, on the other hand, is up only 0.3 per cent, and neighbouring stock markets display minor gains. Tokyo's Nikkei index advanced by 0.3 per cent to 26,632 points. Confidence - not only on the Chinese stock exchanges - is being generated by the fact that in Shanghai, after the lockdowns to contain the Corona pandemic, the restrictions will gradually be lifted again from 1 June and life is expected to return to normal. Among individual stocks, the share price of beverage maker Asahi Group Holdings is down 11 per cent in Tokyo after its first-quarter net profit plunged 87 per cent.


Long-dated U.S. government debt yields were little changed to lower Monday as weak factory data in the U.S. and an unexpectedly big drop in retail sales in China reinforced concerns about a global slowdown. The 10-year Treasury note was yielding 2.890%, down 4 basis points. The two-year yield remained virtually stable at 2.590%.


Jefferies increases target SMA Solar to EUR 35 (33) - Underperf.

Berenberg lifts Vitesco target to EUR 48 (42) - Hold

Citi lowers target Credit Suisse to CHF 8.00 (9.40) - Buy

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