Research Market strategy
By Swissquote Analysts
Published on 07.09.2022
Morning news

Illumina’s Deal to Buy Cancer-Test Developer Is Blocked by EU

Topic of the day

The European Union blocked Illumina Inc.’s acquisition of cancer-test developer Grail Inc., putting a $7.1 billion merger into jeopardy just days after a U.S. administrative law judge allowed it to go forward. The bloc’s antitrust regulator said the purchase would stifle innovation and reduce choice in an emerging market for early cancer-detection blood tests. The decision could prompt Illumina, a maker of gene-sequencing machines, to shed Grail just over a year after scooping it up. The antitrust regulator said Illumina didn’t offer sufficient remedies to address its concerns about the deal, and that it would issue a separate decision ordering Illumina and Grail to dissolve their transaction. “It is vital to preserve competition between early cancer-detection-test developers at this critical stage of development,” said Margrethe Vestager, the EU’s competition czar. The action is a significant intervention by the European competition authority in a case that involves a U.S. company – Grail – with no current revenue inside the bloc. It demonstrates the potential for the EU to influence business deals worldwide and occurs as regulators in Europe, the U.S. and the U.K. are all taking a more aggressive approach to mergers and acquisitions.

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Swiss stocks

Despite suffering a mild setback in the final hour, the Switzerland stock market ended on a slightly positive note on Tuesday. Although the market spent much of the day's session in positive territory, the mood remained cautious amid lingering concerns about slowing global growth and looming interest rate hikes. The benchmark SMI ended with a gain of 14.64 points or 0.14% at 10,834.18, after scaling a low of 10,780.12 and a high of 10,930.48 intraday. Holcim gained 1.85%, Roche Holding climbed 1.36%, ABB gained 1.16% and SGS ended higher by a little over 1%. Novartis drifted down 0.81%, while Nestle and Logitech both shed about 0.5%. Zurich Insurance Group, Lonza Group and UBS Group also ended weak. In the Swiss Mid Price Index, Barry Callebaut, Tecan Group, Schindler Ps, Adecco, Schindler Holding and Swatch Group gained 0.9 to 1.2%. Bachem Holding ended more than 4% down. Dufry drifted down 3.7%, while Kuehne & Nagel shed about 2%. Sonova, VAT Group and AMS also ended notably lower.

International markets

Europe

European stock markets closed higher but far from their highs on Tuesday. Investors remain concerned about the many uncertainties associated with the worsening energy crisis and the European Central Bank's tightening of monetary policy. The Stoxx Europe 600 index gained 0.2% to 414.4 points. In Paris, the CAC 40 and the SBF 120 also rose by 0.2%. The DAX 40 in Frankfurt gained 0.9%, while the FTSE 100 in London rose 0.2%. Deutsche Lufthansa AG will continue negotiations with its pilot union to avert a strike that would cause massive disruptions to flights, the German airline said Tuesday. The pilot union, Vereinigung Cockpit, called for a strike for Sept. 7 and 8, plus another one until Sept. 9 for Lufthansa Cargo, after it said that the airline didn’t submit a new offer in response to demands. Lufthansa said that flight cancellations for Wednesday and Thursday must be decided today at 12 p.m. CET to be able to schedule aircraft and crews, and to give some lead time to affected passengers.

United States

U.S. stock indexes fell, driven by expectations for tighter Federal Reserve policy and an energy crisis in Europe. The S&P 500 declined 0.4% after the long Labor Day weekend. The Dow Jones Industrial Average slid 0.6%, while the tech-focused Nasdaq Composite lost 0.7%. The major indexes all have fallen for three consecutive weeks. Within the S&P 500, seven out of 11 sectors were in the red during afternoon trading, with industrials, healthcare, real estate and utilities gaining. "It's going to be really focused on, 'OK, just how bad does it become, given how restrictive the Fed has been and continues to be?'" said Tim Chubb, chief investment officer at Girard Wealth Advisory.

Asia

Japanese stocks declined, dragged by falls in electronics and energy stocks, as uncertainty continued about the Fed's pace of tightening and costs of borrowing. Some financial stocks were higher, following sharp gains in U.S. Treasury yields overnight. The 10-year Japanese government bond yield was up 1.0 basis point at 0.245%. Investors are focusing on movements of bond yields and the yen. The Nikkei Stock Average was down 0.7% at 27441.49. South Korea's benchmark Kospi was down 1.0% at 2386.83, tracking a weak performance in major U.S. equities. Investors are likely watching the U.S. July trade balance figures due later in the global day, UOB analysts said in a note. Hong Kong's benchmark Hang Seng Index fell 1.4% to 18930.65, amid bearish sentiment for Asian stocks. The weak lead from Wall Street stocks, and the decline in the Nasdaq Golden Dragon China Index should drive some paring of gains in Chinese equities, said IG market strategist Jun Rong Yeap in a note. Chinese shares fell broadly in early trade, reversing gains from the previous session, amid concerns about tighter restrictions to fight Covid-19 outbreaks across the country. Declines were broad-based, with property, coal miners and liquor makers among the sectors being sold off. The Shanghai Composite Index fell 0.2% to 3236.56, the Shenzhen Composite Index gave up 0.1% and the ChiNext Price Index was flat.

Bonds

Treasury yields added to gains in Asia, after Tuesday's U.S. economic data undermined recession forecasts and supported expectations of lasting monetary tightening. On Tuesday, 2-year and 10-year yields posted their largest one-day gains in a month following a small rise in the U.S. ISM services index. Capital Economics said the data struck "a further blow against the idea the economy is close to recession, with a weighted average of the two ISM surveys consistent with GDP growth of around 3% annualised."

Analysis

UBS lowers Logitech target to CHF 68 (70) – Buy

UBS lowers Flutter target to 13,800 (15,000) p – Buy

Bank of America lowers Hellofresh target to EUR 58 (70) – Buy

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