By Swissquote Analysts
EU authorizes Credit Suisse takeover by UBS
Topic of the day
The European Commission announced on Thursday that it was unconditionally clearing the acquisition of Credit Suisse (-0.9% in Zurich) by UBS (-1%), a deal orchestrated by the Swiss authorities in March to quell severe turbulence in the international banking sector. Following its investigation, the Commission concluded that the merger would not give rise to competition concerns in the markets it examined within the European Economic Area. The merged entity "will continue to face significant competitive pressure from a wide range of competitors in all these markets, including a number of large global banks as well as reliable specialist providers and local players", the Commission specified in a press release. In March, Swiss bank UBS agreed to take over its compatriot Credit Suisse, which had been weakened by a series of scandals and massive withdrawals of funds by its clients. UBS was pressured into the deal by the Swiss authorities and international regulators to stem a dangerous loss of confidence in the global banking system following the collapse of several regional banks in the United States. According to Finance Minister Karin Keller-Sutter, the Swiss Confederation has so far collected just over CHF 100 million from Credit Suisse windfall premiums. This figure stood at 80 million at the end of April.
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The Swiss stock market closed slightly lower on Thursday. The SMI lost 0.5 per cent to 11,325 points. Among the 20 SMI stocks, there were 14 price losers and six price winners. 26.03 (previously: 25.59) million shares were traded. The SMI was negatively affected by heavyweight Novartis (-2.3%). Nestle (-0.8%) and Roche (-0.5%) were also sold. Technology stocks defied the negative trend after US chipmaker Nvidia presented strong figures and gave an optimistic outlook. In Switzerland, Logitech, among others, rose 1.1 per cent at the same time as Temenos climbed 2.8 per cent. AMS-Osram added 0.4 per cent.
European stocks struggled on Thursday as U.S. debt-ceiling jitters continued to weigh on market sentiment and after Germany's first-quarter GDP got surprisingly revised down, and the country entered a technical recession. The Stoxx Europe 600 index fell by 0.3% to 456.2 points. In Paris, the CAC 40 and SBF 120 were down by 0.3% and 0.4% respectively. The DAX 40 in Frankfurt lost 0.3%, and the FTSE 100 in London gave up 0.7%. Technology stocks were firmly positioned in the market, with the European Stoxx technology index rising 1.7 per cent after a very strong interim report from Nvidia. Nvidia is seen as the main winner of the AI boom, since the chip company's graphics processors provide the extremely high computing power needed for AI applications. In Europe, ASMI rose by 8.6 per cent and ASML by almost 5 per cent, BE Semiconductor climbed by 7.6 per cent. Generali closed 0.5 per cent up after first quarter figures. Shares in salmon producers Salmar (+10.9 per cent) and Mowi (+6.3 per cent) edged higher in Norway. According to a market participant, the impetus was provided by the fact that the Norwegian parliament had agreed on a compromise according to which a resource tax of 25 per cent would be imposed on salmon farmers; a tax of 40 per cent had been contemplated temporarily. The Centrica share climbed by 2.3 per cent in London. The utilities company benefited from the UK regulator Ofgem announcing its position on the retail EBIT margin review. Meanwhile, Symrise (-0.7%) stocked up on Swedencare (+14.6), now facing a mandatory offer for the Swedish pet products supplier.
Nvidia’s breakout first-quarter results lifted tech stocks despite surging bond yields. The chip maker’s strong outlook came from the booming demand for artificial intelligence, and boosted the Nasdaq Composite to a 1.7% gain with its own 24% rise. Chip makers tied to the AI-frenzy rose across the board. Advanced Micro Devices gained 11%. American depositary receipts for Taiwan Semiconductor Manufacturing - which manufactures Nvidia chips - added 12%. That was its largest one-day percentage increase since 2008. While shares of information-technology firms shot 4.5% higher - the sector’s biggest one-day pop since November - none of the 10 remaining sectors in the S&P 500 gained more than a half percentage point. The benchmark index still managed to rise 0.9%, though the Dow industrials slipped 35 points, or 0.1%. Thursday marked the Dow’s fifth consecutive session of losses. A slate of economic data showed U.S. economic growth and inflation remain hot, adding to fears of persistently tight monetary policy from the Federal Reserve. Gross domestic product, personal consumption, and Core PCE - the Fed’s preferred inflation gauge - all came in hotter than expected for the first quarter. Jobless claims increased slightly last week but remained at historic lows. The looming U.S. debt-ceiling deadline has already rattled short-term bonds, and is starting to cause worry among investors in other corners of the market. On Wednesday, Fitch placed the U.S.’s triple-A credit rating on “negative watch,” citing “increased political partisanship” around the debt limit. Shares of energy, healthcare and utilities firms all fell more than 1% on the day.
In Asia, major indexes broadly closed with gains on Friday. Chip manufacturers continued their rally with Nvidia's increased outlook the previous day. In this context, the shares of Samsung Electronics and SK Hynix climbed by a further 2.3 and 5.7 per cent respectively in Seoul. Hanmi Semiconductor shares rise by 1.8 per cent. In Tokyo, Tokyo Electron increased by 4.9 per cent, Ibiden by 4.8 per cent and Mitsubishi Heavy Industries by 2.9 per cent. This supports the Kospi (+0.1 per cent) in Seoul and the Nikkei-225 (+0.6 per cent) in Tokyo. In contrast, the Shanghai Composite is down 0.1 per cent, while the Hong Kong stock exchange remained closed due to a public holiday.
The policy-sensitive 2-year U.S. Treasury yield rose for an 11th straight time on Thursday, its longest stretch of advances in more than five years, as traders priced in a greater chance of further interest-rate hikes by the Federal Reserve through July. The 10-year Treasury note was yielding 3.822%, up 7 basis points while the 2-year Treasury note was amounting to 4.534%, up 15 basis points. Friction on the short end of the Treasury bill market, where the yield of some 1-month securities exceeded 7%, illustrates investor nervousness as the June 1 deadline for raising the debt ceiling approaches.
Target price VAT: UBS upgrades to CHF 375 (305) - Buy
Target price Bachem: Credit Suisse lowers to CHF 97 (100) - Outperform
Target price Julius Baer: Barclays downgrades to CHF 76 (81) - Overweight
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