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Research Market strategy
by Swissquote Analysts
Morning News

GM Raises Profit Guidance for 2018

Topic of the day

General Motors Co. said its earnings are picking up speed, with added momentum due to come this year from plant closures and job cuts denounced by President Trump. Mr. Trump criticized GM Chief Executive Mary Barra in November after she outlined plans to shut several U.S. factories and lay off thousands of workers. Ms. Barra was summoned to Washington, D.C., by lawmakers irate about the potential fallout of GM's cuts on their communities. The backlash notwithstanding, GM said Friday that its largest restructuring since its 2009 bankruptcy will have a speedy impact on its bottom line. The cuts to its North American operations should boost operating profit in 2019 by nearly 20%, or by more than $2 billion, with more benefit expected in 2020, according to projections GM gave during an investor conference in New York. The Detroit-based auto maker also raised its guidance for last year's earnings, ahead of reporting its 2018 results on Feb. 6. GM's shares rose 7% to $37.17 on Friday. Ms. Barra, now five years into her tenure, has led the largest U.S. auto maker by sales to record profits in part by jettisoning slow-growing or unprofitable business units, including GM's European division in a 2017 sale.

Swiss stocks

The SMI defended its strong gains from Thursday and rose slightly Friday, closing up 0.3 percent on 8,828 points among mixed European markets. The Swiss franc likely helped stocks again Friday, with the currency only partly recovering from Thursday’s steep slump and thus making Swiss exports cheaper and more desirable. Richemont led the SMI to close the week up 2.8 percent after reporting a 25 percent turnover increase in its third quarter, in line with analyst expectations, thanks to strong Chinese demand. Swatch, which often moves in tandem with Richemont, stayed behind this time, closing unchanged. Credit Suisse rose 0.9 percent. Market participants say the bank was buoyed by the launch of the stock buyback it had announced in 2018, for which it plans outlay of up to CHF 1.5 billion by the end of 2019. Among second-tier stocks, dental prosthetics specialist Straumann benefited from an analysts’ “buy” recommendation and rose 3.2 percent.

International markets

Europe

European shares closed only marginally higher after a downbeat start to trading on Wall Street. The Stoxx Europe 600 rose 0.09%, or 0.32 points, to 349.2, but the DAX dropped 0.3% and the CAC 40 fell 0.5% as the Dow Jones Industrial Average declined 59 points to 23942. "What had been shaping up to be a decent session unraveled as Friday went on, a negative start from the Dow Jones ensuring the European indices couldn't recover their initial growth," said an analyst at Spreadex. "The ongoing U.S. government shutdown, as well as Starbucks-refreshed concerns surrounding the Chinese economy, contributed."

United States

The Dow Jones Industrial Average slipped but notched its biggest three-week gain since the period following the 2016 election, a dramatic bounceback from its late-December selloff. Investor appetite for stocks returned in recent trading sessions, boosted by a rebound in energy prices, data suggesting the U.S. economy is still growing, reassurances from the Federal Reserve that it will adjust its pace of tightening monetary policy if needed, as well as by hopes for progress in U.S.-China trade relations. The Dow industrials are up 10% since their Christmas Eve trough, rising 6.9% over the past three weeks. The blue-chip index slipped about 5.97 points, or less than 0.1%, to 23995.95 as falling energy prices dragged oil-and-gas companies lower, a reminder of how tenuous gains are when markets are choppy. The S&P 500 slipped 0.38 points, or less than 0.1%, to 2596.26. Energy companies in the index fell the most, down 0.6%, as the price of U.S.-traded crude oil fell for the first time in almost two weeks. The Nasdaq Composite declined 14.59 points, or 0.2%, to 6971.48.

Asia

In Asia, stocks fell as the Chinese data weighed on sentiment. "Weaker than expected 2018 trade data has seen the China equity market dive lower," an analyst said. "And then sentiment went deeper into the tank on the release of China December Trade data which missed the mark badly."

Bonds

U.S. government-bond prices rose after government data showed that consumer prices declined in December. The yield on the benchmark 10-year Treasury note fell, snapping a five-session run of increases, slipping to 2.701% from 2.731% Thursday. Yields, which fall when prices rise, declined after the Labor Department said that consumer prices contracted by 0.1% from the previous month.

Analysis

Dt. Bank downgrades Erste Group and RBI targets - Buy
Barclays: Delivery Hero achieves a good price - Overweight
UBS downgrades Wirecard target to 176 (220) EUR - Buy
IR downgrades Osram target to 36 (38) EUR - Hold


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.

 
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