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Research Market strategy
by Swissquote Analysts
Morning News

U.K. Parliament Roundly Rejects May’s Brexit Plan

Topic of the day

The British Parliament overwhelmingly rejected a proposed Brexit deal Tuesday, delivering a setback for U.K. Prime Minister Theresa May and further stoking the extreme uncertainty around the U.K.’s exit from the European Union in just over two months’ time. British lawmakers needed to approve the Brexit deal Mrs. May spent years crafting with her EU counterparts for it to go into effect. After months of complaints that the deal was unacceptable, members of the House of Commons voted it down by a vote of 432 to 202. The scale of the defeat by a margin of 230 votes shows the depth of dissatisfaction over the agreement. The result means all Brexit options are on the table, ranging from leaving the EU with no deal to not leaving at all after a second Brexit referendum. The most likely course is that the prime minister decides to double down on her deal, after obtaining further changes from the EU, and put it before Parliament again. That would risk a further parliamentary rejection—and the prospect of exiting the bloc without a deal, subjecting businesses and travelers to significant disruption. Mrs. May could alternatively call a second referendum or even a general election, both steps that would require postponing Brexit. With the U.K. set to quit the EU on March 29, time is running short. Mrs. May must set out the government’s next move by Monday. If, as is most likely, she opts to put a revised version of the deal to a revote, Parliament could be called to approve new wording within weeks.

Swiss stocks

After the previous day’s losses, the SMI rose 0.7 percent to 8,825 points Tuesday. Positive factors included the Chinese government’s new economic stimuli, which fired hopes of a global economic recovery, and a weak Swiss franc against euro and dollar. Downside factors included relatively weak US economic data and disappointing quarterly figures from US bank JP Morgan, along with reticence before the Brexit deal vote in the UK House of Commons after markets closed. Pharma stocks Novartis and Roche, in demand as defensive stocks, rose 1.9 percent and 1.4 percent respectively. ABB closed 0.5 percent higher, partially eroding larger earlier gains. Reinsurer Swiss Re slid 1.5 percent after reporting claims for natural disasters of around US$ 1 billion for 4Q 2018, and claims for natural disasters and man-made major losses of US$ 2.9 billion for 2018 overall. Geberit fell 1.3 percent after an analysts’ “sell” recommendation. Bank stocks were depressed by the disappointing JP Morgan financials, with Credit Suisse and UBS posting only small gains.

International markets

Europe

European markets finished higher, in an up-and-down session, as Chinese government officials outlined plans to boost the country's sluggish economy. In the U.K., politicians were preparing to vote on Prime Minister Theresa May's contentious agreement for leaving the European Union in March. The Stoxx Europe 600 gained 0.4% to close at 348.71, after finishing down 0.5% on Monday. France's CAC 40 closed 0.5% higher at 4,786.17, the U.K.'s FTSE 100 rose 0.6% to end at 6,895.02 and Germany's DAX added 0.3% to 10,891.79. Italy's FTSE MIB lagged behind regional peers, finishing little changed, down less than 0.1% to 19,165.48.

United States

Rising shares of technology companies pulled major U.S. indexes higher intraday, as optimism about Chinese stimulus helped put stocks on track to notch their first day of gains in three trading sessions. Shares of technology manufacturers and other companies led the stock market higher after representatives of the People's Bank of China said they would step up efforts to spur economic growth this year, reversing some of the heavy losses the sector suffered in recent months as trade tensions and tepid economic growth in Asia pressured shares of those businesses. A handful of upbeat fourth-quarter earnings reports, with the latest coming from UnitedHealth Group, also have helped to tamp down some of the brewing concern around the health of corporate profits. The S&P 500 added 1% in recent trading, with shares of tech and communications companies in the broad index each gaining more than 1.5%. The Nasdaq Composite rose 1.6%. The Dow Jones Industrial Average, meanwhile, added 133 points, or 0.6%, to 24041.

Asia

In Asian, stocks were mostly lower with Japan's Nikkei lagging, pressured somewhat by fresh gains in the yen. Chinese big caps edge lower after yesterday's strong gains while smaller stocks are a bit higher as many Asian markets struggle for direction.

Bonds

U.S. government-bond prices bounced between gains and losses intraday as investors responded to muted inflation data. The yield on the benchmark 10-year U.S. Treasury note declined to a recent 2.709%, according to Tradeweb, from 2.710% Monday. Yields, which decrease as bond prices rise, edged lower in early U.S. trading after initially rising when the Labor Department said that the producer-price index fell 0.2% in December from the previous month.

Analysis

UBS starts Dell with Neutral - Target 48 US-Dollar
MS downgrades Oracle to Equalweight (Overweight)
CS raises Delivery Hero target to 52 (51) EUR - Outp.
Citi downgrades Thyssenkrupp target to 22 EUR - Buy


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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