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Research Market strategy
by Swissquote Analysts
Morning News

IEA: Saudi Arabia Contributed to Drop in Global Oil Inventories

Topic of the day

Saudi Arabia's reduction in oil supply was a key driver of a drop in global inventories during December, although the Gulf nation's efforts were blunted by increases from other Organization of the Petroleum Exporting Countries constituents, the International Energy Agency said. In its closely watched oil-market report, the IEA said a drop of 200,000 barrels a day in Saudi supply - to 9.68 million barrels a day - along with a seasonal drop in biofuel production drove a 780,000 barrel a day decline in global supplies. Elsewhere in its report, the IEA left its global oil-demand growth forecasts for 2019 and 2020 unchanged at 1 and 1.2 million barrels a day, and also held its non-OPEC supply growth forecast for 2020 at 2.1 million barrels a day. The agency slightly increased its non-OPEC supply growth estimate for 2019 by around 100,000 barrels a day to 2 million barrels a day. The IEA pointed out that the decision by OPEC and its allies to deepen production cuts - taken last month - will only take effect in January, meaning Saudi Arabia's production curtailment came regardless of the cartel's heated summit in Vienna in which Saudi delegates made examples of under-complying nations for shirking their responsibilities.

Swiss stocks

The SMI climbed 1.4 percent to 10,842 points Friday after hitting a new all-time high at 10,849 points. Market participants pointed to the record highs on Wall Street, the signing of the US-China partial agreement, and higher than expected China December industrial production. Economic growth in China weakened to 6.1 percent in 2019, the lowest level for 30 years, but this was expected. Richemont surged 4.9 percent on good quarterly figures. It increased third-quarter turnover despite a strong decline in key market Hong Kong. The jewellery business did particularly well. Swatch rose 0.5 percent in its wake. Roche rose 2.2 percent to CHF 327.97 after hitting a new record high of CHF 328.25. Heavyweight Novartis was up 1.3 percent and Nestle 1.6 percent. Bank stocks lagged the market, Credit Suisse fell 0.1 percent and UBS rose just 0.5 percent. Outside the SMI, BB Biotech gained 1.4 percent on the news it had closed the 2019 fiscal year with a profit, based on preliminary figures.

International markets

Europe

European stocks rose as largely positive Chinese economic data boosts mining shares and a weaker pound lifted dollar earners on the FTSE 100. The pan-European Stoxx 600 rose 0.9% to 424.56 points, the FTSE 100 gained 0.9% to 7,674.56, the DAX was up 0.7% to 13,526.13 and the CAC-40 increased 1.0% to 6,100.72. Meanwhile, data on Chinese industrial production, fixed asset investment and retail sales were better than forecast. In the U.K., retail sales fell unexpectedly in December, sending the pound lower. Casino Guichard-Perrachon SA (CO.FR) (-4,7%) plunged Friday after reporting a fall in sales for the fourth quarter. The French retailer said late Thursday that net sales in the fourth quarter fell 1.4% as growth in Latin America failed to offset declines in France. The company reported a 4.3% fall in net sales for its French retail segment and a 1.7% increase for Latin American retail. "While this outperformance in LatAm offsets the disappointment in France, we expect investors to remain focused on France as all the covenants restricting dividend payments only concern the French scope," said Clement Genelot, an analyst at Bryan Garnier. Electricite de France SA's (EDF.FR) (+9,8%) shares rose on Friday following media reports of a government reform of the Arenh nuclear market scheme that would benefit the utility.

United States

U.S. stocks set repeated highs this week, pulled higher by shares of big technology companies. The rally coincided with the signing of a trade deal between the U.S. and China that paused a long-simmering battle between two of the biggest world economies. Meanwhile, earnings from big banks showed that the domestic consumer remains strong, and fresh economic data released Friday also added to optimism about the U.S. economy. Many investors for months had been preoccupied by the trade battle between the U.S. and China, worried that tensions between the two countries would weigh on economic growth. The deal this week eased some of that anxiety, while data on the U.S. consumer and housing encouraged investors that the long economic expansion could continue. The S&P 500 rose 12.81 points, or 0.4%, to 3329.62 on Friday, its sixth record close of the year. The Nasdaq Composite advanced 31.81 points, or 0.3%, to 9388.94. The Dow Jones Industrial Average rose 50.46 points, or 0.2%, to 29348.10. All three indexes finished the week at least 1.8% higher at new records. Data on consumer sentiment released Friday suggested that spending should remain robust in the near term. Meanwhile, fresh figures on housing showed that construction of new U.S. homes rose in December to the highest level since 2006.

Asia

In Asia early Monday, Japanese stocks edged higher as investors looked for trading clues ahead the Bank of Japan's start to its two-day policy meeting. The earnings season in Japan is also set to start later this week. China's benchmark lending rates for short- and long-term loans were left unchanged in January for the second straight month, after the central bank held a medium-term lending facility rate steady earlier this month.

Bonds

Yields on longer-term U.S. government debt climbed after the Treasury Department said it would begin selling 20-year government bonds later this year. The yield on the benchmark 10-year Treasury note rose for a second consecutive trading session, settling at 1.834% from 1.809% Thursday. The jump in yields, which rise when bond prices fall, reflects investors' expectations for a growing supply of government debt.

Analysis

UBS lowers Twitter to Neutral (Buy) – Target 35 (37) USD
CS rises the Endesa target to 22,30 (21) EUR – Underperform
UBS rises the Credit Suisse target to 15,70 (14,80) CHF – 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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