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Research Market strategy
by Swissquote Analysts
Morning News

JPMorgan Quarterly Profit Jumps 42%

Topic of the day

JPMorgan Chase & Co. posted its highest-ever quarterly profit after releasing $2.9 billion in funds it had set aside to cover soured loans. The bank's profit jumped 42% to $12.14 billion, or $3.79 per share, far past the $2.62 per share forecast by analysts polled by FactSet. A year earlier, JPMorgan had reported a quarterly profit of $8.52 billion, or $2.57 a share. The nation's biggest bank reported revenue of $29.22 billion for the quarter, up 3% from a year earlier and topping analysts' expectations for $28.67 billion. For the full year, through an economic spiral and an uneven recovery, JPMorgan posted record revenue of $119.54 billion, up 4% from 2019. The growth was powered by the Wall Street operation, which churned out stocks and bonds for clients eager to raise capital and trade securities amid an unsettled economy and record-high markets. Still, the coronavirus pandemic's impact on businesses and consumers forced the bank to put aside billions of dollars for potential loan losses earlier in the year. Full-year profit fell 20% to $29.13 billion.


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Swiss stocks

The SMI closed up 0.2 percent on 10,877 points Friday, buoyed by pharmaceutical heavyweights and analyst comments amid investor reticence at the still-high Covid-19 infection numbers. Novartis gained 2.1 percent and Roche 1.5 percent. Analysts began watching Novartis with a “buy” rating and a CHF 100 target and Roche with "hold" and a CHF 325 target. Partners Group rose 0.9 percent on posting an 11 percent rise to USD 109 billion in assets under management for 2020. Analysts also raised their target to CHF 1,170 from CHF 1,110 and confirmed their "overweight" rating. Banks were pulled down by strong profits but weak incomes from US banks JP Morgan, Wells Fargo and Citigroup. Credit Suisse fell 0.5 percent and UBS 0.4 percent, though analysts had hiked UBS to "buy" from "hold". Second-tier Julius Baer slid 0.8 percent and Vontobel 1.0 percent despite analyst target increases. Geberit fell 1.1 percent and Sika 2.4 percent on profit-taking. ABB lost 3.4 percent and Givaudan 2.8 percent.

International markets

Europe

European stocks drop as investors take profits after recent gains in anticipation of US President-elect Joe Biden's fiscal stimulus plan. The Stoxx Europe 600 falls 1%, the FTSE 100 declines 0.9%, the DAX slips 1.4% and the CAC-40 sheds 1.2%. SAP's preannounced 4Q results were a beat driven by software-licence revenue, Jefferies says. Licence revenue at the German software company was EUR1.7 billion compared with analysts's average estimate of EUR1.53 billion, Jefferies says. Cloud revenue came in broadly in line with consensus, the brokerage adds. "Cloud revenue continues to be impacted by softness in certain product lines such as Concur, due to lower travel demand," Jefferies says. Valeo's preliminary results for fiscal 2020 came in better than expected, Jefferies says, after the French auto supplier reported sales ahead of consensus and a 13.5% Ebitda margin for the second half that was ahead of company guidance. According to Jefferies, the margin implies 2H Ebitda of EUR1.27 billion, compared with consensus of EUR1.12 billion. The sector could see more companies pre-releasing results due to high vehicle production in the fourth quarter, Jefferies says.

United States

Citigroup Inc. said Friday that its fourth-quarter income fell 7% and that it drew down some of the reserves it had set aside to cover potentially soured loans. The New York bank said profit fell to $4.63 billion, or $2.08 a share, compared with $4.98 billion, or $2.15 a share, a year earlier. That still beat the $1.34 expected by analysts polled by FactSet. Revenue fell 10% to $16.5 billion, falling short of the $16.72 billion analysts had expected. Wells Fargo & Co.'s profit rose 4% in the final three months of the year. The San Francisco-based lender said Friday that it made $2.99 billion in the fourth quarter, up from $2.87 billion a year earlier. Per-share profit totaled 64 cents, compared with analyst forecasts of 59 cents. Wells Fargo's results reflect a topsy-turvy year in which the pandemic-induced recession forced lenders to sock away tens of billions of dollars to prepare for a wave of soured loans. The bank released $757 million from its pile of reserves in the fourth quarter, largely because it no longer had to stow away cash on a book of student loans it sold. Shares of Exxon Mobil fell sharply after the Securities and Exchange Commission reportedly launched an investigation of the largest U.S. oil company, responding to an employee's whistleblower complaint last fall alleging that the energy giant overvalued one of its most important oil and gas properties, a key prospect on the Permian Basin of West Texas.

Asia

At the beginning of the week, no uniform trend can be discerned on the stock markets in East Asia and Australia. While good domestic economic data is pushing up the Chinese stock markets, elsewhere the latest developments in the Corona pandemic are weighing on prices. On the Shanghai stock market, the composite index rises by 1.1 per cent. The Chinese economy grew by 2.3 per cent last year despite the Corona crisis, according to the statistics office in Beijing. In the fourth quarter, growth recovered to 6.5 per cent.

Bonds

Treasury yields were unchanged in Asia, with U.S. fixed-income markets closed Monday in observance of Martin Luther King Jr. Day and Capital Economics said upside moves are likely to be limited.

Analysis

UBS rises the Hella target to 65 (52) EUR – Buy
HSBC rises Richemont to Buy (Hold) – Target 94 (83) CHF
JPM rises the LEG target and lowers the Aroundtown target


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