Research Market strategy
By Swissquote Analysts
Published on 24.05.2022
Morning news

Broadcom in Talks to Pay About $60 Billion for VMware

Topic of the day

Broadcom Inc. is in talks to pay around $60 billion for VMware Inc., people familiar with the matter said, in what would be one of the biggest takeover deals of the year. The two technology companies are aiming to announce a cash-and-stock deal worth roughly $140 a share Thursday, assuming the talks don’t fall apart, the people said. The price wasn’t yet set and could still move around, some of the people cautioned. To help pay for the deal, Broadcom plans to tap a handful of banks for a roughly $40 billion debt package, one of the people said. That would make it one of the largest takeovers of the year. Microsoft Corp.’s roughly $75 billion pending acquisition of videogame heavyweight Activision Blizzard Inc. currently registers as the biggest. The VMware discussions, together with Elon Musk’s agreement late last month to buy Twitter Inc. for $44 billion, show that despite market volatility, major deals are still doable. VMware’s shares closed up roughly 25% at $119.49 on Monday on news of the talks.

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Swiss stocks

At the start of the week, prices on the Swiss stock exchange rose. At the recently lowered levels, some investors were more courageous again and made purchases, although the overall negative environment for shares has changed little. The SMI had lost more than 4 per cent in the second half of the previous week. Additional tailwind came from Wall Street in the afternoon, where the indices rose more strongly. The SMI gained 1.4 per cent to 11,466 points. Among the 20 SMI stocks, there were 17 price gainers and 3 price losers. 35.93 (Friday: 41.8) million shares were traded. Bank shares were the day's winners with gains of just over 3 per cent each for Credit Suisse, UBS and Julius Baer. With Partners Group, Swiss Life and Zurich Insurance, shares from the financial and insurance sectors followed in third to fifth place in the SMI. A higher interest rate level also brings advantages for these companies, for example, because more lucrative investment opportunities then arise for insurance premiums. Richemont showed only a meagre recovery of 0.8 per cent from the losses of the previous days in reaction to disappointing business figures. Further target price cuts came at the start of the week from JP Morgan, UBS, Bryan Garnier and DZ Bank, with the first three firms continuing to recommend buying the shares of the luxury products provider.

International markets


European equity indices closed higher on Monday after European Central Bank (ECB) President Christine Lagarde provided some insight into upcoming rate hikes in the eurozone. The Stoxx Europe 600 index gained 1.3% to 436.5 points. In Paris, the CAC 40 and the SBF 120 rose by 1.2% and 1.1%, respectively. In Frankfurt, the DAX 40 gained 1.4%, while the FTSE 100 in London gained 1.7%. The European Central Bank is likely to increase its key interest rate to zero or above by September, President Christine Lagarde said in a blog post Monday, drawing a line under an eight-year experiment with negative interest rates amid record inflation and mounting concerns about the weakness of the euro currency. HSBC Holdings PLC suspended a senior executive who argued that investors didn’t need to worry about climate change and that policy makers were exaggerating the risks, according to people familiar with the matter. Siemens Energy AG said late Saturday that it has made an offer to buy all outstanding shares in Siemens Gamesa Renewable Energy SA for 4.06 billion euros ($4.29 billion), or EUR18.05 a share. Siemens Energy already holds 67% of Siemens Gamesa, and said it intends to fully integrate the Spain-based wind turbine maker. Full integration would lead to cost synergies of about EUR300 million a year within three years, and to mid-triple-digit million euros in revenue synergies by the end of the decade, Siemens Energy said.

United States

U.S. stocks rose, led by the financial sector, as the S&P 500 pushed away from bear-market territory after flirting with such levels in a volatile trading session Friday. The broad-market benchmark advanced 72.39 points, or 1.9%, to 3973.75 on Monday. At one point Friday, the S&P 500 slid so far it was on track to close at least 20% below its January peak -- what would have been considered a bear market -- before regaining ground. The Dow Jones Industrial Average rose 618.34 points on Monday, or 2%, to 31880.24, while the tech-focused Nasdaq Composite Index was up 180.66 points, or 1.6%, to 11535.27. All 11 of the S&P 500's sectors were up on Monday. Financials fared the best, rising 3.2%. JPMorgan Chase was up 6.2% at $124.60 after offering updated guidance during a presentation on Monday, painting a better picture of economic prospects. The bank said it expects to benefit from loan growth and rising interest rates. Investors will also be looking to earnings reports from retail stocks this week, seeking clues about how inflation and the lingering effects of the Covid-19 pandemic are affecting consumers. Macy's, Dollar General and Costco are among the companies set to report. Macy's added 1.2%, or 21 cents, to $18.37, Dollar General was up 3.6%, or $6.82, to $194.42, and Costco rose 3.1%, or $13.05, to $429.48.


Negative signs dominate the stock markets in East Asia and Australia on Tuesday. Once again, economic concerns are dampening the buying mood, while positive impulses are fizzling out. In Hong Kong, the technology sub-index is down 2 per cent, while the benchmark Hang Seng index is down 1.4 per cent. On the Shanghai stock exchange, the composite index falls by 1.1 per cent.


In U.S. bond markets, the yield on the benchmark 10-year Treasury note ticked up to 2.857% from 2.785% Friday. Yields and prices move inversely.


JP Morgan lowers Richemont target to CHF 150 (165) – Overweight

Citi lowers Julius Baer target to CHF 66 (70) – Buy

Citi lowers IAG target to 205 (220) p – Buy

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