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Research Market strategy
by Swissquote Analysts
Morning News

Argentine Peso Dives After Populist Peronists Gain Edge in Vote

Topic of the day

Argentina's currency and stocks plunged amid investor concerns about the possible return to power of the country's populist Peronist movement, which advocates greater state control of the economy and opposes a landmark trade deal with the European Union. The peso initially weakened more than 30% against the dollar after pro-business President Mauricio Macri was dealt a resounding defeat in a primary election Sunday against Alberto Fernández, a leftist whose vice-presidential running mate is former President Cristina Kirchner, a firebrand nationalist. The peso later recovered some ground. Argentina's central bank stepped into currency markets Monday, auctioning off $50 million to try to support the peso. The bank's benchmark interest rate jumped to 74%, from 63.7% on Friday, according to local reports. The Merval index in Buenos Aires closed 38% lower on Monday after jumping 7.7% Friday on expectations that Mr. Macri would come in a close second place in Sunday's primary, a mandatory vote that determines which parties will be able to run candidates in the October election.

Swiss stocks

The general political climate on Monday also dampened sentiment on the Swiss stock market. In view of the never-ending US-Chinese trade dispute, the government crisis in Italy and the threat of a "hard" Brexit, investors acted cautiously. The SMI gained 0.1 percent to 9,760 points. The takeover bid by AMS for the German Osram, with which the Austrian company wants to outperform the financial investors Bain and Carlyle, made headlines above all. The AMS share, which is listed on the Swiss stock exchange, fell by 11.8 percent. The SMI, meanwhile, was led by the ABB share, which improved by 3.1 percent. The appointment of Björn Rosengren from Sweden as the Group's new CEO was well received. Among the biggest losers in the SMI were the shares of the luxury goods groups Swatch and Richemont, which fell by 2.2 and 1.4 percent respectively. In addition to the US-China trade dispute, the unrest in Hong Kong had a negative impact. China, including Hong Kong, is an important sales market for the two companies.

International markets

Europe

The Stoxx Europe 600 edged down 0.3%, weighed down by declines among lenders and travel and leisure stocks. Among the biggest gainers in the region was Tullow Oil, whose shares rose 20% after the company said it had found more oil off the coast of Guyana. Shares in Commerzbank have reached a record low following reports last week that the German government is seeking advice about its 15% stake in the ailing lender. Commerzbank shares trade 2.4% lower at EUR5.30 and are down 11% year-to-date. The German government is looking for an external advisor to evaluate options for its stake in the bank, a recent public tender offer shows. The second-quarter results of CaixaBank were disappointing in terms of commissions, Credit Suisse says as it cuts the target price on the stock to EUR3 from EUR3.8. The Swiss bank also cuts its 2019-21 earnings estimates for Caixa, "as we incorporate the lower rate environment and adjust for the lower fee base, which we expect to be partly compensated by lower costs," it says. Shares in the Spanish bank trade 1.7% lower at EUR2.15.

United States

U.S. stocks fell as a wave of selling that analysts attributed to mounting doubts about a trade deal pulled lower everything from bank stocks to shares of technology companies. Worries about the path of U.S.-China trade negotiations and the global economy have kept stocks and bond yields under pressure for much of the month. Goldman Sachs analysts said Monday that the outlook for trade talks had "collapsed," adding that they believe Washington and Beijing won't reach an agreement before the 2020 elections. The Dow industrials were recently down 402 points, or 1.5%, to 25884. The S&P 500 declined 1.3%, and the Nasdaq Composite fell 1.4%. Bank stocks took a fresh hit Monday as U.S. Treasury yields retreated again, with Citigroup, Bank of America and Morgan Stanley each losing more than 2%. Semiconductor firms also lost ground, with Nvidia down 2% and Advanced Micro Devices losing 5.2%. Other proxies for investors' trade optimism also slipped Monday, with Caterpillar and farm machinery maker Deere down 2.4% and 4.8%, respectively.

Asia

Asian markets fell in early trading Tuesday as tensions in Hong Kong ratcheted up following protests Monday that shut down the city's airport. Hong Kong's airport struggled to reopen Tuesday, while protests continued, though at a smaller scale. Some flights resumed, though many were canceled amid a backlog of flights following Monday's closure. After 10 weeks, the pro-democracy demonstrations show no sign of letting up, while Chinese officials have used the term "terrorism" to describe the protests. The clashes have weakened investors' confidence, some analysts said, and there are fears that a harsh crackdown by China could trigger a global market selloff.

Bonds

A rally in U.S. government bonds resumed, pushing yields back toward multiyear lows, as investors remained concerned about the economic outlook ahead of key data releases later in the week. In recent trading, the yield on the benchmark 10-year U.S. Treasury note was 1.669%, according to Tradeweb, compared with 1.731% Friday.

Analysis

Dt. Bank raises Ströer target to 80 (76) EUR - Buy
IR downgrades Sanofi target to 83 (85) EUR - Hold
IR raises Osram target to 36,75 (35) EUR - Hold
H&A downgrades Sixt Leasing to Hold (Buy) - Target 10 (23) EUR


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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