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Research Market strategy
by Swissquote Analysts
Morning News

Burberry Stock Slips as Luxury Brand Warns Coronavirus is Hitting Sales

Topic of the day

Burberry shares fell on Friday as the global luxury brand warned the spreading coronavirus was hurting sales. The luxury goods maker said 24 of its 64 stores in mainland China are currently closed and the remaining outlets are operating reduced hours with "significant" footfall declines. The stock slid as Burberry became the latest company to warn over the impact of the mystery virus, following Starbucks, Carlsberg, Nike and Nintendo among others. Burberry stopped short of lowering its full-year guidance but said its latest guidance "predated the impact" of the virus, which was hitting sales in China and Hong Kong. "The outbreak of the coronavirus in mainland China is having a material negative effect on luxury demand. While we cannot currently predict how long this situation will last, we remain confident in our strategy," Chief Executive Marco Gobbetti said. The spending habits of Chinese tourists in Europe and other destinations had been less impacted so far, but the company expected it to worsen in the coming weeks due to widening travel restrictions.

Swiss stocks

The SMI slid 0.1 percent Friday but stayed above the newly gained 11,000 points on 11,002 points. After the previous days’ rally, investors were playing safe, traders said, as scepticism about Chinese authorities’ handling of the coronavirus epidemic revived, and with it fears of a long economic decline. An unexpected rise in the US unemployment rate also hit. Credit Suisse fell sharply on the news that CEO Tidjane Thiam had resigned following the fallout from the bank’s two “spying scandals” in 2019, but closed up 0.2 percent as investors used the decline to enter the market. UBS rose 1 percent. Swatch fell 1 percent and Richemont 1.2 percent as British competitor Burberry warned the coronavirus in China was heavily affecting demand for luxury goods, with 24 of its 64 shops in China currently closed. Swisscom surged 2.5 percent, extending the previous day’s gains after quarterly figures. Nestle, Novartis and Roche cushioned the negative trend, only making small gains or losses.

International markets

Europe

European stocks fell as lingering fears about the coronavirus outbreak in China offset upbeat U.S. job data. The Stoxx Europe 600 fell 0.4%, the FTSE 100 retreated 0.6%, the DAX declined 0.6% and the CAC-40 was down 0.4%. "Optimism earlier in the week continues to fade, providing a slightly negative end to the week," said Chris Beauchamp at trading firm IG. "Perhaps investors will return to the fray Monday, but this feels like a market at the mercy of more China news."L'Oreal's 9.6% organic sales growth in 4Q comfortably beat a consensus estimate of 7.4% growth, UBS analysts say, after the French cosmetics company posted 2019 figures. The result likely came in ahead of raised investor expectations following strong 4Q results from both LVMH's Perfume & Cosmetics division as well as competitor Estee Lauder, the bank says. The board of Engie SA (-0,5%) on Wednesday said it wouldn’t reappoint Chief Executive Isabelle Kocher at its next shareholder meeting, bringing an “end of her chief executive officer position.” Ms. Kocher had served as CEO since 2016, the company said, adding her mandate as CEO is due to expire in May. The company said Chairman Jean-Pierre Clamadieu will work with the board’s Appointments, Compensation and Governance Committee to find a successor to Ms. Kocher.

United States

Stocks dropped but held onto strong weekly gains as investors parsed the latest read on U.S. job growth. The Dow Jones Industrial Average declined 277 points, or 0.9%, as of 4 p.m. Eastern time, after rising for a fourth consecutive day to close at a record Thursday. The S&P 500 and Nasdaq Composite both lost 0.5%. All three indexes finished the week with gains of about 3% or more. Investors analyzed the strength of the U.S. job market, a crucial indicator of the economy's health, after the Labor Department said the U.S. economy added 225,000 jobs in January, beating expectations and putting the jobless rate at 3.6%. Wages increased 3.1% from a year earlier. Major U.S. stock indexes had recouped their steep losses from last week, rising in recent days to close at records Thursday.. Shares of manufacturing giants like Caterpillar and Boeing , which are exposed to the global economy, took big hits Friday, falling 2.4% and 1.4%, respectively, dragging on the Dow. Uber Technologies rose 9.5% after the ride hailing and food delivery company said it would reach a measure of profitability a year sooner than previously expected. Rival Lyft gained 4.4%. Shares of eBay dropped 4.3% after Intercontinental Exchange, the parent company of the New York Stock Exchange, abandoned its pursuit of the e-commerce platform. Intercontinental Exchange rose 2.4%.

Asia

Asian stock markets fell on Monday, on the background of the coronavirus crisis. Japanese stocks were broadly weaker with electronics stocks falling especially sharply. China's consumer inflation hit its highest level in more than eight years in January due to impact from the coronavirus outbreak and the Lunar New Year, official data showed.

Bonds

U.S. Treasury yields slumped and prices rose, but booked a weekly increase, as the January employment report showed larger gains than expected. The 10-year Treasury note yield tumbled 6.6 basis points to 1.578%. Friday's action helped to trim the benchmark rate's weeklong climb to 5.7 basis points, its largest such rise in seven weeks.

Analysis

CS rises the Societe Generale target to 27 (24) EUR – Underperform
IR rises the ING target to 12,20 (12,00) EUR – Buy
Citi rises the Delivery Hero target to 84 (71,50) 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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