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Research Market strategy
by Swissquote Analysts
Morning News

Daimler's Profit Slump Pushes It to Slash Dividend

Topic of the day

An unexpectedly sharp fall in profit prompted Daimler AG to cut its shareholder dividend by a third as the luxury car maker battles slumping demand, the escalating cost of a fundamental shift to electric vehicles and charges related to emissions-cheating probes. The maker of Mercedes-Benz said Tuesday that it swung to a loss of EUR11 million ($12 million) in the three months to December, warning it would sell fewer cars this year. The results were well below analysts' estimates and contributed to a 67% decline in full-year net profit to EUR2.4 billion. Daimler said it would propose to shareholders to slash the annual dividend, to be approved at a meeting in May, to EUR0.90 a share from EUR3.25 a year ago, cutting the size of its payout to EUR1 billion, a third of what it returned to shareholders last year. The company said lower profit would also affect executive bonuses. "We cannot be satisfied with our bottom line," Chief Executive Ola Källenius said. "We have a cost problem. Maybe we were too optimistic on what the revenue side could yield in the past," he added. With demand for cars falling world-wide, auto makers more broadly are cutting prices, making it hard to offset the rising costs of building electric cars with a vast array of digital features.

Swiss stocks

The SMI closed up 0.6 percent on a new record 11,101 points Tuesday after hitting an all-time high of 11,114 points. Fears of the coronavirus affecting economic growth abated as China called on key industries to resume interrupted production. Novartis gained 1.2 percent on getting priority review designation for its drug Capmatinib from US FDA. Roche rose just 0.2 percent. ABB rose 1.8 percent on announcing the closure of its plant in Ozd, Hungary with some 1,000 jobs cuts. UBS rose 1.0 percent on the news that investors plan to withdraw about USD 7 billion out of its USD 20 billion Trumbull Property Fund. Credit Suisse gained 2.1 percent. Adecco rose just 0.1 percent despite Dutch competitor Randstad’s good financials. Richemont fell 0.2 percent and Swatch closed unchanged after Italian competitor Moncler posted mixed financials. Among second-tier stocks, AMS slid 3.1 percent on profit-taking after reporting good figures. Peach Property surged 2.8 percent after hiking 2019 profits.

International markets

Europe

European stocks rebounded to a record high in a broad-based advance, with the travel sector rallying as tour operator Tui demonstrated how it has benefited from the collapse of a rival. The Stoxx Europe 600 climbed 0.9% to 428.47. The previous record closing high was set on Feb. 6 at 425.49. The German DAX, which gained 1% to 13627.84, also reached a fresh record. The French CAC gained 0,7%. Tui shares surged 12% on Tuesday as the travel operator said "exceptional" holiday demand would help offset the ongoing impact of the Boeing 737 Max grounding. The company lifted its profit guidance due to a strong performance in the fiscal first quarter and the prospect of compensation from Boeing. Tui now expects full-year earnings of EUR850 million to EUR1.05 billion. It warned in December growing costs relating to the grounding could lead to profits of EUR680 million. Heineken said Tuesday that Chief Executive Jean-Francois van Boxmeer will step down after leading the company for 15 years, and it named Dolf van den Brink, who currently heads its Asia Pacific operations, as his successor.

United States

U.S. stocks ticked higher intraday, with investors encouraged by the latest developments on the coronavirus outbreak and markets-friendly comments from the chairman of the Federal Reserve. The S&P 500 rose 0.2%, and the Nasdaq Composite jumped 0.2%. The Dow Jones Industrial Average added 0.1%. Investors parsed comments by Federal Reserve Chairman Jerome Powell, who said in congressional testimony that the central bank is "closely monitoring" the potential for global economic disruptions from the emergence of the coronavirus in China. While "some of the uncertainties around trade have diminished recently," the viral outbreak "could lead to disruptions in China that spill over to the rest of the global economy," Mr. Powell said in testimony to be delivered before the House Financial Services Committee. Sprint Corp. shares (S) soared 77% in premarket trade Tuesday, while T-Mobile US Inc. (TMUS) was up 10%, after a judge approved the companies' merger plan. U.S. District Judge Victor Marrero said the $26 billion deal was not likely to stifle competition in the U.S. wireless market, the Wall Street Journal reported, as some states seeking to block the deal were arguing. "T-Mobile has redefined itself over the past decade as a maverick that has spurred the two largest players in its industry to make numerous pro-consumer changes," the judge wrote, adding that a closed deal would allow it to continue "T-Mobile's undeniably successful business strategy for the foreseeable future."

Asia

In Asia, shares were higher as signs emerged that the spread of the virus was slowing and investors felt secure that policymakers had the tools needed to combat any economic slowdown stemming from the outbreak. "Despite coronavirus concerns, investors tend to believe that central banks and policymakers have measures to stimulate the economy during and post the public health crisis," said CMC Markets.

Bonds

U.S. Treasury yields traded higher as reports that the spread of COVID-19 may be slowing down helped to cheapen prices for government paper, drawing investors to the Treasury Department debt auction in the afternoon. The 10-year Treasury note yield climbed 4.5 basis points to 1.592%, while the 2-year note rate gained 4 basis points to 1.417%. The 30-year bond yield ticked 3.5 basis points up to 2.056%.

Analysis

IR rises the L'Oreal target to 285 (275) EUR – Hold
IR lowers the Daimler target to 46 (47) EUR – Hold
Dt. Bank lowers the OMV target to 46 (52) EUR – Hold


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