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Research Market strategy
by Swissquote Analysts
Morning News

Trump Administration, Senate Democrats Reach Stimulus-Bill Deal

Topic of the day

Lawmakers and the Trump administration reached an agreement on an estimated $2 trillion stimulus package aimed at shielding the U.S. economy from the worst consequences of the coronavirus pandemic. The legislation, which congressional officials will continue to write throughout the night, will provide direct financial checks to many Americans, drastically expand unemployment insurance, offer hundreds of billions in loans to both small and large businesses and provide health-care providers with additional resources as the virus spreads. "This is a wartime level of investment into our nation," said Senate Majority Leader Mitch McConnell (R., Ky.) in the early hours of Wednesday after the two sides had reached a deal. "The men and women of the greatest country on Earth are going to defeat this coronavirus and reclaim our future. And the Senate is going to make sure they have the ammunition they need to do it," he said. Mr. McConnell said the Senate would move to vote on the massive bill later on Wednesday, setting up a rapid approval of legislation that dwarfs the annual discretionary budget Congress spends much of the year crafting and approving.

Swiss stocks

In tandem with the major East Asia, Europe and North America regions, the SMI rallied Tuesday, surging 7 percent to 8,733 points with all 20 stocks higher, 12 with double-digit gains. The US Federal Reserve pledge of virtually unlimited bond purchases Monday provided a backstop for the US government bond market. But as the coronavirus pandemic still weighs, maintaining the recovery will depend on the speed of new infections, traders say. Insurance stocks were sought Europe-wide, profiting from the recovery of their investments as stock markets rebounded and central banks announced bond purchases. Swiss Re gained 16.7 percent, Swiss Life 15.9 percent and Zurich Insurance 13.4 percent. Bank stocks Credit Suisse rose 15 percent and UBS 12.5 percent. Cyclical stocks Adecco rose 13 percent and Lafargeholcim almost 14 percent. The defensive stocks lagged behind, but they had declined less during the corona slump. Nestle gained 2.4 percent, Novartis 3.6 percent and Roche 4.6 percent.

International markets

Europe

European stocks gained as Wall Street rallies on hopes that U.S. leaders will approve a fiscal stimulus package to shield the economy from coronavirus. The Stoxx Europe 600 rose 8.4%, the FTSE 100 added 9.1%, the DAX advanced 10.9% and the CAC-40 increased 8.4%. U.S. House Speaker Nancy Pelosi said an agreement on coronavirus rescue deal could be reached shortly. Market sentiment was also bolstered by a slowdown in coronavirus deaths and infections in Italy along with a pledge by G7 finance ministers and central bank governors to do whatever it takes to combat the coronavirus crisis. Travel and leisure stocks recover from Monday's declines with Cineworld, Carnival and CTS Eventim AG & Co. among the risers. Banco Santander SA (+9,1%) said late Monday that its senior management has taken a pay cut to finance a newly created fund to help fight the coronavirus, and that it will review its 2020 dividend to make sure it has more flexibility during the pandemic. The fund is initially expected to be worth at least 25 million euros ($26.8 million) and will provide essential materials and equipment, the Spanish lender said. Pernod Ricard's (+3,6%) guidance cut this morning was worse than anticipated, but there are glimmers of good news in the release, RBC analysts say. The French spirits maker now sees organic profit from recurring operations falling 20% for the year ending June 30, while RBC had forecast a 7% fall.

United States

U.S. stocks rallied intraday on signs that lawmakers and the Trump administration were nearing a deal on a giant stimulus package aimed at limiting the economic fallout of the coronavirus pandemic. The Dow Jones Industrial Average gained 1,403 points, or 7.5%, in afternoon trading. It had been up nearly 10% earlier, before paring gains. The S&P 500 climbed 6.1%, while the Nasdaq Composite rose 5.1%. "Markets are definitely reacting to the prospects of a stimulus deal," said Jason Pride, chief investment officer for private wealth at Glenmede. A string of emergency measures by the Federal Reserve to support credit markets and ensure funding for American businesses and homeowners has also helped alleviate some of the most pressing concerns among investors. At the same time, markets remain sensitive to reports of fresh outbreaks of the virus and the damage caused to the economy by measures to stem the contagion. Speculation about the breadth and depth of an impending global recession continue to weigh on investors. Twitter Inc. (+5,7%) warned its financial performance would fall short this quarter as the coronavirus pandemic depresses advertising spending, an indicator social-media platforms may not be able to quickly translate increased user engagement during the global health crisis into financial gain.

Asia

Some Bank of Japan board members expressed their concern about the possibility that the effect of the novel coronavirus on the country's economy could be long-lasting, according to a summary of opinions of the central bank's March meeting released Wednesday. "Japan's economy has shown some weakness since before Covid-19 exerted effects, and there is concern that it could remain weak even after overseas economies recover," the summary quoted one of the nine policy board members as saying at the March 16 meeting.

Bonds

In morning trading in Hong Kong, the Hang Seng Index rose 2.6%. In Japan, the Nikkei 225 jumped 5.5%, while Australia's ASX 200 gained 3.4% and South Korea's Kospi rose 4.5%. The demand for U.S. government bonds, which are seen as a haven when markets are in turmoil, also showed signs of easing. The yield on the 10-year U.S. Treasury, which moves inversely to its price, rose to 0.842%, from 0.763% Monday, according to Tradeweb.

Analysis

IR lowers the BMW target to 45 (48) EUR – Hold
Dt. Bank lowers the PVA Tepla target to 14 (18) EUR – Buy
JPM lowers the Hugo Boss target to 45 (56) EUR – Neutral

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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