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Research Market strategy
by Swissquote Analysts
Morning News

Citigroup Profit Falls 34% as It Sets Aside More Money for Bad Loans

Topic of the day

Citigroup Inc. said Tuesday that its third-quarter profit slumped 34% and the bank set aside billions of dollars to cover potential losses in the coronavirus recession. Citigroup posted a profit of $3.23 billion, or $1.40 a share, down from $4.91 billion, or $2.07 a share, one year ago. Analysts had expected 91 cents a share, according to FactSet. In the second quarter, profit had fallen to 50 cents a share. Revenue in the consumer bank fell as people continued to struggle through the recession. The Wall Street operations turned in higher revenue as trading surged in the uncertain market and bankers helped nervous companies raise cash and sell stocks and bonds to ride out the downturn. JPMorgan Chase & Co., which also reported results Tuesday, followed a similar pattern, though its overall profit rose 4%. Still, Citigroup's results were better than the second quarter's and topped analyst expectations.


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Swiss stocks

After taking a downturn in the afternoon, the SMI closed 0.3 percent softer on 10,336 points Tuesday. Traders said investors were cautious because of all the unknowns in the US presidential election, Brexit and rising coronavirus infections. Although US banks JP Morgan and Citigroup’s quarterly reports held positive surprises, the European bank stocks index fell 2.7 percent, but the Swiss banks in the SMI, Credit Suisse, only slid 0.2 percent and UBS fell 0.3 percent. ABB stagnated despite news that it will supply charging stations for e-vehicles to France and later to other European countries. Roche declined 0.5 percent despite news that it hopes to supply a high-volume antigen test to help diagnose Sars-Cov-2 virus by the end of the year. Traders said the market launch was late compared to other companies. Among second-tier stocks, Emmi crashed 3.3 percent after an analyst downgrade. Relief Therapeutics surged 6.3 percent and Basilea 0.9 percent on reporting positive study results.

International markets

Europe

European stocks fall as coronavirus-vaccine worries and US election uncertainty weigh on market sentiment. The Stoxx Europe 600 and FTSE 100 drop 0.5% apiece, the CAC-40 is down 0.6%. Air traffic will only recover roughly 50% next year while airline profitability will remain very low, JPMorgan Cazenove estimates, prompting the bank to cut its forecast for Airbus's 2021 deliveries by 10% to 633 aircraft. "The outlook for airline profits remains very weak and we expect the global airline industry to remain deeply loss-making in 2021," the bank says. On the other hand, JPMorgan Cazenove now expects the European plane maker to end 2020 with roughly 65 undelivered planes compared with 100 previously estimated. The bank cuts its recommendation on the stock to underweight from neutral. UniCredit SpA said Tuesday that it appointed former Italian minister of economy and finances Pier Carlo Padoan as a nonexecutive director and chairman designate. The Italian bank said the unanimous decision came as Elena Zambon is stepping down. Mr. Padoan will serve as a board member until the annual general meeting to approve the 2020 financial statements, UniCredit said. UniCredit said Mr. Padoan would be the best candidate for the role of chairman for the next term from 2021 to 2023.

United States

U.S. stocks ended lower Tuesday, pressured by a string of mixed earnings reports from companies ranging from airlines to banks. The Dow Jones Industrial Average and S&P 500 both fell 0.6%. The Nasdaq Composite edged down 0.1%. U.S. investor Capital Group Cos. has raised its stake in Deutsche Bank AG, sounding a rare note of confidence in prospects for the troubled European banking sector. The asset manager, which has over $1.7 trillion under management, added another 3.61% stake to its existing holdings in Deutsche Bank AG, according to a securities filing Tuesday. Together with an investment the bank disclosed in March, Capital Group now owns 7.35% of Deutsche Bank. That stake is worth nearly EUR1.2 billion, equivalent to $1.4 billion. Boeing Co. (BA) said Tuesday it delivered 28 commercial airplanes in the third quarter, a 55% drop from the 62 commercial planes delivered in the third quarter of 2019. So far this year, the aerospace and defense company delivered 98 commercial planes, compared with 301 commercial planes delivered by the same time span last year. "We continue to work closely with our customers around the globe, understanding their near-term and longer term fleet needs, aligning supply and demand while navigating the significant impact this global pandemic continues to have on our industry," Chief Financial Officer Greg Smith said in a statement.

Asia

Japanese stocks were down slightly today, weighed by falls in financial and auto stocks amid uncertainty over the pace of a global economic recovery. Prime Minister Yoshihide Suga's economic and regulatory initiatives will be closely watched. South Korea's Kospi was as well lowers ahead of the central bank's policy meeting. Investors were on the sidelines as they waited for the outcome of the Bank of Korea's rate-setting meeting. Hong Kong shares were lower, erasing opening gains as trading resumed after being suspended Tuesday due to the city's typhoon alert.

Bonds

U.S. Treasury yields fell Tuesday after U.S. drugmakers reported setbacks to their efforts to develop a remedy for Covid-19. The 10-year Treasury note yield slid 4.9 basis points to 0.726%, its biggest daily drop since June 11, while the 2-year note rate edged down 1.4 basis points to 0.139%. The 30-year bond yield slipped 6 basis points to 1.513%, marking its biggest one-day drop since July 9.

Analysis

CS rises the Henkel target to 85 (80) EUR – Neutral
JPM rises Adecco to Overweight (Neutral) – Target 58 (55) CHF
Citi lowers the Evotec target to 28,50 (29,50) EUR – Buy


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