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Research Market strategy
by Swissquote Analysts
Morning News

Tight Georgia Runoff Races Leave Senate Control in Balance

Topic of the day

The final day of voting in a pair of U.S. Senate runoff elections in Georgia capped a high-profile and costly fight that left hanging the question of which party will control the chamber as well as the scope of President-elect Joe Biden's legislative agenda. As Election Day drew to a close, both races were too close to call. The leads between the Democrats and Republicans seesawed throughout much of the night. One top state election official said the races could be called by Wednesday morning, and another suggested it could take days for winners to become apparent. The runoffs, held because none of the four top finishers won 50% of the vote in November, drew hundreds of millions of dollars in campaign spending as well as the nation's political attention for the past two months. The elections came as President Trump has alleged widespread voting irregularities in the state, which he lost to Mr. Biden in November by about 12,000 votes, but no evidence of significant fraud has been found after two recounts. The vote also came a day before a group of Republican lawmakers are planning to object to the Electoral College vote count during a joint session of Congress, an effort pushed by Mr. Trump as part of his last-ditch bid to overturn the vote result.


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Swiss stocks

The SMI slid 0.4 percent to 10,694 points Tuesday. The rampant coronavirus pandemic dominated sentiment across Europe amid a new six-week UK lockdown and likely extension of Germany’s lockdown. While financial stocks UBS, Credit Suisse, Swiss Life and Swiss Re were among the SMI’s gainers, heavyweights Roche, Novartis and Nestle each fell by up to 1.2 percent. Lonza rose 1.7 percent to lead the SMI. After a strong Monday, Sika slid 0.1 percent to CHF 248.50 on news that analysts had raised their target to CHF 260 from CHF 240 and maintained their "outperform" rating. Givaudan, another Monday gainer, fell 1.4 percent at the rear of the index. Lafargeholcim gained 0.4 percent after a Bloomberg report that the company is about to acquire Bridgestone subsidiary Firestone Building Products, a move analysts said would give it more medium-term price clout. Dufry rose 0.3 percent on news of a cooperation agreement with Hainan Development Holdings to develop the duty-free products business.

International markets

Europe

European shares mostly fall on concerns about increased coronavirus restrictions, though oil stocks limit overall losses after Saudi Arabia and Russia reportedly agreed to delay any increase in crude production until March. The Stoxx Europe 600, DAX and CAC-40 all close slightly lower, though the FTSE 100 edges 0.6% higher. The price of a barrel of Brent crude gains 4% to $53.12, boosting stocks in BP, Eni, Royal Dutch Shell and Total. "The FTSE 100 isn't as strong as it seems because over half its gains in terms of index points are being derived from Shell and BP," David Madden at CMC Markets says. "Tougher lockdown restrictions in countries like the UK, Germany and Denmark have dampened sentiment." Ryanair Holdings and Wizz Air Holdings each reported sharp drops in December traffic as several European nations impose severe restrictions on movement. Ryanair said passenger traffic fell 83%, as it operated 22% of its schedule with a 73% load factor. Wizz Air said passenger traffic fell 80% on a 56% load factor. Dialog Semiconductor PLC late on Monday raised its fourth-quarter revenue outlook on the back of stronger consumer demand.

United States

U.S. stocks climbed as investors awaited the outcome of two electoral races in Georgia that will determine control of the Senate. The S&P 500 rose 0.7%, and the Dow Jones Industrial Average was up 0.6% as of the 4 p.m. close of trading in New York. The Nasdaq Composite jumped about 1%. The major benchmarks tumbled sharply Monday, after closing at record levels just days earlier. Money managers are closely monitoring the Georgia Senate runoff elections: If Democrats win both seats, that could make it easier for President-elect Joe Biden's administration to pass new legislation. Additional fiscal stimulus would be more likely if Democrats control Congress and the White House, and that could potentially give stocks another leg up, investors say. But the prospect of tax increases and more regulation is also weighing on markets, they caution. Amazon.com Inc. said it has bought 11 Boeing 767-300 aircraft from Delta Air Lines Inc. and WestJet Airlines Ltd., expanding its cargo fleet as it handled surging online orders during the Covid-19 pandemic. The e-commerce giant on Tuesday said the four aircraft acquired from WestJet in March are being converted from their passenger function into cargo and will enter the Amazon Air fleet in 2021. The seven aircraft acquired from Delta will enter the cargo network in 2022, Amazon said. Amazon said it will continue to rely on third-party carriers to operate the aircraft. "Having a mix of both leased and owned aircraft in our growing fleet allows us to better manage our operations," said Sarah Rhoads, vice president of Amazon Global Air. International Business Machines Corp. (IBM) said Tuesday that it has appointed Gary Cohn to serve as vice chairman of its board of directors.

Asia

The stock exchanges in East Asia and Australia show no clear trend in the middle of the week. This means that initial gains, triggered by slightly positive signals from Wall Street, cannot be maintained. The Shanghai Composite is hardly changed at 3,529 points, the Hang Seng Index is down 0.4 per cent. The Nikkei-225 continues its recent negative trend and loses another 0.2 per cent to 27,102 points.

Bonds

The yield on the 10-year U.S. Treasury note has inched closer to 1% as incoming returns from Georgia's two runoff elections cause investors to increase bets that Democrats could win narrow control over the Senate - an outcome that many believe could lead to more government borrowing and higher inflation. The 10-year yield was recently 0.985%, up from 0.955% at Tuesday's close.

Analysis

CS lowers the Pernod-Ricard target to 170 (172) EUR – Neutral
JPM rises the Richemont target to 77 (65) CHF – Neutral
BoA rises Nordex and Siemens Gamesa to Buy (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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