02 May 2016Monday Report

Economy Markets

Swiss Market Recommended Stock Watch

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ABINBEV (Core Holdings) is due to release its Q1 results this Wednesday. Organic sales growth and operating performance should show resilience. On a reported basis, sales, EBIT and EPS will have been affected by various cyclical and non-recurring effects (USD appreciation, economic weakness in Brazil, the disposal of Eastern European businesses and higher finance costs following the acquisition of SABMiller). Good news: according to Nielsen, the US beer market picked up in Q1.

LEGRAND (Core Holdings) is due to release its Q1 2016 results this Wednesday. We are expecting zero organic growth, slightly positive growth on a reported basis (due to acquisitions), a stable operating margin and confirmation of FY 2016 guidance.

PEUGEOT (Satellites): sales of new private cars in France were up 6.5% in April and 7.7% over the first four months of the year. The PSA group’s sales in this segment (a quarter of the group’s French sales) grew 4.1% in April and 5% over the first four months.

SIEMENS (Satellites) is due to release its Q2 2016 results this Wednesday. We expect the upturn in orders observed over the past two quarters to continue (up 5-10% YoY) and full-year operat-ing margin guidance to be confirmed (at 10-11%). Orders and sales in Process Automation, exposed to commodities, will come under close scrutiny.

TELECOM ITALIA (Satellites): according to Bloomberg, the Euro-pean Commission could also oppose the tie-up between Wind and 3 Italia (Hutchison), fearing that it might damage competition in the Italian telecoms market. Notification this June? This could have a slightly negative effect on Q1.

WIRECARD (Core Holdings) has announced a new partnership with T-Systems (Deutsche Telekom’s IT services subsidiary). Wirecard will provide customers (in the retail sector) of T-Systems with access to its POS (point-of-sale) connected payment solutions platform.

To be monitored this week: KOF employment indicator, OFS March retail sales, April PMI, SECO April consumption climate, KOF April economic survey, SNB end April currency reserves and OFS March overnight hotel stays.The following companies are also due to release their Q1 results: Looser, Luzerner Kantonalbank, Straumann, Dufry, UBS, Valiant, Swisscom, Swiss Air Lines, Pargesa, Glencore plc and Datacolor (H1).

NOVARTIS (Core Holdings): the company is rumoured to be in-terested in US firm Medivation. The latter rejected a $9.3bn offer from French pharma company Sanofi last Friday. ROCHE (Core Holdings): the Committee for Medicinal Products for Human Use (CHMP) has recommended that the combination of drugs Avastin and Tarceva be approved in the EU for the treatment of advanced lung cancer.

Stock marketMay should be approached with caution this year. With markets feeling somewhat orphaned by central banks and macro figures not exactly reassuring, indices will likely remain erratic, resulting in higher volatility. We are therefore relatively cautious for the next few days.

CurrenciesThe dollar’s decline has continued, accelerated by Janet Yellen’s comments (USD/CHF: 0.9575; EUR/USD: 1.1480) and the fall in oil prices. Caution: USD/CHF support at 0.9570 is crucial; the next support is at 0.9505. GBP/USD needs to break through 1.4670 to confirm its rise; otherwise, a return to around 1.44 is likely. Gold has once again risen to around $1,294/oz; resistance: $1,345/oz. Our ranges: EUR/CHF: 1.0920-1.1065 flat; EUR/USD 1.1250-1.17 flat/bearish; USD/CHF bullish, with 0.98 possible.

Accommodative announcements from the Fed caused US 10-year yields to fall 7 bps. Eurozone sovereign yields rose slightly (DE: +5 bps; FR: +9 bps; IT: +3 bps) under the impact of strong macroeco-nomic statistics. This pushed down the dollar (dollar index: -2.1%). With the BoJ making no new announcements, the yen soared (up 4%), pulling gold along in its wake (up 5%) and causing domestic equities to nosedive (down 5.2%). Equity markets in general suf-fered (with the MSCI World down 0.8%), but corporate bonds did not (with yields in the global high-yield segment down 10 bps). To be monitored this week: ISM manufacturing and services PMI, vehicle sales, trade balance, consumer credit and employment re-port in the US; retail sales in the eurozone; and manufacturing and services PMI (official and Caixin) in China.

Last week’s US figures were lacklustre. Disappointments included new home sales (down 1.5% in March), durable goods orders (up 0.8% vs. 1.9% expected), consumer confidence (down slightly from 96.1 to 94.2) and the initial estimate of GDP growth, which came in at 0.5% (QoQ annualised). However, a breakdown of the latter reveals that quality is satisfactory, with consumer spending robust (up 1.9%). This should continue, with private income up a higher than expected 0.4% in March. In the eurozone, confidence indica-tors improved slightly, in line with expectations. Good news: GDP growth accelerated in Q1 to 0.6% (QoQ). While the breakdown is not yet known, the main source of growth appears to be domestic demand. In Germany, the Ifo confidence index was stable at 106.6 in April.

Since 22.04.2016 31.12.2015Switzerland SMI -1.83% -9.72%

Europe Europe Stoxx 600 -2.00% -6.65%USA MSCI USA -1.25% 0.77%

Emerging countries MSCI Emerging -0.59% 5.80%Japan Nikkei 225 -5.16% -12.44%

As at 29.04.2016CHF vs. USD 0.9585 1.96% 4.43%EUR vs. USD 1.1454 1.89% 5.44%

10-year yield CHF (level) -0.31% -0.34% -0.08%10-year yield EUR (level) 0.28% 0.23% 0.63%10-year yield USD (level) 1.82% 1.89% 2.27%

Gold (USD/per once) 1 292.34 4.09% 21.65%Brent (USD/bl) 47.49 3.94% 33.03%

Source: Datastream

Source: Thomson Reuters Datastream, 02.05.2016

US contributions to GDP growthPercentage points

2011 2012 2013 2014 2015-4

-2

0

2

4

6

-4

-2

0

2

4

6

Consumption Investments GovernmentInventories Net trade GDP