20 March 2017Monday Report

Economy Markets

Swiss Market Recommended Stock Watch

Sentiment of traders

PerformancesToday’s graph

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GEMALTO (Satellites) has been added to our Satellite Recom-mendations. The group is in the midst of transformation. Gemalto is gradually moving from being a hardware/software and chip card services provider to being a major player in digital security (machine-to-machine; government ID; IoT (Internet of Things)). This transformation will become more visible in 2017 and 2018. The share is currently undervalued.

RELX (Core Holdings) is relatively underexposed to measures con-tained in Donald Trump’s initial budget concerning the NIH (Na-tional Institute of Health), whose budget is to be cut by 18%, and training for healthcare personnel (facing a $403m cut). For RELX’s STM business (34% of group revenue), of which academic journals account for 60%, healthcare and medical represent 30-40% of this segment, or 6-7% of total revenue. Not negligible, but not worry-ing in the short term.

UNILEVER (Core Holdings): rumours in the weekend press suggest that Unilever wants to sells its spreads business, which has a weak growth profile, for £6bn (equating to 11.2x EV/EBITDA). A number of private equity funds are said to be interested. The valuation is thought to be at the upper end of analysts’ estimates.

WIRECARD (Core Holdings) is currently finalising its acquisition (announced June 2016) of Citi Prepaid (prepaid card services) in the US. At the same time, the German group is also buying Citi’s merchant acquiring businesses in 11 Asian countries (including Singapore, Hong Kong, Australia and New Zealand). Completion is expected in June 2018. The consensus contribution to EBITDA is 3%.

To be monitored this week: Wüest Partner 2016 Swiss real estate index, SECO March economic forecasts, AFD February foreign trade/watch exports, KOF consensus forecasts, SNB 2016 annual report, and SNB Q4 balance of payments and international invest-ment position.The following companies are also due to release their 2016 results: Hiag Immobilien, Vetropack, Conzzeta, Komax, Orell Füssli, Part-ners Group, Meyer Burger, Emmi, Investis, Bâloise, Metall Zug, Interroll and Cosmo.UBS (Satellites): management appears pessimistic about the group’s chances of reaching agreement with the French justice system over allegations of money laundering and tax evasion at UBS France. UBS is vehemently contesting the €1.1bn demanded by the French courts, opening the way for a court case that could begin this week.

Stock marketNothing seems able to move markets: not the Fed rate hike, ex-pected as it was, nor Janet Yellen’s cautious speech, and less still the G20, which achieved precious little. The only things that might add a bit of volatility are PMI figures around the world and com-ments from Fed bosses. We remain positive.CurrenciesThe EUR/USD rally might not be over. After closing above 1.07 in NY, upcoming resistance at 1.0830-1.0870 is becoming of particu-lar interest in the short term, with a latest target of 1.1150. How-ever, caution is required: yield spreads in favour of USD, Wall Street in good health and Trump with his tax giveaways mean a return to EUR/USD 1.0350 cannot be ruled out in the medium-to-long term. USD/CHF support at 0.9870 should hold. EUR/CHF must break through 1.08 to move out of the range 1.0630-1.0780. Gold: target $1,250/oz; support at $1,225/oz.

The Fed’s message was reassuring: the health of the economy justi-fies a rate hike, but rising inflation remains under control and will prevent any uncontrolled rise in interest rates. The G20 reached cooler conclusions, and the fight against protectionism was absent from the final press release. Emerging assets had a positive week (equities: +4.3%; sovereign yields: -10 bps; currencies: MXN/TRY/ZAR: +3.5%; RUB: +1%; BRL: +1.8%) thanks to the decline in US yields (10-year yields: -7 bps) and USD (dollar index: -0.9%). Gold also benefited (+2%), and European equities (+1.4%) outper-formed their US counterparts (+0.2%). To be monitored this week: house prices, new and existing home sales, manufacturing PMI and durable goods orders in the US; consumer confidence, and manu-facturing and services PMIs in the eurozone; and Ifo confidence index in Germany.

US statistics released last week contained few surprises. SME con-fidence, despite declining somewhat in February (from 105.9 to 105.3), remained high. Consumer confidence (Univ. of Michigan) increased slightly from 96.3 to 97.6 in March, while confidence among homebuilders (NAHB) bounced back from 65 to 71 in the same month. Pressure on prices is evident but not excessive: in February, producer prices were up 0.3% MoM (up 2.2% YoY) and consumer prices up 0.1% MoM (up 2.7% YoY). In the eurozone, industrial production was disappointing in January (up 0.9% MoM). Note that investor confidence (ZEW) bounced back from 17.1 to 25.6 in March. In China, slightly disappointing retail sales – weaker than expected in February (up 9.5% YoY) – were offset by expec-tation-beating investment (up 8.9% YoY) and industrial production (up 6.3% YoY).

As at 17.03.2017 10.03.2017 31.12.2016SMI 8698.53 0.33% 5.82%

Europe Stoxx 600 378.32 1.36% 4.68%MSCI USA 2265.86 0.32% 6.41%

MSCI Emerging 965.57 4.26% 11.98%Nikkei 225 19521.59 -0.42% 2.13%

As at 17.03.2017CHF vs. USD 0.9980 1.23% 1.84%EUR vs. USD 1.0742 0.80% 1.84%

10-year yield CHF (level) -0.08% -0.03% -0.20%10-year yield EUR (level) 0.43% 0.49% 0.11%10-year yield USD (level) 2.50% 2.58% 2.45%

Gold (USD/per once) 1 229.38 2.42% 6.21%Brent (USD/bl) 51.77 -0.21% -8.71%

Source: Datastream

Since

Source: Thomson Reuters Datastream, 20.03.2017

United StatesInflation measures

1998 2000 2002 2004 2006 2008 2010 2012 2014 2016-2

-1

0

1

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3

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6

-2

-1

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1

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Headline CPI (YoY) Core-CPI (YoY) 10Y moving average

2.8

2.22

1.78