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Research Market strategy
by Swissquote Analysts
Morning News

Apple and Qualcomm Agree to Drop All Litigation

Topic of the day

Apple Inc. and Qualcomm Inc. agreed to dismiss all litigation between the two companies world-wide and forged a new license agreement, ending a long-brewing legal battle over how royalties are collected on innovations in smartphone technology. The settlement, which came hours after opening arguments in a trial between the companies started, includes an undisclosed payment from Apple to Qualcomm. The companies also said in a joint statement that they had reached a six-year license agreement and a multiyear deal for Qualcomm to supply Apple with modem chips. Qualcomm had claimed Apple was violating its patents by withholding royalties, while Apple argued Qualcomm had been overcharging for those patents for years, abusing its dominant position in the market. At stake was the future of Qualcomm's licensing model and billions of dollars in royalties that Apple has either paid or kept. Until the settlement was struck, Qualcomm had lost more than $25 billion in market value amid the looming threat. The emergence of fifth-generation wireless speeds as a key component of coming devices likely drove the two companies to the table. Apple's most recent iPhones have been using modem chips from Intel Corp., which has lagged behind Qualcomm in providing wireless features. Apple also faced falling behind rivals such as Samsung Electronics Co. in offering speedier wireless devices. Determining exactly who benefits by how much is difficult because the companies didn't divulge pricing or other terms of the licensing and supply deals. Qualcomm said the agreement will add about $2 in annual earnings per share as modem-chip shipments begin.

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Swiss stocks

The SMI posted solid gains Tuesday for the second consecutive day as prospects for stocks brightened worldwide. Good Chinese economic data supported the Shanghai stock market before the release of Chinese GDP figures Wednesday. On Wall Street, the latest company financials were mostly well received,with the US leading indices approaching all-time highs. The prospect of long-term low interest rates is also driving the market. Richemont rose 1.6 percent and Swatch surged 3.3 percent, buoyed by hopes of a strong Chinese economy. Both luxury goods stocks are heavily dependent on the Chinese market. Swiss Life gained 1.3 percent after rating agency S&P Global raised the insurer’s creditworthiness rating to A+ from A. Bank stocks continued their recovery. UBS rose 1 percent and Credit Suisse 2 percent. While cyclical stocks were in demand, defensive heavyweights acted as a brake on the index. ABB gained1.5 percent, while Novartis closed slightly down and Roche closed virtually unchanged.

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International markets

Europe

The Stoxx Europe 600 index ended up 1.11 points, or 0.29%, to 389.21, the largest one-day point and percentage gain since April 3. The index now is up for five consecutive trading days. Germany's DAX was up 81.04 points, or 0.67%, to 12101.32 and is up for five consecutive trading days. The CAC-40 index was up 19.94 points, or 0.36%, to 5528.67 and now is up 92.25 points, or 1.70%, over the last five trading days. And the FTSE 100 index was up 33.05 points, or 0.44%, to 7469.92 - the largest one-day point and percentage gain since April 5 and now is up two of the past three trading days. Unicredit gained 3.2% after the financial group agreed to a $1.3 billion fine with the US authorities. Emphasis was also placed on the IPO of the Italian payment service provider Nexi. However, things were not going so well here, as Wirecard's competitor's shares closed at €8.44, well below their issue price of €9. This is one of the largest IPOs of the year in Europe with a proceeds of just under €2 billion for the company.

United States

U.S. stocks eased from session highs intraday, as health-care shares erased early gains on renewed concerns about tighter health-care regulation. The Dow Jones Industrial Average rose 48 points, or 0.2%, to 26434, after climbing more than 140 points in early trading. The S&P 500 rose less than 0.1%, and the tech-heavy Nasdaq Composite added 0.3%. Trading has been thin this week as U.S. major indexes near records, with the Nasdaq Composite clocking the lowest volumes since Christmas on Monday. The S&P 500 is within 0.8% of its September high, while the Dow industrials are off 1.5% of their October record. Health-care stocks in the S&P 500 fell 1.6% after shares of UnitedHealth Group dropped 5.4%, heading toward its biggest percentage loss since November 2015. The parent of the nation's biggest health insurer raised its profit guidance for the year on revenue growth across all its businesses, but shares fell after Chief Executive David Wichmann warned investors that the so-called Medicare for All bill proposed by House Democrats threatens to "destabilize the nation's health system."

Asia

Asian stocks were mixed following the Chinese data, with the Hang Seng and Shanghai turning negative after moving higher immediately following the GDP reading. It was a similar story for most of the region's other benchmarks, which either saw gains trimmed or losses extended.

Bonds

U.S. government-bond prices fell intraday as investors assessed recent comments by Federal Reserve officials suggesting that they could let inflation rise above their 2% target. The yield on the benchmark 10-year Treasury note was recently at 2.583%, according to Tradeweb, up from 2.553% Monday.

Analysis

UBS downgrades Spotify target to 180 (182) USD - Buy
UBS raises Citigroup target to 83 (78) USD - Buy
Dt. Bank upgrades Netflix to Buy (Hold)
Warburg downgrades Software AG target to 45 (50) EUR - Buy

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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