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Research Market strategy
by Swissquote Analysts
Morning News

Kering Bags Another Quarter of Double-Digit Growth

Topic of the day

Kering said Wednesday that its revenue climbed higher in the first quarter, driven by its flagship Gucci brand, which posted another quarter of double-digit growth. The French luxury-goods group said first-quarter revenue was 3.79 billion euros ($4.28 billion), up 22% from EUR3.11 billion during the same period the previous year. Revenue grew 18% on a comparable basis, the company said. Revenue at Kering's closely-watched Gucci label grew 25% to EUR2.33 billion, slightly above analyst expectations of EUR2.31 billion first-quarter revenue, according to a FactSet consensus estimate. The brand accounts for the majority of Kering's earnings and has enjoyed meteoric growth since 2015. Kering said Gucci had a very good quarter despite facing a high comparison basis. Gucci's growth rate does, nevertheless, represent a sequential slowdown from the previous quarter, when the brand's revenue was up 28%. This is normal as Gucci enters a "normalization" phase after two years of "absolutely exceptional" growth, Kering Chief Financial Officer Jean-Marc Duplaix said in a conference call. Mr. Duplaix confirmed in a call that Kering still believes Gucci can outperform the luxury-goods sector and grow at double the growth rate of the sector for 2019.

Swiss stocks

The SMI rose 0.2 percent to 9,597 points Wednesday. China announced better than expected GDP and industrial production figures, but Wall Street was showing signs of fatigue after regaining almost all its losses since October. On the SMI, cyclical stocks were in demand, while defensive papers came under pressure. ABB surged 5.4 percent after releasing first-quarter financials and CEO Ulrich Spiesshofer’s unexpected resignation. Analysts were confident interim CEO Peter Voser would continue his predecessor’s strategy. ABB’s incoming orders recovered strongly after a weak fourth quarter, and its EBITA margin was slightly above analyst expectations. China’s good economic data helped China-reliant luxury goods stocks Swatch gain 3.4 percent and Richemont 2.9 percent. The US "Medicare-for-all" debate pushed Novartis down 2.6 percent and Lonza 3 percent. Roche slid 1 percent, buoyed by better than expected first-quarter turnover figures and an upward revision of its full-year outlook.

International markets

Europe

The stock markets in Europe went up on Wednesday. The Chinese gross domestic product already provided the impetus in the morning, for which it rose by 6.4 percent in the first quarter. Production in the world's second-largest economy even jumped by 8.5 percent, more than two full percentage points more than expected. The DAX rose for the seventh day in a row. It gained 0.4 percent to 12,153. At 12,195 points, it marked its high for the year in the course of the year. The Euro-Stoxx-50 closed 0.4 percent higher at 3,478 points. The winners included, in terms of sectors, automotive stocks, technology stocks and chemical companies. The shares of Ajax Amsterdam, the Dutch honorary division's football club, shot up by 9 percent. The price of Juventus Turin from the Italian Serie A fell by 17 percent on the Milan stock exchange. Wirecard rose by just under 4 percent. Commerzbank gained 1.5 percent. It is said that ING, just like UniCredit, is interested in a takeover. ING was down 0.5 percent.

United States

U.S. stocks edged lower intraday, dragged down by the latest slide in health-care shares despite stronger-than-expected Chinese economic data. The S&P 500 was recently down 0.3%, after entering the session up 16% for the year and 0.8% below last year's record. The Dow Jones Industrial Average inched down 14 points, or less than 0.1%, to 26439. The tech-laden Nasdaq Composite edged down 0.2%. Stocks have wobbled near peaks so far this week, hurt by the deepening rout in health-care stocks. Shares of insurers and drug companies have tumbled lately on fears that tighter regulations pushed by politicians on both sides of the aisle will crimp profits moving forward. The S&P 500 health-care sector fell 2.9% Wednesday, dropping into negative territory for the year and bringing its slide so far in April to 6.6%. Shares of copper company Freeport-McMoRan climbed 0.6% as prices of the metal critical to construction and manufacturing surged to their highest levels since last summer. Qualcomm shares surged 13% Wednesday, after adding 23% a day earlier. Netflix shares were volatile, and recently down 2.2%, after the streaming company exceeded first-quarter targets but gave soft projections for the current period. As reporting wrapped up for the largest banks, Morgan Stanley shares climbed 2.3% following stronger-than-expected profit and sales figures. PepsiCo and United Continental Holdings were among the companies also climbing after their latest quarterly results.

Asia

Asian stocks generally turned modestly lower as the morning's trading progressed, though broad direction was lacking. Korea's Kospi fell 0.7% after the Bank of Korea kept its base rate unchanged and hinted it will tick down 2019's GDP-growth forecast.

Bonds

U.S. government bonds circled back to where they started, having rebounded from overnight losses that followed the release of encouraging Chinese economic data. The yield on the benchmark 10-year U.S. Treasury note settled at 2.592%, the same level as Tuesday.

Analysis

UBS downgrades Paypal to Neutral (Buy) - Target 120 USD
IR downgrades Ericsson to Hold (Buy) - Target 100 SEK
IR raises ABB target to 20,50 (20) CHF - Hold
RBC raises Danone target to 76 (74) EUR - Outperform


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