Tech Selloff Eases After Fed Signals Steady Course
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Tech stocks rebounded from an early swoon after Federal Reserve Chairman Jerome Powell pledged anew to support the economic recovery by keeping interest rates low, easing concerns about the impact of rising rates on the monthslong rally in major U.S. indexes. Tuesday's swings highlight a midwinter shift in investor appetite to real-economy sectors such as banks over the past year's favorites. The reassessment is being driven by investor expectations that Covid-19 vaccinations will pick up, broadening the scope of the economic recovery. The rise this month in U.S. interest rates is forcing a reassessment of the risks of holding shares that have risen sharply over the past year, intensifying longstanding valuation concerns. The yield on the 10-year U.S. Treasury note has risen more than a quarter of a percentage point so far this month, potentially raising borrowing costs for most companies and crimping profits.
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After a subdued start to the week, the Swiss stock market ended trading with losses on Tuesday. The SMI lost 0.8 per cent to 10,609 points. Financial stocks were among the best performers in the weak market environment. Credit Suisse even rose by 1.4 per cent. The share benefited from analysts' comments. Barclays upgraded the shares to "Overweight". Swiss Re gained 1.2 per cent. With UBS (+0.2) and Swiss Life (-0.3%), other financial stocks also held up comparatively well. This is probably also related to the fact that the sector is benefiting from rising bond yields. Alcon advanced 0.7 per cent ahead of the publication of business figures. Otherwise, shares were sold off across all sectors. Sika slumped 2.7 per cent and was the day's loser. Geberit (-1.5 per cent) and ABB (-2.2 per cent) were also among the bottom performers in the SMI. The index heavyweight Nestle (-1.5%) saw a significant downward trend. The two pharmaceutical giants Novartis and Roche each lost 1.0 per cent. Lonza was upgraded to "Overweight" from "Neutral" by JP Morgan. This did not help the share, which also lost 1.0 per cent.
European equity markets ended Tuesday's session in mixed order, torn between the fall in technology stocks and the rebound in oil stocks. The Stoxx Europe 600 index fell 0.4% to 411.3 points. In Paris, the CAC 40 gained 0.2% while the SBF 120 gained 0.2%. In Frankfurt, the DAX 30 dropped 0.6% while the FTSE 100 in London gained 0.2%. Airline stocks gained ground after British Prime Minister Boris Johnson unveiled a plan to gradually deconflict the country. Aéroports de Paris jumped 4.9%, Air France-KLM took 2.6%, while in London, easyJet rose 4.5%. Values in the oil and oil-related sectors rose in the wake of crude oil prices. Vallourec gained 6.2% and Total gained 2.2%. Hydrogen specialist McPhy (-4.3%) and renewable energy producers Albioma (-3%) and Neoen (-0.7%) fell back, suffering from profit-taking by investors. HSBC Bank (-0.9% in London) saw its net profit fall by 35% year-on-year in 2020 as the economic crisis linked to the coronavirus pandemic led to a jump in bad debt losses and a fall in interest rates.
After a weak start to the week, Wall Street showed a similar picture on Tuesday. The Dow Jones index closed little changed at 31,537 points, while the S&P 500 gained 0.1 per cent. The Nasdaq composite was down 0.5 per cent. There were a total of 1,300 (Monday: 1,564) gainers and 1,970 (1,687) losers. A total of 53 (78) shares closed unchanged. Home Depot (-3.1%), the home improvement chain, reported its results in the pre-market. The company performed better than expected in the fourth quarter, but does not dare to give a positive outlook because of the Corona pandemic and the associated uncertain earnings prospects. Macy's (+3.9%) also performed better than expected. Tesla went down by 2.2 per cent. Observers again saw a connection with Bitcoin here. The cryptocurrency, which only on Sunday marked a record high at around 58,000 dollars, fell sharply again on Tuesday. The medical technology group Medtronic (+1.9%) earned significantly less in the third financial quarter, but exceeded expectations.
The stock exchanges in East Asia show significant declines in the middle of the week. Slight initial gains, as in Hong Kong, cannot be maintained. In China, the Shanghai Composite fell sharply by 2.0 per cent to 3,564 points. In Tokyo, where there was no trading the previous day because of a public holiday, the Nikkei-225 falls 1.1 per cent to 29,820 points. In Hong Kong, the Hang Seng Index slumps by 3.1 per cent, weighed down by plans to introduce a tax on share transactions. In Seoul, the Kospi also slips 1.8 per cent.
The yield on 10-year US bonds eased 0.7 basis point to 1.36 per cent following Fed Chairman Powell's comments. The Fed chief - as widely expected - reiterated the US central bank's commitment to maintain loose monetary policy until the economy has further recovered from the effects of the pandemic.
Oddo upgrades Infineon to Outperform (Neutral) - Target 44 (32) EUR
Barclays rates Credit Suisse Overweight - Target 14 (12.50) CHF
JPM upgrades Lonza to Overweight (Neutral) - Target 680 (600) CHF
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