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Research Market strategy
by Swissquote Analysts
Morning News

Swiss Competition Commission Fines Global Banks Over Forex Cartels

Topic of the day

Switzerland's competition commission has fined five global banks a total of 90 million Swiss francs ($90.7 million) over manipulation of the foreign-exchange market, adding to penalties previously levied by the European Union. The commission said Thursday that the settlements will close investigations into two cartels formed by employees of Citigroup Inc. (C), JPMorgan Chase & Co. (JPM), Barclays PLC (BARC.LN), Royal Bank of Scotland Group PLC (RBS.LN), Mitsubishi UFJ Financial Group Inc. (8306.TO) and UBS Group AG (UBS). The fines ranged from CHF28.5 million for Citigroup to CHF1.5 million for MUFG Bank. Swiss bank UBS escaped a fine due to having revealed the existence of the cartels to authorities. JPMorgan, which is paying a fine of CHF9.5 million, declined to comment. UBS noted it was the first bank to disclose potential misconduct and the legacy matter is now resolved. No one from Barclays, RBS or Citigroup was immediately available for comment. An MUFG spokesperson said the penalty related to historic events concerning one individual's conduct. "We are committed to ensuring integrity and compliance with the regulatory authorities in every jurisdiction in which we operate, and have taken a number of measures to prevent this occurring again," the MUFG spokesperson said.

Swiss stocks

The SMI again fared better than other European markets Thursday, closing up 0.2 percent on 9,682 points after European Central Bank President Mario Draghi announced the bank would continue to supply cheap long-term liquidity, but not as cheaply as before. Good German industrial order intake figures buoyed the SMI. Falling market interest rates made dividend stocks with high dividend yields more attractive. Zurich Insurance rose 0.8 percent and Swisscom 0.6 percent. ABB closed up 0.2 percent on news of a major order from the Chinese electricity sector. Falling market interest rates pushed down bank stocks Credit Suisse and UBS were 1.8 percent and 0.3 percent respectively. News of fines totalling CHF 90 million from Swiss Competition Commission on several banks because of forex cartels hardly registered in the market, although an investigation into Credit Suisse continues. Meanwhile, UBS announced the signing of a joint venture with Japanese financial holding company Sumitomo Mitsui.

International markets

Europe

The Stoxx Europe 600 index was down 0.07 point, or 0.02%, to 374.01, its largest one day point and percentage decline since May 31. The decline snapped a three trading day winning streak. The FTSE 100 rose 0.5%, closing up for the fourth day in a row after the European Central Bank signaled that it wouldn't raise interest rates soon. Cigarette-makers Imperial Brands and British American Tobacco topped the chart, ending 5.7% and 3.1% higher respectively. Hargreaves Lansdown was the biggest faller on London's blue-chip index, closing down 4.1%. The French CAC-40 index was down 13.57 points, or 0.26%, to 5278.43. And the German DAX was The DAX was down 27.67 points, or 0.23%, to 11953.14. Mario Draghi didn't take out his proverbial "big bazooka" Thursday but a distinctly smaller caliber, said Wolfgang Bauer, fixed income fund manager at M&G Investments. The prospect of a rate hike has been pushed further out but this hardly comes as a surprise to anyone, he said. In fact, the recent precipitous drop in Bund yields suggests that markets haven't been concerned with rate hikes but, on the contrary, have been pricing in higher chances of a rate cut, Mr. Bauer added.

United States

U.S. stocks extended their gains intraday, buoyed by supportive commentary from global central banks that helped shore up investor confidence earlier this week. The Dow Jones Industrial Average climbed 146 points, or 0.6%, to 25679, heading for its third straight day of gains. The S&P 500 rose 0.5%, and the tech-heavy Nasdaq Composite added 0.3%. All three major indexes are up at least 2% this week, and the blue-chip Dow is on pace to snap a six-week losing streak. Stocks have climbed in recent sessions amid indications that the Federal Reserve might cut interest rates to boost the economy. An escalation in trade tensions have darkened the Fed's economic outlook, making a rate cut possible, if not at the central bank's meeting June 18-19, then possibly in July or later, The Wall Street Journal reported. Investors also other signs of accommodative policy after the ECB said it was keeping interest rates unchanged for now. Policy officials extended the period during which they expected to leave rates on hold from the end of 2019 to at least through the first half of 2020. The euro rose against the dollar to trade 0.5% higher.

Asia

Asian shares were mostly higher in holiday-thinned trade, with markets in Hong Kong, mainland China and Taiwan closed, while U.S. stocks extended gains Thursday on dovish central-bank signals with the Dow and S&P 500 adding to this week's rally.

Bonds

U.S. government bond prices generally moved higher intraday, one day ahead of a much-anticipated jobs report. In recent trading, the yield on the 10-year Treasury note was 2.093%, according to Tradeweb, compared with 2.119% Wednesday. Yields fall when bond prices rise.

Analysis

UBS rises the AB Inbev target to 81 (75) EUR – Buy
Citi lowers Renault to Neutral (Buy) – Target 56 (69,30) EUR
IR rises the Ziel Axel Springer target to 58 (53) EUR – Hold


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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