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Research Market strategy
by Swissquote Analysts
Morning News

Walmart Sales Surge as Coronavirus Drives Americans to Stockpile

Topic of the day

Walmart Inc. is reaping the rewards of being one of few retailers positioned to successfully navigate a global pandemic, reporting a surge in quarterly sales as consumers turned to its giant stores to stock up on food and household goods. The country's largest retailer said U.S. comparable sales, those from stores and digital channels operating for at least 12 months, rose 10% in the quarter ended May 1. It was a period when the new coronavirus upended consumer buying habits, forced many competitors to temporarily close and led more than 30 million Americans to file for unemployment. Walmart's U.S. foot traffic fell in the quarter, but spending per transaction rose 16.5%. Walmart sales got a boost in April when shoppers spent government stimulus money, the company said. E-commerce sales jumped 74% as millions of customers switched to ordering online for home delivery or picking up groceries in the company's parking lots. The company said it absorbed about $900 million in additional costs related to Covid-19, including raising wages for warehouse workers and paying bonuses to its store staff. It also hired 235,000 new hourly workers to help it staff stores. However, Walmart still reported a higher operating profit for the period. Overall, Walmart's global revenue rose 8.6% to $134.62 billion and net income rose 4% to $4 billion. Excluding gains on its investment in China's JD.com, earnings per share were $1.18, slightly better than Wall Street was expecting.

Swiss stocks

After Monday’s strong start, the SMI treaded water Tuesday, only gaining 0.2 percent to 9,764 points shortly before close. The euphoria seen Monday about the promising clinical trials on US pharma company Moderna’s coronavirus vaccine candidate waned Tuesday, as the drug must still pass several stages before approval. The SMI was buoyed by a proposal by Germany and France to set up a EUR 500 billion coronavirus pandemic recovery fund for the European Union. Cyclicals ABB rose 1.3 percent, Adecco 0.6 percent and Geberit 1.9 percent. Defensive stocks Nestle and Novartis each gained 0.3 percent. Roche slid 0.9 percent, which traders again ascribed to profit-taking. Richemont rose 1.0 percent after issuing a EUR 2 billion bond. Swatch rose 1.4 percent in its wake. CS Group rose 0.9 percent and UBS 1.2 percent. Second-tier Julius Baer surged 5.0 percent after releasing financials which analysts said showed good cost discipline. Sonova climbed 4.5 percent on presenting 2019/20 figures.

International markets

Europe

European stocks were mostly lower as traders booked profits following gains in the previous session on optimism over the easing of coronavirus lockdowns. The Stoxx Europe 600 dropped 0.6%, the FTSE 100 declined 0.8%, the CAC-40 slipped 0.9% while the DAX gained 0.2%. "Economies around the global are still being reopened, and hopes remain high for a potential Covid-19 vaccine, but it seems like the bulls have decided to take a breather today," CMC Markets analyst David Madden said. "It might transpire that today's negative move was just a slight retracement before the next leg higher. Thyssenkrupp is lumping together several businesses that have "no sustainable future prospects within" the group and combined account for roughly EUR6 billion in sales a year, as it speeds up restructuring plans. Shares in Telecom Italia fell sharply after the company's first-quarter revenue came in below analysts' expectations, hit by shop closures due to the coronavirus lockdown. Shares in Thyssenkrupp AG traded higher Tuesday after the company detailed further measures to shore up its finances, including asset sales and seeking partners for its steel and marine businesses. The industrial conglomerate said late Monday that its slim-down includes the plan to keep the Materials Services, Industrial Components and Automotive Technology businesses under its roof, while aiming to divest or close businesses with combined sales of 6 billion euros ($6.5 billion).

United States

The Dow Jones Industrial Average slipped intraday, following the biggest rally in blue-chip shares in more than a month. The Dow retreated 33 points, or 0.1%, in midday trading, giving up some of its gains a day after a 3.9% jump sparked by signs of progress toward a coronavirus vaccine. Meanwhile, the S&P 500 gained 0.3%, while the tech-heavy Nasdaq Composite was up 0.8%. "Investors are just pausing for a breather after yesterday's excitement about the potential development of a vaccine," said Hugh Gimber, strategist at J.P. Morgan Asset Management. A successful vaccine would clear the way for a faster recovery in economic growth, he said, but "clearly there's a long way to go before that would come into practice." Despite Monday's rally, the U.S. stock market has hovered in a relatively tight trading range for the past three weeks, with the S&P 500 largely staying between 2800 and 3000. The company's revenue in the fiscal first quarter outpaced expectations of Wall Street analysts as the average customer transaction size rose by 11%.

Asia

Asian markets were mixed after the People's Bank of China left its benchmark lending rate unchanged, as expected. Japanese stocks rose, led by gains in financial, electronics and auto stocks, as hopes for economies to reopen continue, including in Japan. Hong Kong shares ended the session higher, extending a recovery trend after last week's losing streak. China's major stock market benchmarks closed higher, tracking the broader Asian stock market on hopes that a new vaccine could help combat the coronavirus pandemic.

Bonds

The yield on the 10-year U.S. Treasury note slipped intraday to 0.714%, from 0.741% Monday. Bond prices move in the opposite direction from yields. In Washington, Treasury Secretary Steven Mnuchin told lawmakers th

Analysis

CS lowers the Arcelormittal target to 21 (24) USD – Outperform
UBS lowers the Gea target to 27 (29) EUR – Neutral
IR lowers the Richemont target to 48 (74) CHF – Sell


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