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Research Market strategy
by Swissquote Analysts
Morning News

Lufthansa to Ground More Planes, Cut Costs Further Ahead of Tough Winter

Topic of the day

Deutsche Lufthansa AG will ground more planes this winter as up to 30,000 jobs are at risk due to the expected long-lasting fallout of the coronavirus pandemic, the executive board said Sunday in an internal letter sent to employees. The coronavirus-stricken German airline is preparing for winter, described as an "immense challenge" in the letter, by implementing several measures aimed at further reducing costs and operations, the board said. Lufthansa will ground an additional 125 aircraft this winter compared with its original plan to return to 50% of its pre-crisis capacity by the end of 2020. The airline--which had a fleet of 763 aircraft at the end of 2019--also said last week that it was planning to reduce its capacity to a maximum of 25% of last year's level in its fourth quarter as travel demand will remain low. "The number of Covid-19 infections in the world has been rising dramatically again for several weeks and our home markets have been particularly affected by this," the board said, adding that "urgent appeals from politicians to refrain from travel altogether if possible are also placing an enormous burden on our already serious situation."

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Swiss stocks

The SMI closed down 0.4 percent on 9,986 points Monday, below the 10,000 points it had only regained Friday, but fared well compared to European neighbours and Wall Street thanks to its defensive stocks. Economic fears weighed on markets as soaring coronavirus infection numbers are seeing lockdown measures reinstated in some countries. In the US, rising infection figures joined disappointment about the lack of a stimulus package. Weak economic data mirrored developments, including the German ifo business climate index and the US Chicago Fed National Activity Index. SMI heavyweights Nestle gained 0.2 percent, Novartis slid just 0.2 percent and Roche rose 0.8 percent. Novartis will release Q3 figures Tuesday. Lafargeholcim crashed 3.4 percent. ABB fell 0.5 percent after Friday’s disappointing financials. Luxury goods stocks Richemont slumped 2.2 percent and Swatch 2.5 percent. UBS and Zurich Insurance saw only minor losses, while Credit Suisse and Swiss Re each fell by about 2 percent.

International markets


European stocks are firmly lower as optimism about coronavirus vaccine prospects fails to offset doubts about governments' ability to control a potential second wave of infections. The Stoxx Europe 600 drops 1.8%, the FTSE 100 backtracks 1.2%, the CAC-40 falls 1.9% and the DAX retreats 3.7%. The price of a barrel of Brent crude decreases 3.3% to $40.39. AstraZeneca is among a handful of risers in London, up 1.7% after it said its coronavirus vaccine showed a promising immune response in elderly and older adults. Still, coronavirus worries hit airlines and other travel-related stocks. Bayer AG said Monday it would pay as much as $4 billion for U.S. biotech firm Asklepios BioPharmaceutical Inc. to strengthen the German company’s drugmaking arm, as Bayer continues to reel from its acquisition of crops giant Monsanto. The latest deal - for which Bayer will pay $2 billion now and as much as a further $2 billion based on future success milestone - is a bet on cutting-edge gene therapy, in which a functional gene is inserted to counter the effects of a disease caused by a missing or faulty gene. SAP SE shares plunged nearly 20% Monday after Europe's biggest tech company by sales scrapped its profit targets for the year and said measures to thwart a rebound in coronavirus infections would weigh on business through the middle of next year.

United States

Stocks dropped sharply as coronavirus cases surged in the U.S. and Europe, adding to worries about the economic outlook after Congress and the White House failed to agree on a much-anticipated fiscal stimulus deal. The Dow industrials fell 2.3%, the worst day for the blue chips since Sept. 3. The S&P 500 dropped 1.9%, and the Nasdaq Composite fell 1.6%. Among the biggest decliners were the travel and leisure stocks that have come under the most pressure this year during the pandemic. Canadian oil-sands producer Cenovus Energy Inc. and Husky Energy Inc., controlled by Hong Kong billionaire Li Ka Shing, agreed to merge in an all-stock deal valued at 3.8 billion Canadian dollars, equivalent to US$2.9 billion. The deal, unveiled early Sunday, would create the third-largest oil and natural-gas producer in Canada and the second-largest Canadian refiner. Husky shareholders would receive a roughly 21% premium to their shares, the companies said. The transaction marks the latest in a wave of energy deals, as companies merge after a drop in energy prices this year. Facebook Inc. has become the latest tech heavyweight betting that the future of videogaming is in the cloud. The social-media company is adding Netflix-like streaming of games to its Facebook Gaming platform at no cost to players, a move expanding its content library to include more-complex and multiplayer titles. Its free-to-play model is in contrast to the paid, subscription cloud-gaming services that rivals such as Alphabet Inc.'s Google and Microsoft Corp. have introduced.


Asian stocks were broadly down after dimmed hopes for U.S. fiscal stimulus led to selloffs on Wall Street. Canon Inc.'s net profit for the first nine months of the year plunged due to the global spread of Covid-19. Net profit for the nine months fell to 29.73 billion yen ($283.9 million) from Y92.35 billion in the same period a year earlier, the Japanese camera and electronics maker said Monday.


U.S. Treasury yields fell Monday as the bond market rallied in response to rising Covid-19 infections across the U.S. and Europe. The 10-year note yield fell 2.5 basis points to 0.816%, while the 2-year note rate edged 0.4 basis point down to 0.151%. The 30-year bond yield slid 3.7 basis points to 1.609%. Traders expect a choppy market for the next few days, as investors fret about a new wave of Covid-19 possibly leading to further lockdowns. The proximity of U.S. elections exacerbates the risk-off mood - with fears of a prolonged legal battle post-election.


HSBC rises the Unilever target to 50 (49) EUR – Hold
CS rises the LSE target to 9.240 (9.030) p – Outperform
CS rises the Enel target to 8,20 (7,80) EUR – Outperform

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