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Research Market strategy
by Swissquote Analysts
Morning News

Deutsche and Commerzbank Merger Talks Have Broken Down

Topic of the day

Banking giant Deutsche Bank and its crosstown rival Commerzbank on Thursday ended merger talks, leaving in tatters the German government's hope to shore up both banks and create a banking powerhouse. The failure to unite the two ailing lenders is likely to unleash fresh attempts by other banks to scoop up one or both of the banks, a process that could spur the biggest reshuffling of European banking assets since the financial crisis. "After careful analysis it became apparent that such a combination would not be in the interests of either bank's shareholders or other stakeholders," Commerzbank said. After years of flirting with a tie-up, the banks for the first time announced last month they were in formal merger talks. They were both under pressure from investors and the German government to find a way to revive themselves after years of slumping performance and overhauls. A deal offered the potential to drastically slash costs by cutting tens of thousands of jobs and lower funding costs for troubled Deutsche Bank through access to the direct government shareholding and added retail deposit base of Commerzbank. Without a deal, both banks face myriad challenges, though Commerzbank is seen by many investors as the steadier of the two. Since 2016, it has cut staff and narrowed its focus to deposit-taking and commercial lending. That's helped Commerzbank boost its customer base as well as loan volume for German mid-size companies.

Swiss stocks

Good financials from domestic companies pushed the SMI up 0.4 percent to 9,694 points Thursday, though it did not reach the previous day’s record high of just over 9,700 points. UBS gained 1.2 percent on better than expected quarterly figures, also announcing the resumption of its share buyback programme and more positive second-quarter outlook. Heavyweight Novartis profited again from the financials it released Wednesday and positive analyst comments Thursday, rising a further 2.7 percent. Recent Novartis spin-off Alcon surged 3.5 percent, but heavyweight Roche fell 0.9 percent. Heavyweight Nestle closed up 0.1 percent after interim losses. Watch and luxury goods makers Swatch fell 1.2 percent and Richemont 1.7 percent on no news, possibly because of the latest appreciation of the Swiss franc. Among second-tier stocks, logistics group Kühne + Nagel surged 3.8 percent after posting good financials. Analysts said that free cash flow in particular had recovered better than expected.

International markets


The Stoxx Europe 600 index finished down 0.83 point, or 0.21%, to 390.15, its largest one day point and percentage decline since April 9. The German DAX was down 30.56 points, or 0.25%, to 12282.60, while the French CAC was down 18.39 points, or 0.33%, to 5557.67. Meanwhile, the U.K. FTSE 100 index was down 37.62 points, or 0.50%, to 7434.13 - down for the second consecutive trading day. French President Emmanuel Macron promised to cut taxes in a long-awaited address that sidestepped demands for sweeping measures to quell months of violent yellow-vest protests. Speaking from within the gilded interior of the Élysée Palace, Mr. Macron said he planned to peg monthly pensions of less than EUR2,000 ($2,238) to the rate of inflation and to ask his government to look into how to finance a reduction of income taxes.

United States

The Dow Jones Industrial Average slumped intraday, as shares of 3M dropped sharply following a weaker-than-expected earnings report. The blue-chip index fell 81 points, or 0.3%, to 26515, paring early losses after the index shed more than 250 points. The S&P 500 edged up 0.2% and the technology-heavy Nasdaq Composite added 0.4%. Stocks have pulled back in recent sessions after the S&P 500 and Nasdaq notched fresh records Tuesday. The Dow now sits roughly 1.2% below its October closing record. Shares of Dow component 3M shed 13% after the manufacturer of Post - its and industrial products said it would cut 2,000 jobs and restructure its sprawling business after demand for its tapes and adhesives fell in China and other important markets. The company said revenue fell in most of its divisions and that demand for its products was particularly weak in China and among car makers. The declines in 3M pressured the broader market, with the industrial sector in the S&P 500 shedding 1.7%. The losses offset a 1.3% rise in the communication-services group.


Asian equities remain widely lower after generally modest declines in Europe and the U.S. Thursday. Taiwan's market, which has been near early October's high, is the biggest decliner at 0.9% amid broad weakness in Asian chip stocks after Intel's reduced 2019 forecast. Taiwan Semi is off 2.6%. Japan's Nikkei has dropped 0.7%, with a stronger yen adding to the downside move after yesterday's equities outperformance.


U.S. government-bond prices eased lower as new reports sent conflicting signals about the strength of the U.S. economy. The yield on the benchmark 10-year U.S. Treasury note settled at 2.536%, compared with 2.522% Wednesday.


UBS rises Facebook to Buy (Neutral)
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