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IFX - Infineon Technologies AG News Story

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Large Cap
Market Cap £34.26bn
Enterprise Value £37.47bn
Revenue £8.59bn
Position in Universe 36th / 1053

LIVE MARKETS-Closing snapshot: European stocks eke out slight weekly rise

Fri 14th June, 2019 5:01pm
* STOXX 600 down 0.4% * Tech stocks down 1.5%, set for worst day in 2 weeks * Chipmakers hit by Broadcom warning * Kier down more than 25% after Times report on possible housebuilding unit sale June 14 - Welcome to the home for real-time coverage of European equity markets brought to you by Reuters stocks reporters and anchored today by Josephine Mason. Reach her on Messenger to share your thoughts on market moves: CLOSING SNAPSHOT: EUROPEAN STOCKS EKE OUT SLIGHT WEEKLY RISE (1559 GMT) European stocks closed 0.4% lower on Friday as Broadcom's warning overnight sent tech sector reeling. The slide however was not strong enough to wipe-off this week's gains at the pan-European STOXX 600 index .STOXX , which rose 0.3% booking its second straight week of gains after a sharp sell-off in May. Chipmakers AMS AMS.VI , Dialog Semi DLGS.DE , STMicro STM.BN , Infineon IFXGn.DE and BE Semiconductor BESI.AS were among top fallers in Europe. Switzerland-based DKSH was the top faller on the STOXX 600, sliding 10% after Credit Suisse downgraded the stock to "underperform". The utilities sector, seen as safe-haven, strongly outperformed other sub-sectors. (Thyagaraju Adinarayan) ***** SHRINKING LIQUIDITY IN CREDIT MARKETS (1450 GMT) One issue that's had investors worried ever since the financial crisis - and that could exacerbate a global slowdown or market crash in the future - is liquidity in corporate bond markets. "The deterioration in liquidity conditions remains a major source of vulnerability for the market," write Goldman Sachs analysts in a deep-dive on the problem. The corporate bond market has ballooned since pre-crisis - with the market value of investment-grade bonds more than tripling since 2007 - as you can see below, but the banks dealing in corporate bonds have seen their balance sheets and inventories shrink, making them less able to provide liquidity to the market. A key reason for that is tighter regulation in the aftermath of the financial crisis. While this was of course necessary after that global disaster whose consequences the world is still feeling today, some argue it had negative knock-on effects. "This is a classic case of unintended regulatory consequences," says a trader on the problem of illiquidity. "The capital markets and the market for savings and investments function less efficiently due to the loss of liquidity, which is ultimately bad for savers and therefore bad for the economy." Another factor contributing to shrinking liquidity, GS argues, is a contraction in the credit default swap market - a key way investors can short credits. But a silver lining, they reckon, has been credit ETFs which have grown exponentially. "We have documented continued efficiency gains in the ETF create/redeem mechanism that suggest that ETFs are generally net providers, as opposed to consumers, of liquidity," write GS analysts. (Helen Reid) ***** FED RATE CUTS: A REPEAT OF THE 90s? (1321 GMT) Rate cuts or not? Jerome Powell and team, we can only guess! Credit Suisse analysts say the bond market seems of the view that a "short, sharp cutting cycle will be enough to avert a 2001 or 2007 style slowdown". The market is now pricing in 3 rate cuts by January, similar to "insurance" rate cuts seen in 1995 and 1998, Credit Suisse says. (see chart below) It however highlights that the manufacturing data is more healthier now than during the cuts in 90s. Credit Suisse: "The next two weeks, with flash PMI data released on 24th June and the G20 in Osaka 4 days later, should provide us with a clearer sense of whether that view is correct." And what did the S&P500 .SPX do back in the day? It rose 15% during the 1995 rate cut and about 8% in the following 1998 period. (Thyagaraju Adinarayan) ***** "TIRED" MARKET FALLS FURTHER INTO THE RED AHEAD OF U.S. OPEN (1227 GMT) European stocks have slid deeper into negative territory into midday trading as U.S. futures tumbled. If the sell-off continues the STOXX 600 will surrender its weekly gains which currently look pretty fragile at 0.162%. It's "a tired market after a week of bad news," says one dealer. Tensions over trade are still running high while an attack on oil tankers south of the Strait of Hormuz reignited concerns about a confrontation in the Gulf.*:nL8N23L2WZ Chinese data this morning showed industrial output growth slowed to a 17-year low in May, and hours later the central bank announced 300 billion yuan in fresh support for smaller banks.*:nL4N23L1WS "With all that's been happening, the market has held up remarkably well overall," says another. "I think the U.S. 10-year yield at 2.07 is telling you about the slowing down in the U.S. too." As you can see, Wall Street futures are tracking lower after a relatively decent close last night. (Helen Reid) ***** HAVE GERMAN BUND YIELDS HIT THE FLOOR? (1115 GMT) With the German bund yields at record lows, Morgan Stanley analysts believe it may be getting close to finding a floor. If history is any guide, for the past five years European equities tend to lead Bund yields by 6 months, as per the bank. European equities hit multi-year lows in December (that's 6 months back) before a strong bounce back this year. And, bund yields are near record lows now and as per the trend, yields should rise from here, check out the chart: So what happens to equities? Morgan Stanley: "An alternative interpretation would argue that equity markets have in fact got ahead of themselves and the YTD rally we’ve seen is overdone." (Thyagaraju Adinarayan) ***** RATE CUTS AHOY! (1020 GMT) Markets are pricing in significant rate cuts this year not only by the Fed but also by other global central banks including the BoE, Bank of China, New Zealand and Australian central banks, and the Bank of Japan, as you can see below. The expectation central banks will come to the rescue is what's been driving investors into equities this week - the biggest inflows in 13 weeks, according to EPFR data.*:nL8N23L1Y6 The record $46 billion ploughed into government bond funds over the past six months, meanwhile, tells a story of investors seeking shelter in safe-haven assets as the U.S.-China trade war escalates. Cutting interest rates could ease some of the pain from rising protectionism, but likely not all of it. (Helen Reid and Saikat Chatterjee) ***** SURPRISE! EURO ZONE TAKES THE LEAD OVER U.S. (0928 GMT) It may come as a surprise as European equity funds have suffered outflows 64 out of the 66 past weeks (according to EPFR data) - but Citi's measure of economic surprises for the euro zone has actually climbed recently and is now at its highest versus the U.S. since late 2017, as you can see below. Part of that is down to a significant decline in the U.S. economic surprise index. There's been a dramatic increase in economists' expectations of a Fed rate cut due to trade tensions driving recession risk up.*:nL4N23I3TE "While the macro newsflow in the euro area remains broadly weak, it is improving relative to expectations versus other regions, particularly the U.S.," write Morgan Stanley strategists. Sentiment in Europe is still depressed, they add, but fund flows have seen some improvement relative to the U.S. recently. (Helen Reid) ***** OPENING SNAPSHOT: CHIPS ARE DOWN (0723 GMT) Semiconductor stocks are leading the charge lower in early deals as investors digest the repercussions for the broader sector of Broadcom's revenue warning overnight - that much-hoped-for H2 recovery probably ain't going to happen. Infineon, STMicro, Dialog Semiconductor and AMS are all down between 2.5 and 4.7%. It's also fanned wider worries about the impact of Washington's conflict with Beijing, and dragged the benchmark STOXX 600 and all the major bourses into the red. Weaker-than-expected industrial output data from China showing the lowest reading in more than 17 years is not helping sentiment.*:nB9N23B00Q The only sectors in positive territory are utilities, benefiting from their safe haven characteristics, and oil & gas, boosted by the higher crude prices after yesterday's tanker attacks. Stocks are still up on the week though and have had a strong run so far this month - the STOXX 600 is up 2.7% - on hopes the Fed will act to counter a slowing global economy due to the escalating trade war with China. Caution ahead of the Fed meeting next week and the G20 summit at the end of the month may continue to limit investors' appetite for risk in the coming weeks. (Josephine Mason) ***** STOCK FUTURES REVERSE GEAR (0658 GMT) Broadcom's warning overnight that the U.S. ban on Huawei and the broader U.S.-China trade conflict will hurt FY revenues is casting a pall over European stocks futures, which have reversed early gains and fallen into the red. The news from the first chipmaker to disclose the impact of the Huawei sanctions will reignite worries, brushed aside in recent days as investors have pinned hopes on loosening monetary policy this week, about Washington’s protracted spat with Beijing ahead of the G20 summit and much-anticipated meeting between Trump and Xi. It also dashes hopes, flagged by chipmakers in Q1 earnings season, of a recovery in H2 demand. Infineon IFXGn.DE , Dialog Semiconductor DLGS.DE and AMS AMS.S shares are all down sharply in pre-market trading. It's relatively quiet elsewhere on the news front. Kier shares are seen rising 2 to 5% after The Times reported it is considering selling its housebuilding unit. The construction group is one of Neil Woodford's holdings, so it has high short interest which could propel the shares further. Recruiter SThree's shares are expected to rally after reporting a rise in H1 profits bolstered by double-digit growth in its international markets as it battles a hiring slowdown at home. (Josephine Mason) ***** BYE BYE H2 RECOVERY HOPES! (0648 GMT) Just when you thought it was safe to go back into the wafer market ....... Infineon IFXGn.DE , Dialog Semiconductor DLGS.DE and AMS AMS.S shares are all down sharply in pre-market trading this morning after Broadcom's revenue warning overnight that revenue will be hurt by the U.S. ban on Huawei and the broader U.S.-China trade conflict. You remember that H2 recovery in chip demand that semiconductor makers flagged in Q1 earnings season? As one trader puts it this morning: "Goodbye H2 recovery hopes!" Futures have now also gone into the red, down around 0.1%. With that, we'll leave you with our favourite shark .... duh.... duh.... duh: (Josephine Mason) ***** ON OUR RADAR: BROADCOM'S WARNING, SWISS RE AND UBS (0615 GMT) As expected, stock futures are indicating a relatively subdued open with futures flat to slightly higher, but investors are waking up to bad news overnight from Broadcom, which became the first chipmaker to disclose damage to business from the U.S. export ban last month on China's Huawei, one of the world's top smartphone makers. After the closing bell, the company known for communications chips that power Wi-Fi, Bluetooth and GPS connectivity in smartphones cut it FY revenue estimate blaming the U.S.-China conflict, effectively dashing hopes of a substantial H2 recovery in semiconductor demand. Its shares were down sharply after hours, dragging competitors with it, and is likely to hurt Infineon, ASM STMicro and chip equipment makers ASML and ASM International.*:nL4N23K49T It's relatively quiet elsewhere on the news front. Frayed relations have spread to Switzerland. Haitong International, the Hong Kong unit of Chinese brokerage Haitong Securities Co Ltd 600837.SS , has cut ties with UBS UBSG.S following a comment about Chinese pigs by the Swiss bank's global chief economist that was perceived by some as a racist slur. Swiss Re may bring some cheer to the lean IPO market - the Zurich-based insurer has confirmed it wants to float its $4.5 billion UK life assurance business ReAssure with a listing on the London Stock Exchange in July. Here are your early headlines: Swiss Re plans for London listing of $4.5bln ReAssure unit in July*:nFWN23K0MT Haitong Intl Securities cuts business with UBS after "Chinese pig" comment-sources*:nB9N23B013 France’s Total close to buying 30% in Adani Gas for more than $800 mln - TOI*:nL4N23K4UY Shell to invest up to $2.4 bln in Mexican deepwater oil projects Airbus in talks with Indigo Partners on A321XLR sale -sources*:nL8N23J3QF Acacia investor Odey against any 'best and final' offer from Barrick*:nL2N23K0QE Bayer says to invest 5 bln euros in new weed killers*:nFWN23L008 Banks re-open as Hong Kong returns to normal ahead of weekend protest*:nL4N23K4TO Troubled Kier is preparing to sell its housebuilding unit - The Times*:nL4N23L01C BRIEF-Volkswagen sets 27-33 euros for Traton truck unit IPO*:nFWN23L000 Italian motorway companies ASTM, SIAS agree to merge*:nL8N23K68R (Josephine Mason) ***** SUBDUED OPEN IN EUROPE (0529 GMT) It was a subdued close yesterday and it looks like we might have a repeat on our hands at the open unless key Chinese data (industrial output, retail sales and investment numbers) due out in just under two hours provides any surprises. Economists polled by Reuters expect industrial production in China to have risen 5.5% in May from 5.4% in April and believe retail sales increased 8.1% from 7.2% the previous month. For now, spreadbetters are calling the markets slightly higher, taking their cues from Asia and Wall Street overnight, with oil prices still supported by supply concerns after attacks on tankers in the Gulf of Oman. Financial spreadbetters, IG, expect London's FTSE to open 12 points higher at 7,381, Frankfurt's DAX to open 7 points up at 12,176, and Paris' CAC to open 3 points higher at 5,379. STOXX 600 is on track to notch up gains on the week though as investors continue to bet on easier monetary policy from global central banks. (Josephine Mason) ***** <^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^ Futures Jaws indices CESI June 13 Rate Cuts by central banks bund-yield ESc1 June 14 fed-rates Investment Grade Credit market June 14 europe-stocks ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^> (Reporting by Danilo Masoni, Helen Reid, Josephine Mason and Thyagaraju Adinarayan)
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