Strong Start For Markets | Deutsche Bank And Novartis Under Focus
Investors have been nervous and remained over the edge due to the heightened tensions around the trade war between the
US and China. If a trade war does actually break out between the US and China, both counties are going to lose from this
in terms of their economic growth. At the same time, corporate profits would also see the adverse impact.
Having said this, the only silver lining in this entire situation would be that it is another tactic deployed by Mr
Trump. A man who knows how to bring the opponents to the negotiating table. The equity markets over in Asia has kicked
off the week on a positive note by shaking off all those concerns. The US markets on Friday also closed higher and they
are back above the critical 200-day moving average.
Similarly, the European markets also closed strong last week and traders are picking up the moment where they left off.
Markets have seen a massive surge in volatility and there is no shortage of up and down swings in the markets. The main
reason behind any optimism (when it comes to the US and China trade war) is that it is only a strategic tactic, deployed
by President to pressure China in order to get a deal what he desires. However, if this tactic becomes a reality, the
sentiment in the market would be highly negative.
Over the weekend, Mr Trump has used his favourite media channel, Twitter, to communicate more signs of optimism that
perhaps a more friendly solution could be the outcome when it comes to the trade war.
The Q2 earning seasons is going to start this week. The focus among investors isn’t going to be the impact of the past
changes in the US tax system, which was seen as a positive sign for the US corporates, but rather it would be on the
impact of the trade war.
In terms of currencies, the dollar index is trading flat after a more disappointing US NFP data. The Fed chairman had a
more upbeat tone during his speech on Friday after the US NFP however. It doesn’t seem like traders believe that the Fed
is going to be any more aggressive, especially not under the current situation.
As the New CEO takes charge of the Deutsche Bank, looking at the analyst rating on the stock, the ratio is firmly skewed
in favour of bears. The ratio is almost 3-to-1, which means sell recommendations are a lot higher. One thing which is
optimistic about the new CEO is that he has plenty of inside knowledge about the bank among the new top leadership. The
biggest challenge for Mr Sweing is to change the landscape for the bank's plunging revenue which is hitting multi-year
low. We expect him to pull the bank out of many operations which are not profitable-get ready buyers. Overall, investors
are a lot more optimistic about the new CEO and this is the reason that the stock is trading higher.
Gene therapy is one of the biggest areas of growth among healthcare and pharmaceutical companies. If you do not have a
strong position in this area, the strategy is to acquire a firm which is playing a leading role and this is what really
happened between Novartis AG and AveXis. The $8.7 billion dollar deal under which Novartis decided to buy AveXis is
going to make Novartis's position more firm in gene therapy position- an area which is not only revolutionary but also
classified as a game changer. AveXis product called AVXS-101 (to treat spinal muscular atrophy) is the jewel which
Novartis wanted to acquire. The premium of 88% on Friday's AveXis close price paid by Novartis is still a bargain given
the potential the product has.