Equities report: UBS shows resiliency despite the high costs of absorbing Credit Suisse

In the past week, the S&P 500, DOW JONES 30, and NASDAQ 100 managed to reverse two weeks of losses, and all three major indexes are currently moving in an upward fashion, indicative of the positive market sentiment currently. In this report we are to discuss the financial and fundamental environment surrounding US stock markets, the earnings reports released, and conclude with a technical analysis of Uber’s daily chart.

UBS moves higher despite $735 million loss for Q3

UBS (#UBS) the European banking goliath, reported its earnings for Q3, in which it was shown that the bank lost $785 million to cover the costs the bank incurred for its acquisition of Credit Suisse. Despite the bank’s loss, the company stated that it had managed to win back clients’ assets, which resulted in $22 billion in net new deposits from former Credit Suisse clients. The bank’s client retention and win-back strategy appears to be working, as Credit Suisse Wealth Management’s quarterly net new money turned positive for the first time in a year and a half. As a result, the positive indications by UBS that their integration of Credit Suisse has been moving smoothly, the long-term benefits and indications appear to have outweighed the greater-than-expected loss in revenue for the Quarter. Hence, we may see investors’ confidence growing in the Swiss bank which in turn may allow for its share price to continue rising.

Tesla workers in Germany receive a pay rise

Tesla has raised wages by 4% for its workers at its Berlin Gigafactory, following concerns that Germany’s IG Metall Labour Union, was on the cusp of unionizing Tesla’s workers. The pay increase for the roughly 11,000 workers at the German plant starting in November, will also include a €1,500 bonus in December in order to offset inflation. In addition, the company will raise annual wages for workers in production, by €2,500 in February 2024. The wage increases may have been a pre-emptive strike by the company to prevent unionization attempts and proactively avoid any blowback from the wage increases given to American autoworkers. In conclusion, the higher labour costs could potentially weigh on Tesla’s profitability and as such weigh on the company’s stock price. Should Tesla’s actions be mimicked by other European car manufacturers, in order to prevent discontent amongst their employees, their stock prices could also be impacted in the long run. We highlight the issue as it may prove to be pivotal for Tesla’s factories as well as European manufacturers.

Uber’s optimistic forward-looking outlook

Uber the popular ride-sharing company posted its earnings for Q3 on Tuesday. The company reported another strong quarter for Uber, as their YoY trip growth, accelerated to 25%, from 22% in Q2. The better-than-expected bookings, outpaced expectations for the third quarter in a row, according to the company, yet failed to meet market revenue expectations. The company’s revenue came in at $9.28B, which is 2.60% lower than the market expectations of $9.54B. Still, the potential negative effect appears to have been overshadowed by the company’s optimistic growth expectations and the better-than-expected earnings per share which beat market expectations by coming in at $0.34 per share. In conclusion, Uber’s stock price, following the earnings release, reached levels last seen on the 7    of July 2021 and could continue in its upward trajectory, should Uber’s growth expectations start to materialize.

US Fed interest rate decision and Employment data provide a boost to US Equities

The FED’s interest rate decision last week, in which the bank maintained interest rates steady, appears to have boosted the confidence of market participants, as the rhetoric following the decision indicated that the terminal may have been reached. The dovish pause, combined with the lower-than-expected Non-Farm Payrolls figure, seems to have set the stage has allowed the US Equities Markets to strengthen. The reduced expectations of a recession in the US economy, appear to have facilitated an influx of funds from investors whose risk appetite may have increased. In conclusion, should US recession worries further subside, based on the assumption that the Fed will avoid an overtightening scenario, we may see US Equities further gaining, whilst should the worries for a recession, re-emerge, we may see funds being redirected to more “safe” assets.

Upcoming earnings releases

We note that the majority of high-impact earnings releases have already occurred, yet some high-profile companies are still set to report their earnings reports next week. Starting with Home Depot (#HD) on Tuesday, followed by JD.Com (#JD) on Wednesday, and closing of the week is Alibaba (#BABA) and Walmart (#WMT) on Thursday. Hence and given also that Black Friday is nearing, we may see the market’s interest increasingly shifting towards the US retail sector.

技术分析

Uber Daily Chart

Support: 46.70 (S1), 42.90 (S2), 38.85 (S3)

Resistance: 51.90 (R1), 56.60 (R2), 60.53 (R3)

UBS appears to be moving in an upward fashion, with the stock currently aiming for the 51.90 (R1) resistance level. We maintain a bullish outlook for the stock and supporting our case is the RSI indicator below our Daily chart which currently registers a figure of 70, implying a strong bullish market sentiment. For our bullish outlook to continue, we would like to see a clear break above the 51.90 (R1) resistance line, with the next possible target for the bulls being the 56.60 (R2) resistance ceiling. On the other hand, we note that the price action has surpassed the upper Bollinger band and may imply that the share’s price has reached overbought levels and may be ripe for a correction lower. Nevertheless, for a clearcut bearish outlook, we would like to see a break below the 46.70 (S1) support level, and the share’s price to start actively aiming for the  42.90 (S2) support base. Lastly, for a sideways bias, we would like to see the stock remaining confined between the 46.70 (S1) support and the 51.90 (R1) resistance levels.

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