China has, in its own way, signaled it wants to support specific kinds of consumer purchases. Authorities on Thursday announced the equivalent of 300 billion yuan ($41.5 billion) in special bonds would go towards trade-ins and equipment upgrades — a significant expansion of an existing program. “Compared to previous policies on equipment upgrade and consumer goods trade-in, the new policy support is larger in amount (allowance level increased) and the sources of funds are clearly specified,” Ding Wenjie, investment strategist for global capital investment at China Asset Management Co., said in a note. “The portion of central government bearing is also higher (central:local =9:1), which would expedite policy execution,” Ding said. “The program also covers more areas, such as trucks, machinery, home decoration and smart home appliances, in addition to previously announced auto and home appliances.” She expects autos, industrials and home appliances to benefit. The policy at least doubles the subsidies for new energy and traditional fuel-powered vehicle purchases to 20,000 yuan and 15,000 yuan per car, respectively. The policy also laid out specific subsidies for home renovations and consumer purchases of refrigerators, washing machines, televisions, computers, air conditioners and other home appliances. The document said each consumer could get subsidies of up to 2,000 yuan for one purchase in each category. Major Chinese home appliance stocks rose on Friday. The three largest mainland China-traded names in the category — Midea, Gree and Haier — rose by between roughly 5.8% and 8.3%. That’s in contrast to mild gains in the broader mainland China indexes. The 300 billion yuan ultra-long bond issuance is not a new government allocation, but rather a more detailed designation of a 1 trillion yuan ultra-long bond program announced earlier this year. “The amount is beyond market expectations; we expect equipment stocks to react positively,” Morgan Stanley analysts said in a report Friday. “300 billion yuan is the largest equipment upgrade subsidy from the central government historically,” the analysts said. Among the stocks they cover, they expect Inovance is one of a few “to benefit most from higher trade-in subsidies for autos and/or home appliances.” Chinese authorities have resisted cash handouts to consumers despite sluggish retail sales growth. Instead, Beijing has made it clear its focus is on building domestic tech capabilities. Even the 300 billion yuan figure is split roughly between consumer-related trade-ins with business-side equipment upgrades. “We see a decent boost to China’s household consumption (RMB 150bn equivalent to 0.3% of 2023 annual retail sales) and corporate capex, but likely a limited overall impact on GDP growth, considering funding support for infrastructure may be smaller than otherwise,” Tao Wang, head of Asia economics and chief China economist, UBS Investment Bank, said in a note. The latest consumption measures follow China’s twice-a-decade Third Plenum, which typically sets the tone for longer-term economic policy. A more near-term-focused Politburo meeting is expected at the end of the month. “The plenum proposed that ensuring and improving people’s livelihood during development is a major task of China’s path to modernization,” said Darius Tang, associate director of Corporates, Fitch Bohua. “Amid the sustained high-speed growth in household savings and relatively sluggish consumption … we expect that the Chinese government would increase investment in the field of education, healthcare and pension that are directly linked to people’s livelihoods and well-being, which is conductive to eliminating residents’ worries, boost consumer confidence and convert the current excessive household savings to consumption.” — CNBC’s Michael Bloom contributed to this report.
The three keys USB logo is seen outside the London office of Swiss bank UBS in central London, on March 20, 2023.
Daniel Leal | AFP | Getty Images
Swiss giant UBS on Wednesday beat bottom line expectations amid sharp returns in investment banking while warningof the global trade impact of sweeping U.S. tariffs as it seeks to rein in steep share declines.
Net profit attributable to shareholders hit $1.692 billion in the first quarter, compared with a mean forecast of $1.359 billion in a LSEG poll of analysts. Group revenue over the stretch stood at $12.557 billion, versus analyst expectations of $12.99 billion.
Other first-quarter highlights included:
Return on tangible equity reached 8.5%, versus 3.9% in the fourth quarter.
CET 1 capital ratio, a measure of bank solvency, was 14.3%, unchanged from the December quarter.
The lender said it delivered a 32% year-on-year hike in revenues of the global markets unit of its investment banking arm, largely driven by “higher client activity in equities and FX with gains across all regions.”
Critically, the lender posted $1.629 billion in its net interest income (NII) — the difference between earnings from loans and investments and the payments on deposits — down 16% year-on-year and 11% from the fourth quarter, guiding for further declines in the June quarter.
“In the second quarter we expect net interest income (NII) in Global Wealth Management to decline sequentially by a low single-digit percentage, and we see a similar decline in Personal & Corporate Banking’s NII in Swiss francs. In US dollar terms, Personal & Corporate Banking’s NII is expected to increase sequentially by a mid-single-digit percentage, based on current foreign exchange rates,” UBS said.
Investors are keenly watching these metrics as European banks transition to an environment of monetary easing, particularly in Switzerland, which has been combating a strong franc and depressed inflation with interest rates as low as 0.25%.
Deposed this month as continental Europe’s largest bank by market capitalization by Banco Santander, UBS has suffered share declines of roughly 10% in the year to date, with the brunt of losses logged after the White House’s imposition of tariffs on global trade partners on April 2.
Switzerland faces a 31% duty if it fails to agree a more conciliatory trade deal by the end of Washington’s 90-day reprieve in early July. Comparatively, the European Union was hit with 20% in U.S. levies.
Tensions with Washington and a potential recessionary outlook for the world’s largest economy spell trouble for the Swiss banking giant and its money-spinning global wealth management division, with around half of UBS’ invested assets concentrated in the broader Americas region last year.
“Rapid and significant changes to trade tariffs, heightened risk of escalation and significantly increased macroeconomic uncertainty led to major market volatility in the first weeks of April,” UBS said Wednesday. “With a wide range of possible outcomes, the economic path forward is particularly unpredictable. The prospect of higher tariffs on global trade presents a material risk to global growth and inflation, clouding the interest rate outlook.”
It flagged the possibility of “further spikes in volatility” as markets remain sensitive to new tariffs-led developments, noting that “Prolonged uncertainty would affect sentiment and cause businesses and investors to delay important decisions on strategy, capital allocation and investments.”
The picture of UBS’ long-term profitability remains darkened by questions over potential new — and more draconian — capital requirements from Swiss authorities, which have questioned the Swiss titan’s “too big to fail” status since its absorption of collapsed domestic rival Credit Suisse. The transaction — which one politician at the time dubbed the “deal of the century” — has propelled UBS down the path of maximum resistance against further restrictions, which it argues would undermine its competitiveness as an already adequately capitalized entity.
“UBS’s lobbying is both visible and unmistakable. It’s clearly resonating in various places. But once again: the Federal Council cannot be intimidated by lobbying, but must also represent the interests of taxpayers,” Swiss President Karin Keller-Sutter told broadcaster SRF last month, according to a Google translation.
“The Federal Council has one goal: that in the event of a crisis, a UBS that is systemically important is resolvable. This means that the systemically important parts of the bank can be separated in Switzerland. That must be the goal of the Federal Council and the new legislation.”
We asked the “Fast Money” traders to share which market areas should see the most promise — and problems — over the next 100 days.
No. 1: Karen Finerman
Most promise: Big cap pharma. She’s bullish because the group is “way oversold,” and it’s largely out of the tariff crossfire.
Most problems: Container space. It’s likely seeing benefits right now from a big pull forward in demand. If the tariff fight takes a while to get resolved, expect to see fewer containers and a reduction in full containers overall, making for a “very sad income statement.”
No. 2: Tim Seymour
Most promise: Semiconductors and international investing. In the case of semis, they’re the “ultimate cyclicals” and should be a buying opportunity built off of beaten-down valuations. He predicts supply and demand dynamics will “rage again” in the year’s second half.
Seymour is also bullish on international investing. His name for it: MIGA, an acronym for “Make International Great Again.”
He highlights Germany’s DAX index outperforming the S&P 500 since late November. According to Seymour, it’s a trade that should still work over at least the next 100 days because tariffs are both a wake-up call and tailwind.
He lists relative valuation attractiveness and “Magnificent Seven” exhaustion among other key upside drivers.
Most problems: Companies exposed to consumer credit and discretionary spending. Seymour expects U.S. consumers to tighten their belts due to high prices and a deteriorating jobs market.
No. 3: Dan Nathan
Most promise: “Cash will be king.”
Nathan sees little working. He notes defensive groups including utilities, consumer staples and U.S. Treasurys, which historically benefit during economic distress, will eventually slump. According to Nathan, the headwinds produced by a tariff-induced recession will punish them.
Most problems: Planes, trains and automobiles. His base case scenario is a “protracted trade war” with China and possibly other key nations that will choke demand. Nathan advises consumers to “fasten their seatbelts for unexpected turbulence and bumps in the road.
He thinks retail is in an odd spot. According to Adami, there’s “no way to game this out, but they seemingly have the most at stake.”
He told “Fast Money” on Tuesday that the unemployment rate will likely surprise to the upside.
“When you have an economy that’s predicated on people having jobs and feeling good about things… that becomes problematic,” Adami told viewers. “I think the market is still a little expensive here.”
Check out the companies making headlines in after-hours trading. Starbucks — Shares of the coffee giant slipped 4% after Starbucks missed earnings and revenue estimates for its fiscal second quarter. The company also reported same-store sales figures that reflected a decline for the fifth straight quarter. Starbucks posted adjusted earnings per share of 41 cents on $8.76 billion in revenue, while analysts polled by LSEG expected 49 cents per share on $8.82 billion, respectively. First Solar — Shares of the solar technology company dropped 10% after First Solar offered weak guidance for the full year. The company sees earnings for the period ranging from $12.50 to $17.50 per share, while analysts polled by LSEG sought $18.14 per share. First-quarter earnings also missed the mark. Booking Holdings — Shares of the online travel booking services provider shed 3%. Gross bookings for the first quarter came in at $46.7 billion, only narrowly topping the $46.53 billion StreetAccount consensus estimate. Booking Holdings top- and bottom-line results for the period firmly beat expectations, however. Super Micro Computer — The beleaguered server maker saw its shares plunge 16% in after-hours trading. Super Micro announced preliminary results for the fiscal third quarter that fell short of LSEG consensus expectations. The company also lowered the ranges from earlier guidance for the quarter, which ended on March 31. Visa — Shares added less than 1% after Visa exceeded expectations for the fiscal second financial quarter. Visa posted quarterly earnings of $2.76 per share, excluding items, on revenue of of $9.59 billion. Analysts polled by LSEG called for earnings of $2.68 per share on revenue of $9.55 billion. Snap — Snap posted better-than-expected first-quarter revenue but declined to provide guidance, citing macroeconomic uncertainties in the months ahead that could affect advertising demand. Shares plunged more than 12% as a result. For the quarterly period, Snap reported a loss of 8 cents per share on revenue of $1.36 billion, the latter figure coming out just higher than the $1.35 billion expected by analysts surveyed from LSEG. Caesars Entertainment — Shares added 3%. The casino operator reported first-quarter revenue of $2.79 billion, merely landing in line with Wall Street’s expectations, per LSEG. Losses came in wider than anticipated at 54 cents per share, while analysts sought a loss of 19 cents per share. Qorvo – The provider of semiconductor solutions surged nearly 9% after issuing robust fiscal first-quarter guidance on revenue. Qorvo sees revenue for the period landing at $775 million, compared to the $757 million anticipated by analysts polled by LSEG. Fourth-quarter results topped analysts’ estimates on the top and bottom lines. Oneok – The oil and gas midstream company lost 3%. For the first quarter , Oneok posted adjusted earnings before interest, taxes, depreciation, and amortization of $1.78 billion. The result included $31 million of transaction costs related to the company’s acquisition of EnLink Midstream . Analysts surveyed by FactSet sought $1.93 billion. Seagate Technology – The data storage company jumped nearly 8%. Seagate issued upbeat guidance for the fiscal fourth quarter, calling for adjusted earnings of $2.40 per share on revenue of $2.40 billion, while analysts polled by LSEG called for $2.07 per share in earnings and $2.30 billion in revenue. Third-quarter results also surpassed expectations. — CNBC’s Darla Mercado contributed reporting.