UBS saw its profitability plummet in the second quarter of 2024, due to an extremely high basis of comparison and despite a favourable business trend. Goodwill on the acquisition of Credit Suisse had led to a surge in earnings last year. Net profit came to 1.13 billion dollars (980 million francs at today's exchange rate), more than 20 times the 27.33 billion recorded in the second half of 2023, the bank reported on Wednesday. Profit before tax fell by a similar amount, to 1.47 billion dollars, after 27.67 billion. The return on core capital (RoTE), a closely watched profitability indicator, was 5.9%, compared with around 170% in the second quarter of 2023. Revenues jumped by a quarter to 11.90 billion dollars. In volume terms, UBS recorded net new money of USD 27 billion in its strategic wealth management business. Net profit exceeded even the most optimistic expectations. For the first six months of the year, net profit at Switzerland's leading bank came to USD 2.89 billion, compared with USD 28.36 billion previously.

The Swiss stock market ended trading on a slightly firmer note on Tuesday, continuing the upward trend of the previous day. The SMI improved by 0.5 per cent to 11,928 points. Of the 20 SMI stocks, there were 17 price gainers and 3 price losers. A total of 14.17 (previously: 11.67) million shares were traded. Among the individual stocks, the Tecan share fell by 17.3 per cent. The laboratory technology manufacturer has significantly lowered its forecast for the current year. The reason for the weak organic sales growth in the first half of the year included lower sales to biopharma customers and general market weakness in China combined with a difficult comparative basis for China. In contrast, Galderma shares rose by 0.8 per cent. There were two positive news items for the skincare specialist: Firstly, the share will be included in the MSCI World Index, as announced by the index operator. Secondly, Nemluvio received US approval from the FDA as hoped. Nemluvio had already received the FDA's "Priority Review" in February.

Europe
The European stock markets closed on a positive note on Tuesday, as reassuring data on inflation in the United States overshadowed a disappointing economic indicator in Europe. The Stoxx Europe 600 index gained 0.5% to 501.7 points. The CAC 40 and SBF 120 advanced by 0.4% each. The DAX 40 in Frankfurt climbed 0.5% and the FTSE 100 in London rose 0.3%. The biotech company Valneva (+7.8%) confirmed its forecasts for 2024, after returning to profit in the first half. For the first six months of the year, Valneva posted a net profit of €34 million, compared with a net loss of €35 million in the corresponding period of 2023. GTT gained 5.2% to €133. Berenberg raised its recommendation on the specialist in cryogenic membranes for transporting liquefied natural gas from "hold" to "buy" and raised its target price from €148 to €155. European aerospace group Airbus (+0.4%) announced on Tuesday that Latvian airline airBaltic had ordered ten additional A220-300 aircraft. Financial details of the order were not disclosed.

United States
Stocks rallied Tuesday after fresh inflation data boosted investor hopes that the Federal Reserve could cut interest rates by a half point next month. The tech-heavy Nasdaq Composite climbed 2.4%, powered by a jump in Nvidia and other Magnificent Seven tech stocks. The S&P 500 gained 1.7%. The Dow Jones Industrial Average rose by 1%, or about 409 points. The producer-price index rose 0.1% in July from the prior month, which was less than economists had forecast. Inflation will remain center stage on Wednesday, when the consumer-price index for July could give traders more clues on the Federal Reserve’s next move on interest rates. Interest-rate futures implied a 55% chance of a half-point cut in September on Tuesday, according to CME data. On Monday, they had indicated even chances between a quarter-point cut and a half-point cut. Among individual stocks Tuesday, Starbucks stock rallied about 25%, its largest one-day percentage gain on record after the coffee chain replaced its chief executive with Chipotle’s boss. Shares of Chipotle tumbled 7.5%. Trump Media & Technology Group, the parent company of Donald Trump’s social-media platform Truth Social, fell 3.6%. On Monday, the former president posted on X for the first time in nearly a year and gave an interview on the platform. Home Depot rose 1.2% after the company cut its outlook for comparable-store sales, saying high interest rates weighed on home-improvement spending.

Asia
The stock markets in East Asia and Sydney diverged for the Wednesday trading session, despite the very firm lead from Wall Street. In Tokyo, the Nikkei 225 index defended its rapid gains from the previous day, up 0.2 per cent at 36,289 points. On Tuesday, it had soared by over 3 per cent. The stock exchanges in Shanghai and Hong Kong are just about holding their ground. Seoul (+0.6 per cent) and Sydney (+0.5 per cent), on the other hand, are performing well. Sydney in particular is likely to be supported by the fact that key interest rates have been cut in neighbouring New Zealand. Among individual stocks, shares of the technology sector are often the favourites after the rally of their US counterparts the previous day. In Seoul, for example, SK Hynix is up by just under 3 per cent and Hanmi Semiconductor by over 4 per cent, while Advantest climbed 1.4 per cent in Tokyo. In Hong Kong, however, the sub-index of technology shares dropped 0.8 per cent, more than the broad market. Samsung Fire & Marine Insurance was little changed in Seoul following the quarterly report.

Bonds
Yields on U.S. government debt turned lower, sending the policy-sensitive 2-year rate toward one of its lowest levels of the year, after a reading on producer prices for July came in below expectations. The 10-year Treasury note yield fell by 6 basis points to 3.851%. The 2-year Treasury note yield dipped by 8 basis points to 3.946%.

Analysis
Target price Stadler Rail: JPMorgan lowers to CHF 27 (27.50) - Underweight
Rating Galderma: Royal Bank of Canada starts with Outperform - Target CHF 89.00
Baader downgrades Lonza target to CHF 614 (527) - Reduce

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