Morning News

Alibaba Boosts Stock Buybacks as Profit Slumps

By Mathieu VILLARD
Published on Wed, 02/07/2024 ‑ 23:00

Topic of the day

Alibaba Group Holding posted lackluster sales growth and a plunge in profit in the October‑December quarter after the Chinese e‑commerce giant booked more than $3 billion in impairments linked to its Sun Art retailer business and its Youku video platform. Meanwhile, the company approved a $25 billion increase to its share‑repurchase program through March 2027, meaning Alibaba has $35.3 billion available under its buyback program through the next three fiscal years. Chief Financial Officer Toby Xu said the decision underscored the group’s confidence in the outlook of its business and cash flow. The company said Wednesday that revenue edged up 5% in its fiscal third quarter to the equivalent of $36.67 billion. Sales at Alibaba’s core digital‑retail and online‑commerce businesses, Taobao and Tmall, grew 2% on year to $18.18 billion. The group said that while the volume of orders had increased strongly, their average value was in decline. Net income attributable to ordinary shareholders slumped 69% to $2.03 billion. Alibaba booked roughly $3.25 billion in impairments in the quarter. Excluding the impairments, share‑based compensation expenses and other items, profit fell 4% to $6.75 billion.

Swiss stocks

The Switzerland market ended weak on Wednesday, in line with markets across Europe, as investors were reluctant to pick up stocks amid uncertainty about the likely timing of interest rate cuts by central banks, including the Federal Reserve. Data showing an increase in Swiss unemployment rate weighed as well. The benchmark SMI ended down 34.78 points or 0.31% at 11,210.25, after moving along the flat line for much of the day's trading session. UBS Group ended lower by about 2.7%, continued to be weighed down by weak quarterly numbers. Lonza Group drifted down 2.41%. Kuehne & Nagel and Logitech International ended down 1.9% and 1.85%, respectively. Roche Holding ended 1.02% down. Nestle, Swiss Life Holding and Swisscom ended down 0.67 to 0.76%. Givaudan climbed about 1.8%. ABB, Novartis and Sika gained 0.88%, 0.71%, and 0.63%, respectively. In the Mid Price Index, ams OSRAM AG lost more than 6%. Clariant, Adecco, Sandoz, Straumann Holding and Avolta lost 1 to 1.25%. SIG Combibloc declined nearly 1%. Swatch Group gained about 1.7%. BKW, SGS, VAT Group, Georg Fischer, Julius Baer and Lindt & Spruengli gained 0.4 to 0.8%. On the economic front, data from the State Secretariat for Economic Affairs showed Swiss unemployment rate increased to a non‑seasonally adjusted 2.5% in January from 2.3% in the previous month.

International markets

Europe
European stocks closed weak on Wednesday as uncertainty about the outlook for interest rates rendered the mood cautious. Investors also assessed the economic health of the region, tracking the latest batch of economic data. The pan European Stoxx 600 ended down 0.23%. The U.K.'s FTSE 100 dropped 0.68%, Germany's DAX ended 0.65% down, and France's CAC 40 drifted down 0.36%. Switzerland's SMI closed lower by 0.31%. Among the other markets in Europe, Austria, Finland, Greece, Norway, Portugal, Spain and Turkiye closed weak. Denmark, Poland and Russia ended higher, while Belgium, Iceland, Netherlands and Sweden ended flat. In the UK market, J Sainsbury ended down more than 5.5% after reporting lower general merchandize sales in the 16 weeks to January 6. Barratt Developments ended down 5.5% after it agreed to buy rival Redrow. Antofagasta, Vodafone, Anglo American Plc, JD Sports Fashion and Tesco declined 3 to 4%. Legal & General, Glencore, Prudential, Intertek, Barclays Group, Endeavour, B&M European Value Retail, St. James's Place, Segro, Burberry Group and British American Tobacco lost 1.2 to 2.6%. In the German market, Deutsche Bank, Deutsche Post and Infineon lost 4.7 to 5%. Commerzbank ended lower by about 3.6% and Qiagen ended 2.25% down. Vonovia, Bayer, BASF, Deutsche Telekom, RWE, Continental, Allianz and Fresenius ended lower by 0.8 to 1.6%. Siemens Energy, BKW, Hanover Rueck and Sartorius gained 1.3 to 1.6%.

United States
After ending Tuesday's choppy trading session modestly higher, stocks showed a strong move to the upside during trading on Wednesday. The Dow and the S&P 500 set new record closing highs, with the latter reaching an intraday peak just shy of 5,000. The major averages pulled back off their best levels going into the close but remained firmly positive. The S&P 500 climbed 40.83 points or 0.8 percent to4,995.06 and the Dow rose 156.00 points or 0.4 percent to 38,677.36, while the tech‑heavy Nasdaq jumped 147.65 points or 1.0 percent to 15,756.64. The strength on Wall Street may partly have reflected recent upward momentum, which helped stocks rally late last week despite waning optimism about the Federal Reserve cutting interest rates in March. While CME Group's FedWatch Tool suggests the chances of March rate cut are just 18.5 percent, the Fed is still expected to begin lowering rates sometime in the coming months. Share of Enphase Energy (ENPH) soared by 16.9 percent after the solar inverter maker reported weaker than expected fourth quarter revenues but said it expects demand to improve throughout 2024. Auto giant Ford (F) also surged by 6.1 percent after reporting better than expected fourth quarter results, providing upbeat guidance for 2024 and announcing a supplemental dividend of 18 cents per share. On the other hand, shares of Snap (SNAP) plummeted by 34.6 percent after the Snapchat parent reported mixed fourth quarter results and forecast first quarter sales below analyst estimates. Software stocks turned in some of the market's best performances on the day, driving the Dow Jones U.S. Software Index up by 1.9 percent to a record closing high.

Asia
Led by the Tokyo stock exchange, the Asian and Australian stock exchanges are mostly on the rise on Thursday. Hong Kong stands out with significant losses (‑1.4%). The Chinese stock markets have been leading a life of their own for days since government agencies and funds recently announced purchases on the stock market.

Bonds
In the U.S. bond market, treasuries showed a lack of direction over the course of the session before closing modestly lower. As a result, the yield on the benchmark ten‑year note, which moves opposite of its price, inched up by 2.0 basis points to 4.110 percent.

Analysis
UBS lowers the Aurubis target to EUR 90 (92) – Buy

Citi lowers the UBS target to CHF 28 (30) – Buy

BoA lowers the Sodexo target to EUR 89 (120) – Buy