Woodside Energy and Santos said they are discussing a merger that could result in a new global giant worth around $52 billion, illustrating how rising demand for natural gas resulting from the Ukraine war is reshaping the energy sector. Woodside and Santos said talks are at an early stage and there is no agreement over a deal that would rank as one of the largest in the energy sector this year. Santos, whose stock has declined about 5% over the past 12 months, said it was weighing the merger alongside other options to boost value for shareholders. A combination of Woodside, which has a market value of $37.3 billion, and Santos, worth some $14.6 billion, would bring together Australia’s two largest energy companies as the country vies with Qatar to be the world’s top exporter of liquefied natural gas. Joining with Santos would represent the second major transaction completed by Woodside in recent years after it acquired the petroleum business of BHP Group in 2022. Woodside operates LNG export terminals in Australia, and it acquired assets in the Gulf of Mexico and Caribbean through the BHP deal. For Santos, joining with Woodside would be its second merger in less than three years. In 2021, Santos combined with smaller rival Oil Search, which was Papua New Guinea’s largest oil producer and owned a minority stake in the Exxon Mobil-operated PNG LNG gas-export project. That deal came six years after Oil Search rejected a $5.50 billion (reported as 8.4 billion Australian dollars) all-stock offer from Woodside. In Sydney, Woodside Energy ended the day 0.7 per cent lower on Friday and Santos 6.1 per cent higher, driven by merger speculation.

On Thursday. the SMI dropped by 0.3 per cent to 10,968 points. Of the 20 SMI stocks, there were 12 losers and 8 gainers. A total of 15.35 (previously: 19.63) million shares were traded. Among individual stocks, Swiss Re shares lost 0.1 per cent, while Swiss Life climbed 0.2 per cent. According to a Swiss Re survey, 2023 will once again be an expensive claims year for the insurance industry due to the increase in severe thunderstorms, the devastating earthquake in Turkey and Syria as well as the forest fires in Hawaii. At the other end of the spectrum, Swatch shares plummeted by 1.5 per cent. The analysts at Deutsche Bank have withdrawn their "buy" recommendation and now rate the share as a "hold". Although Swatch remains the leader of the Swiss watch industry, it is likely to face headwinds next year.

The European stock markets closed slightly lower on Thursday, as investors remained hesitant ahead of the monthly employment report in the United States. The Stoxx Europe 600 index shed 0.3% to 468.8 points. In Paris, the CAC 40 and SBF 120 were down by 0.1% each. The DAX 40 in Frankfurt lost 0.2%, while the FTSE 100 in London finished close to balance. Metal recycling specialist Derichebourg (+4.4%) published lower results for the year to the end of September 2023, but expects its EBITDA to rebound in 2023-2024. Sanofi (-1.2%) on Thursday detailed its research and development (R&D) strategy, which involves a marked acceleration in investment from 2024. The group intends to reduce its dependence on its star drug, the anti-inflammatory Dupixent. The airline sector fell as JPMorgan lowered its recommendation for Air France-KLM, Lufthansa and IAG to "underweight". Air France-KLM gave up 3.1%, Lufthansa lost 2.1% and IAG dropped 2.4%. JPMorgan believes that the sharp increase in airline capacity, against a backdrop of weakening economic growth, is likely to weigh on their margins in 2024. Danone (+0.7%) announced that it had entered into exclusive negotiations with a company linked to Ferrero concerning the potential sale of the Michel et Augustin biscuit brand.

Stocks resumed their climb Thursday, led by the shares of big technology companies that have powered the market for much of the year. The S&P 500 was up 0.8%, closing near its high for the year. The tech-heavy Nasdaq Composite rose 1.4%, and the Dow Jones Industrial Average gained 0.2%. Advanced Micro Devices was the S&P 500’s best performer, closing up 9.9% after the chip maker said Microsoft, Meta Platforms and Oracle adopted—or are in the process of adopting—its new AI chips. Google parent Alphabet soared more than 5% a day after unveiling its new AI system that will become widely available early next year. Elsewhere Thursday, airline stocks got a boost after JetBlue Airways lifted its fourth-quarter sales outlook, saying that holiday travel demand has been strong. Shares of American Airlines, Southwest Airlines and Delta Air Lines all rose more than 3%. After initial losses, Gamestop shares rose by a marked 10.2 per cent. The distributor of entertainment software disappointed with its third-quarter figures. Analysts at Jefferies noted that Gamestop had costs well under control, although the outlook for sales growth was not good. Abbvie rose by 1.1 per cent. The pharmaceutical group announced that it was buying Cerevel Therapeutics for 8.7 billion dollars or 45 dollars per share. Cerevel Therapeutics rose 11.3 per cent to 41.09 dollars. The Walgreens drugstore chain rebounded by 7.2% to support the Dow Jones index, whereas the stock has lost more than 38% since the start of the year and could post the worst annual performance in its history.

Asian indexes diverged for the Friday trading session. The Chinese stock exchanges gain up to 0.4 per cent, while Seoul rises more strongly by 1.0 per cent. The stock market in Tokyo is the outlier on the downside. After falling sharply the previous day, the Nikkei 225 index declined again by 1.9 per cent to 32,248 points. In addition to the strong yen, the revision of Japan's GDP is also dampening sentiment. According to the data, the Japanese economy shrank by an annualised 2.9 per cent from July to September, rather than the 2.1 per cent that had been reported in the preliminary estimates. Among the individual stocks, Air China in Hong Kong climbed by 1.9 per cent and China Southern Airlines China Air by 0.6 per cent, while Spring Airlines in Shanghai advanced by 1.1 per cent.

U.S. government debt yields finished little changed on Thursday as investors absorbed a likely shift in Bank of Japan policy soon and turned their attention to Friday’s nonfarm payrolls report for November. The 10-year Treasury note yield rose by 3 basis points to 4.139%. On the other hand, the 2-year Treasury note yield fell by 2 basis points to 4.588%.

Target price Kuehne+Nagel: JP Morgan upgrades to CHF 240 (230) - Underweight
Rating Swatch: Deutsche Bank downgrades to Hold (Buy) - Target 240 (350) CHF
Rating Sika: JP Morgan raises to Neutral (Underweight) - Target CHF 237 (223)

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