UBS sought to draw a line under one of the damaging scandals that helped topple Credit Suisse, offering to repay much of the $2.5 billion still stuck in investment funds tied to failed lender Greensill Capital. UBS said a unit would take a $900 million provision in the second quarter to help repay investors 90% of their remaining fund stakes, but that the payouts won’t affect its group results or capital because it took a markdown already. Credit Suisse and Greensill operated $10 billion investment funds backed by supply-chain financing before Greensill suddenly went bankrupt in March 2021. Later that month, another big Credit Suisse client, family office Archegos Capital Management, defaulted on $5.5 billion trading positions, sending the bank into a two-year tailspin.
UBS rescued Credit Suisse last year in a Swiss government-backed deal. It paid $3.7 billion for a bank with close to $50 billion in shareholder equity, and UBS reported a record $29 billion profit in second quarter 2023. It made adjustments to Credit Suisse’s value at the time to absorb anticipated costs from lawsuits and risky assets. The $900 million provision in the second quarter stems from those markdowns at the time of the merger. Credit Suisse already returned more than $7 billion in the Greensill funds to investors. Greensill went bust when it couldn’t renew insurance on the loans, exposing the low quality of much of its lending. Credit Suisse, and then later UBS, had to hold extra capital after Greensill failed, to reflect the potential for having to make payouts to investors or investigating regulators. UBS said the offer seeks to give fund investors certainty as well as an accelerated exit from their investments. It has been trying to settle other probes and lawsuits that came over with Credit Suisse. The remaining fund investments will be managed as part of UBS’s noncore and legacy portfolio, UBS said. UBS has been seeking compensation from Greensill borrowers and insurers, via lawsuits. The Russian-Uzbek multi-billionaire Alisher Usmanov has filed a lawsuit against the German subsidiary of UBS, UBS Europe SE. As Usmanov's lawyers announced on Monday, they are claiming damages from the bank on behalf of their client for "breach of contract and tortious misconduct".

The Swiss stock market ended trading on Monday with small losses. The SMI shed 0.3 per cent to 12,004 points. Of the 20 SMI stocks, there were twelve losers and seven gainers, with one stock closing unchanged. A total of 15.22 (previously: 20.3) million shares were traded. The SMI was weighed down by the heavyweights Nestle (-0.2%), Novartis (-1.5%) and Roche (-0.8%). Bank and insurer shares were in demand across Europe, supported by rising bond yields, among other factors. In Switzerland, Swiss Life, Swiss Re and Zurich Insurance gained up to 1.1 per cent. UBS shares climbed by 2.2 per cent. Richemont fell by 1.2 per cent. New Chinese economic data was mixed. China is an important market for Richemont.

European stocks struggled for momentum on Monday as investors digested mixed Chinese data and awaited a busy week for central bank decisions, including a Bank of England announcement. Early gains faded slightly, with French political uncertainty adding to a somewhat shaky environment for stocks globally. The Stoxx Europe 600 index gained 0.1% to 511.5 points. In Paris, the CAC 40 rose by 0.9%, after falling by more than 6% last week, and the SBF 120 also climbed by 0.9%. The DAX 40 advanced by 0.4% in Frankfurt, while the FTSE 100 shed 0.1% in London. Rail equipment supplier Alstom (+3.3%) announced that it had signed a contract worth around €430 million for ten new Aventra trains to run on the Elizabeth line in the London area. EssilorLuxottica increased its share price by 2.6% to 206.20 euros. UBS raised its recommendation from "neutral" to "buy" and its target price from €181 to €232 for the manufacturer of corrective lenses and frames. Defence and security stocks will be worth watching this week, in particular Thales (+1.2%) and Airbus (+1.4%), as the Eurosatory trade fair gets underway in Paris.

Technology shares propelled major stock indexes to fresh highs to start the week. The S&P 500 added 0.8%, and the Nasdaq Composite was 1% higher. Both closed Monday at records. The Dow Jones Industrial Average was up 0.5%. Information technology was the S&P 500’s best-performing sector, with chip makers having a particularly good day. Broadcom led the way with a 5.4% gain, while Super Micro Computer and Micron Technology also outperformed. Monday’s advance extended a hot streak for major stock indexes, which have benefited from increasing confidence in the economy and the prospect of interest-rate cuts from the Federal Reserve later this year. The S&P 500 is now up 15% in 2024. Pullbacks have been rare and volatility has been exceptionally low. A flurry of central-bank decisions, economic data and speeches from Fed officials could inject some excitement later in the week. Central-bank officials are due to meet in the U.K., Switzerland, Norway and Australia. Switzerland was an early mover in cutting rates. U.S. retail-sales data for May are due Tuesday, offering the latest look at the health of the U.S. consumer. Economists polled by The Wall Street Journal expect a 0.2% increase in retail sales from a year earlier. Resilient consumer spending has helped power a strong economy and rising corporate profits. Traders in interest-rate derivatives currently see a roughly 65% chance that the central bank will cut rates by its September meeting, according to CME Group. Big gains from index heavyweights such as Apple, Microsoft and Nvidia have more than offset weakness elsewhere. The information-technology sector, which has the top weight in the S&P 500, is up 7.9% in the past seven trading days.

The stock markets in East Asia and Australia made up for the previous day's losses in the course of trading on Tuesday. In Tokyo, the Nikkei index rose by 0.9 per cent to 38,445 points after a very weak start to the week. The Chinese stock exchanges in Shanghai and Hong Kong are trending mixed within relatively narrow limits following the previous day's mixed economic data. Among individual stocks, shares from the technology sector are often favoured - with the AI fantasy still smouldering in the background. Lenovo rose by 1.7 per cent in Hong Kong, Sunny Optical by 4.6 per cent. In Tokyo, TDK gained 6.9 per cent and Kokusai Electric 2.0 per cent, in Seoul Samsung Electronics 2.1 per cent and SK Hynix 3.1 per cent. Hanmi Semiconductor advanced by 0.4 per cent. Zijin Mining fell by 2.6 per cent in Hong Kong. The announcement to increase capital is weighing on the company. In Sydney, Beach Energy dropped 2.1 per cent after the oil and gas producer announced plans to sell three non-core business units to cut costs.

U.S. government debt yields moved higher on Monday for the first time in five sessions, bolstered by the view that U.S. economic growth prospects may be stronger than realised. The 10-year Treasury note yield rose by 7 basis points to 4.281%. The 2-year Treasury note yield gained 8 basis points to 4.765%. The market is currently expecting a first rate cut in September, according to the CME Group's FedWatch consensus.

Price target Logitech: Goldman Sachs increases to CHF 105 (97) - Buy
Price target Schweiter: Mirabaud Securities lowers to CHF 435 (510) - Hold
Rating Sensirion: Research Partners downgrades to Hold (Buy) - Target CHF 85 (80)
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