Stock markets

Apple and Qualcomm make their peace

The two technology corporations Apple and Qualcomm have reached an agreement on their dispute over patents, which has dragged on for years now – only a few hours after court proceedings on the dispute opened in the USA. The “iPhone” manufacturer had accused Qualcomm of charging overly high licence fees for smartphone patents and therefore instructed its contract manufacturers not to make licence payments to the chip developer. Qualcomm thereupon sued Apple for using the patents without making the associated payments. The agreement now reached applies retroactively as of 1 April 2019 and terminates all ongoing legal proceedings worldwide, both between the two companies and between Apple’s contract manufacturers and Qualcomm. The corporations have now concluded a licence agreement that runs for six years with the option of it being extended for a further two years. During this time Apple will make licence payments to Qualcomm. Moreover, Apple has undertaken…

The economy and stock markets appear to be decoupled

The German economy is highly dependent on exports and very successful abroad. This is clearly evident from the country’s current account surplus of 7.4 percent of GDP, with which it by far leads the way globally. The German economy’s vulnerability in the event of external interferences is the other side of the coin. Great Britain is the fourth-largest export market for German companies. As such, it is hardly surprising that the never-ending Brexit debacle is impacting negatively on the mood among German companies. China is the most important trading partner outside Europe. The slowdown in growth there that has been looming for months is now becoming clearly tangible with regard to German companies’ export prospects. ifo export expectations have accordingly plummeted. The German economy could well already be in a mini-recession. The economy as a whole, however, is not. For that the labour market, service sector, and building industry are…

Massive surge in share prices in the first months of 2019

In the first few months of this year, share prices literally skyrocketed on financial markets. But as headwinds pick up, this trend is unlikely to continue unimpeded. For almost all asset classes, 2018 was not a good year. But the complete reverse is now the case in the first months of 2019, with virtually all asset classes staging a positive performance since the beginning of the year. The good performance of equity markets in particular highlights the extent to which the price losses in 2018 were overstated. In fact the growth expectations have actually deteriorated over the course of 2019 so far, and the political risks have not improved much either. On the other hand, uplift has come once again from the central banks: the US Federal Reserve ended its cycle of interest rate hikes, and the ECB dashed any expectations of interest rates rising in the near future. It…

Private investors buying shares again – unfortunately in line with the trend

The number of shareholders increased in Germany last year according to the DAI (Deutsches Aktieninstitut), and March 18 was “The Day of the Share” in Germany. This is good news. However, holdings of shares were once again replenished in a bull market. Stock exchanges are governed by other rules than those of everyday life: buyers are only too happy to make purchases if major retailers offer discounts on such campaign days. On the stock market, by contrast, investors buy when prices rise and sell when prices fall. How can this be explained? When things head upwards, investors want to participate in the success rather than miss out. Social proof (i.e. when people conform to the behaviour of others) defines their actions. The tendency to sell when prices are in decline, on the other hand, is probably caused by an escape reflex that has been anchored in human behaviour since man…

DeutschlandBank AG

Since the beginning of September 2016 there has been stubborn speculation over a merger between Deutsche Bank and Commerzbank. On taking office in April 2018 Deutsche Bank’s new CEO, Christian Sewing, virtually excluded a merger between the two major banks for the next twelve to eighteen months, citing the current integration of Postbank and the group’s ongoing restructuring as the reasons. While these arguments are still valid today, the political and possibly also the commercial pressure now seems great enough for informal talks to be conducted with respect to a possible merger between the two banks. The positive effects of merging these two big banks could be: 1. The scalable investment costs for technology and digitalization. 2. The substantial potential cost synergies resulting from similar business fields. 3. A possible transfer of customer deposits within the group. Arguments against it include: 1. Higher capital requirements due to size. 2. The…

IFRS 16 causes a stir

Since 1 January 2019 the new accounting standard IFRS 16 has been in force. In the future almost all leasing agreements (rental and others) are to be shown on corporate balance sheets. Although IFRS 16 was already published in 2016, its initial application now poses substantial challenges for companies and investors and is a source of uncertainty. Admittedly, there are no changes as regards companies’ day-to-day business, their contracts and payments. But the new standard does have substantial repercussions on their balance sheets, income statements and free cash flows. Depending on how large the company’s volume of operating lease contracts (rental) is, there may be massive repercussions on the level of the debt ratio, EBITDA and other balance sheet and profitability ratios. A study by the accounting firm PWC shows that there is a median increase of 13% in EBITDA and of 22% in debt. Especially affected are retail companies,…

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