The gap between ailing banks and US stock markets that are no longer falling is the backdrop to a decidedly atypical month of March. The setbacks of the financial compartment are, judge a majority of investors, the signal of the forced return to a favorable monetary policy. A bold bet, which benefits certain risky assets.
It’s the last market week of a “slightly crazy” month of March, as a well-known American financial media headline put it this morning. For my part, I propose a variation around the famous film title “Four Weddings and a Funeral”, by reversing the formula. The month of March 2023 saw the disappearance of four banks, Silvergate, SVB Financial, Signature and Crédit Suisse. I’m cheating a bit because the nuptials are regarding Credit Suisse’s forced marriage to UBS. And when I say that these establishments are disappearing, it’s not entirely true: they will continue through their assets and sometimes even their brands, but they have been forced to sacrifice their independence on the altar of their survival. It’s beautiful, it looks like ChatGPT. The picture is not blazing, but some political or financial leaders refuse to speak of a banking crisis. The weight of words, always…
Moreover, the words of Olaf Scholz weighed on Friday, but in a good way for the American indices. Wall Street avoided a close in the red following the German chancellor indicated that there is “no reason to worry” regarding Deutsche Bank, which is a “very profitable bank”. Time will tell if this statement stands alongside a few famous quotes, such as the “I can honestly say the company is in probably the best and strongest shape there is” from CEO Kenneth Lay. ‘Enron, in 2001 or Jean-Marie Messier’s “Vivendi is doing better than well” in 2002. Sarcasm aside, the three main American indices recovered on Friday while Europe closed down sharply . Investors are placing the bet of a Fed rate cut above all others currently, judging that the central bank cannot afford banking chaos.
This explains the 6% rise recorded in March by the Nasdaq, while risk aversion in the banking sector is at its height. The US tech index is weightless, supported by its big caps, while the S&P500 has been flat since March 1st. A fairly rare discrepancy. The gap is even more impressive with the broad European Stoxx Europe 600 index, which has lost 4.55% since the beginning of the month.
The banking sector remains under surveillance this week. The weak links are currently Deutsche Bank in Europe and First Republic in the United States. I don’t know if it’s unhealthy or legitimate, but in any case the market is looking for the next domino. We have returned to a period of instinctive investor reactions, with a preponderant “confidence” component: we are talking regarding banking, therefore regarding the underlying architecture of the financial system, not regarding a crisis in the valuation of startups or a shortage of toilet paper.
Europe switched to summer time this weekend, which restores the traditional gap with the United States. As we explained in our weekly update, there are some major important events this week, with two inflation figures (in Germany on Thursday and in the United States on Friday), and two public interventions, that of the boss of the US Treasury, Janet Yellen, Thursday evening, and that of the President of the ECB, Christine Lagarde, Friday.
Here are some recent news to start the week off right:
- The German government and the European Commission have reached a compromise over their disagreements on the medium-term strategy for gasoline vehicles, paving the way for a sector powered by synthetic fuels.
- Russian President Vladimir Putin announced on Saturday the installation of tactical nuclear weapons in Belarus, assuring that his country did not violate its international commitments insofar as such American armaments are positioned in European countries.
- The IMF, in a burst of lucidity, is concerned regarding an increase in risks to financial stability.
- Tensions within the Netanyahu government in Israel are growing.
- In France, the Borne method is sometimes unfathomable: the head of government wants to launch consultations to “appease the country”. Good luck.
- I end with an interesting interview with the boss of Maersk, in the FT, who points out that China’s economic rebound weaker than expected.
The week starts in disorder in Asia-Pacific. Tokyo gained 0.48%, but China lost ground, especially in Hong Kong which lost 0.65%. South Korea is cautious (-0.3%) and India a little more offensive (+0.3%). In Australia, the ASX resumed 0.1% following two sessions of decline. European indices are expected to rise at the opening, to close the gap seen on Friday with the United States. The “futures” of Wall Street are also oriented upwards. The CAC40 started the session up 1.1% to 7103 points.
Economic highlights of the day
The Ifo German Business Confidence Index for March is scheduled for 10:00 a.m. The whole agenda here.
The euro retreated to 1.0772 USD. The ounce of gold too, around 1975 USD. Oil is losing ground, with North Sea Brent at $74.52 a barrel and US WTI light crude at $69.31. The performance of the american debt over 10 years reached 3.37%. Bitcoin is trading around 28,000 USD.
The main changes in recommendations
- Air France-KLM: Societe Generale remains to be maintained with a price target raised from 1.60 to 2.30 EUR.
- Alcon: Julius Bär remains to be kept with a price target reduced from 73 to 65 CHF.
- BB Biotech: Julius Bär remains to be kept with a price target reduced from 60 to 55 CHF.
- Compagnie Plastic Omnium: JP Morgan goes from underweight to neutral, targeting EUR 17.
- Covestro: Berenberg remains to be kept with a price target reduced from 44 to 40 EUR.
- FinecoBank: Morgan Stanley starts tracking to overweight by targeting EUR 18.50.
- HeidelbergCement: Jefferies goes from hold to buy targeting EUR 96.90.
- Nemetschek: Baader Helvea goes from buying to accumulating aiming for 71 EUR.
- Orange: Morgan Stanley moves from online weight to overweight by targeting EUR 14.
- Pernod Ricard: JP Morgan goes from overweight to neutral, targeting EUR 220.
- Roche: Barclays goes from overweight to weighted online by targeting CHF 270.
- Sanofi: Barclays goes from online weighting to overweighting by targeting EUR 115.
- Siemens Energy: HSBC is starting to track the purchase by targeting EUR 24.
- SRV: Inderes goes from reducing to accumulating by aiming for 4 EUR.
- Tecan: Berenberg remains long with a price target raised from 431 to 461 CHF.
- Vitrolife: Handelsbanken starts keeping track.
- Vonovia: Barclays moves from online weight to underweight by targeting EUR 18.
In France
Important (and less important) announcements
- Vinci wins two contracts worth €240 million in Australia.
- S&P is raising the outlook for Elis’ BB+ credit rating from “stable” to “positive”.
- Neoen completes its capital increase of 750 M€ at 20.45 EUR per share.
- Orpea announces the opening of an accelerated safeguard procedure.
- A block of 5% of Lanson’s capital changes hands at EUR 35 per share.
- Obiz specifies that its project to acquire an e-ticketing concerns Ski Loisirs Diffusion.
- The Esso refinery in Gravenchon has been forced to stop its fuel production due to a lack of raw material supply.
- Waga Energy launches a feasibility study in Colombia.
- They have published / They must publish: Equasens, Quadient, Hoffmann Green Cement, IDI, Atland, Latécoère…
In the world
Important (and less important) announcements
- UniCredit intends to redeem AT1 bonds at the earliest opportunity.
- Novartis reported that Kisqali, when combined with endocrine therapy, significantly reduced the risk of disease recurrence in patients with early-stage breast cancer.
- First Citizens will acquire Silicon Valley Bank from SVB Financial.
- Finma might take disciplinary action once morest Credit Suisse.
- According to the American press, Adidas should end its partnership with Beyoncé.
- Apple and China have a “symbiotic” relationship, says Tim Cook.
- Sinopec (China Petroleum & Chemical) is losing ground in Hong Kong following posting disappointing results.
- Solvay finalized the sale of 50% of RusVinyl for €433 million.
- Standard Chartered is parting with its Jordanian division by selling it to AJIB.
- Bridgebio would be courted by buyers from the pharmaceutical sector, according to Bloomberg.
- FDA approves Pharming’s Joenja for the treatment of APDS.
- Lifco acquires the Norwegian company Aura Electric.
- The main publications of the day: BioNtech, ENBW, Carnival, Pershing Square, Salzgitter… The whole agenda here.
Lectures
