The return to the long weekend was a bit brutal yesterday in the United States, where the indices fell quite heavily. The benchmark trio made -2% for the S&P500, -2.06% for the Dow Jones and -2.4% for the Nasdaq 100. Only the most defensive compartments of the rating held up to the shock. In finance, the companies perceived as the most defensive are those that will continue to sell basic products when consumers have cut away the superfluous. Concretely yesterday, the vendors of food, gasoline and beer. I leave you to meditate on the presence of beer in this list, even if Homer Simpson brilliantly theorized it. To this must be added the arms manufacturers, following the continued deterioration of relations between the West and Russia, which Vladimir Putin forced out of the New START nuclear arms control treaty.
This loss of investor libido for risky assets prolongs the phase of doubt which had intensified last week. The powerful rebound that followed the 2022 annus horribilis rested on two pillars: the recovery of the Chinese economy and the near end of the Fed rate hike cycle. The traction force of the first point leaves something to be desired, in the absence, for the moment, of tangible signals of acceleration. It should happen, but for the moment we remain in the realm of the hypothetical probable. As for the hopes of the end of the restrictive monetary policy, they rested on the supposed victory of the Fed on inflation. Victory personalized by the drop in the rise in prices and several macroeconomic indicators showing that the economic overheating was in a cooling phase. The problem is that these indicators have tended to stabilise, or even reaccelerate for some over the recent period. Too early and too strong, no doubt, in the eyes of the central bank. Therefore, investors’ big bet on a return to less tight monetary policy (synonymous with “Yolo, return of the bull market“) is taking a beating. Yesterday, the US PMI activity indicators quite clearly exceeded expectations, another signal of caution for the markets, on the grounds that good news for the economy is not not necessarily good news for finance, which prefers low rates to any other scenario.
That’s for the romanticized part. The quantified translation can be found on the bond market where the yield on the US 10-year debt jumped to 3.94% yesterday, whereas it was 50 points lower not so long ago. Translation ? The market expects the Fed Funds rate to rise to more than 5.3% this summer, while the forecast was still 4.9% at the beginning of February. bis translation? Financiers believe that the Fed will raise its rates beyond what they feared and the debate is still open on the duration of maintaining these rates at a high level. translation | It’s not good for stocks. Nor for bonds, some of which have lost almost all of their 2023 advance (bond prices move inversely to their yield).
Doubts on the rates, in the United States but also in Europe elsewhere. Renewed tension with Russia. And floating in China on the recovery. Three factors which weigh on the markets this week, even if the European markets have seemed, once once more this year, curiously little concerned. The Stoxx Europe 600 fell just 0.2% at the close. And while all major indexes except the Swiss SMI were down, the contractions were relatively modest.
Today, continuation of the publications of results with some beautiful posters like Rio Tinto, Danone, Stellantis and Iberdrola in Europe. Nvidia, Pioneer Natural Resources and eBay will follow in the United States. The macro agenda will be occupied mainly by the Ifo index of business sentiment in Germany (10:00 a.m.) and by the publication of the minutes of the last Fed meeting (9:00 p.m.). In other news, the yield on Japanese government debt settled for the second day above the theoretical ceiling set by the Bank of Japan. Washington is threatening to sanction Chinese companies that support Russia’s invasion of Ukraine and oil is contracting in a market that doubts future global economic momentum. Finally, the corridors of the ministries may ring a little hollow since the consulting firm McKinsey should cut 2,000 jobs worldwide, according to Bloomberg.
It’s not a lot of fun in Asia Pacific this morning at the end of the course. Japan lost 1.3% and Australia 0.3%. Mainland China lost 0.8% and Hong Kong 0.2% while the session is not yet over at the time of writing. Korea is at -1.5% and India at -1%. European markets are expected to decline but relatively moderate, no doubt helped by the rise in American “futures”. A fragile rise in view of all that has just been said.
Economic highlights of the day
In Germany, the refined January inflation reading will be released at 8:00 a.m. ahead of the February Ifo business confidence index at 10:00 a.m. In the United States, the Fed will unveil the minutes of its last meeting at 9:00 p.m. The whole agenda here. Hong Kong’s GDP contracted by 3.5% in 2002, while the city is aiming for growth of between 3.5 and 5.5% this year.
The euro varies little around 1.0657 USD. The ounce of gold is in tune at 1835 USD. Oil is falling, with Brent from the North Sea at $82.52 a barrel and US light crude WTI at $76.14. The performance of the american debt over 10 years rises sharply 3.94%. Bitcoin retreats around $26,500.
The main changes in recommendations
- Air France-KLM: JP Morgan goes from neutral to overweight, targeting EUR 2.25.
- Allianz: Jefferies remains on the buy side with a reduced target price of 250 to 245 EUR.
- BNP Paribas: Berenberg remains to be kept with a price target raised from 55 to 70 EUR.
- Davide Campari: Jefferies should be kept with a target price raised from 10 to 11 EUR.
- Idorsia: Jefferies remains to be kept with a price target reduced from 16.20 to 13 CHF.
- Logitech: UBS goes from buying to neutral, aiming for 57 CHF.
- Nestlé: Julius Bär remains long with a price target reduced from 130 to 125 CHF.
- Novo Nordisk: Jefferies remains underperforming with a price target raised from 625 to 730 DKK.
- Publicis: Credit Suisse goes from neutral to outperformance by targeting EUR 87.
- Saipem: Jefferies remains long with a price target raised from 1.40 to 1.80 EUR.
- Sulzer: Kepler remains long with a price target raised from 98 to 102 CHF.
- Tecan: UBS remains long with a price target reduced from 493 to 483 CHF.
- Temenos: Jefferies remains to be kept with a price target raised from 55 to 66 CHF.
- Tenaris: Morgan Stanley remains overweight with a price target raised from 42 to 44 EUR.
- Wacker Chemie: Morgan Stanley goes from online weight to overweight by targeting EUR 185.
In France
Company results (comments are given on the spot and do not prejudge the evolution of securities)
- Compagnie Plastic Omnium: 2022 results are better than expected. The group wants to continue to outperform the global automotive market this year, and is setting targets for 2025.
- Danone: is aiming for 3 to 5% growth and a rising margin this year.
- Korian: targets organic revenue growth of more than 8% in 2023.
- Stellantis: exceeds forecasts in the second half and announces a €1.5 billion share buyback.
Important (and less important) announcements
- EDF signs agreements to help L’Oréal achieve its carbon neutrality targets by 2025.
- Alpine (Renault) is recruiting its engineering director from Ferrari.
- Societe Generale will pay $157 million to settle the fraud lawsuit once morest Allen Stanford.
- Euronext appoints a new boss in Brussels.
- Gaztransport & Technigaz will design the tanks for two new LNG carriers for SHI.
- Eiffage wins a contract worth nearly €190 million for Lyon-Turin.
- Ipsen extends its tender offer for Albireo Pharma shares to March 1, 2023, pending the verdict of the Hart-Scott-Rodino antitrust law.
- JCDecaux won a contract in Estonia.
- Voltalia will supply Adeo France (Leroy Merlin) with 20% of its electricity consumption.
- Courbet takes the Collège International de Cannes back to the bar of the court.
- Inertam (Europlasma) referenced in Italy by Furia.
- They have also published / they are on the agenda: Eiffage, Seb, Eramet, Patrimoine et Commerce, Compagnie Plastic Omnium, Nexity, Cnova, Korian, etc.
In the world
Company results (comments are given on the spot and do not prejudge the evolution of securities)
- BE Semiconductor: the group expects an evolution of between 0 and -10% of its activity in fiscal Q1.
- Fresenius: 2023 results are expected to decline.
- Iberdrola: to follow
- Lloyds: to be continued
- Rio Tinto: 2022 profit fell by 38% and is below expectations. The dividend is reduced to 4.92 USD per share.
- Siegfried: 2022 loop on results up but below AWP forecasts.
- UCB: results are down in 2022. Turnover should fall further this year, for an expected EBITDA margin of between 22.5 and 23.5%.
Important (and less important) announcements
- Fresenius will cede control of Fresenius Medical Care, changing its legal form from a limited partnership (KGaA) to a public limited company.
- The Brookfield Consortium is reducing its bid for Origin Energy to AUD 8.90 per share.
- Tesla would transfer part of Germany’s EV battery production to the United States, taking advantage of the advantages offered by Washington.
- Chesapeake will sell its shale oil assets to chemical maker Ineos for $1.4 billion, according to the Wall Street Journal.
- Shell is exploring options for its European retail gas and power unit, Bloomberg reported.
- BYD launches in Germany.
- Givaudan acquires a portfolio of cosmetic ingredients from Amyris.
- AMC shareholders are suing the company for voting to issue new shares.
- Steven F. Mayer has resigned as executive chairman of the board of Spanish pharmaceutical company Grifols, citing health and other personal reasons.
- KKR has extended by four weeks, until March 24, the non-binding offer for Telecom Italia’s fixed line network, following a government request.
- Philips will not pay bonuses to its executives for 2022, following a poor year.
- The main publications of the day: Nvidia, Rio Tinto, Iberdrola, Pioneer Natural Resources, Stellantis, Baidu, Lloyds, Danone, Genmab, eBay, Aena, Wolters Kluwer … The whole agenda here.
Lectures
