The support measures provided by the authorities following a wave of bankruptcies and destabilizations in the banking sector seem to have borne fruit. But I’ve been dawdling in the markets for too long to find that completely reassuring. We end the week with a panorama of the shock treatments administered by the authorities to stop a chain reaction, some monetary considerations and a squadron of witches.
That’s it, it’s over ? The reaction of the equity markets yesterday, that is to say a good big general rebound, seems to mean that investors think that the banking Berezina is over. If my previous sentence is full of convolutions, it is because a quick poll among market players would show that no one is very comfortable with this idea. However, the Euro Stoxx 50 recovered 2% and the Nasdaq 100 almost 2.7%. To understand the path that led to this very favorable closing following a rather bright red Wednesday session, you have to combine banking news and monetary news.
Most of the relief probably came from the banking sector. Thursday was marked by a double rescue. From the previous night, we knew that the Swiss National Bank was going to come to the aid of the country’s second bank, Credit Suisse. Even if the support was not presented as a blank cheque, it is one in a way, which also makes the Swiss press cringe. The bank seems to have done everything in the last decade to scuttle itself, without successive leaders failing to curb the unhealthy culture that had developed within the establishment. The authorities have no real choice but to come to the aid of Credit Suisse, but they do not do so lightly. It is rumored that Bern would think regarding a rapprochement with UBS, but the establishment with the three keys would be particularly reluctant to recover its dented rival. Credit Suisse ended up 19% yesterday. But even with this variation worthy of a terminal biotech, the title has lost a quarter of its value in three months and 73% in one year.
The other event that carried the markets in the banking sector yesterday was the lifeline of $30 billion sent by eleven American banks to their colleague the First Republic, the price of which fell from 122 to 17.50 USD between March 6 and 13. It must be said that the establishment was the fourth candidate for bankruptcy following the disappearances of Silvergate, SVB Financial and Signature in one month. The hecatomb was beginning to approach bigger players (First Republic is the 14th largest American bank), so the others thought that it was probably time to do something before more dominoes fell. It is said that it is the “3J”, Janet (Yellen), Jamie (Dimon) and Jerome (Powell) who would have orchestrated all this. Or respectively the head of the US treasury, the boss of JPMorgan Chase and the president of the Fed. The First Republic rallied 10% yesterday to rally to $34. It is still a quarter of the value displayed ten days before, but as on the side of Credit Suisse, the plunge has stopped.
In addition to these two banking events, the markets gave a good welcome to the monetary policy decision made yesterday by the ECB. However, the central bank tightened its main key rate by 50 basis points to bring it to 3.50%. It was what she had planned to do, but the turmoil in the banking sector might have dulled her convictions. Nothing happened, but the markets seem to think that this turn of the screw might be the last. The most cautious economists believe instead that the ECB will continue to raise its rates if some form of serenity returns to the financial complex, and that it will give up with pragmatism if things get out of hand. Christine Lagarde, who has not always shone in the art of crisis communication, obviously did well yesterday.
So the equity markets were satisfied with the management of the bazaar. But all other things being equal and to make the service killjoy, the situation on the morning of March 17 is still much worse than it was ten days before. We find ourselves with on our arms a piece of banking crisis which cost the lives of three actors of good size and required the rescue of two others in emergency. That is in addition to the big question that has been plaguing investors for months: will monetary policy help curb inflation without destroying economic momentum? Question to which we can therefore add … and without destroying part of the banking sector feeding on free money? From there to think that it is the perpetual headlong rush, there is only one step.
There will be a big stake on the Fed’s decision on March 22. The US central bank is expected to hike rates by a quarter point, according to the CME’s FedWatch tool, with an 82% probability. The remaining 18% predict a status quo. Ten days ago, the market saw a tightening of 50 basis points by a narrow majority. This shows whether the banking events have changed the situation in the short term.
On the side of the Asian markets, it goes up everywhere. Tokyo and Hong Kong gained more than 1% and Shanghai and Sydney around 0.4%. Note that today is the 3rd Friday of the month, synonymous with the clearing session with the monthly expiry of equity and index derivatives. And as it is also the 3rd Friday of a quarter-end month, longer maturities are also coming to an end. We call it the four witches session, which is not necessarily terrible but which is generally a source of volatility because it is necessary to adjust the strategies for the future. The CAC40 gained 0.8% to 7082 points at the opening.
Economic highlights of the day
In the United States, industrial production (2:15 p.m.) will be followed by the University of Michigan confidence index (3:00 p.m.). The whole agenda here.
The euro rose to 1.0643 USD. The ounce of gold remains firm at 1928 USD. Oil is attempting a micro-bounce, with North Sea Brent at $75.25 a barrel and US Light Crude WTI at $69.05. The performance of the american debt over 10 years fell slightly to 3.54%. Bitcoin is strengthening around $25,800.
The main changes in recommendations
- Adidas: RBC remains at market performance with a target raised from 110 to 130 EUR.
- Evonik: Jefferies remains to be kept with a target price reduced from 18.80 to 17.70 EUR.
- GSK: Deutsche Bank goes from holding to buying, aiming for 1700 GBp.
- KBC: HSBC goes from buying to keeping, targeting EUR 68.
- La Française des Jeux: Redburn starts tracking at neutral.
- Nel: Goldman Sachs goes from neutral to buy, targeting NOK 20.60.
- Nexus: Pareto Securities goes from hold to buy targeting EUR 61.
- Ruby: Portzamparc remains long with a target raised from 33.50 to 35.10 EUR.
- Sage: Exane BNP Paribas goes from outperformance to neutral.
- Societe Generale: HSBC goes from holding to buying, aiming for EUR 33.
- Stadler Rail: Vontobel remains long with a target price reduced from 42 to 40 CHF.
- SUSE: JPMorgan remains neutral with a price target raised from 19 to 20 EUR.
- Swatch Group: Jefferies remains long with a price target raised from 370 to 390 CHF.
- Symrise: Goldman Sachs goes from neutral to buy, targeting EUR 117.
- Synlab: JPMorgan remains neutral with a price target raised from 8.30 to 8.60 EUR.
- Tessenderlo: KBC takes over the follow-up to accumulate aiming for 38 EUR.
- Wärtsilä: Nordea resumes long tracking, targeting EUR 10.60.
In France
Company results (comments are given on the spot and do not prejudge the evolution of securities)
- Ruby: results increase less quickly than income, but the dividend is slightly increased. Earnings are expected to grow further this year.
- Wendel: NAV fell 10.8% to EUR 167.90. The group is embarking on management for third parties.
Important (and less important) announcements
- Sanofi will cut the price of its flagship insulin in the United States by 78% next year.
- Saint-Gobain and Dalsan obtain the green light from regulatory authorities to combine plasterboard and plasterboard units in Turkey.
- Alstom will operate the automatic shuttle at Newark airport over 7 years, for expected revenues of €250 million.
- Thales participates in the round table of Geoflex.
- Megan Clarken and Ulrica Fearn proposed as directors of Capgemini.
- Casino drops to 11.7% of Asai’s capital by recovering €723.3 million.
- Ipsen announces that the FDA will make a decision on the approval of palovarotene as a potential treatment for fibrodysplasia ossificans progressiva.
- Biophytis changes its ADS ratio from 1:10 to 1:100 to save its Nasdaq listing.
- They have published / They must publish: Orapi, Samse, Transgene…
In the world
Company results (comments are given on the spot and do not prejudge the evolution of securities)
- Deutsche Wohnen: keeps its operating result stable.
- Enel: 2022 profits are up. A dividend of EUR 0.40 is proposed.
- Fedex: the American logistician gained 11.5% outside the session following the publication of its results.
- Vonovia: solid 2022 results, before a drop expected this year.
Important (and less important) announcements
- The big American banks are flying to the aid of First Republic by providing $30 billion.
- UBS and Credit Suisse oppose the idea of a mandatory merger.
- After its fall, Baidu blazes on the promises of a competitor to ChatGPT.
- Telenor and CK Hutchison in talks to merge their operations in Denmark and Sweden.
- Carlsberg has appointed Jacob Aarup-Andersen as chief executive.
- Compagnie Financière Richemont is planning a secondary listing in Johannesburg.
- John Wood Group extends deadline for proposed acquisition of Apollo Global Management.
- Volkswagen wants to invest in mines to reduce the cost of battery cells.
- Motive Partners would negotiate the acquisition of ACI Worldwide, according to Bloomberg.
- SGS acquires activities of the Spanish Asmecruz.
- Aerojet Rocketdyne shareholders approve pending acquisition by L3Harris Technologies.
- Novartis obtains FDA approval for combination treatment for childhood brain cancer.
- Diploma completes the purchase of Tennessee Industrial Electronics and plans a capital increase.
- The main publications of the day: Sonova, Bechtle, Wendel, Interroll, Unibel… The whole agenda here.
Lectures
