The mountain gave birth to a bit of a mouse yesterday on the stock market, with US inflation which woke up the market’s libido for 3 minutes 32 flat, before the indices lost their lead. Until a lower US close. Business is picking up once more this morning with an anchor in China, to which I link in a somewhat audacious way both LVMH, Alibaba, Emmanuel Macron and Tupperwares. You will quickly understand. Finally, I hope.
Finally, equity markets were not so impressed by the self-fulfilling prophecy of slowing US inflation. Probably because once once more, the situation is neither white nor black, but rather gray. Let me explain. The Bureau of Labor Statistics reported yesterday that price growth slowed to, say, 5% in March year on year. This remains substantial but it is the smallest increase of the last two years. What’s more, it is slightly lower than expected. This is what made the equity markets react very positively yesterday at the time of the announcement.
A reaction quickly slashed by a small backlash because core inflation (“core inflation”, ie the rise in prices excluding energy and food) was given at 5.6% over one year. This is in line with what was expected here, but it also shows that prices are still on the upswing. It is this core inflation that the Fed is looking at, which probably still considers it a little too vigorous. This suggests that the central bank will roll out the continuation of its rate hike program by giving a 25 basis point tightening, perhaps the last of the cycle, at the May 3 meeting. Expressed otherwise, the equity market would probably have been on fire for good news on the side of core inflation, but it ends up with more or less neutral data, hence a form of disappointment visible in the closing of Wall Street yesterday evening: -0.1% for the Dow Jones, -0.4% for the S&P500 and -0.89% for the Nasdaq 100 (which signs a 3rd drop in rank).
Inflation is not the only data published yesterday in the United States. The minutes of the last Fed meeting also played an important role in the stock performance. It was in a way the second blade, which came to annihilate the attempt to recover mid-session. We can read that the institution anticipates a slight recession later in the year and that it is concerned regarding the situation of the banking system. Let us not forget that this report concerns a meeting which took place on March 22, that is to say immediately following the rescue of Credit Suisse by UBS and the sterilization of SVB Financial and Signature Bank by the American authorities. Since then, the speeches are a little more reassuring on the solidity of the financial system with the remoteness of the specter of a new Lehman Brothers. The last American company in difficulty is not a bank but a manufacturer of plastic boxes, and not just any: Tupperware. The company expressed doubts this week on its continuity of operation. Will it join the graveyard of endangered brands like Toys “R” Us, Blockbuster, Polaroid, Emmanuel Macron, Kodak or Bed, Bath & Beyond? Mystery. Unless an army of private investors decides that it is necessary to save this masterpiece in danger in the manner of GameStop or AMC Entertainment.
But enough joking, the Fed’s inflation/minutes combo caused the US indices to take a nosedive in the evening. Stocktaking of the races: Investors are still expecting a rate hike in early May but continue to believe that the Fed will have to start backtracking later in the year. The central bank, for its part, takes note of the turbulence but continues to roll out its plan by trying to organize a soft economic landing. A ball all over the center in a way.
Earlier in Europe, the indices had experienced disparate closings. Slight increase in France, more marked increase in Germany and the United Kingdom and decreases in Benelux and Switzerland. Not much to say regarding this session marked by a certain wait-and-see attitude before the first publications of quarterly results from major companies. Which also started last night with LVMH, whose figures have quite clearly exceeded expectations thanks, obviously, to the awakening of the Chinese market. We are still in an exceptional area, that of luxury, since the other figures announced this morning are less flamboyant, particularly on the side of BASF and Givaudan. The other two important news of the day concern China. First on the side of exports in March, much more dynamic than expected, even if this does not really cheer up the CSI300 in Shanghai, which lost 0.3% in session. Then concerning Alibaba, whose price faltered following the Financial Times revealed that the shareholder SoftBank sold most of its shares. In Hong Kong, the Hang Seng dropped 0.4%.
Elsewhere in Asia-Pacific, Japan is up slightly but India and Australia are down. South Korea is in equilibrium. European leading indicators are, like the day before, hesitant in pre-opening. The CAC40 starts up sharply by 0.8% thanks to LVMH.
Economic highlights of the day
The second reading of German inflation in March (8:00 a.m.) will be followed by European industrial production in February (11:00 a.m.), before in the United States at 2:30 p.m. producer prices and weekly jobless claims. The whole agenda here. This morning, Japanese machinery orders contracted less sharply than expected in March (-4.5% vs -6.4% expected). March Chinese exports jumped 14.8% and imports fell 1.4% (consensus +7% / -0.5%).
The euro climbs back to the gates of USD 1.10. The ounce of gold is firm at 2018 USD. Oil is accelerating with North Sea Brent at $86.95 a barrel and US Light Crude WTI at $82.84. The performance of the american debt over 10 years evolves to 3.41%. Bitcoin is trading around USD 30,100.
The main changes in recommendations
- Barratt: HSBC goes from hold to buy targeting 570 GBp.
- Barry Callebaut: Barclays moves from overweight to weighted online by targeting CHF 2075.
- Bellway: HSBC goes from holding to buying, aiming for 2700 GBp.
- Berkeley: HSBC goes from selling to keeping, aiming for 4000 GBp.
- Billerud: DNB goes from hold to buy targeting 124 SEK.
- EssilorLuxottica: JP Morgan starts tracking to overweight by targeting EUR 215.
- Geberit: Jefferies remains underperforming with a price target reduced from 338 to 336 CHF.
- Givaudan: Bernstein remains underperforming with a price target raised from 2490 to 2550 CHF.
- Klépierre: Barclays goes from underweight to overweight by targeting EUR 24.
- Knorr-Bremse: Societe Generale goes from buying to keeping.
- LVMH: JP Morgan raises its target price from 815 to 900 EUR. Credit Suisse raises its target price from 960 to 1005 EUR.
- Novo Nordisk: Credit Suisse goes from neutral to outperformance by targeting 1250 DKK.
- OVH: Citigroup reduces its target price from 14.80 to 13 EUR.
- Persimmon: HSBC switches from holding to buying, aiming for 1550 GBp.
- Redrow: HSBC moves from hold to buy targeting 670 GBp.
- Romande Energie: Baader Helvea goes from accumulating to buying, aiming for 1,500 CHF.
- Sartorius AG: Berenberg remains to be kept with a price target reduced from 493 to 448 EUR.
- Sartorius Stedim Biotech: Berenberg remains long with a price target reduced from 446 to 365 EUR.
- SGS: Baader Helvea goes from buying to accumulating aiming for CHF 96.90.
- Swiss Re: Barclays remains weighted in line with a price target raised from 94 to 96 CHF.
- Taylor Wimpey: HSBC goes from hold to buy targeting 150 GBp.
- Verallia: Exane BNP Paribas goes from outperformance to neutral, targeting EUR 44.
In France
Company results (comments are given on the spot and do not prejudge the evolution of securities)
- LVMH: Q1 sales growth clearly exceeded expectations, thanks in particular to the rebound in China.
Important (and less important) announcements
- Pernod Ricard has resumed exports of Absolut vodka to Russia.
- Renault in contract with Verkor for EV batteries.
- Sopra Steria joins the NVIDIA Partner Network.
- Eurazeo unties its cross-shareholding with Rhône Group.
- Eutelsat has signed a multi-year agreement with the Brazilian company RecordTV.
- Quadient expands its parcel locker network in the UK.
- AB Science will release data on Masitinib at AAN 2023 in late April.
- The small corner of dilution: Drone Volt no longer holds any dilutive instruments, following the conversion of the last You you Barclays remains at s OC Atlas. Neovacs’ partner, BioScence, will submit a clinical trial application in China with IFNα Kinoid in the treatment of lupus.
- They have published / They must publish: Kaufman, Toosla, Obiz, Marie Brizard, IDI, Bourse Direct, Genfit, Theranexus…
In the world
Company results (comments are given on the spot and do not prejudge the evolution of securities)
- BASF: the chemist published lower quarterly results. Annual operating profit should reach a maximum of €5.4 billion.
- Givaudan: saw its sales fall very slightly by 0.4% over one year to 1.77 billion CHF in Q1.
- Tesco: expects stable profits for the financial year 2023/2024.
- VAT Group: revenues and orders down in Q1.
Important (and less important) announcements
- Alibaba suffers in Hong Kong following a stock placement by Softbank.
- Brookfield Infrastructure is buying freight container lessor Triton in a $13.3 billion deal.
- According to the Wall Street Journal, International Business Machines is considering divesting its weather business.
- Saab is considering Colombia and Peru as potential Gripen customers as part of its Latin American campaign.
- Apple has tripled its iPhone production in India, according to Bloomberg, confirming its efforts to diversify away from China. In addition, the group would negotiate with suppliers to produce MacBooks in Thailand, according to Nikkei.
- Teck shareholders are asking Glencore to increase its initial takeover offer, which reached $22.5 billion.
- Tesla is regarding to launch the Powerwall 3 home battery.
- Siemens is aiming for a long-term increase in software sales share to 20%, according to its CEO.
- The promoter Sunac China collapses by nearly 60% in Hong Kong for its resumption of listing.
- Netflix has announced plans to expand its operations in Africa, building on the success of shows or series like the South African series “Blood and Water”.
- Accenture invests in Virtonomy, a data-driven simulations company.
- The main publications of the day: Progressive, Fastenal, Delta Air Lines, Givaudan, Christian Hansen, VAT Group, Tesco… The whole agenda here.
Lectures
