There are two ways to analyze the new stock market decline yesterday. The optimist is seeing some waning of selling pressure, which has resulted in limited contractions. Finally limited compared to recent standards, since we will see that the drops are sometimes still substantial. The pessimist is content to take note of a new low, in particular a closing at the lowest since the end of 2020 for the most watched index in the world, the American S&P500. This means that Wall Street has eliminated all of the gains accumulated between December 2020 and December 2021. The decline takes the elevator and the rise the staircase, would certainly say our most experienced analyst at Zonebourse, who surely still sleeps at this hour- this. The S&P500 lost 23% in 2022. The tech-weighted Nasdaq is down -31%. I remind you that the so-called growth stocks are more severely attacked than the others during these phases, because the dynamic of perpetual economic headlong rush that feeds them is broken. Europe version 2022 is not doing much better: -20% for the broad Stoxx Europe 600 index, -19% for the French CAC, -21% for the Swiss SMI and -23% for the German DAX.
Yesterday, the markets again lost points. Except in the UK where British phlegm tends to turn into something a little crazy at regular intervals. The FTSE 100 climbed 0.03% as the pound burned and the price of Gilts, Britain’s government bonds, crashed. Her Majesty’s 10-year yield rose to 4.24% (the bond price and yield move in opposite directions). The tax measures announced by the Truss governments have raised a lot of questions and an outcry from the financial markets. Smarties have noted that the British announcements even overshadowed Giorgia Meloni’s rise to power in Italy. “To thin horses go flies”, says the proverb. The sick economy of Europe is perhaps no longer what we believe. Finally if we consider that the United Kingdom is in Europe geographically if not politically. The panic over the pound was barely mitigated by its rebound yesterday.
A Reuters columnist pointed out overnight that this situation could become a headache for some Asian central banks rich in Gilts. “Our currency, your problem“, to paraphrase Nixon Treasury Secretary John Connally’s witticism to European finance ministers in 1971. It was obviously about the dollar, and it remains as relevant as ever for the greenback. time, the market is still buzzing with rumors of emergency intervention by the Bank of England to support its currency, even if it must be admitted that the lead taken by the institution in the aggressive rise in its key rates does not hasn’t had much impact so far.
When a central banker goes out the door, there is always one to come in through the window, says another proverb. Or at least, we could think about creating it. Yesterday, it was the boss of the ECB, Christine Lagarde, who occupied the media field by recalling lots of tricks from central bankers. Basically it revolves around “confidence, firmness, we know what we are doing, but it will sting“. This afternoon, the Fed’s Jerome Powell will be coming in through the window talking central banker stuff. It might sound like “confidence, firmness, we know what we are doing, but it will sting“. He will speak at 1:30 p.m. during an event organized in Paris by the Banque de France, before a series of important indicators: durable goods orders for August (2:30 p.m.), followed at 4:00 p.m. by the figures for new real estate sales in August and the US consumer confidence index in September, compiled by the Conference Board.
This morning, equity markets are trying to rebound in Japan, Australia and mainland China. On the other hand, South Korea and Hong Kong are still losing quite a bit of ground. European markets are showing signs of a rebound. Leading indicators are moderately bullish, helped by more firmly anchored green US futures. Projections that are likely to vary with the return of nervousness and therefore volatility. The VIX index, which measures this, rose above 32 points yesterday, a level close to mid-June. The CAC40 gained 0.6% and returned to 5800 points at the opening.
Economic highlights of the day
A big banner from the US today: Durable Goods Orders (2:30 p.m.), FHFA Home Price Index (3:00 p.m.), Conference Board Consumer Confidence Index, China Manufacturing Index Richmond Fed and New Housing Numbers (4:00 p.m.). The whole macro diary here.
The Euro is trading at USD 0.9642, slightly higher. The ounce of gold remains under pressure at 1631 USD. Oil too, with Brent from the North Sea at 84.56 USD a barrel and US light crude WTI at 77.18 USD. The yield on US 10-year debt continues to climb to 3.87%. The 5-year is at 4.13% and the 2-year at 4.30%. Bitcoin rallied to $20,000.
The main changes in recommendations
- 888: Jefferies remains long with a price target reduced from 370 to 280 GBp.
- Adidas: Goldman Sachs goes from buy to neutral.
- Aurea: Portzamparc resumes the follow-up to be reinforced by aiming for 8 EUR.
- Avantium: Berenberg remains the purchase with a price target reduced from 6.60 to 4.40 EUR.
- Byggfakta: Jefferies remains long with a reduced price target of 50 to 45 SEK.
- Devolver Digital: Berenberg goes from buy to hold aiming for 80 GBp.
- HelloFresh: Bernstein remains for sale with a target reduced from 27 to 19 EUR.
- Hugo Boss: Deutsche Bank goes from buying to holding, targeting EUR 58.
- Huhtamaki: Jefferies remains long with a reduced target price of 45 to 40 EUR.
- Inchcape: Berenberg starts long tracking by targeting 1035 GBp.
- Johnson Matthey: Berenberg remains long with a reduced target price of 2550 to 2200 GBp.
- Kering: Barclays goes from overweight to weighted online by targeting EUR 555.
- MCH: Research Partners goes from hold to buy targeting 7 CHF.
- QinetiQ: Jefferies remains long with a reduced target price of 411 to 400 GBp.
- Quadient: Portzamparc remains long with a target raised from 34 to 36 EUR.
- Rovi: Kepler Cheuvreux remains long with a target raised from 87.60 to 88.30 EUR.
- SGS: RBC goes from outperformance to sector performance by targeting CHF 2,350.
- SKF: Jefferies goes from retaining to underperforming by targeting 123 SEK.
- Snam: Citigroup goes from sell to neutral, targeting EUR 4.30.
- Solaria: Societe Generale goes from holding to buying, aiming for EUR 21.
- Unicredit: JP Morgan goes from neutral to overweight, targeting EUR 15.
- WithSecure: Berenberg starts long tracking by targeting EUR 2.60.
Important (and less important) announcements
- TotalEnergies is joining forces with SARIA to develop the production of sustainable aviation fuel on the Grandpuits platform. In addition, the employees of the oil group today begin a strike movement in France in support of wage demands.
- ArcelorMittal issues €600m of 4.875% bonds maturing in 2026.
- Asda chooses Dassault Systèmes planning and optimization solutions to transform its transportation business.
- Two subsidiaries of Crédit Agricole receive small fines for violations of American sanctions.
- Arkema is revising upwards its global capacity extension for Pebax elastomers at its Serquigny site.
- Electricité de France, in consortium with KEPCO and Kyushu Electric, finalizes the financing of the electricity transmission project in the UAE. In addition, EDF signs an agreement with EPH to sell its stake in a power plant in the Netherlands.
- Fnac Darty selects SES-imagotag for the digitalization of more than 200 stores in Europe.
- JCDecaux Portugal renews its partnership with Sonae Sierra.
- Technicolor Creative Studios, a Technicolor spinoff, begins listing on Euronext.
- Transgene holds an R&D day.
- CGG signs a multi-client license agreement with TotalEnergies for the storage of carbon dioxide.
- Leroy Merlin entrusts Voltalia with the construction of a solar power plant in Centre-Val de Loire.
- Servier lifts the exclusive worldwide license option on the program for the treatment of Parkinson’s disease from Oncodesign Precision Medicine, a subsidiary of Oncodesign.
- Guerbet obtains financing of €1 million from the BPI.
- Quadient, Cabasse, Marie Brizard, FIPP, Precia and Roctool have published their accounts.
In the world
Important (and less important) announcements
- Sika will sell assets to avoid the wrath of the antitrust as part of the takeover of the MBCC group.
- Ford Motor on Monday called for a retrial in the case that last month saw it ordered to pay $1.7 billion following a fatal accident involving one of its commercial vehicles.
- Biogen will pay 900 million to settle a case of bribes.
- Biffa accepts a buyout offer at 410 GBp per share in cash from ECP.
- Nexi expects to generate €2.8 billion in excess cash over 2023/2025.
- The CEO of Siemens Gamesa believes that he will restore the onshore wind branch in 2022.
- Generac Holdings enters the portable battery market.
- Georg Fischer confirms his 2025 objectives.
- Stanley Black & Decker and TerraCycle are launching a free recycling program for appliances and tools.
- Main publications of the day: Ferguson, Jabil, United Utilities, Verbio, Danieli… The whole agenda here.