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Nothing new before tomorrow?

  • Post category:Economy News
  • Reading time:8 mins read

The equity markets decided to play it patchwork yesterday, at the end of a session which did not provide much information to investors in search of visibility. France and Belgium gave up some ground while Germany, Italy and Switzerland grabbed some points. London was taking a break to bury the Queen of England, whose disappearance aroused a wave of emotion even in my municipal council, where the debate raged last night about the flag at half mast at the pediment of the town hall. Perfidious Albion, it was she who had soaped the imperial plank for us and who had gotten rid of Joan of Arc. The subject also seemed controversial in the United States, since the war of independence did not take place against the Zapotecs, as far as I know. Beyond the monarchical symbol, we could perhaps just rejoice that a transnational event still arouses emotion.

But back to our financial sheep. In the United States, the indices ended in the green. The gains were around 0.7% for the S&P500, the Dow Jones and the Nasdaq, helped by a buying trend on large stocks like Apple or Microsoft. The market is still awaiting the verdict that the American central bank must render tomorrow on its rates. Futures contracts show that the most likely scenario is a 75 basis point hike, which would take the main US policy rate from the “2.25 to 2.50%” range to the “3 to 3, 25%”. This level would be the highest reached since the financial crisis of 2008.

But surely you are beginning to know the song: more than the decision itself, it is the level that rates are likely to reach at the peak of the recovery cycle that matters to financiers. That’s what they’ll be looking to determine in Jerome Powell’s decision presentation speech tomorrow night. Equity markets could relax if this brave Jay suggests that the fight against inflation is well underway. Or get depressed if he puts on his Paul Volcker disguise and suggests it’s still gonna be long, implied “I have no fucking idea when all this shit is going to stop“.

Unless it’s a somewhat wobbly in-between, which would contribute to the financiers continuing to pedal in the fondue, as we say back home (it’s a lie, nobody says that because a fondue does not spoil). Ah, I forgot another hypothesis, which is the big odds of the week: the Fed directly raises its rates by 100 basis points (note: futures contracts only give this scenario an 18% probability as of today Tuesday morning). If that were the case, there would probably be a significant increase in volatility tomorrow night, because the markets don’t like surprises very much. But even in this hypothesis, it is the way in which Jerome Powell will argue the decision that will make the trend.

The macroeconomic news is quite poor today. Oil seems to have calmed down, while the euro-dollar pair is still moving close to parity. On the statistical side, the construction figures in the United States in August are scheduled for 2:30 p.m. The big ball of central banks starts today with the Swedish Riksbank and therefore continues tomorrow with the Bank of Brazil and the Fed. It will continue on Thursday with the Bank of Japan, the Swiss National Bank and the Bank of England in particular. On the company side, the main information of the night is the reduction in Ford Motor’s forecasts. The automaker is affected by additional supply costs estimated at $1 billion and by shortages of components that prevent it from completing vehicles in production.

On the financial markets, it’s a panty party this morning. No, really: apparently the slip made its first appearance on September 20, 1913 in the magazine L’Illustration, according to a dubious source. In any case investors look perky in Asia Pacific, Tokyo is coming out of a long weekend with a gain of 0.4%, while Hong Kong and Sydney are recovering by winning more than 1%. Western leading indicators are fairly well anchored in the green. Investors remain optimists who tend to bet on the power of monetary decisions to create bullish inflection points. This will not prevent a few resurgences of nervousness according to rumors and market comments. The CAC40 started the session up 0.43% to 6087 points.

Economic highlights of the day

Focus on US real estate with housing starts & building permits in August. The whole macro diary here.

The euro rises to 1.0029 USD. The ounce of gold recovered slightly to 1676 USD. Oil is not far off from Friday’s level, with North Sea Brent at $92.05 a barrel and US WTI light crude at $85.32. The yield on US 10-year debt gained 2 points to 3.47%. Bitcoin is trading around $19,300.

The main changes in recommendations

  • Adyen: HSBC goes from buying to keeping, aiming for 1500 EUR.
  • Aena: Barclays moves from online weight to underweight by targeting EUR 115.
  • Aéroports de Paris: Barclays goes from underweight to weighted online, targeting EUR 136.
  • Coloplast: Jefferies goes from buy to hold aiming for 880 DKK.
  • Dufry: HSBC remains on the buy side with a target reduced from 47.50 to 44 CHF.
  • EDP: Barclays moves from online weight to overweight by targeting EUR 5.90.
  • Emmi: Vontobel remains on the buy side with a reduced target of CHF 1,100 to 1,000.
  • Emova: Kepler Cheuvreux remains long with a target reduced from 2.40 to 2 EUR.
  • Endesa: Barclays moves from online weight to overweight by targeting EUR 22.10.
  • Euronext: Credit Suisse goes from outperformance to neutral, targeting EUR 77.
  • Flughafen Zürich: Barclays goes from overweight to weighted online by targeting 170 CHF.
  • Fraport: Barclays goes from online weight to overweight by targeting EUR 56.
  • HelloFresh: DZ Bank remains to be kept with a target reduced from 31 to 28 EUR.
  • Helvetia: Berenberg remains to be kept with a target reduced from 104 to 100 CHF.
  • Medacta: UBS is still buying with a target reduced from 117 to 115 CHF.
  • Ocado: HSBC goes from keeping to reducing, aiming for 575 GBp.
  • Oxford Instruments: Jefferies remains to be retained with a target reduced from 2320 to 2010 GBp.
  • Pandora: Nordea goes from holding to selling aiming for 300 DKK.
  • United Internet: DZ Bank remains long with a target reduced from 35 to 30 EUR.
  • Wizz Air: Oddo BHF goes from underperformance to neutral by targeting 2500 GBp.

In France

Important (and less important) announcements

  • Safran signs two service contracts with the airline Cathay Pacific for its Airbus fleet.
  • La Française des Jeux is negotiating the takeover of the second online horse racing betting operator, Zeturf.
  • JCDecaux takes control of Chicago’s large-format digital network operator.
  • The British CMA is opening an investigation into the planned takeover of LeasePlan by ALD.
  • Wallix and Nozomi Networks sign technology alliance to bolster industry cybersecurity.
  • Metalliance (Gaussin) is selling 12 vehicles for the construction of the metro between Sydney and its airport.
  • Global Bioenergies sells bio-isobutene to Repsol for gasoline formulation testing.
  • Pharmasimple formally denies being in a situation of insolvency or filing for bankruptcy”.
  • Dolfines signs a new dilutive financing line with Negma.
  • The operational phase of cooperation between BARDA and Crossject began in July.
  • Implanet concludes its partnership with Sanyou Medical.
  • Hybrigenics entrusts Inoviem Scientific with the development of its molecule for the treatment of Crohn’s disease.
  • GECI International is expanding in Israel and Brazil.
  • Groupe Gorgé, ABC Arbitrage, Genoway, AST Groupe, Adocia and Streamwide have published their accounts.

In the world

Important (and less important) announcements

  • Ford warns on its Q3 results. The title lost 4.4% outside the session.
  • Henkel raises its organic growth outlook for 2022.
  • ThyssenKrupp believes that market conditions do not allow a rapid IPO of its hydrogen subsidiary Nucera.
  • Moderna is the other vaccine specialists fall after Joe Biden declared the pandemic over.
  • FDA approves Cobas (Roche) laboratory solutions.
  • Bachem signs two new peptide supply contracts.
  • Main publications of the day: Kingfisher, TUI AG, Formycon, Sthree… The whole agenda here.