Investors can thank the month of July 2022, which allows them to mitigate the underperformance accumulated during the first half of the year. In Europe, the broad Stoxx Europe 600 index recovered 7.6%, its best monthly score since November 2020. More cyclical national indices like the French CAC40 did better (+8.9%), while those that are more defensive like the Swiss SMI did not reach the average (+3.8%). The reason is quite simple: Technology, Industry and Consumer Cyclicals have taken off again, leaving Health and Finance in the lurch. Might as well take advantage of it because, statistically, August and September are on average the least prolific months of the year for the Stoxx Europe 600. A little music to celebrate July with dignity?.
In the United States, the sector performances are distributed more or less in the same way, so that the Nasdaq 100 index, rich in Technologies, recovered 12.5%. We have to go back to April 2020 to find a more favorable month. The more diversified S&P500 rallied 9%.
The market rebound was based on a number of somewhat wobbly elements, which together ended up giving shape to something more solid. Investors seem to have passed the stage where they see everything in black. Which means they start to see glass half full rather than glass half empty in everything. They have priced in the Fed’s punitive rate hike cycle and the ongoing macroeconomic slowdown. They also found that the majority of companies are still able to pass on their rising costs to the consumer. And that valuations are less delusional than six months earlier, even in view of less dynamic results than they may have been in previous quarters. All of this remains very fragile and the impact of the macroeconomic forces at work, I am thinking in particular of inflation or energy and climate disorders, is extremely difficult to quantify.
But in the “shock cycle”, the market stopped denying the positive news, which is already a huge step up from the weeks before. You only have to look at the very warm welcome given last week to the results of Apple or Amazon when they were very far from the usual standards of the two companies to understand that something has happened. thing on investors’ minds lately. Investors who even found comfort in the poor second quarter US GDP figures. Their animal spirit leads them to think that the Fed could come and play the firefighters again by ending its policy of fighting inflation earlier than expected, to restore momentum to the economy. Have investors lost their minds? This is the subject of the second song of the day.
The shock cycle
To start the week, know that Joe Biden is not finally cured of his Covid and that the Democratic President of the House of Representatives, Nancy Pelosi, has started a tour of Asia. Rumor has it that it passes through Taiwan, which would obviously cause new tensions with China. On the macroeconomic agenda, we will find Thursday a decision by the Bank of England on its rates and Friday the employment figures in the United States in July. This weekend, China published poor manufacturing activity figures for the month of July. So welcome to August, in music.
There will be another big series of corporate results this week, including around 60 worth more than $50 billion. In Europe, after HSBC and Heineken this morning, BP Plc, AXA, Siemens Healthineers, BMW, Novo Nordisk, Bayer and Allianz will follow. In the United States, are expected in particular PayPal, Costco, CVS Health, Eli Lilly, Amgen or ConocoPhillips.
European leading indicators are bearish this morning, like those of the US market. We must probably digest the recent gains. In Asia, Tokyo and Sydney gained 0.6% at the close. Mainland China is up but Hong Kong is losing some ground. The VIX volatility index fell to 21 points, which had not happened to it since last April. A sign that there is a little less nervousness in the market. The CAC40 lost 0.11% to 6441 points at the opening.
Economic highlights of the day
The July manufacturing PMI indices are on the program for the main economies, including the euro zone at 10 a.m. and the United States at 3:45 p.m. Across the Atlantic, there will also be the manufacturing ISM and construction spending (4:00 p.m.). The whole macro diary here. China reported an official manufacturing PMI back in contraction territory in July at 49 points, below expectations (50.3). The Caixin PMI, which contains more private companies, deteriorated to 50.4 points but remained in the expansion zone.
The euro changed little at 1.0228 USD. The ounce of gold stabilizes at 1761 USD. Oil was down from the previous week, with North Sea Brent at $102.90 a barrel and US WTI light crude at $97.30. The yield on US 10-year debt stabilized at 2.66%. Bitcoin is trading around $23,400.
The main changes in recommendations
- Ageas: HSBC goes from holding to buying, aiming for EUR 50.
- Air France-KLM: HSBC goes from keeping to buying, targeting EUR 1.60.
- Amundi: Credit Suisse raises its price target from EUR 52 to EUR 60.
- Anglo American: JP Morgan goes from neutral to overweight, targeting 3850 GBp.
- Arkema: Berenberg remains on the buy side with a price target reduced from 152 to 131 EUR.
- BAE Systems: Jefferies remains long with a target raised from 945 to 960 GBp.
- BNP Paribas: Jefferies remains long with a target reduced from 73 to 72 EUR.
- Croda: Berenberg remains the buy with a price target reduced from 90 to 84 GBp.
- Diageo: Berenberg remains to be kept with a reading target of 3900 to 4160 GBp.
- Hermès: Citigroup raises its target price from 1213 to 1366 EUR.
- Inficon: Research Partners remains to be retained with a reduced objective of 910 to 850 CHF.
- Ipsen: Berenberg remains to be kept with a price target raised from 98 to 102 EUR.
- Jet2: HSBC goes from buying to keeping, aiming for 970 GBp.
- Kerry: Berenberg remains long with a price target raised from 124 to 128 EUR.
- Renault: Jefferies remains on the buy side with a price target raised from 40 to 43 EUR.
- Rheinmetall: HSBC goes from holding to buying, targeting EUR 242.
- Safran: Jefferies remains to be kept with a target raised from 100 to 106 EUR.
- Scor SE: Jefferies remains to be kept with a price target reduced from 26.50 to 17.50 EUR.
- Securitas: JP Morgan moves from underweight to neutral as it targets its SEK.
- Siltronic: Jefferies remains long with a target raised from 110 to 115 EUR.
- STMicroelectronics: Citigroup raises its target price from 44 to 52 EUR.
- Swedish Orphan Biovitrum: Morgan Stanley Resumes Overweight Tracking Targeting SEK 280
- Swiss Re: JP Morgan remains neutral with a target reduced from 100 to 80 CHF.
- Tokmanni: SEB Equities goes from hold to buy targeting EUR 16.
- Eiffel Tower: Kepler Cheuvreux remains to be kept with a target price reduced from 27 to 23 EUR.
- Umicore: Jefferies remains underperforming with a target raised from 26 to 27 EUR.
Important (and less important) announcements
- New car registrations were down 7.06% in July in France, according to the PFA.
- Saint-Gobain finalizes the acquisition of Kaycan.
- Vinci buys the 29.9% held by Fintech Advisory in the Mexican airport operator OMA for $815 million.
- Ipsen signs a partnership with Marengo Therapeutics in immuno-oncology. The laboratory acquires exclusive rights for an experimental ERK inhibitor as part of its research partnership with AGV Discovery.
- Fitch lowered Faurecia’s BB+ credit rating outlook from stable to negative.
- Moody’s could lower Eutelsat’s Baa3 rating after the OneWeb deal.
- Icade signs a sales agreement for a building in Nanterre.
- Bolloré’s half-year results are up sharply.
- Innate Pharma and AstraZeneca failed on monalizumab combined with cetuximab in phase III.
- Peugeot Invest and its partners are selling 13 bulk carriers.
- Gascogne signs a syndicated loan of €126.8 million and a loan agreement of €50 million with the European Investment Bank.
- Uniti strengthens its partnership with PGIM Real Estate.
- PCAS, NSE, DLSI, Algreen, Cnova, ST Dupont, Finatis, Delfingen, Courtois, MG International, Carpinienne, Foncière Euris… have published their accounts.
In the world
Important (and less important) announcements