(CercleFinance.com) – The Paris Stock Exchange (+1.5%) is on the rise again after the ECB press release confirming a 50Pts increase in the key rate (to 3.00%) and the probable repetition of this scenario in March (3.5%).
The markets play ‘the fait accompli’ and the CAC40 climbs to 7180 points, notably driven by Dassault (+12.5%), Publicis (+6.6%), and Capgemini (+6.5%).
The CAC40 ‘global return’ posted a new absolute record at 21,080 Pts (yes historic, with economic conditions – including much higher interest rates – and geopolitics notoriously less favorable than January 5, 2022, the date of the previous record).
The Euro-Stoxx50 soared by +1.6% to establish a new annual zenith at 4,245, in the wake of a DAX in full incandescence with +2% at 15,500 and which garnered +31% in 4 months a day for day, one of the biggest hikes in history, and by far the biggest in a rate hike cycle…and that’s unheard of when growth drops to zero in the meantime.
We really have the feeling of a switch to ‘FOMO’ mode: investors are literally running after the paper, taken aback by a rise that they did not see coming.
So technically, it’s ‘panic buying’, everyone understood it, but basically, what justifies paying the CAC 40 ‘GR’ more expensive than January 5, 2022? ?
On Wall Street, the day after a surge of +2%, the Nasdaq rockets an additional +3% upwards (i.e. +16.2% since January 1, these are the best first 5 calendar weeks of a year stock market in history) in the wake of META which exploded by +25%, Amazon soaring by +6%, Tesla by +8%.
The ECB therefore comes in its turn to reassure the markets (it does not use an overly aggressive tone) which had been confirmed in their scenario of a decline in inflation (Jerome Powell used the word ‘disinflation’).
The Federal Reserve raised interest rates by just 25 basis points last night, taking a less aggressive stance in its fight against inflation… and when it claims rates won’t come back until the end of 2023, obviously , Wall Street -euphorically- does not believe her and continues to bet on a ‘pivot’ during the second half of 2023.
The market only hears what it wants to hear (prices are ‘falling momentum’) and obscures the promise of further rate hikes this year (at least 2, which will take Fed Funds to 5.00/ 5.25%), without ever showing the will to put an end to its monetary tightening cycle immediately.
The figures of the day are largely overshadowed by the messages deemed ‘dovish’ from central banks: orders to American industry rebounded less strongly than expected in December, confirming the current bout of weakness in the manufacturing sector, the Department announced on Thursday. Trade.
After a 1.9% decline in November, industrial orders recovered by 1.8% (against +2.3% expected) thanks to demand for transport equipment and to a lesser extent for materials mining, electricity and telecommunications.
In detail, orders for transport equipment climbed 16.9% in December, thanks to a surge in orders for civil aircraft and aircraft components.
Orders for capital goods excluding transport, considered a good barometer of business investment projects, are on the other hand down 1.2% in December.
Non-farm productivity rose 3% in the United States in the fourth quarter of 2022 at an annualized rate, according to a preliminary estimate from the Labor Department, after a decline of 1.4% in the previous quarter.
This significant gain reflects a 3.5% increase in production while the number of hours worked increased by only 0.5%. Taking into account a 4.1% increase in hourly wages, unit labor costs increased by 1.1%.
The labor market continues to show disconcerting vigor: claims for unemployment benefits in the United States fell by 3,000 during the week of January 23, settling at 183,000 according to the Department of Labor (a floor of 50 years !).
Elsewhere, the four-week moving average – seen as a better indicator of the underlying trend in the job market – shows a decline of 5750 week-over-week to settle at 191,750.
Finally, the number of people regularly receiving benefits fell by 11,000 to reach 1,655,000 during the week of January 16, the last week available for this statistic.
US T-Bonds eased by -6Pts to 3.34%, in Europe, a real euphoric shift is taking place with OATs erasing 28Pts of yield at 2.485%, Bunds post -25Pts at 2.041%… and the record is for the Italian BTPs with -45Pts at 3.84%: everything happens as if the ECB had in fact announced that the rise in rates would stop today and that its objective had been achieved: there would be at best 0 rate hike in March, or even at worst 0.25%, and then nothing.
The day also promises to be particularly busy from the point of view of results with the expected publications of ABB, Eli Lilly, Merck, Roche, Shell, Honeywell, Santander, Ferrari, Infineon on the day’s programme.
This evening after the closing of the American markets, it is the American technological giants Apple, Alphabet, Amazon.com which will in turn comply with the exercise.
Faced with this busy agenda, the menu promises to be less heavy on the macroeconomy side, even if the participants will take note, this afternoon in the United States, of the figures for registrations for unemployment benefits, productivity in the fourth quarter and industrial orders.
In corporate news, Publicis Groupe reveals for 2022, current EPS up 26% to 6.35 euros, and free cash flow of 1.7 billion euros, with an improved operating margin of 50 basis points to 18% for net income up 20% to nearly 12.6 billion.
Air Liquide announced Thursday that it would join forces with TotalEnergies to develop a network of hydrogen stations for heavy goods vehicles in Europe.
TotalEnergies announces that it has decided to increase by 15% for 2022, compared to 2021, the bonus budget for non-executive employees (workers, employees, technicians and supervisors), as well as the variable part budget for executives in France .
Dassault Systèmes publishes for 2022, a growth of 19% of its non-IFRS EPS to 1.13 euros, with a non-IFRS operating margin down 0.9 points to 33.4%, but a turnover of nearly 5.67 billion euros, up 9% excluding currency effects.
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