(Boursier.com) — THE TREND
The CAC40, which rose in the morning to 7,366 points, close to its historic highs, finally faltered in the afternoon under the weight of profit taking. The index corrects 1.78% back to 7,187 points at the close in an active market after taking note of worrying inflation figures for the month of January in the United States, which could prompt the Fed to reconsider the timing of its famous “pivot point”.
The personal income of American households for the month of January thus increased by 0.6% compared to the previous month, while personal consumption expenditure rose by 1.8%, against 1.3% consensus. The markets were mainly watching the ‘core PCE’ price index linked to household spending today: This indicator, excluding food and energy, rose by 0.6% compared to the previous month, against 0.4% of consensus, an increase of 4.7% year-on-year against 4.3% expected. So this is yet another disappointing reading for US inflation…
A month before, in December, the core PCE price index had climbed 0.4% from November, a 4.6% year-on-year gain (upward-revised readings). Despite the upward adjustment in the December figures, the January figures point to an acceleration in consumer price inflation…
The Fed’s Philip Jefferson indicated that wage growth was still too high for a return to the 2% inflation target… The outlook for inflation in non-real estate services will depend on the rebalancing of the job demand and supply. For now, this imbalance suggests that high inflation can only come down slowly. Jefferson points out that the current situation is different from previous fights against inflation, and that the argument that central bankers must accept the cost of disinflation makes sense. He believes that the current credibility of the Fed is higher now than in the 1960s or 1970s…
Loretta Mester, head of the Cleveland Fed, indicated for her part that the Fed should do a little more to fight against inflation… She hopes that inflation can be brought under control without causing a recession, but adds inflation risks remain on the upside. In an interview with Bloomberg, Mester notes that inflation readings are still not at the desired level. She believes that today’s report on core PCE inflation shows that the Fed needs to do a little more to ensure that this inflation returns to target. Mester did not comment on the Fed’s next move, though she had previously not ruled out a 50 basis point move. Rather than say more about her expectations for the next meeting, she prefers to point out that the terminal rate, or the level of the ‘peak rates’, matters more. In an earlier interview with CNBC, Mester mentioned his support for a final rate “somewhere above 5%” later this year, which should hold for some time.
Jamie Dimon, the emblematic boss of JP Morgan Chase, does not rule out the hypothesis of a rate of 6% in the United States, while inflation remains “pressing”… Asked by CNBC, the leader of JP Morgan thinks the Fed should probably take a break on rates at just over 5%, while the current range for the fed funds rate is 4.5 to 4.75%. Nevertheless, the leader says he suspects that rates could go even higher to reach 6%. This level would therefore go quite clearly beyond the current terminal rate assumption of the American central bank, which would rather be in a range of 5.25 to 5.5%.
The rhetoric of ECB members also continues to weigh down the mood with new warnings about several significant rate hikes that could still be necessary, in addition to a 50 basis point tightening expected on March 16. .. The euro retreats tonight back to 1.0550/$. Oil is trading at $83 for Brent.
RISING VALUES
Saint Gobain climbed nearly 5% the day after the presentation of record annual results. The French building materials giant generated an operating profit of 5.33 billion euros in 2022, up +18.4%, for a turnover of 51.19 billion euros, up 15.9%. The operating margin thus reached the historic level of 10.4% (+20 bp). The group attributed this solid performance to the strong momentum of all segments worldwide, despite an “unstable geopolitical, energy and macroeconomic environment in 2022”. For 2023, Saint-Gobain expects the operating margin to remain in a range between 9% and 11%. The group is also proposing a dividend of 2 euros per share, up 23% compared to last year, adding that it will allocate at least 400 million euros for share buybacks in 2023 to further reduce the number of its outstanding shares.
Elior : +4% with Esi Group
Accor ends very well this week with a title that is still progressing by 3.5%. The buying flow on the hotel group is to be linked to a note from Stifel which raised to ‘keep’ its advice on the value with a target raised from 20 to 32 euros.
Sopra Steria : +3% with P&V, Carrefour
Still carried by his last publication, SEB gained 2.5% this weekend. TP ICAP Midcap nevertheless downgraded the value to ‘hold’ while maintaining its target at 110 euros.
SergeFerrari : +2.5% with Icade, Catana, Vantiva (+2%)
Edenred : +1.5% followed by Thales, Bureau Veritas, Alstom
Genfit : +1% with Orange, Euronext
FALLING VALUES
Fnac-Darty corrected this weekend (-9%), weighed down by 2022 results in decline and 2023 forecasts without relief. The distributor reported a net loss of 28 million, against a profit of 160 ME in 2021 for sales of 7.95 billion euros, down 1.9% like-for-like, but growing by + 7% compared to 2019 pro forma. “This performance is part of a context of tensions on purchasing power linked to a high level of inflation which has persisted throughout the year, and after a record year 2021”, specifies the group. Current operating income reached 231 ME after 271 ME in 2021, while the gross margin rate stands at 30.3%, up +80 basis points. For 2023, the Group expects sales to be down slightly in the 1st half, with a sharp rise in costs, in particular for energy, but should benefit from less unfavorable market conditions in the second half with a level of inflation that could be lower than in the first semester. Overall, Fnac Darty expects current operating income in 2023 to be down around €200 million (but in line or up compared to 2022 excluding the impact of the expected rise in energy costs). This decline should be more pronounced in the 1st half than in the 2nd half, due to a greater weight of fixed costs on the activity and higher energy costs over this part of the year.
Valeo fall of 9% below 20 euros, sanctioned after a forecast of free cash flow below expectations. The automotive supplier expects free cash flow generation of more than 320 million euros in 2023, while the latter stood at 388 ME last year, with a turnover of between 22 and 23 MdsE and an operating margin between 3.2% and 4%.
Korian down another 7% followed by Eramet
Guillemot : -4% with Kering, Inventiva, LVMH, Valneva
Schneider : -3.5% with Faurecia, L’Oreal
Capgemini : -2.5% with Legrand, Atos, Casino, Pernod Ricard, Air France KLM, Stellantis, BioMerieux
Renault yields 1.7%. Fitch Ratings raised Renault’s long-term issuer credit rating from ‘BB’ to ‘BB+’. The outlook is ‘stable’. This increase reflects the strengthening of Renault’s profitability and balance sheet flexibility following the update of its strategic plan.
Alten (-0.8%) saw its operating margin on activity increase by 31.2% to €419.6 million over the 2022 financial year, despite wage inflation partially offset by price increases, thanks to an improvement in the activity rate, and rigorous management of structural costs. Alten also cites the strongest contribution from international business, which is more profitable, having enabled the operating margin on business to reach 11.1% of turnover (10.9% in 2021).