To fix things and at the risk of pounding your ears on the same topics over and over again, the Fed’s first monetary policy decision in 2022 was eagerly awaited by investors lacking benchmarks. The heavy profit taking that has plagued US equities for the past three weeks is a sign of heightened nervousness, shown by a VIX volatility index at a one-year high (the last peak of this level was at the end of January 2021 , even if we forget it a little).
What did these investors expect from the Fed? Let’s say the usual balanced speech, a fistful of marshmallow in a velvet glove. So of course, Jerome Powell, the president of the central bank, has been a little less marshmallow lately, concerned about galloping inflation which, in one year, has increased the price of energy by 29%, that of food by 6% or used vehicles by 37%. But overall, the market had taken its side of the coming turns of the screw and was buying into what some economists called the “Goldilocks scenario“, with a soup served neither too hot nor too cold, just perfect. Without metaphor, this would give a cycle of rate hikes and reductions in monetary support capable of curbing inflation with a moderate impact on growth.
The tenor of the statement issued by the Fed at 8:00 p.m. was in line with Goldilocks, at least on paper. The problem is that Jerome Powell launched into some improvisations during the press conference which followed the announcement of the decision. First, he muddled the issue on the pace and speed of rate hikes, suggesting that the agenda is not completely fixed and emphasizing that the Fed has plenty of room to maneuver without affecting the labor market. Investors translated this by: a double rate hike in March is not taboo and the scenario of five monetary tightenings this year cannot be ruled out. I remind you that rate hikes are not fatal to equities, far from it, if they are gradual and in phase with the economic cycle. The market does not really like the monetary policies of hussars.
Economist Joachim Klement calls the talk of labor market leeway a “rookie mistake” comparable to the one Powell made in 2018. He adds that the Fed boss made one. another when he casually blurted out to conclude the lecture that “asset prices are somewhat high“. Klement thinks that the members of the Fed will have to do a job of backpedaling in the coming weeks during their various public outings, just to cover up the boss’s blunders. It’s all the more stupid, judges the economist , which Powell made clear at the start of the call that the FOMC is very pleased with his communication with the market, meaning he confirmed that rate expectations were virtually accurate. of 25 points in March, followed by two to three more rate hikes by the end of the year.
All this to explain that even if the American closing was more or less balanced, a lot of indicators went to hell afterwards. The “futures” of Wall Street are bright red, those of the European markets are no better and the Asian markets are nosediving, with -3% in Tokyo and Seoul or -2.5% in Hong Kong. As with each episode of this type, the reactions are exacerbated at first, before the agitation calms down and gives way to more rational approaches. After all, Powell may not have made a mistake and may have just wanted to show the determination of the Fed, just to make up for lost time in the fight against rising prices?
The morning soundtrack:
Britney Spears: Oops!…I Did It Again
Economic highlights of the day
Major macroeconomic news in the United States at 2:30 p.m. with durable goods orders, the first estimate of Q4 GDP and weekly jobless claims.
The euro retreats to 1.12247 USD. The ounce of gold drops to 1815 USD. Oil is consolidating after new highs, with Brent at $89.17 and WTI at $86.57. The remuneration of the 10-year American rises to 1.85%. Bitcoin falls back below USD 36,000.
The main changes in recommendations
- ABB: Jefferies remains to be kept with a price target raised from 29 to 30 CHF.
- Air Liquide: Goldman Sachs goes from neutral to long, targeting EUR 188.
- ArcelorMittal: Goldman Sachs goes from buying to neutral targeting EUR 33.
- Bpost: Jefferies goes from buying to keeping, targeting EUR 7.50.
- Carmila: Exane BNP Paribas goes from neutral to outperformance by targeting EUR 15.50.
- Derwent London: Exane BNP Paribas goes from neutral to outperformance by targeting 3820 GBp.
- Gecina: HSBC goes from keeping to buying, targeting EUR 151.
- Kerry: Morgan Stanley starts the overweight follow-up by targeting EUR 127.
- LEG Immobilien: Exane BNP Paribas goes from neutral to outperformance by targeting EUR 139.
- Legrand: Jefferies goes from holding to buying, targeting EUR 104.
- Orpea: AlphaValue goes from buying to selling, targeting EUR 38.80.
- Prudential: Jefferies remains long with a price target raised from 1750 to 1800 GBp.
- Rentokil: Exane BNP Paribas goes from outperformance to neutral by targeting 550 GBp.
- Sage: Jefferies remains long with a reduced target price of 900 to 890 GBp.
- Swiss Re: UBS remains short with a price target raised from 84 to 87 CHF.
- Symrise: DZ Bank remains to be kept with a target reduced from 119 to 110 EUR.
In France
Important (and less important) announcements
- STMicroelectronics is doing better than expected in Q4 and will invest between $3.4 and $3.6 billion in 2022.
- Bercy affirms that a “renationalisation” of Electricité de France is not under consideration. In addition, London will grant £100 million in financing to the group for the construction of the Sizewell C power plant.
- Valeo will present its annual results and medium-term outlook on February 25.
- Orpea mandates two firms to conduct an independent audit after the revelations of mistreatment within its establishments.
- Soitec generates €581 million in revenue over nine months and confirms its objectives.
- Eurazeo invests in Cranial Technologies, market leader in the treatment of infantile plagiocephaly.
- Xilam strengthens its production division.
- Invibes launches a private placement of €15 million.
- Navya and Valeo are co-developing a specific safety system for the marketing of level 4 autonomous vehicles.
- Pixium Vision announces the publication in Nature Communications of clinical data demonstrating the clinical benefit of the Prima System in patients with dry AMD.
- Geci announces the end of the capital conversion of its convertibles.
- Hydrogen Refueling Solutions will participate in the IPO of Haffner Energy.
- Alan Allman Associates finalizes the acquisition of the Belgian group The Human Factory.
- Nanobiotix publishes new preclinical data on nbtxr3.
- Groupe Crit, Elior, Aubay, Solutions 30, U10, Infotel, Mastrad, Maurel, Audiovalley, Geneuro, Groupe Partouche, Augros, Groupe Berkem, Visiativ, Spineguard have published their accounts.
In the world
Important announcements (and others)
- Tesla fell 0.8% post-session after slightly higher than expected results.
- Intel loses 2.8% out of session after its results.
- Siemens Energy could reintegrate Siemens Gamesa into its scope.
- Samsung Electronics down 2% after its quarterly results, which came out sharply higher but a little less solid than expected.
- China is considering dismantling China Evergrande Group to end the crisis, according to Bloomberg.
- UBS acquires Wealthfront for $1.4 billion.
- Woodside Petroleum leaves Myanmar.
- Constellation Energy will replace The Gap in the S&P500.
- Pershing Square bought more than 3.1 million shares of Netflix.
- Deutsche Bank will return €700 million to its shareholders through share buybacks and dividends.
- Givaudan acquires 48% of the Brazilian Nanovetores Group.
- Main results publications : Apple, Visa, Samsung, LVMH, Mastercard, Voltalia, Maisons du Monde, McDonald’s, SAP, Diageo, STMicroelectronics, Sartorius Stedim Biotech, Unicredit… Find the full agenda for the day here.
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