Positive or negative signals from the war in Ukraine continue to determine the color of stock market indices, and by extension a certain number of other assets. Yesterday, talks between Russian and Ukrainian representatives appeared to result in constructive announcements, particularly as Moscow hinted that the noose on Kyiv would loosen. Both camps seemed inclined to make concessions, leading to a marked boost in investor confidence, which rushed into the most cyclical issues.
The proof with the automobile, undoubtedly the most representative sector of the current big bazaar. The profits of manufacturers and suppliers are closely linked to growth curves, it is in this sense that the sector is considered to be very cyclical. But despite the surge in post-lockdown GDP, manufacturers benefited little from the leverage effect in 2021. In the first year of the pandemic, they had vehicles but no buyers. The following year, buyers returned but there were not enough vehicles to satisfy them all, due to supply shortages, particularly in semiconductors. In 2022, production was to normalize. But the supply chains were not quite on their toes at the start of the year. The Russian invasion of Ukraine has caused a new shock, because the country is the productive cradle of certain automotive components, for example, wiring harnesses. By combining cyclicality and the risk of shortages, the sector had a front row seat to being cut: -12% for the STOXX Europe 600 Automotive against +2% for the STOXX Europe 600 since February 24. And -20% for Renault, which combines cyclicality, shortage, high beta and direct exposure to Russia via AvtoVAZ.
Yesterday, the positive news from the negotiations sent the sector skyrocketing. When Renault wins 12% in a single session, it’s because Something is wrong risk appetite is back. The equipment supplier Faurecia even caught fire by 17%. Overall, all sectors progressed, except for energy. The STOXX Europe 600 gained 1.7%, while the French CAC40 soared 3%, boosted by luxury (+5.7% for LVMH), financials (+6.4% for BNP Paribas) and cyclical industrial therefore (+6.6% for Stellantis). In the United States, the rise reached 1.2% on the S&P500 and 1.7% on the Nasdaq, again fueled by cyclicals, technology and real estate.
Well, everyone knows that promises only bind those who listen to them. Is Russian promise equal to Gascon promise? That is the question. Westerners ask themselves. The Ukrainian presidency too. Specifically, Moscow has announced its intention to move away from Kyiv and focus on Donbass. Is it to cover the tracks? Be that as it may, the ultra-reactive equity markets greedily seize on each new piece of information, even if it has no future. It’s hard to know how this will all turn out. But we can say without too much risk that everything will not go back to how it was in a snap of the fingers and that a hypothetical end to hostilities would not instantly put an end to the cascade of retaliation that has been put in place. A bit of caution therefore seems warranted.
On the debt market, it is still discord on the American rates, with maturities at 2, 5, 10 and 30 years which are remunerated at very similar levels, a sign of some confusion in the expected economic trajectories by investors. The main macroeconomic indicator of the day is the ADP report on employment in the United States (2:15 p.m.).
European markets are expected slightly lower at the open this morning. In Asia, the rebound in the yen is upsetting the Japanese indices, in particular the Topix which lost 1.87%. In China, on the other hand, dark green dominates. American “futures” are currently positioned in moderate decline. The CAC40 lost 0.5% to 6752 points shortly after opening.
Economic highlights of the day
German inflation for March will be known at 2:00 p.m., just before the ADP US employment study (2:15 p.m.) and the latest estimate of US GDP for Q4 2021 (2:30 p.m.). The whole macro diary here.
The euro is back to 1.111 USD this morning. The ounce of gold stabilizes at 1924 USD. Oil lost ground but returned to yesterday morning’s price, with Brent from the North Sea at 111 USD and US light crude WTI at 104.94 USD. The yield on US debt decreases to 2.35% over 10 years, below 5 years (2.45%) and not far from 2 years (2.32%). Meanwhile, German debt rose to 0.63% over the same period and the French OAT accelerated to 1.05%. Bitcoin climbs to 47,500 USD.
The main changes in recommendations
- Antofagasta: RBC goes from sector performance to underperformance by targeting 1350 GBp.
- ASM International: Aletheia Capital is starting to track purchases by targeting EUR 500.
- Civitanavi: Berenberg starts follow-up to buy by aiming for 6 EUR.
- Compleo Charging Solutions: Berenberg remains long with a reduced target price of EUR 100 to 90.
- Credit Suisse: Jefferies remains to be kept with a price target reduced from 10 to 7.40 CHF.
- Danone: Jefferies remains long with a price target reduced from 64 to 58.50 EUR.
- Dermapharm: Berenberg remains long with a target price reduced from 105 to 97 EUR.
- Deutsche Euroshop: Oddo BHF resumes neutral tracking, targeting EUR 18.
- Experian: Citigroup goes from buying to neutral, targeting 3146 GBp.
- Henkel: Bankhaus Metzler goes from buying to holding, targeting EUR 73.
- Huhtamaki: Inderes goes from accumulating to buying aiming for 39 EUR.
- Kion: Societe Generale goes from buying to keeping, aiming for EUR 67.50.
- Lanxess: Bankhaus Metzler goes from hold to buy targeting EUR 57.
- Logitech: Exane BNP Paribas resumes neutral tracking, targeting CHF 80.
- Nokian Renkaat: SEB goes from holding to selling targeting EUR 13.
- Novozymes: Wealthy bank goes on to keep a buy aiming for 500 DKK.
- Technip Energies: AlphaValue remains long with a target reduced from 18.70 to 17.70 EUR.
- UBS: Jefferies remains long with a price target reduced from 23 to 22 CHF.
- Vesuvius: Barclays moves from online weight to underweight by targeting 375 GBp.
- Zur Rose: Baader Helvea remains to be accumulated with a target reduced from 300 to 140 CHF.
In France
Important (and less important) announcements
- Unibail is holding an Investor Day today, with new targets including resuming the payment of a dividend in 2024.
- French banks are the “first European financiers of fossil fuels”, according to Reclaim Finance.
- Suez would seek to take over IWS from Veolia, according to La Lettre A.
- Havas (Vivendi) acquires the Chinese Front Networks.
- The government will publish the investigation report within “a few days” on Orpéa.
- Rémy Cointreau strengthens its executive committee.
- GPA (Casino group) has entered into a partnership with Magalu, one of the main e-commerce platforms in Brazil.
- Gaztransport & Technigaz will design the tanks for three new LNG carriers.
- Manitou inaugurates a new nacelle factory in Candé.
- AB Science could appeal against the AMF sanction.
- Pizzorno Group more optimistic about its 2021 gross operating surplus.
- BOA Concept signs a historic contract worth more than €10 million.
- The EMA and the FDA agree to assess the marketing authorization applications for Guerbet’s Gadopiclenol.
- Prologue will be transferred to Euronext Growth on March 31.
- La Française de l’Energie communicates on the elimination of CO2.
- Lexibook strengthens its contract with Disney.
- The LDLC Group launches its foundation.
- Park Partners is buying 31.8% of Madvertise at EUR 0.58 per share.
- Planet Media becomes Erold.
- The FDA has granted Orphan Drug Designation to Abionyx’s CER-001 for the treatment of LCAT deficiency.
- Herige, Exclusive Networks, Visiomed, Ceram and Toosla have published their accounts.
In the world
Important announcements (and others)
- UBS launches a major share buyback program.
- Credit Suisse wants to appeal a $500 million court decision.
- Adecco confirms its medium-term financial objectives.
- Lululemon gains 8% off-trading after its quarterly releases.
- Nintendo stock drops 5% on ‘Legend of Zelda’ delay.
- Kinepolis announces the departure of its financial director.
- Roche suffers a phase III study setback for an experimental cocktail in lung cancer.
- China Evergrande Group will sell its stake in the Crystal City project for approximately $575 million. The Chinese real estate giant, in great difficulty, will at the same time release its first electric car, via its subsidiary China Evergrande New Energy.
- The main publications of the day: CNOOC, Paychex, BioNtech, Cosco Shipping, Haier, Exor, Sixt… The whole agenda here.
Readings