Let’s start this morning column with a quick summary of the day before. Yesterday, Europe lost ground, but far enough from the lows hit at the start of the session. The intensity of the decline also varied by region. The German DAX, richer in cyclical and industrial stocks, lost 1.40% while the Swiss SMI, richly endowed in defensive stocks, gained 0.11% thanks to the good performance of its fortress stocks such as Givaudan, Roche, Nestlé and Novartis. In the United States, the three main indices took the same trajectory, losing ground. There too, low-risk profiles dominated the list of increases: it was health and utilities that led the dance to the detriment of stocks sensitive to economic cycles and the cost of money such as technology stocks or mining stocks in the basic materials compartment. Put more prosaically, we buy Merck & Co and Sartorius to sell Tesla and Anglo American. The stage is set.
It is therefore time to wait and it is a safe bet that this feeling will dominate the session of the day before the start of the quarterly results season. The latter will have a particular flavor in Europe where investors will listen carefully to the speeches made by companies and more particularly by energy-intensive industries, which are bearing the full brunt of runaway energy prices. To briefly return to this Russian gas story, Gazprom has stopped shipping its gas to Germany via the Nord Stream 1 pipeline. This is actually a long-planned annual maintenance operation that is expected to last until July 21 at the latest. But Berlin fears that this gas pipeline will never be put back into service, enough to create upward pressure on prices. To give you an order of magnitude, the TTF, the Dutch benchmark, briefly exceeded the 170 EUR/MWh mark, or the equivalent of a barrel of oil at 300 USD. We are no longer very far from the levels reached at the beginning of the year at 200 EUR/MWh when the crisis was at its peak with the invasion of Ukraine by Russia.
Those who thought that this crisis would be short-lived thanks to the American LNG alternative were therefore mistaken. Proof of this is that the futures contracts which allow the price of electricity to be fixed in 2023 and 2024 have soared in Germany and the rest of Europe, at levels never seen before: 340 EUR/MWh in Germany. If we immediately think of future household bills for heating next winter, we must remember that it is above all industries that bear the cost. In this respect, the German chemical industry already sounded the alarm a few days ago, citing “a heart attack for the German economy” in the event that Berlin fails to secure its supplies of industrial gas. This is true for chemicals, but also for steel and many other industries ranging from fertilizer production to chicken farming. On the other hand, it is good news for coal and players like Drax Group, which can extend the life of their coal-fired power plants.
In order not to close this long digression on energy in Europe in an overly pessimistic way, let us try to keep in mind that Nord Stream 1 is a means of pressure that Moscow exerts on European economies, but also an excellent source revenue for Gazprom, especially at these price levels. Closing the gas tap immediately would therefore be just as harmful for Russia’s finances, which would deprive itself of a sizeable tactical privilege: slowing down flows at all times.
Let’s return to the equity markets and the day’s session by turning to the Asia Pacific region where the markets are moving in a dispersed order. The Japanese Nikkei 225 fell 1.89% and the Hong Kong Hang Seng 1.21%. It is Australia that is holding up the best with an ASX200 index which has gained 0.1% at the time of writing these lines. The leading indicators are once again bearish in Europe with the CAC40 expected to fall by almost 1%.
Economic highlights of the day
The ZEW Index of German Financial Confidence in June will be released at 11:00 am.
L’euro is approaching parity with the dollar at 1.0015 USD. The ounce of gold loses ground to 1727 USD. Oil is also falling with a Brent from the North Sea at 105.20 USD per barrel and an American light crude oil WTI at $102. The american debt shows a 10-year yield of 2.97%. the bitcoin is trading for 20000 USD each.
The main changes in recommendations
- Arkema: JP Morgan goes from neutral to underweight and lowers its target from 142 to 82.50 EUR.
- Atos: Stifel downgrades its recommendation to hold on to sell with a target price of EUR 9.
- Autogrill: Stifel goes from buyer to neutral with a target price of EUR 6.90.
- BlackRock: UBS is still long but lowers its target from 825 to 718 USD.
- Eli Lilly: Guggenheim is long and is revising its price target upwards from 333 to 351 USD.
- Epiroc: Societe Generale downgrades its recommendation to hold for sale and targets 155 SEK.
- Hasbro: Stifel is long but lowers its price target from $111 to $103.
- Julius Bar: JP Morgan maintains its overweight opinion but lowers its target from 65 to 61 CHF.
- Klepierre: Goldman Sachs goes from neutral to buyer and is targeting EUR 21.80.
- LEG Immobilien: Goldman Sachs is still buying but with a price target reduced from 102.30 to 88.70 USD.
- Meta Platforms: Stifel is still long but with a reduced price target of $325-$260.
- Roche: Berenberg lowers its target price from 365 to 350 CHF.
- Tempur Sealy: Keybanc Capital Market is buying but with a price target reduced from 42 to 38 USD.
- Twitter: Citigroup maintains its neutral recommendation but lowers its target from 54.20 to 36 USD.
- Unibail-Rodamco-Westifield: RBC Capital Market downgrades its underperformance recommendation and lowers its target from EUR 77 to EUR 42.
- Vonovia: Goldman Sachs maintains its buying opinion but lowers its target price from 47 to 39.90 EUR.
- Wells Fargo: JP Morgan remains neutral but with a price target reduced from 52 to 47.50 USD.
- Zur Rose: Deutsche Bank lowers its target price from 180 to 84 CHF.
In France
Important (and less important) announcements
- The French government would have to spend more than 8 billion euros to take full control of Electricité de France.
- Renault’s sales fell in the first half, weighed down by the shortage of semiconductors and the shutdown of activities in Russia.
- Sephora (LVMH) signs an agreement for the sale of 100% of the shares of its subsidiary in Russia.
- Thales acquires OneWelcome in cybersecurity for 100 million euros.
- Alstom’s joint venture (Satee) wins a supply contract for the Nanjing metro in China.
- Airbus estimates that the number of planes in the world should double in 20 years.
- Eiffage is strengthening in the Netherlands through two majority stakes in Harwig and Eltra.
- Bonduelle is revising its annual growth targets downwards.
- Gaztransport & Technigaz receives an order from Samsung Heavy Industries for the design of tanks for three LNG carriers.
- Casino carried out a bond cancellation operation.
- Ekinops achieved a turnover of 35.5 million euros during the second quarter.
- Figéac Aero, 2CRSi, Kalray, Paragon Id, Lucibel reveal their accounts.
In the world
Important (and less important) announcements
- Amazon’s Prime subscriber count is stagnating according to a Bloomberg report.
- Chemist BASF exceeded expectations in the second quarter thanks to its energy subsidiary Wintershall DEA.
- Galenica acquires all shares in the Aargau company Aquantic.
- Holcim completes the acquisition of Teko Mining in Serbia.
- Ascom signs a 1.5 million dollar contract with the Belgian division of Korian.
- Twitter is preparing for a long legal battle.
- Main publications of the day: Pepsico, DNB Bank… The whole agenda here.
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