Stock markets again moved a little in all directions yesterday, with the relapse of cyclical stocks in Europe. All of this had an air of deja vu with fairly marked drops for the Paris and Frankfurt stock exchanges, while Zurich and its defensive behemoths floated (+0.02%). The strength of the health sector was also one of the only points in common between Europe and the United States yesterday. On Wall Street, the dispersion was also closing, but on tenuous amplitudes: -0.07% for the S&P500 and +0.18% for the Nasdaq 100. The oil sector retreated after being flamboyant the day before. I wrote yesterday that in 2022, when investors have no idea, they buy Oil but that’s not quite true: they also buy Health, especially since the beginning of June .
Health, in this case mainly large laboratories and biotechs, had experienced a certain disaffection in the post-pandemic world. It is now over, especially since the sector fits perfectly with the current context and fears of recession. Its fundamentals areincredibly robust“, as an excellent connoisseur of the sector points out. Please note, I am talking here about the “pharma” part of the health sector, that which includes the laboratories which develop and market treatments. Not the equipment and services part, which is pays more and which is much less equipped to cope with the current inflationary context. For example, “pharmas” are now valued on average 18 times the expected results for 2023, while sellers of equipment and services are higher. above 22 times, with peaks at 30 times for the former darlings of investors.
The macroeconomic component of the session is expanded with the publication overnight of Chinese manufacturing indicators (the official PMI in this case) disappointing. The industry returned to the expansion zone in June, but weaker than expected. On the other hand, data on services surprised positively. Closer to home, an OPEC+ meeting will take place today. The cartel should not change anything in its policy, which for several months has kept oil at a very high level. The interests of some are not necessarily those of others. Anyway, say the experts, the members of the organization do not have many levers to increase the pumping because of the decrepit state of the infrastructures of certain countries and the sanctions which strike others.
Still macro, with a lot of consumer data today, especially in Germany, France and the United States. As Wall Street cares about European indicators like a fig, it is the income and expenditure of American households, published at 2:30 p.m., which will set the trend. I have already spoken about it this week, but the ability of American consumers to absorb the inflationary shock without capitulating is an important determinant of economic dynamics, and therefore of the flexibility of the landing in sight.
On the company side, LVMH has a nice vineyard in California, while Trigano (motorhomes) and OVH (data centers) publish their results. There will be a few quarterly publications to watch in the United States, notably those of Micron in semiconductors and Constellation Brands in spirits.
Finally, a few words on the first stock market semester of 2022, which ends tonight and which will go down in history as one of the bad experiences. Most of the main world indices will post double-digit declines at the close this evening, which even flirt with 30% for the fallen angel of the rating, the American Nasdaq. There are a few exceptions however. The Tokyo and London stock markets are down much more measured. The Nikkei 225 took advantage of the slide in the yen and the City of a FTSE100 index largely dominated by Oil stocks, Finance, Commodities and Health, the winning cocktail for 2022. Special mentions for the places of Lisbon and Oslo too, which are up this year thanks to the fairly classic composition of their flagship indices, as explained here.
The trading session (and semester) is coming to an end in all directions in Asia Pacific. It fell by more than 1% in Japan, Korea and Australia, it was relatively stable in India and it rose by 1.8% in mainland China. Hong Kong is gaining slightly as I write. European leading indicators are bearish, because US futures are also tinged with red.
Economic highlights of the day
Several consumption indicators are expected in Europe this morning, including those from Germany and France. In the United States, weekly jobless claims and household income and expenditure (2:30 p.m.) will precede the Chicago PMI (3:45 p.m.). The whole macro diary here. This morning, China reported a weaker than expected manufacturing PMI, albeit back in expansion territory, while the services PMI accelerated strongly.
The euro retreats to 1.0449 USD. The ounce of gold crumbles to 1816 USD. Oil remains firm with North Sea Brent at $116.04 a barrel and US WTI light crude at $110.05. The yield on US 10-year debt fell to 3.10% over 10 years. Bitcoin remains stuck at the $20,000 area.
The main changes in recommendations
- Barry Callebaut: Berenberg goes from holding to buying, aiming for CHF 2,600.
- Clariant: Goldman Sachs remains on the buy side with a price target raised from 19.60 to 21.70 EUR.
- In: Berenberg starts long tracking targeting EUR 16.10.
- Edenred: Credit Suisse starts outperformance monitoring by targeting EUR 56.
- Givaudan: Goldman Sachs remains neutral with a reduced price target of 4000 to 3000 CHF.
- Intertek: JP Morgan goes from overweight to neutral by targeting 5300 GBp.
- National Grid: Jefferies goes from buying to keeping, aiming for 1070 GBp.
- Orsted: HSBC goes from holding to buying, targeting 930 DKK.
- SGS: JP Morgan remains neutral with a price target reduced from 3000 to 2350 CHF.
- Stora Enso: SEB goes from buying to holding, targeting EUR 17.50.
- Uniper: Oddo BHF goes from underperformance to outperformance by targeting EUR 25.
- Worldline: Credit Suisse starts tracking at underperformance by targeting EUR 36.50.
- Zur Rose: Barclays remains overweight with a price target reduced from 173 to 166 CHF.
In France
Important (and less important) announcements
- LVMH acquires the Californian vineyard Joseph Phelps.
- Canal+ (Vivendi) has won the call for tenders for the broadcasting rights in France for the new Football Champions League for the period 2024-2027.
- OVH should exceed its growth objective this year. The medium-term objectives are confirmed.
- Florence Parly should take the presidency of Air France-KLM.
- Aramis inaugurates its second industrial vehicle reconditioning site in France.
- Compagnie des Alpes is going to buy the MMV hotel group.
- Econocom specifies the impact of the takeover of Semic.
- SES welcomes the launch of the SES-22 satellite.
- Metabolic Explorer waives its 2022 targets.
- Everstream deploys Ekinops’ FlexRate solution on an optical network covering ten US states.
- Selectirente acquires a portfolio of 22 shops in the Les Halles district of Paris.
- Auplata obtains an extension for the holding of its general assembly.
- Donecle (of which Delta Drone holds 25%) acquires Dronetix to have a complete offer of aeronautical inspection by drone.
- Nextedia launches its first share buyback program for €1 million.
- Alan Allman draws a first tranche of its dilutive financing.
- Trigano, Corep Lighting, Graines Voltz, Fiducial Office Solutions and Fiducial Real Estate have published their accounts.
In the world
Important (and less important) announcements
- Pfizer and BioNTech obtain a $3.2 billion contract from the American authorities for new covid vaccines.
- Shell is to buy Equinor’s 51% stake in a development project in the Gulf of Mexico in the United States.
- UBS signs $25 million settlement with US SEC to settle fraud charges.
- Spirit Airlines postpones vote on takeover bids.
- The Estée Lauder raises its estimate of restructuring costs to between $500 million and $515 million.
- Novartis is relaunching its production of radioligands in Italy and the USA.
- Snap is diversifying beyond advertising with a paid version, Snapchat+.
- The Japanese brewer Kirin sells its shares in its activity in Burma.
- Yara organizes an investor day.
- Burberry and Tate & Lyle detach their dividends.
- Main publications of the day: Micron, Constellation Brands, Walgreens Boots, Babcock… The whole agenda here.
Readings