The equity markets therefore recovered yesterday, after a complicated session on Tuesday. In Europe, gains were around 1% for the STOXX Europe 600, but some disparities emerged between defensive indices such as the SMI in Switzerland (+0.08%) and higher leverage indices such as the CAC40 in France (+1.59%). In the United States, the losses of the day before were erased by a rise of 1.7 to 1.8% of the three main indices. Since 1er January, the STOXX Europe 600 lost 8.5% and the S&P500 almost 8%.
Investor sentiment improved on news of possible ceasefire talks in Ukraine. The belligerents indeed meet again today to try to find a way out. But meanwhile, the fighting is still raging and major Ukrainian cities are being bombed. However, Vladimir Putin seems to be looking for a way out which, if not honorable, would be acceptable. A comment to be taken with a grain of salt of course, since the Russian leader has proven on many occasions in the past that he is anything but predictable.
In the meantime, retaliatory measures have continued to rain down on the Russian economy, which is suffering a brutal backlash with sometimes fatal consequences, as for the European activities of the banks Sberbank and VTB. Among the news related to sanctions, we can mention the reflection initiated by the Europeans to limit Russia’s recourse to cryptocurrencies (one wonders a little how) or the exclusion of Russian shares from the emerging FTSE Russell or MSCI indices. I add an additional damage. And I’m not talking about the attempt of the indescribable Credit Suisse to make disappear documents entrusted to investors on the system of loans set up by the bank to the Russian oligarchs. No. But the fall in the price of the carbon permit, which plunged to 68 EUR, a drop of 28% since the peaks reached ten days ago at 95 EUR. The right to pollute is less expensive but the reasons for dropping out are not obvious, even for ESG specialists who have written on the subject.
The other factor that contributed to reassuring investors, we do not really see why in the end, was the hearing of Fed boss Jerome Powell yesterday by American parliamentarians. The central banker has decided to roll out the scenario of a rate hike cycle to counter inflation, which is logically the Fed’s primary concern. However, Powell acknowledged that the Russian-Ukrainian conflict increases uncertainty and that it can be a “game changer”, a game changer in plain English, for the economic outlook. Monetary policy bookmakers saw this as a sign that there will not be a 50 basis point hike in key rates on March 16, but rather a 25 point hike. Powell even hinted that this minimum turn of the screw was his preference, not without insisting on the fact that the Fed remained open to a greater effort if inflationary signals remained too worrying. We therefore remain on a discourse of adaptation to the circumstances, even if the CME’s FedWatch tool which I sometimes mention here shows that the participants are almost unanimous in anticipating an increase limited to 25 points on March 16. But as we have learned, or rediscovered, very recently, things can change very quickly and what seemed inconceivable the day before turns into reality the day after, as my colleague Anne Applebaum wrote yesterday in a very nice article in The Atlantic.
Equity markets move with announcements in a pattern seen over and over when investors lose control of the narrative due to an unpredictable event. The trend is rather optimistic this morning, since the promises of dawn tend towards discussions between the emissaries from Moscow and Kyiv. Will everything go back to the way it was in the event of a ceasefire between the two factions? Chances are not, because what has been broken between Russia and the rest of Europe will take time to rebuild and Western leaders have become aware of the new challenges facing the world. Therefore, caution is always needed because geopolitical turmoil has direct economic consequences. It is enough to look at a graph of the evolution of the price of raw materials to be convinced of this.
In Asia, the indices continued their rebound this morning, except in mainland China where the CSI300 lost some ground. European leading indicators are hesitant.
Economic highlights of the day
The end-services PMIs for the month of February will be ticking throughout the day. There will also be employment in the euro zone in January (11:00 a.m.) and several indicators in the United States: Challenger study on layoffs (1:30 p.m.), weekly jobless claims, labor costs (2:30 p.m.) then orders of durable goods and ISM of services (4:00 p.m.).
The euro fell to 1.11028 USD, while the ounce of gold consolidated at 1923 USD. The oil surge continues: Brent is at 116.88 USD and WTI at 114.24 USD. The American debt is remunerated at 1.85% (vs. 1.74% the previous day) over 10 years and the Bund rises to 0.02% (-0.08% the previous day). Bitcoin retreats to $43,300.
The main changes in recommendations
- Cegedim: Societe Generale goes from keeping to buying, aiming for EUR 34.
- Entra: Goldman Sachs starts tracking at neutral, targeting NOK 180.
- Hapag-Lloyd: Oddo BHF starts tracking at neutral targeting EUR 280.
- Hikma: Morgan Stanley moves from overweight to weighted online by targeting 2300 GBp.
- Neste: Inderes goes from holding to buying, aiming for 44 EUR.
- Nokian Renkaat: Handelsbanken goes from buying to holding, targeting EUR 16.
- SGS: UBS remains neutral with a target reduced from 99 to 96 CHF.
- Shurgard: Societe Generale goes from holding to buying, aiming for EUR 62.
- UCB: Morgan Stanley goes from online weight to overweight by targeting EUR 120.
In France
Main results publications
- Thales: the Ebit margin will reach at least 10.8% this year, for organic growth of 2 to 6%. A dividend of EUR 2.56 is proposed.
- Technip Energies: 2021 results are up sharply. The group gives up working on new opportunities in Russia, while 23% of the order book is based on the country. Management estimates the potential financial impact “contained”.
Important (and less important) announcements
- Engie has a credit risk assessed at €987 million on Nord Stream 2.
- Three NGOs take TotalEnergies to court for misleading commercial practice.
- Gecina signs two leases in Boulogne-Billancourt and Neuilly.
- Vallourec signs a contract with OneSubsea for the supply of intervention risers on Equinor’s Bacalhau field in Brazil.
- Imerys completes the sale of certain kaolin assets in North America.
- Death of Jean-Pierre Pernod, former star presenter of TF1.
- Deinove is delighted to have benefited from the AGIR program.
- Drone Volt acquires the Danish Viking Drone.
- A voluntary buyout offer at EUR 1.22 launched by Cecurity.
- Global Bioenergies, CGG, SergeFerrari, DBV Technologies have published their accounts and/or their forecasts.
In the world
Publications of results
- Deutsche Lufthansa: the annual operating loss of €2.3 billion is in line with expectations and lower than that of the previous year (€5.5 billion).
- Logitech: the objectives for the financial year ended at the end of March are confirmed. Over the next financial year, growth should reach 5% and Ebit 900 to 950 M€.
- Merck KGaA: 2021 EBITDA increased to €6.1 billion, in line with analysts’ forecasts. Profits will continue to grow strongly this year.
Important announcements (and others)
- The German automotive trade association VDA said the sector would be hit hard in terms of component and material supply by the war in Ukraine.
- Credit Suisse has asked investors to destroy documents related to loans granted to Russian oligarchs to finance yachts and jets, reveals the Financial Times.
- The second Russian bank, VTB Bank, could close its subsidiary in Europe, like Sberbank.
- Apple is expected to introduce a new, cheaper iPhone on March 8.
- Google and the French daily press sign an agreement on neighboring rights.
- Amazon will close its bookstores and other stores but strengthen its food stores.
- The FTSE Russell will remove Russia from its indexes.
- Telecom Italia will split into two.
- The MSCI will remove Russia from its emerging market status.
- Severstal stops exporting its steel to Europe.
- Evraz and Polymetal leave the FTSE100, replaced by Endeavor Mining and Howden.
- Array Technologies postpones the filing of its annual report.
- Elliott would eye control of Mercury Systems.
- German wholesaler Metro still active in Russia and Ukraine.
- Russian billionaire Roman Abramovich is to sell Chelsea Football Club and donate the net proceeds to war victims in Ukraine.
- The main publications of the day: Broadcom, Costco Wholesale, Merck KGaA, Marvell, Universal Music Group, CRH, Thales, Best Buy, Fortum, Evonik… The whole agenda here.
Readings