I begin this morning with a quick review of recent stock market trends. Western equity markets continued their crossover last week, with a positive weekly balance sheet in Europe but negative in the United States. The previous week, the United States had withstood the shock of the war in Ukraine much better than the old continent. Since 1er January, the main world indices lost between 10 and 15%, with two exceptions: the Dow Jones, which limited its losses to -8.7%, and the Nasdaq 100, which widened them to -18.5%. I make an exception of the Russian RTS index, whose liabilities exceed 40% and which still has not re-listed since February 25. Yesterday, the Russian central bank extended the suspension until March 18. I remind you here that the RTS is the index of the Moscow Stock Exchange in rubles, which is doubled by the MOEX, its alter-ego in dollars. For lovers of anecdotes, know that Zonebourse had just opened mid-February to its readers access to Russian indices. A few days after going into production, they stopped listing. Bad timing.
The Nasdaq’s decline is an excellent indicator of investors’ current risk aversion. Regular readers will know that I like to use Cathie Wood’s Ark Innovation ETF as an inverted barometer of market appetite for bold investments: with a price down to $55.5, it’s down 41% since beginning of the year, which means it does about the same performance as the RTS. So obviously it’s wrong to shoot the ambulance. But Miss Wood being not stingy with complacency when things are going well, it is not illogical that she is a little heckled when times are tough. Companies with exuberant multiples continue to be slashed, while the upcoming reduction in liquidity will force investors to be more selective in the quality of the files they support.
Markets remain buffeted by the immediate and future consequences of the conflict in Ukraine. Until now, investors had become accustomed to being enthusiastic at the slightest announcements of negotiations and to sink into depression at the mention of failures in the talks. Experience shows that the passage of time reduces epidermal reactions, but we are not yet at this stage this morning. As proof, the announcement of the resumption of dialogue between Russians and Ukrainians or the planned meeting between two senior American and Chinese diplomats are helping to anchor the leading indicators in the green. And too bad if rumors suggest that Russia would have asked China for economic aid and military equipment to help it in Ukraine.
In addition to the aftermath of this conflict reminiscent of the last century – we all have a short memory – the markets will gradually take hold of the change in the monetary paradigm which is announced on Wednesday. By dint of talking about it wrong and through for months, we would have almost forgotten that the American central bank has not yet officially kicked off a policy intended to fight against inflation by using the good old weapon of the increase in key rates, supposed to gradually reduce the quantity of money in circulation. The Fed meets over two days from Tuesday and will therefore give its verdict on Wednesday at 8:00 p.m. Paris time: in this case, the announcement of a rate hike of 25 basis points, the inaugural tightening which should be followed by a series of others throughout the year. Economists are wondering how long the central bank will be able to regain control of inflation after being overwhelmed in recent months. I could be wrong but I have the impression that the central bankers don’t know either.
Monetary policy and the war in Ukraine are therefore still the major determinants of the moment. I add a point of vigilance on the resumption of the coronavirus in China, which could upset already fragile supply lines a little more. In Asia, Tokyo picked up 0.6% and Sydney just over 1%. China is still depressed with marked declines for the Hang Seng in Hong Kong and the CSI300 in Shanghai, weighed down by technology stocks and the return of the pandemic.
Economic highlights of the day
Eurozone industrial production for January will be the only major economic indicator for the day (11:00 am).
The euro fell back towards 1.09. The ounce of gold lost a little ground to 1972 USD. Oil is still volatile, with North Sea Brent at $109.70 and US Light Crude WTI at $106.14. The yield on US debt is again above the 2% mark, at 2.01% over 10 years, and the Bund is stable at 0.24%. Bitcoin is hovering around USD 38,500.
The main changes in recommendations
- Adevinta: Jefferies remains long with a target reduced from 130 to 115 NOK.
- Amundi: Credit Suisse reduces its target from EUR 78 to EUR 69.
- Atresmedia: Barclays moves from online weight to underweight by targeting EUR 3.50.
- Bayer: Jefferies resumes long monitoring, targeting EUR 64.
- Belimo: Morgan Stanley moves from online weight to overweight by targeting CHF 530.
- BNP Paribas: JP Morgan reduces its target price from 73 to 62 EUR.
- Carlsberg: Berenberg goes from sell to hold aiming for 835 DKK.
- Compagnie d’Entreprises CFE: Berenberg remains long with a target raised from 130 to 147 EUR.
- Credit Agricole: JP Morgan goes from overweight to neutral, targeting EUR 12.50.
- CRH: Jefferies remains long with a target price reduced from 61.80 to 53.10 EUR.
- Danone: Bernstein went from market performance to outperformance by targeting EUR 56.
- Dufry: UBS remains neutral with a price target reduced from 48 to 46 CHF.
- EssilorLuxottica: Berenberg remains long with a target reduced from 210 to 195 EUR.
- Faurecia: Jefferies remains to be kept with a target price reduced from 38 to 28 EUR.
- Home24: Jefferies remains long with a price target reduced from 23 to 13 EUR.
- K+S: Berenberg goes from buying to holding, aiming for EUR 22.
- Kendrion: Berenberg remains to be kept with a target price reduced from 20 to 12 EUR.
- Kering: Citigroup reduces its target price from 860 to 741 EUR.
- Lanxess: Jefferies remains long with a target reduced from 72 to 62 EUR.
- Leonardo: AlphaValue remains to be accumulated with a target raised from 10.30 to 10.60 EUR.
- Maisons du Monde: Berenberg remains on the buy side with a target raised from 27 to 28 EUR.
- Mercedes: Jefferies remains to be kept with a target price reduced from 82 to 66 EUR.
- Nestlé: Exane BNP Paribas goes from neutral to outperformance by targeting 135 CHF.
- Nordea: AlphaValue shifts from accumulating to lightening aiming for 94.90 SEK.
- Ocado: Jefferies remains to be kept with a target reduced from 1850 to 1300 GBp.
- Publicis: Barclays goes from overweight to weighted online by targeting EUR 65.
- Reckitt: Bernstein goes from market performance to underperformance by targeting 5300 GBp.
- Rémy Cointreau: Exane BNP Paribas goes from neutral to outperformance by targeting EUR 205.
- Renault: Jefferies remains to be kept with a target price reduced from 41 to 25 EUR.
- Schibsted: Jefferies remains long with a target reduced from 320 to 305 SEK.
- Societe Generale: JP Morgan reduces its target price from 41 to 32 EUR.
- Stellantis: Jefferies remains long with a reduced target price of 25 to 20 EUR.
- Ströer: Barclays goes from online weighting to underweight by targeting EUR 65.
- SMCP: Goldman Sachs goes from sell to neutral, targeting EUR 8.30.
- Unicredit: JP Morgan goes from overweight to neutral by targeting EUR 12.
- Universal Music Group: Barclays moves from online weight to overweight by targeting EUR 24.
- Wizz Air: Citigroup remains short with a reduced price target of 3,500 to 2,300 GBp.
- Wolters Kluwer: Barclays goes from online weight to overweight by targeting EUR 110.
- WPP: Barclays moves from overweight to weighted online by targeting 1250 GBp.
In France
Important (and less important) announcements
- Kering has signed an agreement to acquire American eyewear manufacturer Maui Jim.
- Investor Clearway is asking TotalEnergies to leave Russia or submit to a shareholder vote.
- Sanofi unsuccessful in phase II with amcenestrant in the treatment of breast cancer.
- Safran ceased to operate in Russia.
- The government published on Saturday the texts increasing the quota of electricity sold at a reduced price by Electricité de France to its competitors within the framework of the tariff shield. EDF which has again warned about its objectives.
- Orpea has appointed two firms to carry out an external and independent evaluation. The group published results and renounced the takeover of Hestia.
- Groupe Gorgé enters into exclusive negotiations to acquire iXblue for €410 million.
- MND has two contracts representing €19.6 million to invoice with Russia.
- Pharmasimple draws the remaining €0.5 million from its €10 million dilutive line of financing.
- Erytech and Encres Dubuit have published their accounts.
In the world
Important announcements (and others)
- Volkswagen expects to achieve 7 to 8.5% operating margin in 2022, for a consensus of 7.75%.
- Foxconn (Hon Hai Precision) suspends operations in Shenzhen, China due to covid lockdown.
- JPMorgan Chase is the main counterparty to the Chinese nickel tycoon’s bearish bet.
- Deutsche Bank has planned to close the remainder of its business in Russia. Commerzbank
- Telecom Italia is starting talks for a takeover with KKR.
- Rio Tinto will buy back the remaining Turquoise Hill shares for $2.7 billion.
- Mediatek is going to price its Bluetooth chip unit.
- The London Stock Exchange suspends its products and services in Russia.
- Sandoz acquires inhaler specialist Coalesce.
- S&P returns The Kraft Heinz debt to investment grade.
- Burckhardt Compression is suspending all new Russia-related business.
- JD Logistics will buy the courier company Deppon.
- The main publications of the day: The Charles Schwab, Meituan, Prada, Talanx, Neoen, Acea… The whole agenda here.
Readings