We ramble, we ramble… Equity markets are still subject to contrary forces at the dawn of the second quarter of 2022. But they are holding their ground, to the point of having reduced their losses since the start of the Russian invasion of Ukraine , February 24. The bond market seems to be sending another signal with short rates and long rates still hovering around reversal points in the US. American debt is better remunerated at 2 years than at 10 years and at 30 years, which reflects a certain concern among investors… who are not turning away from equities, however.
Because even if the terrible tandem shortages / inflation is spreading everywhere, the growth forecasts, even planed, are still high. They maintain the optimism of financiers, who seem to have digested the prospect of a schedule of aggressive rate hikes from the US central bank quite well. One of the main questions at the moment is whether consumers will be able to withstand the shock. “The current environment is perhaps more complex than the crises of 1997, 2008 or 2020, because the problem is not only nominal, but also real: raw materials are real resources, and the inequality of resources cannot be solved by quantitative easing… …you can print money, but not oil to heat or wheat to eat“wrote economist Zoltan Pozsar last week, who works for Credit Suisse after having worked for the Fed and the US Treasury. The paper from which this quotation is taken, which deals more generally with currencies and commodities, is available here. In particular, we find an analogy between the “the dollar is our currency, but your problem” by John Connally in 1971 and “these are our raw materials, but that’s your problem“, which could become the refrain of Russia and other producing countries.
The weekend was rich in news, so I am resuscitating the summary list this morning:
- The European Union is preparing new sanctions against Russia, excluding energy. In Ukraine, abuses are suspected by Russian troops who withdrew from the outskirts of Kyiv. At the same time, Moscow has given Europeans a month to pay their energy bills in rubles.
- In France, the energy network manager RTE fears a tense situation around 9:00 a.m. today because of the cold snap, but thinks it can import the energy needed for consumption. Still in energy, the UK could build seven nuclear power stations by 2050, according to Her Majesty’s Government.
- China records a spike in coronavirus contamination. The session is a holiday for the Shanghai Stock Exchange, but Hong Kong is progressing by taking advantage of positive comments from Beijing on the resolution of the conflict over the financial audits of Chinese companies in the United States.
- In Hungary, Victor Orban triumphs in the legislative elections. In Hong Kong, Carrie Lam will not run for a second term.
- In the United States, the House of Representatives passes a bill to legalize marijuana. But the Senate had to revoke it.
- In the section who cares, Will Smith leaves the Academy of the Oscars while in Germany, a man is vaccinated 90 times to sell fake health passes.
European markets are expected to rise moderately this morning at the open. In Japan, the Topix started the week with a gain of 0.3%. Hong Kong’s Hang Seng gained 1.4% and Australia’s ASX 200 0.4%. The CAC40 gained 0.4 to 6712 points shortly after opening.
Economic highlights of the day
US durable goods orders for February will be announced at 4:00 p.m. The whole macro diary here.
The euro is stable at 1.1047 USD this morning. The ounce of gold fell to 1917 USD. Oil is close to last weekend’s levels, with North Sea Brent at $104.20 and US WTI light crude just below $100. The yield on US debt rose a little to 2.41% over 10 years, while the yield on 2 years exceeded that of 30 years for the first time in fifteen years. Bitcoin is trading at USD 46,500 each.
The main changes in recommendations
- Adesso: Berenberg remains long with a target price reduced from 244 to 233 EUR.
- Aena: Barclays resumes online weighted tracking targeting EUR 145.
- Aéroports de Paris: Barclays resumes monitoring to underweight, targeting EUR 98.
- Air France-KLM: Barclays resumes online weighted tracking, targeting EUR 4.60.
- AMG: Berenberg remains on the buy side with a price target raised from 37 to 46 EUR
- CareTech: HSBC goes from buying to keeping, aiming for 725 GBp.
- Compagnie Financière Richemont: UBS remains on the buy side with a price target raised from 159 to 167 CHF.
- Deutsche Lufthansa: Barclays resumes underweight tracking by targeting EUR 5.20.
- EasyJet: Barclays resumes online weighted tracking aiming for 705 GBp.
- Enav: Barclays resumes overweight monitoring by targeting EUR 4.90.
- Flughafen Zürich: Barclays resumes overweight tracking by targeting CHF 170.
- Fraport: Barclays resumes tracking to underweight, targeting EUR 54.
- Hexagon: Berenberg switches from holding to buying, aiming for 155 SEK.
- International Consolidated Airlines: Barclays resumes overweight tracking by targeting 210 GBp.
- Logitech: Goldman Sachs goes from neutral to long, targeting CHF 107.
- Ocado: Kepler Cheuvreux with a target price reduced from 1414 to 859 GBp.
- Ryanair: Barclays resumes overweight tracking by targeting EUR 17.60.
- Siemens Gamesa: Jefferies starts the follow to hold targeting EUR 17.30.
- Sika: Jefferies remains long with a price target reduced from 375 to 374 CHF.
- Sodexo: AlphaValue remains long with a reduced target price of 95.20 to 89.30 EUR.
- Vestas: Jefferies starts underperforming tracking by targeting DKK 148.
- Wizz Air: Barclays resumes overweight tracking targeting 5300 GBp.
In France
Important (and less important) announcements
- Christel Heydemann takes over as CEO of Orange as of today.
- EssilorLuxottica completes the sale of stores in the Netherlands and Belgium.
- FDA grants Priority Review to Sanofi’s Dupixent for the treatment of patients with eosinophilic esophagitis.
- BNP Paribas becomes the exclusive financial partner of Stellantis in its financing activities in Germany, Austria and the United Kingdom.
- Vinci will buy back €300 million in shares by the end of June.
- Unibail sells a shopping center in Germany for €116 million.
- Technip Energies has been awarded an engineering contract for Equinor Firefly’s floating offshore wind project in South Korea.
- Accor continues its activity in Russia but considers not to participate in the war effort because the group does not pay taxes there.
- Getlink’s energy subsidiary is taking advantage of soaring prices and the disgrace of its competitor Aquind, according to La Lettre A.
- Iliad completes the acquisition of UPC Polska.
- The rating agency Scope Ratings has raised Fnac Darty’s credit rating from “BBB-” to BBB”.
- Nexans has completed the acquisition of Centelsa.
- Nexity postpones its investor day.
- Generix goes up to 100% of its Portuguese subsidiary.
- Europlasma draws two new tranches of OCABSA.
- Audacia, Bluelinea have published their accounts and/or their forecasts.
In the world
Important announcements (and others)
- The Microsoft cloud in the crosshairs of the EU.
- Tesla delivered a record number of cars in the first quarter of 2022, despite China. The figure reaches 310,048 units.
- Novartis will integrate its pharmaceutical and oncology units into an innovative medicines business to simplify its structure, aiming for savings of at least $1 billion by 2024.
- Telecom Italia is discussing with the CDP with a view to starting formal discussions on a rapprochement in the networks with Open Fiber.
- Workers at an Amazon warehouse in New York have voted to form a union, a first in the United States.
- KKR, Permira, EQT and CVC would be interested in Stratec.
- Ryanair lowers its forecast.
- BBVA will recover for €2 billion 662 branches that had been sold to Merlin Properties in 2010.
- Delivery Hero launches €1.4bn debt financing syndication.
- The Russian bank PJSC Sberbank will cease its activities in investment banking in London.
- Cewe CEO accused of hampering diversity and the appointment of women to the board.
- General Motors’ US sales fell 20% in the first quarter.
- The Chinese Shein could be valued at $100 billion as part of a new funding round.
- Company publications and announcements: Ford, Fast Retailing, Repsol… The whole agenda here.
Readings