While waiting for the arrival of the first 2021 results for listed companies, there will be a lot of macroeconomics in the coming days on the stock markets. Well, a little more than usual, since we are already crumbling under indicators without always knowing how they manage to relate to each other. Are we still going to talk about the American central bank? Yes of course. His boss Jerome Powell and his right-hand man Lael Brainard will be before the US Senate tomorrow for a hearing prior to their new term. Economists expect a confirmation of the hardening of the institution’s policy on key rates, especially after the figures published on Friday on the US labor market in December. The unemployment rate fell below 4% while wages continued to rise. There are still more than 10 million positions looking for takers in the United States. America has problems of the rich, which it cannot solve by the simple play of supply and demand.
The cocktail between a tight labor market and unbridled inflation is forcing the Fed to raise rates to avoid an uncontrolled slippage, I think everyone has understood this correctly. The content of the rise in consumer prices will be known on Wednesday, but everything suggests that the superlatives will still be there. Inflation should have reached 7% over one year in December across the Atlantic. In the game of forecasts, the markets now foresee a first rate hike at 80% in March, and at 70% a second in June. The strategists of the investment bank Goldman Sachs for their part last night increased from three to four the number of turns they anticipate in 2022. “We continue to see increases in March, June and September, and we have now added an increase in December“, they explain. It is called coming out of heavy artillery in the face of soaring prices.
I would like to take this opportunity to take a break from interest rate trajectories to answer the main question that any investor asks: should you run away from stocks when central banks tighten the screws at a slow pace? as high? As often in economics, the answer is not binary. In fact, periods of rising rates are not necessarily negative for equities. Especially when the cycle starts from very low rates and they don’t go too high. As rates have never been so low, this raises some hopes. Episodes of complicated monetary tightening have coincided with much higher interest rate levels than at present and / or with more severe economic shocks. Specifically, stocks do quite well when real rates go up. Real rates are calculated by deducting inflation expectations from nominal rates. Monetary screw turns are not necessarily bad news. But investors must adapt as the period is favorable for sector rotations and changes in investment style.
To this news focused on rates and inflation, which has not changed much from daily life in recent months, you will say, is added the return of parliamentary debates on the social plan of Joe Biden. The “Build Back Better” project supposed to have a budget of $ 2,000 billion suffered a major setback in December when influential Democrat Joe Manchin publicly declared that he would not support it. The debates will resume this week. “We expect a smaller version to be adopted, but the risk of nothing passing increases.“, underlines the economist Stephen Gallagher, of the Société Générale. A more restrictive plan, and a fortiori no plan at all, would weigh in particular on the green energy policy of the White House, on the social policy… and on the popularity rating of a Joe Biden who has been sorely lacking in iconic hits for several months.
Finally, this week, it is impossible to ignore the negotiations between Washington and Moscow on the situation on the Ukrainian border. No one knows how far the protagonists are ready to go, but the war rhetoric is very present and Europe seems to be playing the supporting roles, while it is at its doors that Russia is knocking. Geopolitical tensions are helping to create a climate of mistrust at the start of the year, after a complicated first stock market week in 2022 in the United States.
Leading indicators are slightly bullish in Europe this morning. In Asia, the Hang Seng rebounded thanks to a surge in its technology stocks, while the Tokyo Stock Exchange was closed for a public holiday.
The economic highlights of the day
Two statistics today, the euro zone unemployment rate in November (11:00 a.m.) and US wholesalers’ stocks for November (4:00 p.m.).
The euro retreats slightly after rising to $ 1.1335. Gold is stagnant at $ 1,792, while oil remains firm at $ 81.86 per barrel of Brent and $ 79 per barrel WTI. The yield on US debt rose four points to 1.76%, while that of the German Bund stood at -0.05%. Bitcoin regains some colors at $ 42,166.
The main changes in recommendations
- Adidas: HSBC moves from buy to hold targeting EUR 280.
- Aixtron: Oddo BHF goes from neutral to outperforming around 26 EUR.
- Aviva: Jefferies remains to be held with a price target raised from 425 to 435 GBp.
- BASF: Berenberg remains to be retained with a price target raised from 70 to 72 EUR.
- BMW: Goldman Sachs goes from neutral to buy, targeting EUR 123.
- Bureau Veritas: Morgan Stanley moves from overweighting to online weighting.
- Compagnie Financière Richemont: UBS is still buying with a price target raised from CHF 152 to CHF 169.
- Compleo Charging Solutions: Berenberg remains for the purchase with a target price reduced from 105 to 100 EUR.
- E.ON: Goldman Sachs moves to buy to neutral targeting EUR 13.25.
- Electrocomponents: Jefferies remains for purchase with a price target raised from 1500 to 1520 GBp.
- Eurofins: Jefferies switches from buy to hold aiming at EUR 100.
- Flughafen Zürich: UBS moves from neutral to buy, targeting CHF 198.
- Ipsen: AlphaValue remains for the purchase with a lowered target from 107.22 to 96.40 EUR.
- JCDecaux: Exane BNP Paribas goes from neutral to underperformance by targeting EUR 20.
- National Grid: Bernstein goes from outperformance to market performance by targeting 1105 GBp.
- Novartis: Citigroup resumes buy tracking targeting CHF 95.
- Orsted: Goldman Sachs goes from neutral to buy targeting 995 DKK.
- Schneider Electric: Citigroup goes from neutral to sell.
- SoftwareONE: UBS reduces its target price from EUR 25.20 to EUR 20.80.
- STMicroelectronics: Citigroup goes from neutral to buy.
- The Swatch Group: UBS remains neutral with a price target raised from CHF 254 to CHF 299.
- UCB: Citigroup moves from buying to neutral targeting EUR 97.
- Unilever: Citigroup resumes buy tracking targeting 4,500 GBp.
- Vetropack: Stifel goes from buy to keep targeting 63 CHF.
- WPP: Exane BNP Paribas goes from underperformance to neutral, targeting 1060 GBp.
- Zur Rose: Jefferies remains for the purchase with a reduced target of 571 to 515 CHF.
In France
Important (and less important) announcements
- Veolia succeeds in its takeover bid for Suez by holding 86.22% of the capital at the end of the initial period of the offer.
- Sodexo will acquire the American group Frontline Food Services.
- Bruno Le Maire favors Christel Heydemann to succeed Stéphane Richard at Orange.
- Atos warns about profits.
- Covivio acquires a portfolio of 640 housing units in Berlin for € 154 million.
- CGG expects revenue from activities “around $ 941 million” in 2021.
- Europlasma takes over the Luxfer plant in Gerzat.
- Amoeba postpones the broadcast of the 4e slice of its OCA, without saying why.
- Alan Allman carries out a capital increase reserved for new shareholders, for a dilution of around 0.5%.
- Audacia acquires a building in Reims.
In the world
Important announcements (and others)
- Alcon completes the acquisition of Californian Ivantis.
- Departure of the communications director of Meta Platforms (ex-Facebook).
- Shockwave Medical could be bought out, according to Bloomberg.
- Novartis licenses ensovibep, a treatment for COVID-19, from Molecular Partners.
- Goldman Sachs and Morgan Stanley are said to be the advisory banks selected for Reddit’s IPO.
- BPER raises its offer on Banca Carige.
- A group of directors of Telecom Italia, including Vivendi, asked the president of the company to call a special meeting to appoint a new managing director.
- Idorsia obtains approval for daridorexant in the United States.
- Xlife Sciences confirms its desire to be listed on the Swiss Stock Exchange.
- Main results publications : Taiwan Semiconductor, Tilray …
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