The rebound in global equity markets is gaining momentum after another strong rally. Gains for major Western indices were generally between 1 and 2%, with spikes above 2% for those with notoriously higher leverage, such as the US Nasdaq. Thanks to four consecutive sessions in the green, the technology index has erased half of its downward movement from June. But we will still have to work hard to improve the 2022 balance sheet, which is still at -25.80%. We sometimes forget it, but we have to take back 34.8% to cancel out a drop of 25.80%. This renewed appetite is accompanied by the eternal question: does it mark the beginning of a major movement or is it a new rebound in a bear market? There have already been three such bursts in 2022: late January, mid-March and late May. No future for the moment.
I was trying this morning to place a title like “Tragic ball in Downing Street, 1 death” after the fall of Boris Johnson, in reference to the mythical title of Hara Kiri during the death of General de Gaulle. But that would have been out of place as former Japanese Prime Minister Shinzo Abe is in critical condition after being shot and wounded during a speech this morning. Of course, these two events have nothing to do with each other, but they nevertheless illustrate the growing unrest that reigns in the political sphere. In London, the City did not react much to BoJo’s upcoming departure: some of the British media had already sidelined the whimsical Prime Minister. However, the pound rebounded, a sign that Johnson’s stubbornness to cling to his post was seen as a political weakness for the UK.
More generally, the financial markets preferred to be enthusiastic yesterday about the green light that Beijing is preparing to give to local authorities to take on debt to the tune of the equivalent of more than 210 billion euros to launch projects of infrastructure. It has been clear to investors for months that China has the potential to boost confidence in a revival of global growth. However, Beijing has so far refrained from overplaying this card, for political reasons and because it was also necessary to manage the resurgence of the coronavirus and the structural weakness of the real estate sector. The announcements concerning the fundraising of local authorities were expected, but their realization puts a little balm in the hearts of investors.
At the same time, the market slightly improved its level of confidence in the ability of central banks to curb inflation without doing too much damage to the economy. All of this is more the Coué method than a real economic analysis, as the variables are numerous, but we know the power of investor morale on the stock market. In the meantime, the bond market still tells a slightly more complex story, with 2-year and 5-year rates slightly higher than 10-year rates in the United States, a sign that the fear of an economic contraction is very present. The results and corporate targets that will begin to be announced next week will help complete the picture. In particular to understand whether listed companies, the vast majority of which have so far withstood the inflationary shock remarkably well, are facing a demand shock due to the reluctance of consumers and the drying up of their wallets.
To wait for these first figures, financiers will be able to interpret the US employment report for June, which will be published at 2:30 p.m. today. As I wrote earlier in the week, the word “recession” is on everyone’s lips, but unemployment remains extremely low on both sides of the Atlantic. Moreover, companies are unable to recruit. New illustration in Germany yesterday where the national airline Deutsche Lufthansa is forced to cancel hundreds of flights in the middle of the summer period, for lack of staff. With a new deleterious effect: the carrier only sells seats in its most expensive booking class for the month of July, which does nothing to fix the price increase. But where have the workers disappeared to?
The week ends up in Asia Pacific. Only China is showing some signs of weakness at the end of the course. The leading indicators are slightly bearish in Europe and the United States, but we feel, at least in the morning, that the markets are pulling up. My colleague Jordan Dufee will take over the daily column for the next fortnight, while I recharge my batteries and renew my stock of heartbreaking jokes.
Economic highlights of the day
So focus today on employment figures. No one will care about the French trade balance, the consumption of Japanese households and the stocks of American wholesalers. The whole macro diary here.
The dollar keeps the pressure on the euro at 1.0145 USD for 1 EUR. The ounce of gold stabilizes around 1740 USD. Oil is recovering, with Brent from the North Sea at 105.15 USD a barrel and US light crude WTI at 102.87 USD. The yield on 10-year US debt rose to 2.98%, still below the 5-year and 2-year rates, which are around 3%. Bitcoin bounced back to $22,000.
The main changes in recommendations
- Adecco: Oddo BHF goes from outperformance to hold by targeting CHF 43.
- Aker BP: JP Morgan goes from neutral to overweight by targeting NOK 407.
- Atlas Copco: Exane BNP Paribas goes from neutral to outperformance by targeting 125 SEK.
- Barratt Developments: Morgan Stanley resumes online weighted tracking, targeting 457 GBp.
- Compagnie Financière Richemont: Goldman Sachs remains long with a price target reduced from 126 to 124 CHF.
- EQT: Citigroup goes from neutral to sell by targeting 180 SEK.
- Experian: Morgan Stanley goes from online weight to overweight by targeting 3100 GBp.
- Flatexdegiro: Berenberg remains long with a target reduced from 35 to 30 EUR.
- Glencore: Barclays remains overweight with a price target reduced from 770 to 700 GBp.
- Global Fashion Group: Baader Helvea goes from buying to accumulating targeting EUR 1.60.
- Hermès: Goldman Sachs remains for sale with a target raised from 980 to 1015 EUR.
- Holcim: Barclays remains weighted in line with a reduced price target of CHF 50 to 44.
- Leonardo: Oddo BHF goes from neutral to outperformance by targeting EUR 12.50.
- LVMH: Goldman Sachs remains long with a target raised from EUR 675 to EUR 700.
- Melrose: Exane BNP Paribas goes from outperformance to neutral by targeting 155 GBp.
- Persimmon: Morgan Stanley resumes underweight tracking targeting 1600 GBp.
- Publicis: Berenberg remains long with a target reduced from 70 to 61 EUR.
- Rexel: Exane BNP Paribas goes from neutral to outperformance by targeting EUR 18.
- Straumann: Jefferies remains long with a price target reduced from 182 to 147 CHF.
- Taylor Wimpey: Morgan Stanley resumes underweight tracking by targeting 100 GBp.
- U-Blox: Baader Helvea goes from reducing to accumulating by aiming for 110 CHF.
- Ubisoft: Exane BNP Paribas goes from outperformance to neutral by targeting EUR 45.
- Verbund: HSBC goes from holding to buying, aiming for 115 EUR.
In France
Important (and less important) announcements
- Icade Santé and Saint-Gobain Glass are innovating with the first low-carbon glass at the Polyclinique du Parc in Caen.
- La Française des Jeux is developing in payment services for the general public and for merchants with the planned acquisition of Aleda.
- Gaztransport & Technigaz receives an order for two LNG-powered container ships.
- Nexans equips TenneT’s BorWin 6 project.
- Aéroports de Paris chooses Lagardère Travel Retail as partner in airport distribution.
- Getlink’s passenger shuttle traffic almost quadrupled year on year in June.
- Eurazeo sold its shares in Orolia to Safran.
- Réalités raises €35m at €45 per share.
- Olympique Lyonnais revises its objectives downwards.
- AST Groupe launches “The Site Platform” and digitizes the recruitment of craftsmen.
- Inventiva screened the first patient in the Phase IIa LEGEND trial with the lanifibranor / empagliflozin combination in patients with NASH and T2DM.
- Auplata is seeking sources of funding to honor its obligations to San Antonio Securities.
- Séché, Vranken and Lacroix detach their dividends.
- LDC, Emova, Ecomiam and Safe SA have published their accounts.
In the world
Important (and less important) announcements
- Elon Musk may quit Twitter over the network’s inability to determine the number of fake accounts, according to the Washington Post.
- Deutsche Lufthansa will again massively cancel flights due to lack of manpower.
- Elliott is building a position in Swedish Match, according to Bloomberg.
- Public Eye files a criminal complaint against UBS.
- Essity buys 80% of Canadian waterproof clothing manufacturer Knix Wear.
- The CEO of The Boeing Company evokes a possible cancellation of the B737MAX10.
- SGS acquires Proderm.
- Wisekey has completed its share buyback program.
- Holcim strengthens in Romania.
- KBC finalizes the acquisition of the Bulgarian operations of Raiffeisen Bank International.
- AT&T, Intuit, Iberdrola, Micron, Indra detach dividends.
- Main publications of the day: OMV, ICA Gruppen… The whole agenda here.
Readings