I read this morning the well-turned commentary of an investment bank which spoke of media noise and truth. The author basically explains that the financial markets have been reacting for the past two weeks to conflicting information from Ukraine and Russia and that only volatility is winning, but not the truth. It’s fair enough of course, and it proves to us that the narration remains at the heart of the way we perceive events, what’s more in our over-informed (or over-disinformed, delete the unnecessary mention) society.
Yesterday, therefore, the European markets continued their rebound, telling each other their truth of the moment: discussions continue between the belligerents to reach a ceasefire and oil is falling. The other truth is that we continue to gut each other on the ground and ravage the Ukraine, while the barrel remains more expensive than a fortnight ago. I don’t remember who wrote “the price determines the narrative and the narrative determines the price, so the splurges can go on for a long time“, but he was damn right.
The facade of optimism in Europe is not necessarily shared by the Americans, who again experienced a complicated stock market day yesterday. Despite Elon Musk’s proposal to challenge Vladimir Putin to a man-to-man duel. I wonder if there is anything more dangerous than a bored American billionaire. But that’s another debate. If the Dow Jones continues to put up resistance, the Nasdaq 100 fell by losing 1.9%. The technology index has officially entered a bear market (bear = bear, the animal that symbolizes the decline of the financial markets and which illustrates this paper), i.e. it has lost more than 20% on its recent peaks (precisely, it fell from 16,576 points on December 27, 2021 to 13,046 points at the close yesterday, i.e. -21.2%).
The Nasdaq isn’t the only place that’s malfunctioning right now. I could cite for example the Russian stock market and the nickel market, which suddenly no longer work at all. But also Chinese technology stocks, which are messing around at full blast. Or the service of the Russian debt, which is looming tomorrow and which will be done in rubles and no longer in dollars, sanctions oblige. I can also cite socially responsible investment, which everyone is talking about but which systematically takes second place behind the economic emergency.
And then there is the major dysfunction of the moment, galloping inflation, which will destroy the purchasing power of a large part of the planet in the weeks to come. During the municipal council meeting of my village yesterday, our mayor who officiates in the agricultural field in the private sector launched “you will see that there will be food stamps in France from this summer“. It is his truth at the moment. Maybe it will be ours too in a few months. Central banks are supposed to take care of the problem, even if they are very far from my village. In particular the American central bank, which is due to start its campaign to raise key rates tomorrow, by tightening the screw a quarter turn.The “swaps” linked to the Fed now include seven rate hikes in 2022. Economist Brian Wesbury wrote last night that the politicians try to blame inflation on all sorts of causes: on the left, corporate greed or Russia, on the right, government spending or deficits, in the center, deglobalisation. in reality, it is essentially the result of the expansion of the money supply fed by the central bank. the money supply increases too quickly, inflation increases; if the money supply increases too slowly or decreases, there is deflation. If the central bank does its job well, you get stable prices“, believes Wesbury. His attack is of course aimed at the Fed, which has its work cut out for it if it wants to regain control of a situation that it created itself. But it also applies to other central banks which have chosen to rush forward to manage the economic problems since the financial crisis of 2008, by missing the opportunities they had to normalize their policies when the economic situation allowed it.
On the eve of the Fed’s major monetary policy change, the yield on US ten-year debt rose to 2.14%, surpassing its recent peaks. Chinese stock markets are crashing again, with Hang Seng losing 5% as of this writing. Tokyo is still resisting by grabbing a few points on the Nikkei 225. European leading indicators are pointing to a lower opening, with volatility still very present, it will be understood. The American nervousness index VIX rose not far from 32 points, while its European counterpart modeled on the DAX, the VDAX, is stable around 40 points. Those who feel like a long-term investor should perhaps turn off their computers and go fishing to escape the ambient noise. This is my truth for the day, but you don’t have to share it.
Economic highlights of the day
The ZEW survey of German investor confidence is due at 11:00 am (this indicator measures the sentiment of analysts on the situation of the German economy six months ahead, compared to the survey of the previous month). In the United States, the Empire State index for March and the producer price index for February will be published at 1:30 p.m. The Empire State is a business questionnaire sent to 200 New York-area industry leaders on 1er of the month, which measures the dynamism of the economy.
The Euro is trading at USD 1.0982, slightly higher. The ounce of gold lost ground again at 1941 USD. The decline in oil continues, with Brent from the North Sea at 102.30 USD and US light crude WTI at 98.56 USD. The yield on US debt exceeded its recent peaks at 2.14% over 10 years, while German debt gained more than 10 points since the day before, with a Bund at 0.36%. Bitcoin is hovering around USD 39,000.
The main changes in recommendations
- Air France-KLM: Berenberg remains on sale with a price target reduced from 3.25 to 3.10 EUR.
- Aperam: Exane BNP Paribas goes from outperformance to neutral, targeting EUR 56.
- Aryzta: Baader Helvea switches from accumulating to buying targeting CHF 1.30.
- Asos: Exane BNP Paribas goes from neutral to underperformance by targeting 1900 GBp.
- Associated British Foods: Exane BNP Paribas goes from outperformance to neutral, targeting 2050 GBp.
- Biotalys: Berenberg remains long with a target price reduced from 10.50 to 9 EUR.
- CGG: Barclays moves from online weight to underweight.
- Currys: Exane BNP Paribas goes from neutral to underperforming, targeting 85 GBp.
- Deutsche Börse: Exane BNP Paribas goes from neutral to outperformance by targeting EUR 180.
- EssilorLuxottica: Societe Generale goes from selling to keeping, targeting EUR 179.
- Eurazeo: AlphaValue remains on the buy side with a price target raised from EUR 89.70 to EUR 93.
- HeidelbergCement: Morgan Stanley goes from overweight to weighted online by targeting EUR 68.
- Hunting: Jefferies remains long with a price target raised from 330 to 380 GBp.
- Ipsen: JP Morgan reduces its target price from 88 to 80 EUR.
- LVMH: RBC reduces its target price from 880 to 770 EUR.
- OMV: Berenberg remains long with a price target reduced from 65 to 54 EUR.
- Prosus: JP Morgan goes from overweight to neutral by targeting EUR 47.
- Puma: Jefferies remains long with a price target reduced from 115 to 95 EUR.
- Rentokil: Jefferies remains long with a reduced target price of 675 to 650 GBp.
- SIG Combibloc: Jefferies remains long with a price target reduced from 30 to 27 CHF.
- Subsea 7: Jefferies remains long with a price target raised from 90 to 100 NOK.
- SUSE: Jefferies goes from hold to buy targeting EUR31.
- Swedbank: Goldman Sachs moves from selling to Neutrons targeting 169 SEK.
- Technip Energies: Jefferies remains long with a price target reduced from 18 to 14 EUR. Barclays goes from underweight to weighted online.
- Unibail: Societe Generale goes from selling to buying, targeting EUR 71.
- Zalando: Exane BNP Paribas goes from underperformance to neutral by targeting EUR 52.
In France
Important (and less important) announcements
- Greenpeace France and Friends of the Earth France call on TotalEnergies to leave Russia.
- Sanofi announces a €300 million collaboration with Blackstone Life Sciences in multiple myeloma.
- Unibail sells a site under development in the United States for $82.5 million.
- Accor plans to open more than 300 new hotels and resorts this year.
- Neoen is targeting 360 to 375 M€ of EBITDA this year and in line with its 2025 forecasts.
- Vallourec launches its materials selection platform.
- Aramis convinced 164 employees to participate in its first employee share ownership plan.
- DBV Technologies invited to present at the 32nd Oppenheimer Annual Healthcare Conference.
- Pixium Vision convenes its shareholders to validate new sources of financing.
- Lucibel communicates on the OVE mask developed by its cosmetics subsidiary.
- Eurasia buys the La Villette Tower.
In the world
Important announcements (and others)
- Foxconn (Hon Hai Precision) is negotiating the installation of a $9 billion factory in Saudi Arabia, according to the Wall Street Journal.
- Solvay on Tuesday presented a plan to separate into two independent listed entities, one in basic chemicals and the other in specialty chemicals.
- Intel will probably choose Germany to set up its next European factory.
- Amazon could be days away from reaching a deal to buy Metro Goldwyn Mayer Film Studios, a deadline for the FTC’s decision.
- Nielsen Holdings is courted by a consortium of investors, including Elliott, for $15 billion, according to the Wall Street Journal.
- The London Stock Exchange will resume trading nickel contracts on March 16.
- Equinor will suspend its Russian oil transactions following the conflict in Ukraine.
- Vetropack improved its revenues but the net profit declined, penalized by the strong franc and rising costs. Same situation for Stadler Rail.
- Tencent is bracing for a record fine from Beijing for violating anti-money laundering laws.
- Uniti Group Limited confirms that it is negotiating the takeover of HRL Morrison at AUD 4.50 per share.
- Tsingshan Holding reaches a moratorium with its creditor banks on its margin call after the nickel spike.
- D’Ieteren signs the definitive agreement to acquire PHE.
- Dufry extends its concession at Bali airport for six years.
- Suspension of Kinepolis covenants extended until December 31, 2022.
- The main publications of the day: Alimentation Couche-Tard, Ferguson, Assicurazioni Generali, RWE, Hennes & Mauritz, Traton, Wacker Chemie, Reply, Stadler Rail, Tecan… The whole agenda here.
Readings