There was a differential of more than 4% last night at the close between the performance of the main European stock markets and the Nasdaq. The US index ended up 1.7% after losing a lot of ground at the open, while Paris, London or Frankfurt sank more than 2.5%. The lag was also present on Wall Street itself, although to a lesser extent, since the Dow Jones lost 0.4% at the end of the ball. The difference is explained by the heavy fall in oil stocks in the wake of the barrel and by a transfer to technological and cyclical stocks.
Impossible to deny a certain confusion yesterday while the previous sessions had rather been dominated by a form of simplification of the issues. Investors gave the impression of having been resigned to the sequence of inflation, rate hikes, economic pressures and a return to better fortune. They had even found some grounds for optimism, such as this rumor of a reduction in customs surcharges imposed by the United States on China to alleviate inflationary pressure. But at the same time they had to deal with growing short-term recession fears, visible in US government bond yields which themselves boosted the dollar against the euro after several sessions of stagnation. They are also faced with the return of the little red lights on the coronavirus at a time when the northern hemisphere is preparing for the big summer brew. I add to this the signs of rising social discontent all over the world since inflation is so high that it is overwhelming for households, whereas it has gone relatively unnoticed for several decades.
Mixing it all up and shaking well, you get this somewhat wobbly session, during which investors burned their oil, banking and industrial idols to take up a few tech bets. I admit that this unexpected movement makes me quite skeptical. What is easier to understand, however, is that oil’s somewhat suspicious invincibility cloak took some damage yesterday. The barrel suddenly lost more than 10% during the session, causing WTI to return below 100 USD. Black gold is overtaken by fears of an economic slowdown, fears which are also visible on the trajectory of industrial metals, which are hurting their faces. The S&P index, which measures the evolution of a basket comprising aluminium, copper, lead, nickel and zinc, has lost 25% since the start of the Russian offensive in Ukraine at the end of February. The fall in agricultural products reached at the same time 15%. This means that the threat of recession weighs more heavily than the geopolitical tensions on supply at present.
In yellow, industrial metals. Energy (oil and natural gas in this case) has also started to decline.
These are not the only disorders of the moment. And it is not the extravagant Boris Johnson who will say the opposite, he who lost two key ministers yesterday. Including the charismatic Rishi Sunak, in charge of finance, who sent him a rather salty letter. Will BoJo become BoGo, the British press wonders, as a poll shows that more than half of voters in his own party want him out of office. On the other side of the Channel, there will be a crucial vote in the European Parliament today on the energy transition, which will determine whether or not the EU can rely on natural gas and nuclear before finding more virtuous. A vote whose stakes are immeasurably more gigantic than the media coverage it receives, since it exposes us to a radical paradigm shift on energy and, above all, to a short-term price-reality that risks undermining the myth of the “happy transition”.
In the rest of the news, while the United States seems ready to ease the customs surcharges aimed at China, it does not seem to want to give up technological sovereignty since it would pressure groups like ASML stop exporting semiconductor production equipment to the former Middle Kingdom. Rumors are also circulating about a possible ceasefire that could be negotiated by Moscow if its armies emerge victorious from the Donbass campaign. In France, TotalEnergies will have to be watched, since a significant proportion of MPs would like to make energy companies pay for measures to preserve purchasing power. After all, even Boris the Liberal did it in the UK. Finally, several indicators are expected in Europe and the United States in the macro agenda, until the publication in the evening of the minutes of the last Fed meeting.
Leading indicators are bearish for now in the US, but they point to a rebound in Europe where a technical recovery will help offset some of the lag with Wall Street yesterday. In Asia Pacific, red largely dominates with declines of 1% or more seen in Japan, China and Hong Kong. The Australian ASX holds the shock a little better but still retreats.
Economic highlights of the day
The EU will release its new economic forecast at 11:00 a.m. alongside May retail sales. In the United States, the session will be dominated by the JOLTS survey on job openings and the ISM services index at 4:00 p.m., followed by the publication of the minutes of the last Fed meeting at 8:00 p.m. The whole macro diary here.
The dollar is waking up against the euro and is trading 1.0263 USD for 1 EUR. The ounce of gold plunges to 1770 USD. Oil took a big hit behind the head yesterday, with North Sea Brent at $103.67 a barrel and US WTI light crude at $99.75, down about $10 from the price. the day before. The yield on 10-year US debt fell to 2.83% while short maturities tended to rise, with a 6-month at 2.51%. Bitcoin is back below $20,000.
The main changes in recommendations
- Aalberts: Oddo BHF goes from outperformance to neutral by targeting EUR 40.
- Applus: Jefferies remains long with a target price reduced from 12 to 10 EUR.
- Bureau Veritas: Jefferies remains long with a target price reduced from 31 to 30 EUR.
- Continental: Barclays goes from underweight to weighted online by targeting EUR 70.
- Credit Suisse: Jefferies remains to be kept with a price target reduced from 6.90 to 6 CHF.
- Eurofins: Jefferies remains to be kept with a price target reduced from 100 to 85 EUR.
- Evonik: Jefferies remains to be kept with a target price reduced from 25.50 to 21.50 EUR.
- Faurecia: Barclays faces online weighting to underweight by targeting EUR 15.
- Geberit: Barclays remains weighted in line with a reduced price target of CHF 550 to 480
- HeidelbergCement: Oddo BHF goes from neutral to underperforming, targeting EUR 45.
- Inficon: UBS remains long with a price target reduced from 1350 to 1220 CHF.
- Intertek: Jefferies goes from buy to hold saying 4700 GBp.
- Ion Beam: ING goes from selling to holding, targeting EUR 18.
- Michelin: Barclays goes from online weighting to overweighting by targeting EUR 35
- Nordex: Stifel goes from buying to holding, targeting EUR 9.
- Sage: Barclays moves from underweight to weighted online by targeting 720 GBp.
- SAP: Barclays goes from overweight to weighted online by targeting EUR 102.
- SGS: Jefferies remains to be kept with a price target reduced from 2850 to 2400 CHF.
- Sika: Jefferies remains on the buy side with a price target raised from 313 to 314 CHF.
- Software AG: Barclays goes from online weight to underweight by targeting EUR 30.
- Swiss Re: Jefferies remains to be kept with a price target reduced from 82 to 75 CHF.
- The Swatch Group: Stifel goes from buy to hold, aiming for CHF 250.
- Titan Cement: Oddo BHF goes from outperformance to neutral by targeting EUR 12.
- UBS: Jefferies remains long with a price target reduced from 24 to 21 CHF.
- Valeo: Barclays goes from overweight to weighted online by targeting 20 EUR.
- Wienerberger: Oddo BHF goes from neutral to underperformance by targeting EUR 20.
In France
Important (and less important) announcements
- CFM International (Safran) signs an agreement with Air France-KLM to power the new fleet of A320neo family aircraft.
- Accor is reorganizing and will renew the term of CEO of Sébastien Bazin.
- Electricité de France shares fall after news that a hot summer could affect nuclear generation.
- Schneider, Legrand and Rexel accused of limiting the tariff autonomy of distributors in France. Companies defend themselves against illegal practices.
- Gaztransport & Technigaz obtains an order from the Jiangnan shipyard for the design of the tanks of three new LNG carriers.
- JCDecaux strengthens its targeting solutions by taking control of Displayce.
- Icade Santé is continuing its development in Spain.
- The takeover bid initiated by KKR for Albioma has been authorized by the European Commission.
- Drone Volt obtains a €2.5 million Innovation Loan from Bpifrance.
- Amoeba postpones its 6e slice of OCA.
- SixSq (Ekinops) joins the 5G-EMERGE project to design solutions for the 5G satellite media market.
- Clever cloud selects Kalray for its high performance storage solutions.
- Pernod Ricard pays a dividend.
- Omer Decugis and Tronics have published their accounts.
In the world
Important (and less important) announcements
- The United States is pushing for ASML to stop selling chipmaking equipment to China.
- BYD sells more electric cars than Tesla.
- Germany could carry out a partial nationalization of Uniper.
- Mitsui, Mitsubishi and other Japanese groups fall after Medvedev suggests the loss of Russian oil and gas supplies to Japan.
- Tokyo Electric Power falls on the stock market after rumors of Toshiba interest.
- TechnipFMC obtains a contract from Equinor for an offshore project in Brazil.
- US senators call for investigation into TikTok and data security.
- Telecom Italia is aiming for a valuation of at least €25 billion, including debt, for its fixed network as part of the proposed split between its fixed telephony activities and its services.
- BioNTech will “vigorously” defend itself against CureVac’s patent infringement claims.
- Kudelski opens a center dedicated to computer security in Madrid.
- Holcim takes over the Belgian company Cantillana.
- Roche obtains a priority review from the FDA in the United States for Lunsumio.
- Vertex announces that the FDA has lifted the clinical hold on the Phase 1/2 clinical trial of VX-880 for the treatment of type 1 diabetes.
- GSK and Voestalpine hold their general meetings.
- Main publications of the day: United Microelectronics, Aeon, Novatek… The whole agenda here.
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