The United States yesterday offered a rock’n’roll trading session all in volatility, through bipolar technology stocks. Fortunately for investors, the pendulum has shifted from a sharp drop to a symbolic rise and vice versa. Concretely, the Nasdaq 100 lost up to 2.7% during the session but closed with a gain of 0.14%. In this context, the declines of 0.14% in the S & P500 and 0.45% in the Dow Jones are almost anecdotal. In the game of a posteriori explanations, the theory of cheap redemptions holds the road, since the return of the buying flow has coincided with the approach of the “contraction zone” on the Nasdaq. This doesn’t mean that the index will necessarily rebound, but it is an important marker for investors. In addition it allows me this morning to draw a little precise bearish vocabulary, a commodity as rare in these times of rise as an American central banker who does not trade or a day of work without a little party at the 10 Downing Street.
More seriously, we can classify the phases of market decline in three main categories:
- Consolidation : there is no really precise definition, but this term covers all periods of moderate decline in the equity markets. This movement goes beyond simple “profit taking” or “withdrawal” in the sense that it stretches over several sessions, but it does not last long and its amplitude is limited.
- Correction : this phase occurs when an index loses 10% on its closest highs. This percentage is arbitrary, because we like round numbers in finance. A correction is usually not extremely long. Historically, it lasts four months and results in a drop of 13%, if one refers to those which have occurred since the Second World War, according to Goldman Sachs. Over the past forty years, there have been 33 correction phases on the S & P500. Yesterday at the low of the session, the Nasdaq lost up to 9.5% on its historic peaks of November 22. We therefore came close to entering the correction zone.
- Bear Market (bear market in French, the bear symbolizing the decline in the stock market, as opposed to the bullish bull): we speak of a bear market when the equity market records a prolonged phase of decline, with a slider set by practice at -20% ( because we like round numbers in finance, therefore). The most intense and longest bear market in recent years is the 2007/2009 period, which cost many indices more than half of their value. In reality, the most recent bear market is that of March 2020, but it has been so quick and so quickly swept away by a rebound (less than six months later new all-time highs were reached) that it is unique in the annals. Technically, it was despite everything a bear market. For your personal culture, note that there have been 6 “bear markets” since 1980, including three between 2000 and 2020. Except in the case of March 2020, the previous three had coincided with an economic recession.
Note that this brief glossary of misfortune has no prophetic vocation, because I do not know where the clues go. But let’s say that it makes it possible to sort through the types of market when volatility returns and the VIX index wakes up (while remaining well below its levels at the end of November / beginning of December).
In Europe, most indices chained yesterday a third consecutive session of decline, just to replicate the current bearish series in the United States, if we therefore disregard the small surge of the Nasdaq yesterday. We are talking a little in the serious press about the turmoil created in China by the Omicron variant of the coronavirus and the economic consequences that this could have. This is a point to watch. Investors will especially be interested in the sequence of speeches by Jerome Powell (this afternoon) / publication of December inflation in the United States (tomorrow) which will probably make it possible to confirm the central bank’s rate hike forecasts. American this year.
In the meantime, European markets should rebound this morning since they were already closed yesterday at the time of the turnaround on Wall Street. In Asia, Tokyo reopens in decline after a long weekend, Sydney retreats and Hong Kong picks up a few points.
The economic highlights of the day
No major indicator today, but a hearing of Jerome Powell by the Senate at 4:00 p.m. KST.
The Euro is trading $ 1.338, while the ounce of gold has climbed back to $ 1,805. In the oil market, North Sea Brent is trading at $ 81.21 per barrel, while US light crude WTI is trading at $ 78.71. The T-Bond shows a stable return of 1.76% over 10 years. Bitcoin regains color at $ 42,300.
The main changes in recommendations
- Adidas: RBC goes from sector performance to outperformance.
- Aveva: Jefferies remains to be retained with a target price reduced from 3700 to 3300 GBp.
- Beiersdorf: Jefferies remains for the purchase with a target price reduced from 113 to 109 EUR.
- Boliden: Bernstein starts market performance monitoring by targeting SEK 329.
- Capgemini: Jefferies resumes buying monitoring targeting 270 EUR.
- Computacenter: Jefferies resumes buy tracking targeting 4100 GBp.
- Daimler Truck: Stifel starts follow-up on purchase by targeting 48 EUR.
- Darktrace: Jefferies remains for purchase with a target price reduced from 1030 to 800 GBp.
- Idorsia: Research Partners switches from buy to keep targeting CHF 22.
- Lindt: Julius Bär goes from buy to keep.
- Link Mobility: Jefferies remains for purchase with a target price reduced from 58 to 34 NOK.
- Micro Focus: Jefferies switches from keep to buy, aiming for 600 GBp.
- Moncler: RBC goes from sector performance to underperformance, targeting 61 EUR.
- Rieter: UBS remains neutral with a price target raised from CHF 198 to CHF 200.
- SAP: Jefferies is still buying with a price target raised from 142 to 154 EUR.
- SUSE: Jefferies remains to be held with a price target raised from 32 to 37 EUR.
- The Swatch Group: RBC goes from sector performance to underperformance, targeting CHF 275.
- Vantage Towers: Jefferies remains for the purchase with a price target raised from 35 to 36 EUR.
- Zealand Pharma: Jefferies switches from keep to buy targeting DKK 200.
In France
Important (and less important) announcements
- Airbus receives 507 net orders and delivers 611 aircraft in 2021.
- Estelle Brachlianoff will be the next CEO of Veolia. Antoine Frérot will remain president.
- TotalEnergies will continue to increase its investments in renewables and electricity, according to its CEO, to the tune of € 3.5 billion this year.
- Crédit Agricole excluded from the race at Banca Carige, in favor of BPER.
- TechnipFMC sells 5% of Technip Energies and leaves the Paris Stock Exchange.
- Gecina signs three new leases at La Défense.
- Tikehau takes a stake in ORYX.
- Mercialys signs € 96.6 million in sales commitments in the 4th quarter of 2021.
- The proposed simplified takeover bid at 175 EUR on Envea has been filed.
- Mint takes stock of its activity.
- Les Constructeurs du Bois claim a record order book at the start of 2022.
- Qonto fintech valued at $ 5 billion after a new funding round.
In the world
Important announcements (and others)
- Holcim acquires the French PRB.
- In China, Volkswagen sales are down 14% in 2021.
- Pandora is posting better than expected fourth quarter results.
- Mizuho Financial Group is considering acquiring US private equity placement agent Capstone Partners, according to Reuters.
- Cerberus reduces its stake in Deutsche Bank and Commerzbank.
- Intel steals its CFO from Micron.
- Delivery Hero expects its food delivery business to break even in the second half of 2022.
- Sika’s 2021 revenues up 17.3%.
- Brussels would block the merger between Daewoo Shipbuilding and Hyundai Heavy Industries in shipyards, according to the FT.
- Vodafone Idea falls after announcing a share issue for the benefit of the Indian government.
- Reply strengthens its presence in North America with the acquisition of Enowa LLC and The Spur Group.
- Gilead and Merck will evaluate dual therapy for lung cancer in two clinical studies.
- Abercrombie & Fitch sees its fourth quarter sales increase by 4-6%, slightly less than expected.
- Main results publications : Sika, ICA Gruppen, Electrocomponents, Games Workshop…
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