Yesterday, the European equity markets worked to erase their fall on Tuesday, while Wall Street offered a third consecutive session of increases. The S&P500 had lost around 1100 points since its peaks at the beginning of 2022 around 4800 points, it has just regained 150 since the low point of June 17 at 3674 points. This is not a panacea but the drop in volatility, which notably measures the nervousness of investors, is still visible. Both sides of the Atlantic colluded to send oil stocks plummeting, in the wake of oil’s downgrade from the “$110-$120” box to the “$95-$105” box. Once popular, they have been at the heart of profit taking for the past few days. On the upside, Europe has given the package on technology and cyclical stocks, even risking industrials. The US also benefited from buying tech stocks, but local investors were less enthusiastic about consumer-related companies, because the recession probability gauge is still high, even if the shape what the contraction will take is a bit nebulous.
The Wall Street Journal has also signed an article yesterday on this funny recession that is pointing its muzzle, with a still flourishing job market and companies that do not seem to be suffering unduly. The major deterioration in household morale visible in the latest surveys or the cold spell on the real estate market have not materialized with enough violence to completely change the mood. Hence this bizarre in-between which continues to maintain the suspense on a rather happy economic outcome to the efforts made by central banks to counter inflation.
In this regard, the Fed published yesterday evening the minutes of its last meeting. Unsurprisingly, the tone is still very strong and the message remains unchanged: blood and tears until prices come back under control. The release lifted US bond yields quite strongly, a sign that the market is once again taking the Fed seriously. This is, moreover, exactly the aim of the central bank, which became aware a little belatedly that its economic approach to Goldilocks (understand lukewarm, as in the story of the three bears in which the little girl chooses the bowl neither too hot nor too cold) had been a mistake in recent quarters, after running for a long time. I have already said this recently, but the Fed’s objective is also to hit the pot as hard as possible, again and again, so as not to have to implement all of its threats in reality. So much for yours truly’s pifometric analysis. The more serious among you will prefer that of our friend Christophe Barraud, who gave us the pleasure of explaining all this in the columns of Zonebourse with the professionalism that we know of. Christophe has again just been named best global forecaster by Bloomberg for the United States, China and Europe in the second quarter of 2022.
On the equities side, well the market is awaiting the first salvo of corporate results, scheduled for next week with for example PepsiCo, American banks including JPMorgan Chase, but also UnitedHealth or Rio Tinto. A few isolated publications are likely to make investors react. This was the case last night for Samsung Electronics, whose figures were well received. Or Costco, which will communicate on its June sales at midday.
On the economic-political agenda, the crisis is brewing in the United Kingdom where Boris Johnson is pressed from all sides to leave power, after being let go by part of his close guard. But the prime minister is hanging on for now. He even sacked his minister Michael Gove, who had asked him to leave. Those familiar with British politics, of which I am not one, believe that Johnson will face more resignations in the coming days and that he is likely to fall in parliament next week if he does not take the fronts. Finally, this afternoon there will be a large series of indicators on the American employment market, which will make it possible to refine the forecasts concerning the most awaited statistic of the week, the state of the labor market in June, which will be published tomorrow afternoon. The possibility of an announcement on US tariffs targeting China as early as this week is a bonus to which investors give a reasonable probability.
The morale of the troops was a little boosted this week on the financial markets and it is still visible on the leading indicators which are bullish. No need to insist too much on the fact that the configuration remains fragile and subject to the uncertainties of the moment, you are already aware since the index amplitudes are still strong on certain sessions. In Asia Pacific, the Nikkei 225 erased its losses from the day before on a session up by more than 1% and the Shanghai index, the CSI300, gained 0.6%, like its Sydney counterpart, the ASX.
Economic highlights of the day
Big news on American employment with weekly jobless claims at 2:30 p.m., but also the ADP report on employment (2:15 p.m.) and the Challenger study on layoffs (1:30 p.m.), pending the publication of official figures tomorrow for the month of June. The whole macro diary here.
The dollar keeps the pressure on the euro at 1.0205 USD for 1 EUR. The ounce of gold continues to fall to 1746 USD. Oil is floating after its fall, with Brent from the North Sea at $101.25 a barrel and US light crude WTI at $99.07. The yield on the US 10-year debt rose to 2.92%, below the 5-year and 2-year. Bitcoin is trading around $20,300.
The main changes in recommendations
- ABB: Barclays remains weighted in line with a reduced target from 34 to 29 CHF.
- AMS-Osram: Jefferies remains to be kept with a price target reduced from 13 to 8 CHF.
- AO World: Numis goes from hold to buy aiming for 60 GBp.
- AT&S: Berenberg goes from holding to selling, targeting EUR 38.
- BHP: Berenberg remains to be held with a reduced price target of 2700 to 2200 GBp.
- Greenyard: Berenberg goes from holding to buying, targeting EUR 13.70.
- Hannover Rück: RBC resumes outperformance tracking by targeting EUR 170.
- Infineon: Jefferies remains underperforming with a price target reduced from EUR 23 to EUR 18.
- Lonza: Credit Suisse remains outperforming with a price target reduced from 750 to 700 CHF.
- Melexis: Jefferies remains underperforming with a price target reduced from 65 to 55 EUR.
- Munich Re: RBC resumes sector performance tracking, targeting EUR 245.
- Rio Tinto: Berenberg goes from holding to selling, aiming for 4200 GBp.
- Roche: Jefferies remains to be kept with a price target reduced from 360 to 355 CHF.
- Salzgitter: Jefferies goes from buying to holding, aiming for 23 EUR.
- Schindler: Barclays remains weighted in line with a reduced price target of CHF 205-180.
- Schneider: Barclays lowers its target from EUR 175 to EUR 145.
- Scor: RBC resumes outperformance tracking by targeting EUR 26.
- Segro: Exane BNP Paribas goes from neutral to underperforming by targeting 800 GBp.
- Sinch: Berenberg remains long with a reduced target price of 140 to 100 SEK.
- STMicroelectronics: Jefferies remains underperforming with a price target reduced from 30 to 24 EUR.
- Swiss Life: Berenberg remains long with a price target reduced from 659 to 635 CHF.
- Swiss Re: RBC resumes sector performance tracking, targeting CHF 80.
- UCB: Citigroup goes from neutral to sell, targeting EUR 74.
- Valora: Research Partners remains to be kept with a price target raised from 190 to 260 CHF.
In France
Important (and less important) announcements
- Electricité de France soared yesterday as the French government announced its intention to raise the stake to 100% to take the file off the stock market.
- Eurazeo sells its stake in Reden Solar and pockets €633 million.
- Solutions 30 signs with Unifiber in Wallonia.
- Haulotte obtains a PGE of €96 million.
- Frey acquires the Parque Mediterráneo retail park in Spain.
- Nicox announces the publication of new data on NCX 470 showing improvements in ocular hemodynamics and retinal cell physiology.
- Les Constructeurs du Bois wins a new project worth €28 million for an eco-district.
- CBo Territoria sells 40% of its outdoor activities.
- Erold is refocusing on health.
- CrossJect raises €2.8 million thanks to its in-the-money BSAs.
- Cogra has published its accounts.
In the world
Important (and less important) announcements
Readings