An abominable first half of the stock market had to end on a negative note. The Western equity markets again tripped over the carpet yesterday, losing between 0.6% (for the Swiss SMI, very defensive) and 2% (for the British FTSE100, obviously less defensive). The Nasdaq 100 (-29.5%) had its worst semester since 2002. And we have to go back to 1970 to find traces of a more negative performance for the S&P500 (-20.6%). In Europe, we oscillate rather between 10 and 20% of fall, which is the case of the German DAX and the French CAC40. The FTSE100 is floating, I spoke about it yesterday, with a drop in 2022 which is limited to 3% thanks to the fairly conservative composition of the British index (full of banks, oil and commodities).
And yes, stock markets don’t always go up, even if they go up gradually over the long term. And, no, bullish Groundhog Day does not exist. What also does not exist are gains without risk, at least not over time. All madness ends, often in violence. The first half of 2022 brought back to the forefront companies that had long since emerged from techno-urban goodwill.
H1 2022 performance for the STOXX Europe 600 (Source Zonebourse, click to see something there)
What are the two sectors that have enabled investors to cushion the fall in the indices? The Oil and Gas industry first, with an overall increase of 34% during the 1er semester in Europe. The biggest positive contributors to the STOXX Europe 600 index were Shell, Equinor and TotalEnergies. La Défense next, with a 42% increase between 1er January and June 30, 2022. Spearheaded by BAE Systems and Thales. None of this is very sexy, but geopolitics has made a resounding comeback in the range of risks. I add to these two sectors the Telecoms, this unloved compartment of the investors which in spite of everything guaranteed a rise of 21% this year, led by Deutsche Telekom, Orange and Telefonica.
It’s always the same story. For decades, investors have needed to be put back on the ground at regular intervals, that is to say almost every time they can no longer convince themselves that their follies justify crazy asset prices. We invariably fall back on the famous maxim of John Templeton for whom the four most dangerous words in finance are “This time it’s different“.
The markets are now openly afraid of a recession. The decline in US government bond yields signals that financiers believe that the US central bank will at some point need to raise the foot of the key rate accelerator. I guess that’s the message that Jerome Powell and his assembly have been trying to get across for the past few days: overplaying the bogeymans to scare economic actors by relying on the weight of words. A way to calm inflation without having to apply the austerity cure to the end. But for the moment, the equity markets are harder to move than the bond markets and it is the fear that weighs on the economic dynamics that prevails.
In corporate news in France, Sodexo has published its results and Air France-KLM could cut jobs. In Switzerland, Novartis is considering splitting its generics branch rather than selling it to private equity. The German Siemens will heavily depreciate its energy subsidiary and the Belgian Proximus abandons a merger project for its subsidiary Telesign.
Leading indicators are bearish again this morning. Investors seem paralyzed by the assessment of the semester and the failure of the last attempt to rebound. In Asia, Japan corrected quite heavily while mainland China fell more contained. Australia is in balance. Hong Kong observes a public holiday for the 25th anniversary of the handover to Beijing by the British. The CAC40 started the session down 0.9% to 5869 points.
Economic highlights of the day
The market takes notice today of the refined reading of the June manufacturing PMI indices for the main economies of the world. In Europe, the June inflation figures will be released at 11:00 a.m. In the United States, there will also be the manufacturing ISM (4:00 p.m.) and construction spending for May (4:00 p.m.). The whole macro diary here. This morning, China reported a weaker than expected manufacturing PMI, albeit back in expansion territory, while the services PMI accelerated strongly.
The euro is stabilizing around 1.045 USD. The ounce of gold fell to 1802 USD. Oil is also losing ground with Brent from the North Sea at 108.84 USD a barrel and US light crude WTI at 105.43 USD. The yield on US 10-year debt drops to 2.96% over 10 years. Bitcoin retreated around $19,400.
The main changes in recommendations
- Addtech: ABG goes from hold to buy aiming for 160 SEK.
- Amundi: Citigroup lowers its target from 76 to 64 EUR.
- Auto Trader: Jefferies remains long with a reduced target price of 790 to 750 GBp.
- Barry Callebaut: Research Partners starts the follow-up to keep aiming for 2300 CHF.
- Enel: HSBC goes from buying to keeping, targeting EUR 5.90.
- Fielmann: Baader Helvea remains long with a price target reduced from 68 to 56 EUR.
- Geberit: Jefferies remains underperforming with a price target reduced from 461 to 356 CHF.
- Grand City Properties: HSBC goes from hold to buy targeting EUR 18.
- Holcim: Jefferies remains to be kept with a price target reduced from 47.10 to 45.40 EUR.
- Julius Bär: Credit Suisse remains outperforming with a price target reduced from 65 to 62 CHF.
- Kion: Baader Helvea remains long with a price target reduced from 84 to 65 EUR.
- Kuehne + Nagel: JP Morgan remains neutral with a price target raised from 269 to 278 CHF.
- La Française des Jeux: Citigroup goes from neutral to sell, aiming for 31 EUR.
- Lancashire: Barclays moves from overweight to weighted online by targeting 482 GBp.
- Lanxess: Jefferies remains long with a target price reduced from 55 to 50 EUR.
- AP Moller Maersk: JP Morgan moves from neutral to overweight, targeting DKK 30,800.
- Medmix: UBS remains long with a price target reduced from 52 to 37 CHF.
- Novartis: UBS remains neutral with a price target reduced from 88 to 86 CHF.
- Novozymes: Jefferies remains long with a target price reduced from 550 to 520 DKK.
- Ocado: Jefferies remains to be held with a price target reduced from 1300 to 875 GBp.
- OVH: Citigroup goes from buying to neutral, targeting EUR 18.
- Sika: Jefferies remains long with a price target reduced from 374 to 313 CHF.
- Solvay: AlphaValue goes from reducing to accumulating, targeting EUR 88.50.
- Swiss Re: Barclays moves from overweight to weighted online by targeting CHF 86.
- TotalEnergies: Jefferies goes from holding to buying, aiming for EUR 60.
- UBS: Credit Suisse remains outperforming with a price target reduced from 24 to 23 CHF.
- Umicore: AlphaValue remains to be accumulated with a price target reduced from 40 to 38.90 EUR.
In France
Important (and less important) announcements
- Vinci will carry out the Penlink road project north of Auckland (New Zealand) for €305 million.
- AXA completed the transformation of AXA SA into an internal reinsurer.
- CMA CGM and Engie will co-invest in the Salamander project to produce 2nd generation biomethane.
- Sodexo confirms its annual objectives and simplifies its organization.
- Air France-KLM is negotiating new job cuts, according to Le Figaro.
- Gaztransport & Technigaz signs a major contract with a major player in the transport of liquefied gas for its “smart shipping” solution on 30 ships.
- Worldline completes the acquisition of Eurobank’s merchant acquiring business.
- Robertet is offering to buy back 9.77% of its capital at EUR 885 per share.
- Eurazeo invests in Electra.
- Casino canceled a nominal amount of €34.07 million of Quatrim 2024 covered bonds, following buybacks on the market.
- In Albania, Voltalia is launching the construction of the Karavasta project, the largest solar power plant in the Western Balkans.
- The DGAC has asked airlines operating at Paris-Roissy-Charles de Gaulle airport (Aéroports de Paris) to remove one in six flights departing from CDG on Friday, between 07:00 and 14:00, i.e. 17% of flights.
- Bonduelle signed the sale of 65% of the capital of Bonduelle Americas Long Life to the Fonds de solidarité FTQ and CDPQ, based on an enterprise value of €625 million.
- Nextedia acquires Manika.
- Les Bains de Mer de Monaco sold its 47.3% stake in Betclic Everest to FL Entertainment, with a very significant favorable impact on the consolidated accounts.
- ABC Arbitrage is buying a new block of 250,000 shares from Aubépar at EUR 6.90 per share.
- Touax issues its first “green” bond to refinance its TSSDI.
- Micropole’s General Meeting approves the plan to transfer the listing to the Euronext Growth Paris market.
- Onxeo will initiate its first phase 1b/2 study in the United States in patients with solid tumors
- Biophytis draws €4 million from its dilutive financing line.
- Scientific Brain Training delays publication of its accounts and issues an OCA.
- Cafom, Televerbier, Signaux Girod, EO2, Osmozis have published their accounts.
In the world
Important (and less important) announcements
- Siemens suffered a $2.9 billion impairment on its stake in Siemens Energy.
- Novartis would rather spin off its generic drug business than sell it, according to Bloomberg.
- Apple raises the price of the iPhone by almost a fifth in Japan.
- Lonza plans to invest 500 MCHF in new filling and finishing facilities in Stein.
- Julius Bär pays 105 MCHF to extinguish a lawsuit related to a case in Lithuania.
- Kohl’s is ending sales negotiations with Franchise Group, according to CNBC.
- The merger project between Telesign, a subsidiary of Proximus, and NAAC has been abandoned.
- Barry Callebaut’s Belgian factory shut down for the presence of salmonella.
- EToro abandons its plan to go public via a SPAC.
- Telekom Austria, Fluidra and Acerinox detach their dividends.
- Main publications of the day: … The whole agenda here.
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