The first week of May ended with a fall of 4.6% for European equities (STOXX Europe 600), but only 0.2% for American equities (S&P500). Japanese equities even gained 0.9% (Topix). However, the impression that emerges from the previous weekend is a bit depressing. Probably because the American Nasdaq lost more than 5% the day after the major monetary tightening announced by the Fed. But as he had won about as much over the previous three sessions, the record is not as bad as it seems.
Well, we should be careful not to be too happy either because the underlying trend remains clearly negative for the American technology index, which has sunk to its lowest levels for the year. It is at -22.22% since the 1er January, where the Dow Jones limits its losses, if I may say so, to 9.5%. The difference between the two is that the Nasdaq 100 gives pride of place to technology (Apple, Microsoft, Amazon, Tesla, Alphabet and Meta weigh 44% of the index) while the three biggest influencers of the Dow Jones are , in order, UnitedHealth (an insurer), Goldman Sachs (a bank) and The Home Depot (a home materials and products retailer). The Dow Jones calculation may be archaic (it’s based on stock price, not capitalization), but it shows just how much technology and to a lesser extent consumer discretionary are weighing on the trend.
“No wonder it’s dropping so much, everyone has the same stocks in the United States“, slipped last week a manager in a popular discussion thread among professionals, in particular with reference to passive management products such as ETFs. As often, the pieces of the puzzle come together after the fact for part of the market. Those who had felt the tide turn will always be able to say that the capital correction of risky assets (certain Nasdaq stocks with dubious economic models have lost more than 50% in a few months) was almost certain from the moment the central banks would start to pump the liquidity pool that they had filled once from 2008, then a second time in 2020 with the planetary “whatever it takes” The others take their losses hoping that the current episode of turmoil will not last not too long.
Bank of America, which has rather had a hollow nose in recent months regarding its forecasts, recalls that the market has experienced 19 bear markets in 140 years. A bear market is a phase during which the indices lose at least 20%. An average bear market lasts 289 days and results in a decline of 37.3%. The American bank, which has a bit of a caustic humour, points out that by applying this average, the bottom is forecast for October 19, 2022 with an S&P500 at 3,000 points and a Nasdaq at 10,000 points. Well, it’s mainly to amuse the gallery, recognizes Bank of America, which concedes despite everything that a lot of shares are already in panic mode, since 49% of Nasdaq shares have already lost 50% on their records. “The good news is that bear markets are shorter than bull markets“, concludes the bank, decidedly piquant at the moment.
The equity markets will continue to be driven in the coming days by the endless debates on the consequences of the rise in interest rates in the United States. The Economic Soft Landing gauge needle will fluctuate based on published statistics. The Fed would rather be the heroine whose shock treatment saved economies from stagflation than the succubus who exhausted investors. First big statistical test this week with US consumer prices for April, which will be announced on Wednesday. Economists believe that inflation peaked in March and should begin to decline. If this were not the case, nervousness could increase and the hypothesis of an acceleration in the pace of rate hikes would be reinforced. In the event of confirmation of an easing, the discussions would surely focus on the pace of normalization, which risks being slow but which would make it possible to maintain the stock market flame.
The week started in a heavy mood with bearish leading indicators, rising real rates and high commodity prices, especially since the G7 agreed on a gradual embargo on Russian oil. Markets in Asia Pacific are also falling.
Economic highlights of the day
No major indicator today, but some secondary data. All the “macro” agenda here. This morning, China announced a sharp slowdown in its exports.
The euro retreats towards 1.05 USD. The ounce of gold is close to its levels at the end of last week, at 1876 USD. Oil remains firm, with North Sea Brent at $112 a barrel and US WTI light crude at $108.90. The yield on US 10-year debt continues to rise to 3.12%. Bitcoin retreats below USD 34,000.
The main changes in recommendations
- Adidas: Jefferies remains long with a target reduced from 250 to 235 EUR.
- Aker BP: Stifel goes from sell to hold, aiming for NOK 355.
- Aperam: Jefferies remains to be kept with a target reduced from 40 to 37.50 EUR.
- Boohoo: Societe Generale goes from buying to holding, aiming for 72 GBp.
- Bpost: Jefferies remains to be kept with a price target reduced from 7.50 to 6 EUR.
- Byggfakta Group: Jefferies remains long with a reduced target of 70 to 60 SEK.
- DiaSorin: Jefferies remains to be kept with a target reduced from 125 to 116 EUR.
- Euroapi: JPMorgan starts tracking to overweight by targeting EUR 17.
- Groupe Bruxelles Lambert: Societe Generale goes from holding to buying, aiming for EUR 100.
- Hensoldt: Morgan Stanley starts the overweight follow-up by targeting EUR 29.90.
- Nestlé: Goldman Sachs raises its target from 138 to 144 CHF.
- Prosus: Jefferies takes over the follow-up to be kept with a target reduced from 55 to 46 EUR.
- Rheinmetall: Deutsche Bank switches from buy to hold targeting EUR 215. Bankhaus Metzler remains long with a reduced target price of 255 to 240 EUR.
- SMA Solar: Jefferies goes from holding to underperforming by targeting EUR 33.
- Schibsted: Berenberg remains to be held with a price target reduced from 215 to 190 NOK.
- Scor: Berenberg remains long with a target price reduced from 37 to 35 EUR.
- Siemens Gamesa: Berenberg remains to be kept with a price target reduced from 19.50 to 12.50 EUR.
- Solutions 30: Exane BNP Paribas resumes outperformance monitoring by targeting EUR 8.
- Swiss Re: Oddo BHF goes from neutral to outperformance by targeting CHF 97.
- Telefonica: Berenberg remains to be kept with a target price raised from 4.30 to 4.60 EUR.
- Unicredit: Berenberg remains on the buy side with a price target raised from 12.50 to 13.50 EUR.
- Valneva: Stifel goes from holding to buying, targeting EUR 14.40.
In France
Important (and less important) announcements
- Danone announces the sale of its remaining minority investments in partnerships with Mengniu and the acquisition of Dumex.
- France could do without Russian gas “in the long term”, estimates the president of Engie.
- Qatar will not contribute its shares to the takeover bid launched by Vivendi for Lagardère.
- The CEO of Orpea believes that the group “sinned for lack of rigor”, in an interview with the JDD.
- Euronext cash volumes faltered in April.
- Claude France will join the board of directors of Ubisoft.
- The French hydrogen producer Lhyfe announced on Monday the launch of its IPO in Paris.
- Eurofins signs a contract in the Netherlands.
- Fountaine Pajot entrusts Chantier Naval Couach with the construction of boats in its “motor yacht” range.
- Europlasma draws €3 million from OCE. The company also announced “positive results” for the trials paving the way for the commercialization of the hazardous aluminum waste recycling process in China.
- Adomos issues ABSAs.
- Recylex in receivership. No resumption of listing in the program.
- The Baverez and Delfingen Hotels have published their accounts.
In the world
Important announcements (and others)
- Infineon raises its 2022 forecast.
- Shaftesbury and Capital & Counties are negotiating a merger.
- Brookfield Asset Management will buy Watermark for $3.2 billion.
- The French PNF is interested in Credit Suisse. The bank is also preparing to file a $430 million lawsuit against SoftBank over Katerra.
- The Canadian antitrust should refuse the merger between Rogers and Shaw Communications.
- Southwest Gas settles board battle with Icahn and replaces its CEO.
- PostNL in turn warns because of rising logistics costs.
- The Benettons and Blackstone are said to be ready to launch a bid for Atlantia at the end of the summer.
- EasyJet will remove some airline seats due to staff shortages.
- Shell will organize negotiations for the sale of service stations and a lubricants factory in Russia.
- Nippon Telegraph and Telephone will buy back 100 billion JPY of NTT Data shares.
- Bombardier’s Board of Directors Approves Share Consolidation.
- Main results publications of the day: Duke Energy, Westpac, Exelon, Microchip, Infineon, BioNTech, Tyson Foods, Palantir, ICA Gruppen… The whole agenda here.
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