Let’s start with an observation: the stock market indices went all over the place yesterday, with a marked divide between Europe and the United States. You only have to compare the 3.8% fall in the CAC40 in Paris with the 3.4% rise in the Nasdaq 100 in New York to be convinced. To be completely objective, this does not mean that the perception is different in the two markets, even if Kiev is closer to Paris than to New York. It is above all a question of jet lag: Wall Street started in the red yesterday before ending at the highest of the session. The European indices could not follow in the footsteps of the American technologies for the good and simple reason that they were already closed at that time. I am talking about technologies because these are the values that pulled the market yesterday in the United States.
Let’s come to the question posed by these antagonistic paths: how can the American indices soar the day Vladimir Putin overturns the table by bringing down a European democratic regime with his tanks? As often, there is behind all this a sum of explanations which come to telescope.
First, the fact that the Western response to Russia’s aggression in Ukraine is financial, not military. It was almost obvious, since Europe only has remnants of armies left and the United States has neither the will nor the time for a reaction on the ground. But the various declarations confirmed it yesterday. Moreover, the sanctions announced so far do not directly concern the oil and gas sector (would we be dependent on it?) nor the SWIFT banking network, which are perceived as the two forms of retaliation that would be the most destabilizing for European economies.
Among the other explanations for the American reversal, there is also the risk management of investors, who direct flows towards the most secure market, that of the United States. I even noticed the return this morning of the famous “cheap purchases” that are all over the place in the media, but I will not insult you by expanding on that.
In normal times, investors react to the base scenario they have composed. But during these more volatile periods, the anchor point of the scenario tends to move. Last week, markets were initially spooked by the risk of a full invasion of Ukraine. When Russia finally gave the impression that it would limit itself to providing diffuse support to the breakaway regions, investors were almost relieved. Same situation yesterday: the market had marked the closing of the Russian energy tap and a military intervention in the Kremlin’s projects as the two most extreme scenarios. In the end, neither took place, which helped reverse the trend in the United States. In this period of reframing, philosophical, geopolitical and forward-looking considerations tend to take a back seat on the stock market, behind epidermal reactions. We are more concerned with risk than with what is right or wrong.
But they should come back at a gallop because the chain of reactions is being set up. And it is the sum of these little (or big) follies, and their combination, that is impossible to quantify. An example. What happens when you enter among your possible variables:
- Soaring raw materials all over the place
- Rearmament of Europe when it was the thing has been, therefore badly financed, par excellence
- Bringing Russia (which has accumulated large foreign exchange reserves to spend) closer to China to circumvent Western restrictions
- Uninhibited autocrats face tetanized democrats
- Galloping inflation
Personally I don’t know, but I think I’m not the only one. In any case, the complexity of the world has gone up a notch and the same story is being played out over and over again.
But back to our stock market sheep. European markets should rebound strongly this morning to replicate the US session. Wall Street’s leading indicators are bearish for the moment, since they have to accept the fact of having been euphoric the day Ukraine was stepped on. But all this can change quickly, we will understand. The session will be marked by a series of statistics in the United States, which could revive the discussion on the monetary policy of the Fed. There are still a few publications of quarterly results to digest, in particular those of BASF, Saint-Gobain or Vale.
The CAC40 gained 0.8% to 6579 points.
Economic highlights of the day
In the United States, the market will be interested in household income and expenditure and durable goods orders, but above all in PCE inflation (2:30 p.m.), before at 4:00 p.m. sales of existing homes and the consumer confidence index from the University of Michigan.
The euro/dollar pair is trading at 1.1221 USD. The ounce of gold fell to 1912 USD. Oil remains high at 94.82 USD per barrel of WTI and 101.30 USD per barrel of Brent. The yield on US debt rises to 1.96% over 10 years, while the Bund is remunerated at 0.17%. Bitcoin returned to $38,500.
The main changes in recommendations
- Aixtron: Jefferies remains to be kept with a target raised from 16 to 18 EUR.
- Amundi: Exane BNP Paribas goes from neutral to outperformance by targeting EUR 79.
- Anglo American: Jefferies remains to be kept with a price target raised from 3,300 to 3,800 GBp.
- Anheuser-Busch Inbev: Jefferies remains long with a target raised from 71 to 72 EUR.
- Arkema: AlphaValue remains to be reduced with a price target reduced from 125.70 to 113 EUR.
- BAE Systems: JP Morgan goes from underweight to neutral, targeting 630 GBp.
- Davide Campari: Berenberg remains long with a price target reduced from 14 to 12.50 EUR.
- Eiffage: AlphaValue remains to be accumulated with a target price reduced from 114 to 112 EUR.
- Groupe LDLC: Midcap Partners remains long with a target lowered from 103 to 70 EUR.
- HeidelbergCement: DZ Bank remains long with a price target reduced from 81 to 72 EUR.
- JDE Peet’s: Berenberg remains to be kept with a price target raised from 30 to 32.50 EUR.
- Norsk Hydro: UBS goes from neutral to long, aiming for 100 NOK.
- Polymetal: Berenberg remains long with a price target reduced from 1,500 to 1,000 GBp.
- Rentokil: Jefferies remains long with a target raised from 650 to 675 GBp.
- Royal Boskalis: Jefferies starts tracking long, aiming for EUR 35.
- S4 Capital: Jefferies remains long with a target reduced from 930 to 720 GBp.
- Scor: AlphaValue remains to be accumulated with a reduced target price of 35.90 to 34.90 EUR.
- Solvay: Berenberg remains on the buy side with a price target reduced from 140 to 135 EUR.
- TotalEnergies: RBC goes from outperformance to sector performance by targeting EUR 55.
In France
Main results publications
- Casino: the debt is growing. There will be no dividend this year.
- Saint-Gobain: 2021 net profit almost doubled to €2.8 billion.
- Valeo: the equipment manufacturer is aiming for an EBITDA margin of 14.5% in 2025 and will sell €500 million in assets.
- Vallourec: the RBE margin rose to 14.3%, for €40 million in net profit. The EBITDA should grow this year.
Important (and less important) announcements
- Atos partners with Nokia to offer private 4G and 5G networks to businesses.
- Valneva must go through the EMA’s question and answer session before seeing its covid-19 vaccine approved.
- Somfy is going to buy Teleco.
- Getlink and the CAT group launch a cross-Channel rail freight service.
- Voltalia is building a hydroelectric power plant in northern Brazil.
- Gaztransport & Technigaz obtains an order from Hyundai Samho Heavy Industries for the design of the tanks of two new LNG carriers.
- Colas Rail wins a €760 million contract for the first underground line of the Manila metro.
- LDLC Group
- Mint offers the Planète OUI brand.
- Technicolor, Bénéteau, Aures, NR21, Bourse Direct, Adux, Union Financière de France, Miliboo, Clasquin, Frey, Hiolle, MRMPCAS have published their accounts.
In the world
Main results publications
- BASF: expects lower profits for the full year due to slowing economic growth.
- Beyond Meat: further disappointment in the results of the company that produces meatless steaks, whose share price fell 10% after the close.
- Coinbase: the title of the cryptocurrency trading platform loses 5.8% post-session after its quarterly.
- Moncler: sales jumped 30% in Q4.
- Vale: the Brazilian mining group exceeds the consensus for the last quarter of the year.
Important announcements (and others)
- Volkswagen and Porsche have unveiled the terms of a possible IPO of Porsche sports vehicles.
- The SEC is opening an investigation into Elon Musk and his brother over Tesla stock transfers, according to the WSJ.
- Taiwan Semiconductor claims to comply with export control rules to Russia.
- Hexagon will acquire ETQ for $1.2 billion.
- The United States Department of Justice is suing to block UnitedHealth’s bid for Change Healthcare.
- Grifols signs a collaboration and license agreement with Endpoint Health for the treatment of sepsis.
- The main publications of the day: AIA Group, BASF, Sempra, Holcim, Cellnex, Swiss Re, IMCD, Elia, International Consolidated Airlines… The whole agenda here.
Readings