The stock market session was hit again yesterday in the United States, with a new large gap between the Dow Jones (+0.15%) and the Nasdaq 100 (-2.2%). The technology index has lost 29.8% compared to the records signed in mid-November 2021. The Dow Jones is down -11% compared to its peak which is more recent (January 2022). -11% “only” if I may say so. I refer you to the previous day’s column for an explanation of this performance lag. I take this opportunity to answer a question I was asked recently about the difference between the Nasdaq 100 and the Nasdaq Composite, both of which are used by the media. The first is the top of the second basket, which is much larger since it has more than 2,000 companies. I won’t offend you by telling you how many values the Nasdaq 100 has. The Nasdaq Composite lost 2.35% yesterday, a bit more than the other, because it includes both smaller values and/or more fragile. Since its peak in November, it is -30.5%. The performances, or underperformances in this case, are therefore very close because it is the very large capitalizations common to the two indices that make rain or shine.
Yesterday the blow of tobacco came from the particularly pessimistic comments of the management of Snap after the announcement of mediocre results. Snapchat’s parent company has made it clear that tougher times are looming for social media advertising revenue. Results of the races, -43% at the close for the title. It looks very excessive as it is, but this percentage also incorporates the correction for the irrational exuberance of certain past valuations. Investors had no trouble convincing themselves that they were paying the right price when earnings growth trajectories pointed to infinity. Since the slopes are less marked, it’s life-and-death. Snap, which is rather a dwarf compared to a lot of other Californian companies that keep us glued to our smartphones, has dragged down its illustrious rivals. Alphabet (Google) lost 5%, Meta (Facebook) 7.6% and Amazon 3.2%. Smaller comparables like Pinterest (-23%) also suffered. I read that about $200 billion in capitalization evaporated from social media yesterday, which is like eradicating a Novartis, to take a perfectly absurd picture.
In Europe, the indices had clearly corrected at the close, carried away by the entire rating. Well, not all because banking stocks held up after JPMorgan Chase raised its forecasts, reminding everyone that the sector benefits from a rising rate environment, which attracts savings. The healthcare sector has also held up well, as its defensive virtues are appreciated at the moment. No wonder in this context that the Swiss SMI is the only European index to emerge on yesterday’s session with a gain of 0.15%, proof that Novartis has not been eradicated. The flagship index of the Zurich stock exchange includes 42% health stocks (Roche, Novartis, Lonza, etc.), 18% financials (Zurich Insurance, UBS, etc.) and 18% consumer staples (Nestlé), where a relatively good resistance on a session of the kind of the day before.
We will have to follow today in the United States the figures for durable goods orders (2:30 p.m.) and the content of the minutes of the last Fed meeting (8:00 p.m., therefore outside the European session). Yesterday, the two statistics published there were lower than expected: the Richmond Fed’s activity index disappointed and the new housing figures are beginning to bear the marks of the rate hike. The feeling that emerges from all this is that the American economy is beginning to be affected by the current disorders but also that the overheating is beginning to subside. Financiers reflected this by lowering their expectations of what rates will be in a few months, which explains why the yield on US government bonds fell. I’m afraid to be a little abstruse but to simplify it is rather a positive signal for the market: basically, the Fed might not have to be as aggressive as expected in the long term.
Among the other events of the day, I also noted the annual general meeting of TotalEnergies. That of Shell was to say the least eventful yesterday by activists who invited themselves to the debate to force the company to accelerate its energy transition. The meeting was suspended for two hours. The French group for its part refused to include on the agenda a resolution carried by several shareholders, including institutional investors, asking for the inclusion of compliance with the Paris agreement in the strategy. The debates could be heated. TotalEnergies which announced this morning the acquisition of the 5th American producer of renewable energies, Clearway. Coincidence? I do not believe.
Equity markets will open higher this morning in Europe. A so-called “technical” rebound after the drop the day before. In Asia Pacific, early trading gains have faded, but mainland China, Hong Kong and Australia are still up. The CAC40 gained 0.8% to 6303 points at the opening.
Economic highlights of the day
In the United States, durable goods orders (2:30 p.m.) and the minutes of the last Fed meeting (8:00 p.m.) will generate the greatest interest. The whole macro diary here.
The euro continues its ascent to 1.0714 USD. The ounce of gold gains a little ground to 1862 USD. Oil remains very close to its recent levels with Brent from the North Sea at 114.82 USD a barrel and US light crude WTI at 111 USD. The yield on US 10-year debt stood at 2.76%, down. Bitcoin is trading around 30,100 USD.
The main changes in recommendations
- ACS, Actividades de Construccion y Servicios: Goldman Sachs goes from buying to neutral.
- Banco Santander: Jefferies remains long with a price target raised from 4 to 4.30 EUR.
- BBVA: Jefferies remains long with a reduced target price of 7.40 to 7.10 EUR.
- Bankinter: Jefferies remains to be kept with a target price raised from 5.50 to 6 EUR.
- CaixaBank: Jefferies remains to be kept with a price target raised from 3.50 to 3.65 EUR.
- Compagnie Financière Richemont: Julius Bär remains long with a target price reduced from 155 to 115 CHF.
- Credito Emiliano: Jefferies went from underperforming to keeping, targeting EUR 5.90.
- CTS Eventim: Exane BNP Paribas resumes underperformance monitoring by targeting EUR 50.
- EQT: Barclays starts tracking to overweight by targeting 315 SEK.
- Euroapi: Societe Generale is starting to track purchases by targeting EUR 15.50.
- Getlink: Goldman Sachs goes from buying to neutral, targeting EUR 19.
- Hikma: JP Morgan moves from overweight to neutral by targeting 1900 GBp.
- Homeserve: Jefferies remains to be held with a price target raised from 830 to 1200 GBp.
- HSBC: AlphaValue remains to be reduced with a target raised from 462 to 511 GBp.
- Intesa Sanpaolo: Jefferies remains to be kept with a target price reduced from 2.35 to 2.25 EUR.
- Legrand: Jefferies remains long with a price target reduced from 104 to 92 EUR.
- Munich Re: Jefferies remains long with a price target raised from 300 to 305 EUR.
- Partners Group: Barclays starts online weighted tracking targeting CHF 1040.
- Philips: JP Morgan goes from neutral to underweight, targeting EUR 21.30.
- Unicredit: Jefferies is still buying with a price target raised from 15 to 16 EUR.
In France
Important (and less important) announcements
- TotalEnergies takes 50% of Clearway on the 5and player in renewables in the United States. The operation is arranged in cash and in SunPower shares, on the basis of 35.10 USD per Clearway Energy share (a subsidiary of Cleanway) and 18 USD per SunPower share.
- Stellantis and Samsung SDI confirm the construction of a joint venture battery factory in Indiana for an amount of $2.5 billion.
- Saint-Gobain will acquire the building materials companies Fibroplac and Falper, based in Portugal.
- S&P places Electricité de France in France on negative watch due to nuclear issues and rising debt.
- Sodexo has finally given up bringing an external investor into its Benefits & Rewards subsidiary, which will remain a key asset in the years to come within the scope.
- NGOs accuse KLM (Air France-KLM) of “greenwashing” and threaten to take legal action.
- Klépierre confirms Jean-Marc Jestin as Chairman.
- Technip Energies and Samsung Engineering win an engineering contract with Texas LNG in the United States and create a joint venture.
- Valneva successfully completes a trial evaluating its chikungunya vaccine candidate.
- Compagnie Plastic Omnium places a Schuldschein of €400 million.
- Neoen wins 80 MWp of solar projects in Ireland.
- Bonduelle is negotiating the sale of 65% of its Americas Long Life division to FTQ and CDPQ based on an enterprise value of €625 million.
- Séché will acquire certain industrial water treatment activities in France from Veolia.
- Prodways will deliver six additional 3D printers and associated materials to a major industrial customer.
- Hydrogène de France and Pestech are collaborating on the production of green hydrogen from hydroelectric power plants in Cambodia and Malaysia.
- Archos obtains a waiver on the dilutive financing contract signed with Yorkville.
- Compagnie des Alpes, Manutan, Qwamplify, LDC, Osmozis and Entech have published their accounts.
In the world
Important (and less important) announcements
Readings