The second quarter earnings season started on a mixed note in the United States. After JPMorgan and Morgan Stanley who disappointed yesterday, Wells Fargo and Citigroup unveiled their accounts for June 30 early Friday afternoon. The first reported a fall of almost half (-48%) in its profit due to the increase in provisions for bad debts while the rise in interest rates slowed down mortgage activity. The fourth-largest bank in the United States strengthened its reserves for credit losses by setting aside $580 million (the same in euros), while it had taken over $1.26 billion in reserves during the same period. last year. The amputation of profits is less significant at Citigroup (-27%), which did better than expected. Above all, the market appreciates that the establishment has been able to take advantage of the rise in interest rates and trading activity sustained by the volatility of the financial markets. The stock climbed 10% on Wall Street.
It is too early to draw any conclusions from these results, we will have to wait for the season to progress. The coming days will be intense in the United States in terms of publications. On Monday, two other banks, Bank of America and Goldman Sachswill be in charge, at the same time as the computer giant IBM. Twitter, Tesla, Netflix, Johnson & Johnson, American Express and Schlumberger will follow this week.
On the macroeconomic level, operators seem to have returned to more reason regarding the monetary policy of the American Federal Reserve (Fed). On Thursday, the scenario of a 100 basis point hike in interest rates Fed-funds at the end of the meeting of July 26 and 27 dominated, supported by the announcement, Wednesday, of an acceleration of inflation in June to 9.1% over one year. On Friday, stock markets lowered their expectations and expect an increase of 75 basis points, the second in two months. This tightening is favored by Governor Christopher Waller and St. Louis Fed President James Bullard.
Another element of market support: better than expected US economic indicators. Thus, retail sales increased by 1% last month (+0.9% expected), while manufacturing activity rebounded in July in the New York area, the index calculated by the local branch of the Fed having recorded a surprise increase to 11.1 points, against -2 expected -1.2 in June. Finally, the consumer confidence index, as calculated by the University of Michigan, improved slightly in July, rising to 51.1, against 50 in June and 49.9 expected by the consensus.
Abandoned luxury
In China, Beijing’s “zero Covid” policy had a cost: it caused GDP to plunge by 2.6% between the first and second quarters. Nevertheless, an improvement appeared at the very end of the second quarter, with a rebound in retail sales and industrial production in June, fueled by the easing of health restrictions. It remains to be seen how long this dynamic will last as the cases of contamination start to rise again. They are at their highest level since May. This rebound, coupled with announcements from Burberry and Richemont on their sales in China, weighed down the luxury compartment on the Paris Stock Exchange during the session. But thanks to an acceleration in the final stretch, the titles LVMH, Kering and Hermes ended up in the green.
For its part, the title TotalEnergies rebounded 3.14%. The major expects exceptional results in refining and chemicals in the second quarter. The refining margin more than tripled over the period, she has already indicated.
In the end, the Bedroom 40 gains 2.04%, to 6,036 points, which allows him to be a winner in extremis over the week of … 0.05%. The trading volume increased to 3.2 billion euros. Across the Atlantic, the three major indices are also in great shape, the Dow Jones taking 2%, the Nasdaq Composite 1.5%.
The car is accelerating
Biggest increase in the Cac 40, the manufacturer Renault climbed 6.94%, while OEMs Faurecia and Valeo gained 5.56% and 4.5% respectively. BofA Securities believes fears about the auto sector are overblown. For the author of the note, a cut of Russian gas to Europe could halt production for several quarters, but a resumption of flows would lead to a rally during the second quarter earnings season.
Finally, Dassault Aviation rose 3.43%. JPMorgan took over the cover of the title of the manufacturer Falcon and the Rafale at “neutral” to target 162 euros.
PC