Weekly review: the CAC40 nosedives, Société Générale falls

(Boursier.com) — The previous nice weekly rebound gave way to a clear consolidation of the Parisian market. At the end of a week full of news, the CAC40 fell by 2.63% over five sessions, to 7,185 points this Friday evening. Central banks once again took center stage, particularly the main one, the American Federal Reserve. As expected, the Fed opted for the status quo on its rates but also signaled that an additional increase of 25 basis points is possible by the end of the year, in order to ensure that it brings back the inflation towards the 2% objective.

Additionally, Fed officials expect rates to fall only 0.5% next year from the potential peak of 5.5-5.75%, meaning rates will remain therefore “higher, longer”. In June, Fed members instead forecast a drop of one percentage point in rates in 2024 compared to the peak… Jerome Powell did not provide reassurance to the markets either, emphasizing the solidity of activity economic and worrying about the rise in crude prices – which obviously complicates the fight against inflation. Overall, this stronger-than-expected or more resilient economy means that “we have to do more with rates,” according to the Fed boss.

In Europe, the Bank of England and the Swiss National Bank surprised by also decreeing pauses in their monetary tightening cycle, suggesting that inflationary dynamics were slowing sufficiently. But the BoE warned that it would not take the recent fall in inflation in the United Kingdom for granted, adding that it was ready to raise the cost of credit again if necessary. On the ECB side, several officials, such as Joachim Nagel and Martins Kazaks, have also warned of persistent inflationary pressures, deeming any debate on a rate cut premature. In this context, rates have risen sharply on the sovereign bond market, like the American 10-year bond which crossed the 4.5% mark on Thursday for the first time since 2007.

On the oil market, the barrel continued its rally with Brent surpassing the $95 mark before falling back somewhat. The market remains buoyed by the latest production reduction announcements from Saudi Arabia and Russia until the end of the year while demand prospects improve. “We have long maintained that the oil market will be increasingly tight in the second half of 2023,” Arne Lohmann Rasmussen, head of research at A/S Global Risk Management, told ‘Bloomberg’. “That tightening is now here, and it’s only a matter of time before we see a test of $100 a barrel.”

On the currency side, the euro remained under pressure this week, and is trading below $1.07. Finally, Bitcoin is moving close to $26,670 on Coindesk.


* Stellantis takes 2.3% and Renault gains 0.5%. The European automobile market remained dynamic in August. Sales in the European Union increased by 21%, reaching 787,626 units, marking the thirteenth consecutive month of growth. Although August is generally a slower month for the sector, double-digit gains indicate that the European market continues to recover after last year’s slump linked in particular to component shortages, underlines the Association of European Automobile Manufacturers. Double-digit increases were recorded in most markets, including the three largest: Germany (+37.3%), France (+24.3%) and Italy (+11.9%). %). At the manufacturer level, the group Renault (+22.3%) performed very well again in August, as did Volkswagen (+21.2%) and BMW Group (+22.5%). The month was more difficult for Stellantis (+6.4%), Mitsubishi (-7.2%) or even Hyundai (+6.3%).

* Ubisoft increases by 2.8%. The good news is getting closer for the video game publisher to the extent that the British Competition and Markets Authority has opened the door to the takeover of Activision Blizzard by Microsoft after the concessions proposed by the latter. Activision, the manufacturer of “Call of Duty”, notably agreed in August to sell the “streaming” rights of its games to Ubisoft… This remedy “substantially responds to previous concerns”, declared the regulator. “Although the CMA has identified limited residual concerns regarding the new agreement, Microsoft has proposed remedial measures which the CMA has provisionally concluded should address these issues,” the competition watchdog added.

* Edenred advance of 0.9% after the announcement of the signing of an agreement with PagBem to combine its assets in the Brazilian freight payment market with those of PagBem. Edenred will be a shareholder of approximately 70% of the merged activities, the remaining share being held by current PagBem shareholders. Edenred will not pay any sum as part of the operation, which includes a mechanism allowing it to achieve a 100% participation.

* Eutelsat (+0.6%). The company’s Board of Directors approved a program to repurchase the company’s ordinary shares for a maximum amount of 381,804 euros or 58,739 shares, representing less than 5% of the company’s share capital.

Conversely, * ALD LeasePlan falls by 19%. The Société Générale subsidiary dedicated to car rental was weighed down by the presentation of ‘PowerUP 2026’… A new strategic plan which did not convince, both among operators and analysts. Exane BNP Paribas has also downgraded ALD to ‘neutral’ while cutting its target from 19 to 9 euros. “Our investment thesis is no longer valid,” writes the broker. The expected synergies from the merger will likely be offset by inflation and cost overruns…

* Orpea plunges 13.6%. The Caisse des Dépôts et Consignations is convinced that the group of investors it leads will succeed in taking control of the retirement home specialist. Eric Lombard, general director of the CDC, was quite confident about the restructuring of the company during a press briefing organized by the French Association of Economic and Financial Journalists. Despite multiple calls from dissatisfied creditors, the manager believes that they “should be completed by the end of the year”. If Orpea’s restructuring plan is validated, a general meeting of shareholders will be organized at the end of December, allowing the group of investors led by CDC to take control. For the moment, Caisse des Dépôts has no governance role and no money placed in the capital of Orpea. According to comments reported by ‘Bloomberg’, Eric Lombard stressed that the public institution and its partners will put in place “all the necessary tools” to ensure the well-being of patients in the group’s nursing homes and clinics. Quality of care will be “the first priority”. The one who has been at the head of the CDC since 2017 expects that Orpea will see its profit margins decrease in the future. The company is unlikely to be able to pay dividends at this stage; However, Caisse des Dépôts will not seek to make “a lot” of money from this investment.

*Societe Generale stumbled by 12.7% after the bank’s general director unveiled his medium-long term strategy. The operators appear disappointed by more than one point: the objective of growth in profitability and revenues revised downwards, lack of details on asset transfers, lower objective of return to shareholders… Slawomir Krupa, who took the reins of Société Générale last May succeeding the 15-year mandate of Frédéric Oudéa, said he had the ambition to make the group a “robust and sustainable leading bank” after years of mediocre performance. The third French bank by market capitalization is therefore aiming for a return on tangible equity ratio (ROTE) of 9% to 10% in 2026, compared to 5.6% declared at the end of June, thanks to the improvement in its profitability and the reduction of its costs. It is also targeting an operating coefficient of less than 60% in 2026, compared to 75% in the second quarter, with a gradual improvement from 2024.
“We will strengthen the group by shaping a simplified business model. We will take the necessary decisions to strengthen capital and gain flexibility, structurally improve our operational efficiency and maintain our demanding risk management at the best level,” said Slawomir Krupa. A speech which did not convince.

* Elior falls by 10.6%. A simple lowering of the objective seems to be at the origin of this drop, a sign of the high volatility in the share of the collective catering and services group. Still ‘neutral’ on the issue, UBS reduced its target from 3.1 to 2.4 euros to reflect the latest warning on the firm’s adjusted EBITA margin, which now anticipates a margin of around 1%, compared to the bottom of the previous range of 1.5 to 2%. “We now expect a slower recovery in margins, given that inflation remains high, contract renegotiations in the French public sector remain complicated, costs are higher for some new contracts and given the balance sheet weaker execution of Elior compared to its peers”, explain the Swiss bank’s analysts.

* Alten fell by 6.2%, weighed down by the announcement of a sharp drop in its intermediate accounts. The operating profit from activity amounted to 188 ME, or a margin of 9.2%, versus 11.4% a year earlier, and the net profit fell by 20% to 111.1 ME. The integration of less profitable companies; an activity rate lower than that of 2022, an increase in structuring expenses as well as the seasonality of the activity explain the decline in the operating margin compared to June 2022. Even if the pace of growth slows, Alten should achieve a organic growth of around 10% in 2023, a satisfactory operating margin and will continue its targeted external growth strategy.

* Hermès International yields 5.8%. A seller flow to be linked to a note from Oddo BHF which downgraded the saddler to ‘neutral’ while reducing its target from 2,100 to 1,967 euros. In a study on luxury, the broker explains that the momentum on forecasts has clearly changed direction in recent weeks in the sector with the proven slowdown in local demands in the US and Europe and continental China whose post-Covid recovery is not working. only for the wealthiest customers. If Hermès and Moncler have in common that they have shown the best momentum over the first half of the year and are therefore perceived as the most attractive stocks, the broker finds the current level of expectations, in relative terms, too high. Oddo BHF does not discuss the resilient nature of the value but at current levels of expectations and valuation, the stock becomes more exposed to the slowdown in the sector.

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