The stock market dreams of a “blue sky” scenario
Among them (esoteric signals, not serious things) the main element remains the slowdown of inflation in the US and Europe. Price trends certainly remain strongly positive throughout the year, but overheating is not only mechanically declining because the fundamentals are high, but also under the influence of an economic slowdown. My little finger tells me that central banks want sharper economic braking to prove that their economic policy transmission belt is effective, but no one listens to my little finger.
Thus, we have entered a phase where Care Bears have the upper hand over Calimero, an analytical approach to the available data has tipped the scales in favor of optimism. Stock markets were relieved yesterday by the release of December inflation in the United States, which was in line with expectations in all respects, i.e. with a decline. The session was least volatile on Wall Street, but the S&P500 was up 0.3%, the Nasdaq was up 0.5% and the Dow Jones was up 0.6%. If inflation had fallen more than expected, the indices would probably have accelerated more strongly, which is what the hottest investors are hoping for. In a sense, these measured evolutions are reassuring because they avoid the +4% sessions that intoxicate investors and contribute to disconnecting the capital market from reality. The bond market says otherwise: the yield on 10-year US debt fell further to 3.47%. This is a sign that experts support a lower interest rate peak scenario than was feared last fall.
In this context, financiers are taking new bets and readjusting their risk networks. Bank of America’s monthly survey of global asset managers cited inflation as the top risk since fall 2021. Faced with a severe global recession, prolonged high interest rates and geopolitical turmoil. Investors’ number one fear may change as overheated prices fall. Moreover, the answer should be today, because Bank of America usually publishes the result of its investigation on the 13th of the month. Even if the latest indicators suggest that the world may be reeling from a large air pocket, it is entirely possible that the cards will be reshuffled with more distributed risks and certainly an increase in the recessionary theme.
For reference here, I’m stealing information posted this morning on Liberum’s very good morning. First up is this stat from the Stoxx Europe 600, where 14 companies hit a record 52-week high with the index yesterday. Among the increased spreads we have luxury (LVMH and Christian Dior, Compagnie Financière Richemont, Swatch and Hermès), industrial with MTU Aero Engines, Siemens, Safran and Renault, banking with UBS, Banco de Sabadell and Swedbank, as well as amazing. Inditex and Merck KGaA. Conversely, there are more distinct securities at 52-week lows than the index. We’ve had hearing system suppliers (Sonova, Amplifon, and Demant) that have been openly pulverized in the stock market for some time. I have a lot of silly explanations in mind, but I’ll let you think of the worst: maybe inflation cures deafness? We also have former market darlings like Cellnex, Adyen, Dassault Systèmes or AP Moller Maersk who haven’t restarted yet, for whom investors fear their best years are behind them. And then there is health (Eurofins, Novozymes, Recordati, Roche) accompanying chocolate king Barry Callebaut and Swiss carrier Kuehne + Nagel.
In the news of the day, China still features prominently in anticipation of midday US financial stock results, particularly from JPMorgan Chase, Bank of America, Wells Fargo, BlackRock or Citigroup. That’s why authorities in China are considering strategic stakes in several listed tech stars, such as Alibaba and Tencent, to maintain control over these companies. I imagine that Western indicators would not be happy to be joint shareholders of a company alongside the Chinese Communist Party, even if they actually often are. Moreover, Chinese foreign trade figures for December worsened with the telescoping of zero-covid / maxi-covid policies. In the United States, Joe Biden has apparently scattered classified documents that could harm him. The latest statistic to watch this week is an important gauge of the morale of the American consumer, the University of Michigan’s confidence index, released monthly at 4 p.m.
The week ends with volatility in Asia, notably the Japanese market, which fell 1.3% on the side of the Nikkei 225, and the Indian market, which is still struggling to recover from a particularly successful year with the SENSEX losing 0.2% in 2022. session. On the other hand, Chinese locations, Hong Kong like Shanghai, advanced slightly, while growth was more marked in South Korea (+0.9% for KOSPI) and Australia, where the ASX 200 ended with a 0.66% increase. third session on the green. Europe’s leading indicators move around balance, but there is no discernible trend.
Economic highlights of the day
Two key dates today: European industrial production at 11:00 and the University of Michigan consumer confidence index at 16:00. The whole agenda is here.
Euro continues to rise to 1.0834 USD. The ounce of gold rose to 1,892 dollars. Oil is strengthening, with North Sea Brent at $83.54 a barrel and US WTI light oil at $78.05. The yield on US 10-year debt rises to 3.47%. Bitcoin is trading around $18,800.
Major changes in recommendations
- Air France-KLM: Davy moves from underperform to neutral, targeting €1.30.
- Allianz: Berenberg remains on the buy side with a price target raised from EUR 271 to EUR 304.
- Bouygues: Morgan Stanley moves from online weight to underweight, targeting €30.
- Holcim: Jefferies should maintain with a price target raised from CHF 50.10 to CHF 50.90.
- Kion: Societe Generale moves from hold to buy, targeting €45.
- Logitech: Deutsche Bank goes from buy to hold, targeting CHF 54.
- NN Group: HSBC switches from buy to hold with €46 target.
- Partners Group: Goldman Sachs is long with a price target cut from CHF 1,150 to CHF 1,080.
- Pendragon: Berenberg maintains buy watch targeting 35 GBp.
- RWE: Jefferies is long with a price target cut from EUR 54 to EUR 50.
- SES SA: Berenberg is long with a price target cut from EUR 11.20 to EUR 9.20.
- Stabilus: Stifel moves from buy to hold, targets EUR 70.
- U-Blox: UBS switches to sell from neutral, targeting CHF 100.
- Ubisoft: Societe Generale continues to sell, targeting €19.70.
- Va-Q-Tec: Stifel targets EUR 26.
- Zurich Insurance: JP Morgan remains overweight with target price cut from CHF 560 to CHF 550.
Important (and less important) announcements
- 51% increase in traffic at Vinci Airports in the 4th quarter over a year.
- Ecopetrol selects Total Eren for the construction and operation of the photovoltaic park.
- Electricité de France’s nuclear production reached 279 TWh in 2022.
- Rémy Cointreau liquidates 1.93% of its treasury fund.
- Gaztransport & Technigaz announces the delivery of the first two very large dry LNG tanks equipped with GST technology to Tianjin, China.
- Cnova, a subsidiary of Casino, changes its management and calls an extraordinary general meeting.
- JCDecaux acquires Pisoni. In addition, the group receives an extension of its advertising concession at Changi Airport in Singapore.
- Mauna Kea announces positive result of robot-assisted bronchoscopy study.
- Réalités acquires Vargo Invest.
- OVH, Société Marseillaise du Tunnel Prado-Carénage and Ecomiam have published their accounts.
In the world
Important (and less important) announcements