2023-08-21 06:33:45
After a third week of declines for equities, investors are still wondering if China will act to support its real estate sector and revive its economy. So far, it’s lukewarm. They also wonder if the rate hike cycle is over or not in the West. The central bank symposium in Jackson Hole this weekend may provide some clues. In the meantime, it’s hot and the new star Nvidia will present its results on Wednesday.
Last Friday, the stock market session had everything to end in min-cata: nervous investors, rising volatility, part of the participants on vacation and aoutian clearing session. The kind of ingredients that fuel you for a short day at -3% for the indices. In the end, this scenario did not materialize, even if the Western markets all ended down, with the exception of one of the three New York indices. The Dow Jones summoned its old guard, namely Walmart, Boeing and UnitedHealth to finish in the green. But by the smallest of margins, +0.01%. Not enough to reverse the trend of a difficult month for equities: -4.8% for the S&500 and for the Stoxx Europe 600 since August 1st. -7.5% for the Nasdaq Composite and -11% for the MSCI China.
I end on the Chinese index on purpose since it is on the side of Beijing that the financial cracks of the moment are the most visible. Investors made this market their favorite at the start of the year. Eight months later, no one wants Chinese stocks except compulsive contrarians. China’s real estate sector continues to falter after being fed steroids for years. Everyone fears a local contagion, or even a crisis of greater magnitude. The global mainstream press has begun to take hold of the subject, a sign of the importance it is taking on. I know it’s August and we need to furnish, but still!
As good Westerners, we are waiting for Chinese-style “whatever it takes”, that is to say a spectacular blank check from the Chinese central bank or an XXL fiscal stimulus plan, if possible with four zeros in billion. Or even both eh, why skimp? The problem is that Beijing is dragging its feet, for many reasons that I have already mentioned in recent weeks. Even rout, as is still the case this morning. The PBOC was supposed to act on its 5-year rate, the one that matters most for mortgages. Everything was going in this direction, until the rate reductions operated by the institution last week on other key rates. And then finally no: the prime 5-year loan rate remained at 4.2% instead of falling to 4.05%. The PBOC only acted on the 1-year loan rate, bringing it down from 3.55 to 3.45%. “Confusing” is the word that often emerges from the dispatches quoting Asian market specialists that I was able to read this morning. Enough for the Hang Seng to lose another 1.4% in Hong Kong this morning at the start of the week, while other Asian markets are trying to rebound.
In the meantime, the Chinese economic situation remains the marker for the month of August. Small aside: we can meditate on the schizophrenia which consists in multiplying restrictions and sanctions against China while being sorry to see its economy falter, but I leave it to people better equipped intellectually than me to develop this part.
It will probably be necessary to wait until Thursday and the start of the annual meeting of central bankers in Jackson Hole, in the United States, to divert attention from Chinese disillusionment. The market still thinks US rates won’t go higher, even though the Fed suggests otherwise. The Jackson Hole symposium will perhaps be an opportunity to test everyone’s positions. The BRICS (Brazil, Russia, India, China and South Africa) are meeting from tomorrow in Johannesburg, in particular to discuss the African market. In the rest of the news, even if the Ukrainian counter-offensive is slowing down, things are not going well for Russia, which has just suffered a setback with the loss of its lunar probe. In parallel, the Netherlands and Denmark will supply American-designed F-16 fighters to kyiv. Elsewhere, natural calamities make the headlines: sweltering heat in Europe, giant fires in Canada and a tropical storm in California.
The agenda for the week includes the flash PMI indices for August, which will be available on Wednesday for the main world economies. I’m not coming back to Jackson Hole (Thursday to Saturday). There will also be weekly employment and US durable goods orders (Thursday) and German business sentiment and US consumer confidence (Friday). The corporate earnings season is coming to an end, with a few laggards like Zoom Video, BHP, Medtronic, Baidu and Intuit. But all eyes will be on Nvidia, which will present its results and forecasts on August 23. The American group, a new paragon of artificial intelligence, recently joined the circle of companies capable of changing the stock market situation on their own.
In Asia-Pacific, Tokyo recovered 0.5%, while Bombay and Seoul were up 0.3%. Australia is still suffering (-0.3%), like Hong Kong therefore. European leading indicators are modestly bullish around 7:30 am. The CAC40 resumed 0.3% to 7183 points shortly after the opening.
Economic highlights of the day
There will be no major macroeconomic indicators today. The whole agenda here.
The euro is trading at 1.0881 USD. The ounce of gold is almost unchanged at 1892 USD. Oil rebounded, with North Sea Brent at $85.44 a barrel and US WTI light crude at $82. The performance of the american debt over 10 years rose to 4.28%. Bitcoin is trading around $26,080.
The main changes in recommendations
Adyen: Credit Suisse maintains its outperformance recommendation with a reduced price target of EUR 1,800 to 1,100. DZ Bank AG Research maintains its sell recommendation with a price target reduced from 1200 to 850 EUR.Alba: AlphaValue/Baader Europe maintains its buy advice with a price target reduced from 68.70 to 67.90 EUR. Arcticzymes Tech: Pareto Securities maintains its recommendation to hold with a price target reduced from 38 to 35 NOK.Berkeley: Deutsche Bank maintains its recommendation to hold with an unchanged price target at 4007 GBp.Boozt: DNB Markets maintains its recommendation to hold with a target price reduced from 120 to 115 SEK.Carl Zeiss: Landesbank Baden-Württemberg maintains its buy advice with a target price reduced from 141 to 121 EUR.Coloplast: Credit Suisse maintains its recommendation to outperform with a target price reduced from 1045 to 1005 DKK. Daimler Truck: Morgan Stanley maintains its overweight recommendation with a price target raised from 41 to 43 EUR. Demant: JPMorgan raises its recommendation from neutral to overweight, targeting 340 DKK. Elekta: Citi maintains its sell recommendation with a price target reduced from 57 to 53 SEK.Entain: AlphaValue/Baader Europe maintains its advice to buy with a price target reduced from 2012 to 2000 GBp.Fastned: Berenberg maintains its advice to buy with a price target reduced from 45 to 43 EUR.Ferrovial: AlphaValue/Baader Europe goes from sell to reduce with a price target raised from 24.20 to 30 EUR.Geberit: Vontobel maintains its recommendation to keep with a price target reduced from 490 to 460 CHF.GN Store: Bernstein maintains its market performance recommendation with a new price target of 155 DKK.Green Hydrogen: Carnegie Group switches from sell to hold with a price target reduced from 26 to 8.90 DKK.Henkel: AlphaValue/Baader Europe maintains its advice to accumulate with a target price reduced from 71.70 to 70.90 EUR.HSBC: Jefferies maintains its advice to buy with a target price raised from 930 to 1000 GBp.International Consolidated Airlines: AlphaValue goes from reducing to buying, targeting EUR 2.59. Iveco: Morgan Stanley maintains its weighting recommendation in line with a price target raised from EUR 7.50 to EUR 8. targeting EUR 670.Kingspan: Societe Generale maintains its buy advice with a price target raised from EUR 78 to 84.Komax Holding: Mirabaud Securities maintains its buy advice with a price target reduced from CHF 315 to 290. MBB SE: Quirin maintains its buy advice with a target price reduced from EUR 125 to 115. Mobilezone: Vontobel maintains its recommendation to keep with a target price reduced from 15.50 to 14.50 CHF. Publicis: AlphaValue /Baader Europe maintains its recommendation to reduce with a price target raised from EUR 74.60 to 75.30. Novo Nordisk: Morgan Stanley maintains its overweight recommendation with a price target raised from 1,210 to 1,370 DKK. Siegfried: Vontobel maintains its buy advice with a price target raised from 870 to 930 CHF.SIF Holding: HSBC remains on the buy side with a price target raised from 12.60 to 16 EUR.Tecan: Baader Helvea maintains its buy advice with a price target reduced from 457 to 417 CHF.Traton: Morgan Stanley maintains its weighting recommendation in line with a price target raised from 20 to 22 EUR.Viaplay: Jefferies maintains its underperformance recommendation with a price target reduced from 50 to 22 41 SEK.Virbac: Stifel goes from buy to hold, targeting EUR 293.Volkswagen: Bernstein maintains its market performance recommendation with a new price target of EUR 130.WPP: HSBC maintains its buy recommendation with a target of course reduced from 1130 to 1080 GBp.
In France
Important (and less important) announcements
TotalEnergies acquires a 26% stake in the Cash-Maple gas discoveries in Australia.Unibail-Rodamco-Westfield has signed a $925 million financing for Westfield Century City.Saint-Gobain will complete the acquisition of Building Products of Canada on September 1. Ipsen and Exelixis obtain positive phase III results with the cabozantinib / atezolizumab combination in prostate cancer. Visiomed responds to a controversy that caused its stock price to fall. The small corner of the dilution: Abivax signs up to €150 million in financing with Kreos Capital, Claret and Heights Capital Management via OCABSAs and bonds (details here). They have published / They must publish: no one…
In the world
Company results (comments are given on the spot and do not prejudge the evolution of securities)
Important (and less important) announcements
Amazon is relaunching its parcel service to compete with FedEx and United Parcel Service. DuPont De Nemours is in advanced talks to sell its Delrin resins unit to private equity firm The Jordan Company for about $1.8 billion, according to Bloomberg. .Direct Line has approached Adam Winslow, a senior Aviva executive, to take over as CEO of the company, Sky News has reported. .Weinstein Group reportedly offered $12 a share to buy Sculptor fund.Coca-Cola Hellenic accused of continuing operations in Russia through ten bottling plants.Polymetal seeks to complete sale of Russian assets within six months.Volkswagen launches production of its new ID7 electric sedan in Emden. Black notebook: Adobe co-founder John Warnock has died aged 82. Roberto Colaninno, CEO of Piaggio, died at the age of 80. The main publications of the day: nobody… The whole agenda here.
Lectures
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