2023-05-19 05:55:58
The last session of the week coincides with the monthly clearing on the equity markets. But the three witches do not really scare investors whose libido for risky assets has woken up. Unless Jerome Powell plays love killer tonight. This is the subject of our overview of the day, embellished this morning with some personal reflections on the communication vocabulary of companies and many of Japan.
European equity markets did not have to look far for inspiration for their session on May 18, a public holiday in several countries but rarely a day off on the stock market. They went to see what happened at Uncle Sam’s the day before to replicate it. Wall Street roared with delight after the convergent announcements of Democrats and Republicans on the need to quickly find a solution to the problem of the debt ceiling, to avoid a catastrophic deadlock. The promises bind only those who listen to them, but in this case, no one believes that the American political Landernau will take the risk of playing with a default of payment by the United States, even if it is technical. So the three main Wall Street indexes had jumped on these announcements on Wednesday evening, and Europe followed on Thursday. The French CAC40 gained 0.6%, the German DAX 1.3% and the British FTSE 100 0.25%.
Last night, Wall Street extended the party, especially the Nasdaq 100 which erased its one-year peaks by winning 1.8% to 13,835 points. The S&P500 rose 0.9% and the Dow Jones, slower due to its defensive players, 0.3%. The new dominant scenario is a variant of the previous one: the question of the American debt ceiling is resolved in the short term and the Fed is done with its rate hike cycle. Investors do not all agree on this last point, but a majority of them support this scheme, despite a resurgence of the clan of supporters of a rate hike on June 14th. Roughly speaking, a third of the market sees a rate hike and two-thirds a status quo on this date. A week ago, the probability of a rate hike was only 11%. Between the two, the US macroeconomic statistics showed resilience, some members of the Fed showed their teeth and the regional banking crisis tended to ease. The change in forecasts can be seen in the course of the dollar, which went back up to 1.08 against the euro, and in the yield on the US 10-year bond, which rose to 3.63%. Fed boss Jerome Powell will likely provide some additional guidance later this afternoon when he speaks at a public event.
After stuffing your head with these psychological-economic comments, let’s move on to our lighter Friday paragraph, devoted this week to overused words in financial communication. As in other fields, certain terms are in fashion in the stock market when it comes to calling a cat a dog. You only have to look at the main pages of listed companies to realize that they are all working towards a brighter future for humanity and the preservation of the planet’s resources. I had already done a quiz this year on the intellectual catchphrase scam of certain companies to describe their activity. But this morning we’re going to talk about some overused words used in press releases. I had already deciphered here three announcements of rather amusing companies, but this time I draw your attention to five catch-all words or expressions of the time:
- “Strategic”. This term lines the press releases. By definition, the term “contract” only exists among has-been communicators. We will prefer “strategic agreement”, more opulent. Same story for the partnership. The partnership is “strategic”. If not, it really is a third-rate partnership. A strategic partnership maintains the mystery of great things to come, even when it’s a cheap contract.
- “New” Again, this is to mark a kind of exclusivity. We may encounter a “new period of growth”, a “new contract” or, if you have followed correctly, the end of the end: a new strategic agreement. The idea is to show that society is jaded by signing contracts, agreements or whatever. It also works with earnings release titles. A “new year of growth” is still more stuffy than a simple “year of growth”.
- “Historical”. It’s kind of the top version of “strategic”. Moreover, we sometimes have events that are both strategic and historical. Globally when it comes to a society showing its muscles, the term historical is used all over the place. I admit that I have not come across a “new historic strategic agreement”, but we must not lose hope.
- “Of transition”. We leave the superlatives for the vocabulary of attenuation. If you come across “transition” in a press release, it’s a red light that comes on. We have “transition exercises” or transition periods”. Clearly, this means “we missed our objectives so what we planned may happen, but later, if ever”.
- “Make the point”. When a company includes the term “update” in a press release title, it means that it has bad news to announce. If the Bidule company has a big contract to announce, it will say “Bidule signs a new historic agreement with Machin”. On the other hand, if she writes “Gizmo takes stock of its agreement with Machin”, expect something to be wrong.
- I skip over the terms sustainable, green and all the environmental semantics, because a simple review wouldn’t say enough bad things.
The highlights of the day are, in addition to Powell’s speech this evening, the publication of annual underlying inflation of 3.4% in Japan in April, in line with expectations. The country seems to be coming out of the humdrum of the past few decades, as illustrated by the course of the local stock market indices, which are currently setting records despite having so far failed to exceed the levels reached… during the bubble Internet. I don’t know if Volodymyr Zelensky earns miles when he travels miles by plane, but if so, he must be able to travel free of charge until the end of his life: the Ukrainian president will be present at the G7, at the Japan precisely, to plead the cause of his country.
Japan still, decidedly, with the Tokyo Stock Exchange which does not stop rising, with a seventh consecutive session in the green for the Nikkei 225. On the Chinese side, it is rather depressed with a CSI300 which slips slightly and a Hang Seng, which lost 1.2%, weighed down by its technologies, in particular Alibaba after poorly received results. The Chinese economy’s inability to maintain strong momentum despite the boost from the end of covid-related restrictions at the end of 2022 is worrying. South Korea and Australia end their week with solid gains. European leading indicators suggest a positive start to the day for this so-called three witches session, ie the monthly expiry of index and equity derivatives. A session that can hold surprises because traders must decide on their orientations for the following month. The CAC40 started the day up 0.27% to 7467 points.
Economic highlights of the day
It is the speech to be delivered by Jerome Powell around 5:00 p.m. which constitutes the high point of the day. The whole agenda here.
The euro continues its slide to 1.0767 USD. The ounce of gold drops to 1962 USD. Oil is firm, with North Sea Brent at $76.39 a barrel and US WTI light crude at $72.46. The performance of the american debt over 10 years reached 3.63%. Bitcoin is trading for 26,830 USD.
The main changes in recommendations
- Arkema: Jefferies remains long with a price target reduced from 142 to 111 EUR.
- Aston Martin: Mediobanca goes from underperformance to overperformance by targeting 360 GBp.
- ASOS: Citigroup goes from neutral to buy, aiming for 600 GBp.
- Boliden: Berenberg switches from buy to hold aiming for 360 SEK.
- Compagnie Financière Richemont: CFRA remains to be kept with a price target raised from 145 to 150 CHF.
- Helvetia: UBS goes from buying to neutral, aiming for CHF 135.
- Munich Re: Berenberg remains long with a price target raised from 365 to 385 EUR.
- Nagarro: Jefferies remains long with a price target reduced from 174 to 136 EUR.
- SGL Carbon: Jefferies starts long tracking targeting EUR 10.50.
- Siltronic: Berenberg remains to be kept with a price target reduced from 83 to 78 EUR.
- Sonova: Credit Suisse remains neutral with a reduced price target of 260 to 250 CHF.
- Ubisoft: Citigroup reduces its target price from 50 to 45 EUR.
- Yara: Berenberg remains to hold with price target reduced from NOK 475 to 410.
In France
Important (and less important) announcements
- A TotalEnergies executive believes near-term petrochemical demand is weaker than earlier forecasts.
- Swedish Orphan Biovitrum and Sanofi report that the EMA has accepted and validated their regulatory application for efanesoctocog alfa for the treatment of haemophilia A in all age groups.
- ESI Group confirms discussions with potential buyers.
- The general manager of Focus Entertainment resigns.
- French software company Planisware is exploring options, including going public.
- They have published / They must publish: none.
In the world
Company results (comments are given on the spot and do not prejudge the evolution of securities)
- Alibaba: the title loses 5% in Hong Kong after disappointing results.
- Applied Materials: the title lost 1.4% after the publication of its quarterly out of session.
- Smiths Group: revises its annual revenue growth forecast upwards.
Important (and less important) announcements
- Carl Icahn (Icahn Enterprises) admits a mistake with his $9 billion bearish bet.
- Dufry holds 87.1% of the capital of Autogrill.
- Twitter accuses Microsoft of misusing its data.
- In response to attacks by Ron DeSantis, Walt Disney cancels the creation of 2,000 jobs in Florida.
- Netflix subscription with is approaching 5 million users.
- IMCD reaches agreement to buy Malaysian specialty distributor Euro Chemo-Pharma.
- Interpump offers Waikato for €30M.
- The main publications of the day: Deere, Smiths Group… The whole agenda here.
Lectures
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