Stock Markets Open for Ascension Thursday: Positive News from US Debt Ceiling Negotiations Boosts Indices

2023-05-18 09:02:02

Stock markets are open for Ascension Thursday. Yesterday, soothing words from Joe Biden on the US debt ceiling negotiations boosted US indices. This optimism should spread to European markets this morning, where the news is quite limited, except on the side of London where a few publications will animate the exchanges.

Ascension Thursday is a public holiday in a number of countries in Europe, Africa and even Latin America, but not on the stock exchange, since the main financial centers are open. In Germany and France, however, the news is sparse and not much should happen. If I believe my patented personal indicator, the number of people who pass at dawn in front of the windows of my office on the edge of Lake Annecy, everyone is asleep or almost and I wonder when I makes you squirm while being on call. I still have a few things to tell you because it’s business as usual in other markets, especially in the United Kingdom where the day is marked by the publication of some company results, including the luxury group Burberry and the airline EasyJet.

The eclectic playlist of the ascent:

Weak news is not incompatible with a rebound in the indices. This is also what should take shape this morning in Europe after the awakening of Wall Street yesterday. All three major U.S. indexes rallied more than 1% at the close, ending a streak of soporific sessions. It was the positive news on the debt ceiling negotiations that rekindled the flame. United States President Joe Biden and Republican congressional leader Kevin McCarthy disagree on substance but have agreed to constructive talks with small teams. This was immediately interpreted as a step towards the end of the crisis and this is the kind of story that the market wanted to hear, failing to immediately obtain the white smoke of a compromise on the raising of the debt. Further proof that investors are always sensitive to storytelling, which allows me to recommend that you read this very good paper that we published yesterday on the subject. This self-promotion may lack a bit of humility, but you are never better served than by yourself, after all.

So the S&P500, the Dow Jones and the Nasdaq 100 all gained 1.2% yesterday thanks to the positive turn taken by the debt ceiling negotiations. The renewed confidence has benefited the files that currently have the strongest leverage effect, the American regional banks, which took advantage of this to rebound quite clearly. The debt narrative also perked up the dollar, which is riding seven-week highs, and sent gold down. The markets were not even bothered by the small recovery in US debt yields, which reflected a slight rise in the odds of a June Fed rate hike among bookmakers, with the percentage rising from 11% last week to 28% yesterday, according to CME’s FedWatch tool. But this current is still not in the majority, far from it, and then everything in its time: the priority is to rule out this issue of the debt ceiling before re-examining the other macroeconomic aspects.

On the company side, we therefore have a few publications of results on the Anglo-Saxon markets, with Walmart and Applied Materials in the United States and the aforementioned British. The Chinese trading giant Alibaba is also in the running. In France, the average values are in the spotlight with Trigano and its half-year results unveiled last night and rumors of takeover on ESI Group, which would be courted by several suitors, including the giant of software Dassault Systèmes. For the anecdote, Meta Platforms celebrates its 11 years of stock exchange. Facebook’s IPO was at $38 on May 18, 2012, compared to $244 today.

The macro agenda has a few lines this afternoon in the United States: an employment indicator, a manufacturing indicator and a real estate indicator. In addition, the agreement on grain exports to the Black Sea has been extended for two months, which removes a source of volatility in agricultural commodities.

European stock markets, which ended in disorder yesterday, will benefit this morning from the pulling force of Wall Street. In Asia Pacific, Japan remains weightless with Nikkei 225 up 1.5% and TOPIX above its recent highs. Mainland China and Hong Kong are progressing together, like India and South Korea. Australia comes out of two sessions of decline on a rebound of 0.5%. The CAC40 started the session up 0.6% to 7443 points.

Economic highlights of the day

In the United States, weekly jobless claims, the Philly Fed index (2:30 p.m.) and old real estate figures (4:00 p.m.) are on the program. The whole agenda here.

The euro is moving at 1.0841 USD. The ounce of gold drops to 1981 USD. Oil is consolidating its recent gains, with North Sea Brent at $76.82 a barrel and US WTI light crude at $72.69. The performance of the american debt over 10 years rises again to 3.56%. Bitcoin drops to $26,700.

The main changes in recommendations

888 Holdings: Berenberg remains long with a price target reduced from 220 to 190 GBp.
Adyen: Jefferies remains long with a target price reduced from 1677 to 1657 EUR.
Alfen: Jefferies remains underperforming with a price target reduced from EUR 62 to EUR 58.
Banco Santander: KBW goes from outperformance to market performance by targeting EUR 4.26.
Clariant: Jefferies remains to be kept with a target price reduced from 16 to 15 CHF.
Elior: AlphaValue switches from buying to accumulating, targeting EUR 4.19.
Heidelberg Materials: Redburn goes from neutral to buy.
Marks and Spencer: Citigroup goes from buying to neutral, targeting 170 GBp.
Mitchells & Butlers: Jefferies goes from hold to buy targeting 270 GBp.
Neoen: Societe Generale goes from selling to keeping, targeting EUR 29.10.
Neste Oyj: Redburn goes from neutral to sell.
SAP: Berenberg remains long with a price target raised from 133 to 135 EUR.
Siemens Energy: Citigroup goes from neutral to buy, aiming for EUR 29.
SOL SpA: Berenberg remains long with a price target raised from 28.10 to 30.80 EUR.
Technoprobe: Berenberg remains to be kept with a reduced target price of 6.70 to 6.50 EUR.
The gym Group: Jefferies remains long with a target price reduced from 220 to 180 GBp.

In France

Company results (comments are given on the spot and do not prejudge the evolution of securities)

Trigano: activity slows down in the first half, and profits fall.

Important (and less important) announcements

The recent turmoil on ESI Group, visible for a few days in the course, is explained a posteriori by the interest of private equity and even Dassault Systèmes for the ETI specialized in CAD, according to Bloomberg.
The takeover of Aesop by L’Oréal approved by Brazil.
S&P raises Capgemini’s credit rating from “BBB” to “BBB+”, stable outlook.
Total traffic for the Aéroports de Paris group rose to 26.2 million passengers in April.
Ipsos buys the Chinese Shangai Focus (healthcare).
Eramet buys back €143.3 million of 2024 bonds with a view to canceling them.
Voyageurs du Monde has circumscribed a cyberattack, the analysis is in progress.
Cellectis presents clinical data from the AMELI-01 study and preclinical multiplex engineering data at ASGCT 2023.
EURO Resources renews its senior management.
Aures postpones a second time, to May 26, the publication of its annual report.
They have published / They must publish: Nanobiotix, Infotel, Poxel, Rougier,…

In the world

Company results (comments are given on the spot and do not prejudge the evolution of securities)

BT Group: annual net profit up 5% to £7.9bn.
Burberry: quarterly sales growth reached 16% (consensus 14%).
Cisco: the title lost 4% off session after the publication of the quarterly.
EasyJet: the loss in the first half is in line with forecasts and management is confident for the summer season.
National Grid: the group recorded a 15% increase in its annual operating profit.
Nomura: the Japanese bank reduces its forecast for the financial year ending in March 2025.
Take-Two: the title rebounded by 9.5% outside the session after the publication of the quarterly.

Important (and less important) announcements

Volkswagen plans to revamp its main brand to revive it, according to an internal memo seen by Archyde.com.
Sony is considering a spin-off followed by an IPO for its finance division, according to Bloomberg.
Qatar’s sovereign wealth fund is exploring the possibility of taking legal action against Switzerland over losses incurred with Credit Suisse.
ThyssenKrupp may reconsider its €2bn green steel plant as German state aid hangs in the balance.
Amazon will invest $12.8 billion over several years in cloud services in India.
Informa acquires business-to-business events group Winsight for $380 million.
Kindred CEO Henrik Tjärnström has resigned and will be replaced on an interim basis by Nils Andén. AlphaValue believes this is a manifestation of pressure from Corvex.
Shell is reportedly looking to sell French floating wind turbine developer Eolfi.
Boeing is closing in on a 787 Dreamliner deal with Air Canada.
Still a lot of hype around Software AG’s takeover bids.
Walgreens Boots Alliance to pay $230 million to settle San Francisco opioid complaints.
Nestlé cuts 117 positions in Vittel at Nestlé Waters.
Deutsche Bank paid $75 million to settle Epstein lawsuits.
The main publications of the day: Walmart, Alibaba, Applied Materials, National Grid, BT Group, Burberry, EasyJet… The whole agenda here.