"The Friday Column: Witches, Unpronounceable Names, and Market Volatility - Weekly Market Update and Analysis"

2023-04-21 05:59:05

The Friday column’s own eclecticism includes witches, a Swedish company with an unpronounceable name, volatility, 10% declines, diary bits and macro statistics. The equity markets themselves tensed up a bit yesterday, even if they don’t seem to have really shed the background of optimism that has been driving them for several weeks.

Laurent P., the colleague who faces me at the office, is a treacherous being. During yesterday’s session, he amused himself by making fun of my headline from the day before on the disappearance of volatility, by listing the European stocks which were going all over the place. And it is true that the equity markets have gained in nervousness, even if some of them have continued their evolution within narrow bounds, such as the French CAC40 (+0.14%) or the British FTSE (+0.05% ). In the United States, the indices hesitated but they ended up letting go at the end of the session. The drop reached 0.6% on the S&P500 and 0.78% on the Nasdaq 100.

Suddenly, we are indeed on more substantial variations and Laurent will still be able to chamber me this morning. The slide in oil weighed on energy while financial and real estate stocks suffered from the return of fears about regional banks, whose results are really not brilliant. To this must be added a few major mishaps. The large telecom operator AT&T fell by 10% after announcing disappointing results, which are a stain on this type of file which is generally predictable. 10% drop is also the price for Tesla, taken aback by the market for having clearly chosen volumes at the expense of margins. The price war started by the Californian weighed on the entire sector yesterday, with heavy losses in Europe and the United States, particularly on the side of Stellantis, Renault and Continental.

The overall picture is almost unchanged until next week the publication of the results of several stars of the rating, from Airbus to Verizon via Nestlé, Coca-Cola, Alphabet, Microsoft, Roche or Amazon. Investors expect the Fed to hike rates a quarter point on May 3 and then pause. If the economic situation were to deteriorate too dangerously in the United States, they even hope that the central bank will backtrack in the months to come. The game of cat and mouse between declarations by central bankers, real intentions by central bankers and interpretation of the markets is not ready to end.

All sprinkled with macroeconomic statistics, with mediocre figures yesterday from the employment market and that of old real estate in the United States, which added to the caution of investors yesterday. Today, it is the PMI activity indicators of the major economies for industry and services that will focus attention. They take the pulse of the optimism or pessimism of corporate purchasing managers and are therefore a good indicator of economic activity. The most awaited data are those of the euro zone (10:00 a.m.) and the United States (3:45 p.m.). The March batch showed continued contraction in manufacturing, while services remained robust. Poor figures in the United States could strengthen the market’s conviction that the Fed’s monetary policy will change… while increasing fears of recession. Very clever whoever can say which of the two approaches will take precedence over the other. That said, there could also be good surprises, which would add to the confusion.

But it’s still Friday and failing to be blue, on Fridays, I try to make you laugh or answer existential questions about finance. For example today: which listed company has the longest name? I preferred that to “this company is going to make 3000% this year”, which I’m saving for later. When I come across an original or long company name, I tend to write it down, it can always serve to make you smile, especially if I have to pronounce it next for the podcast. For example, PotlatchDeltic Corporation is an American company that owns and operates forests in the United States, whose name I had noted recently. But to this day, my star remains Samhällsbyggnadsbolaget, which is a Swedish social housing operator. So complicated that its leaders themselves call it SBB. If you have better than these 23 letters in a single word, do not hesitate to show up.

Serious news is dominated by quarterly corporate results this morning. EssilorLuxottica, SAP, Mercedes and Holcim have already announced their figures. There are many more, right down to Procter & Gamble at midday in the United States. On the geopolitical side, defense ministers and senior military officials from several countries are meeting this morning in Ramstein, Germany, to discuss continued support for Ukraine in the war against Russia. The Ukrainian president yesterday called on his allies to allow him to begin the process of joining NATO. Meanwhile, the Wall Street Journal reveals that pro-Russian hackers have attacked Eurocontrol, the European air traffic control system. In Washington, rumors are circulating about new measures by the Biden administration to limit American investments in China.

Third Friday of the month obliges, it is the clearing session on the markets, known under the name of “three witches”. The expiry of several classes of options creates moments of volatility during the session. In Asia Pacific, the main markets are trending moderately lower to end the week. The Nikkei 225 lost 0.4% in Tokyo, as much as the ASX 200 in Sydney. The declines are more pronounced in China, Hong Kong and South Korea, since they are around 1%. India holds the shock by limiting its decline to 0.1%. European leading indicators are moving around balance.

Economic highlights of the day

There will be a full delivery of advanced PMI activity indices for all the major economies, with the Eurozone (10:00 a.m.) and the US (3:45 p.m.) featured. The whole agenda here.

The euro is firm at 1.0965 USD. The ounce of gold goes back to 2002 USD. Oil is stabilizing, with North Sea Brent at $80.96 a barrel and US WTI light crude at $77.28. The performance of the american debt over 10 years falls to 3.53%. Bitcoin is moving at 28,800 USD.

The main changes in recommendations

Adyen: CICC starts outperformance tracking by targeting EUR 1770.
BNP Paribas: Jefferies is still buying with a price target raised from 83 to 89 EUR.
Comet: UBS remains long with a price target reduced from 280 to 276 CHF.
Crédit Agricole: Jefferies remains to be kept with a price target raised from 11 to 12.50 EUR.
Eiffage: Jefferies remains to be kept with a price target raised from 112 to 115 EUR.
EssilorLuxottica: Jefferies remains to be kept with a price target raised from 165 to 175 EUR.
Gensight: Chardan changed from buying to neutral.
IMI: HSBC goes from holding to buying, aiming for 1960 GBp.
Nokia: Inderes goes from accumulating to buying, targeting EUR 4.80.
Orange: Berenberg remains to be kept with a price target raised from 10.40 to 11.40 EUR.
Sampo: Berenberg remains long with a price target reduced from 52 to 51 EUR.
Tryg: Berenberg remains long with a price target raised from 190 to 195 DKK.

In France

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

Bureau Veritas: is aiming for moderate organic revenue growth.
EssilorLuxottica: Q1 revenues are higher than expected.
Fnac Darty: confirms its objectives after stable turnover in Q1.
Gaztransport & Technigaz: the objectives are confirmed after a Q1 up 17.2%.
Gecina: 2023 recurring net income per share target confirmed at between EUR 5.80 and 5.90.
Ipsos: activity contracted in Q1 but the objectives are confirmed.

Important (and less important) announcements

Crédit Agricole has reached an agreement to avoid the “Cum-Cum” procedure.
Verallia sets up the refinancing of its €1.1 billion syndicated line of credit, which now includes sustainable performance criteria.
ALD postpones its Extraordinary General Meeting to May 22, 2023.
Gensight withdraws Lumevoq filing from EMA, to discuss terms of resubmission. Visibility on funding does not go beyond June at this stage.
Omer-Decugis is strengthening in Côte d’Ivoire.
They have published / They must publish: Robertet, SRP Groupe, GL Events, Pixium Vision, Solutions 30, Mercialys, Aubay, Altur, Median Technologies, Tikehau, Carmila, Tarkett, Biosynex, Genomic Vision, Orapi, Damartex, Cibox…

In the world

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

Holcim raises its full-year guidance after a better-than-expected first quarter.
Mercedes: publishes preliminary results above expectations in Q1.
Salvatore Ferragamo: turnover down in the first quarter.
SAP: the annual results should be a little higher than expected.

Important (and less important) announcements

AT&T shares tumbled 10% yesterday on Wall Street, their biggest drop since 2000, after poor quarterly numbers.
After triggering a price war, Tesla raises the price of certain models in the United States.
Negotiations with Lufthansa are “very advanced” regarding ITA Airways, according to Rome.
Henkel sells its Russian business for €600 million.
Italy would ratify the reform of the EU bailout fund as a ‘growth instrument’.
Chilean President Gabriel Boric announces a plan to nationalize the lithium industry in Chile.
Petrofac secures a 12-month extension to its bank lines of 252 million dollars.
The G7 studies the almost total ban on exports to Russia.
FirstGroup and infrastructure fund I Squared are considering competing bids for parts of Deutsche Bahn’s international transport business, Arriva.
Credit Suisse is facing a $160 million lawsuit over the sale of subprime mortgages.
Eni begins drilling the Raia-1 well offshore Mozambique.
Sony Interactive Entertainment acquires Firewalk Studios from ProbablyMonsters.
IMCD acquires Swedish minerals and chemicals distributor ACM.
The main publications of the day: Procter, BHP Group, SAP, Schlumberger, Investor AB, Holcim, Sandvik, Geberit, Teleperformance, Bachem… The whole agenda here.