Last week, financial markets resumed a strong blow to the Tatans, returning major indices close to the year-end lows. The European index STOXX Europe 600 lost 4%, and the American index S & P500 – a little more than 5%. Risky assets were again the most vulnerable, such as the ARK Innovation Index Fund, which lost 13% in the last two sessions, or bitcoin, which is currently trading at $ 26,000 apiece, compared to $ 67,000 at its highest level last November. .
Perhaps last week, investors lost their last buttocks of innocence. Because the European Central Bank was more or less forced to leave its care of the bear’s costume (I change animals, I’m tired of hawks and pigeons). And because data on inflation in the United States shows that, ultimately, the decline is not now. Obviously, Wall Street is very concerned about the ECB’s policy, because investors already have their hands full with the Fed. I quote analyst Jeffrey Halley, who summed up the situation overnight: “the market, which is constantly looking for reasons to reduce expectations of an increase in the Federal Reserve (so that it can buy shares), on Friday dashed its hopes“.
The evolution of sentiment about the US Federal Reserve illustrates the level of market complacency. I will try to summarize this for you in a simplified way in four stages, using inelegant points that have the advantage of clarity, even if they contradict the literary classicism that I am trying to cultivate in these columns:
- Last year, financiers joked that the Fed had suffered a bit from its rhetoric about transitional inflation, but they put up with it and the markets rose.
- Seeing that the situation was deteriorating due to inflation, but the economy continued to operate at full speed, they then thought that the central bank could regain control through good speeches and a few technical changes.
- Well, because things REALLY went wrong and there were not enough spells, we had to integrate a more painful policy. This is the phase of panic that characterized the beginning of the year, intensified by Russia’s invasion of Ukraine.
- Lately, investors have thought that they have a real scenario of a more or less soft economic landing with an aggressive Fed, but with initial success in fighting inflation. Those that could make people say “The Fed was very aggressive in the beginning, but it worked, so it will be able to ease the pressure by the end of the year. How about buying stocks?“.
Caramba, failed again! The problem, which became apparent on Friday after the announcement of US consumer prices in May, is that the surge continues, even if bottlenecks in production are absorbed. Hence the return of the extremely negative sentiments of the past week, reinforced by the lexical field of economic recession. This weekend, I even received a Bloomberg alert stating that traders were estimating the likelihood of a Fed rate increase of 75 points in July as a one-to-two chance. Let me remind you that at the beginning of the year the norm was to increase rates by a quarter of a point, and even then it was still best to avoid raising rates.
This Monday morning there is chaos everywhere, especially regarding the yield of bonds, which are worried, in particular, about the 2 and 5-year maturities. The market is also on Asian indices, which are significantly losing ground in Tokyo and Hong Kong, or on cryptocurrencies, which are erasing recent lows. In this context of risk aversion, the US dollar has suddenly strengthened against the euro, although it has not been so high against the yen since the beginning of the millennium.
Events are accelerating, and the institutions seem to have completely lost the thread of the story, which is not very reassuring. But redundancies are often erased by other redundancies, and we may be in this second phase. After all, as the US bank said on Friday, if you were told in June 2020 that in two years, US retail sales would increase by 67%, unemployment would fall by 17 million, inflation would rise from 0.1% to 8.3%. . that oil would rise from $ 12 to $ 120 a barrel and that a pandemic was accompanied by war and famine, you would be considered crazy … but that’s what happened.
I was planning to finish this this morning, but as I reread it, I realized that the column of the day makes you hang up, so I’m adding a few lines to better start the week. The period we are going through is the most difficult to manage in the stock market since 2008. It makes it possible to separate the self-proclaimed geniuses of finance, who only followed the liquidity of real investors who know how to identify opportunities for the environment. while maintaining an acceptable level of risk. It’s time to look at the basics of any smart investment.
European stock markets will open this morning. Oh, I forgot, no big stats today, but all looks at the June Fed meeting on Wednesday. Even if investors have lost some faith in central banks, they risk clinging to Captain Powell’s speech without having another captain for difficult situations. CAC40 lost 1.5% to 6093 points shortly after opening.
Economic moments of the day
There will be no main indicator today. The whole macro diary is here.
The euro again lost ground at $ 1.0491. An ounce of gold trades at $ 1,864. Oil remains in the $ 120 zone, North Brent oil – $ 120.30 per barrel, and WTI light oil – $ 118.97. The yield on 10-year US debt accelerated to 3.18%, and 5-year – to 3.33%. Bitcoin is worth $ 25,500.
The main changes in the recommendations
- Adevinta: Jefferies remains long with a reduced target price of NOK 115 to 105.
- Aker BP: Berenberg is moving from sales to retention, seeking 390 Norwegian kroner.
- Auto Trader: Jefferies remains long with a reduced target price of 870 to 790 GBp.
- British American Tobacco: Jefferies remains long-term, with the target raised from 3,900 to 4,200 GBp.
- Demant: Morgan Stanley restores online weighted tracking, focusing on 319 Danish kroner.
- ENI: Berenberg remains long to raise from 16 to 17.50 euros.
- Equinor: Berenberg remains on hold to raise from NOK 335 to NOK 380.
- Hamnet: Jeffries remains to spend with a reduced target price of 150 to 130 Swedish kronor.
- Maisons du Monde: Societe Generale goes from purchase to storage, aiming for 12.40 euros.
- Orange: Bernstein goes from neutral to highly productive, focusing on 13 euros.
- Repsol: Berenberg remains with the target price raised from 15.50 to 16.50 euros.
- Rheinmetall: Goldman Sachs resumes procurement monitoring, focusing on 298 euros.
- Rolls-Royce: Morgan Stanley is moving from online weight to overweight, focusing on 118 GBp.
- Saab: Goldman Sachs resumes sales tracking, focusing on 352 Swedish kronor.
- Schibsted: Jefferies remains long, the target price is reduced from 305 to 285 NOK.
- Scout24: Jefferies remains long, the price has been reduced from 80 to 71 euros.
- Thales: Goldman Sachs resumes monitoring of purchases, focusing on 146 euros.
- TotalEnergies: Berenberg remains long with a target price raised from 58 to 66 euros.
- Vesuvius: Jefferies remains long, price reduced from 705 to 535 GBp.
- Voestalpine: Jeffries remains to be saved, and the target price has been raised from 27.50 to 29 euros.
Important (and less important) ads
- Qatar has provided TotalEnergies with 25% of the new national company to increase the country’s total liquefied gas export capacity.
- S&P upgraded Thales from “BBB +” to “A-“, outlook “stable”. The group also presents a new tactical system of training and modeling based on artificial intelligence.
- Sanofi and GSK are doing well with their next-generation revaccination candidate based on the beta variant antigen against covid.
- Saint-Gobain cancels 8.9 million of its own shares.
- Atos may split its activities as part of a major reorganization, according to some rumors.
- Pizzorno Environnement Group will win a contract for the collection of household waste in Lille for 161 million euros over 7 years.
- Orpea signs a protocol of agreement with the main banking partners.
- Groupe Gorgé opens its new marine drone assembly plant in Ostend, Belgium.
- Sercel (CGG) is equipping a new ship in South Korea with a complete marine seismic collection system for 3D seismic surveys.
- The COVID-19 vaccine from Valnova is hot if Europe does not guarantee minimum orders.
- Hopium is signing a € 50 million dilution share with LDA Capital.
- Medesis Pharma includes the first patients in its phase II study.
- Delta Drone receives a new tranche of ORNAN for 1 million euros.
- Enogia has set up a joint venture with ADEME Investissement.
In the world
Important (and less important) ads
- Shares of American beauty brand Revlon fell 53% on Friday due to fears of bankruptcy.
- A British financial police officer is putting Credit Suisse under surveillance, according to the Financial Times.
- The US SEC is investigating Goldman Sachs through ESG funds.
- BlackRock offers the opportunity to vote at the general meeting of almost half of its customers who have index products.
- Tesla will split its stake into three parts to make it more affordable and increase stock liquidity.
- Netflix is launching its second season of Squid Game.
- Countryside launches its sale.
- A large fire engulfed a large processing plant in central England owned by Smurfit Kappi.
- Google is paying $ 118 million to settle a class action lawsuit for sex discrimination.
- Novartis provides positive data on Kymriah in leukemia.
- Pinterest completes acquisition of The Yes trading platform.
- Italy may nationalize Lukoil’s refinery in Sicily.
- Main publications of the day: Oracle, L’occitane, DFDS… The whole agenda is here.