to follow in
Because financial information is consumed like cupcakes, hot and at breakfast time, Anthony Bondain gets up at dawn to serve you the Morning Meeting every morning.
It must be recognized that the last quarter of 2022 does not start with the best auspices on the stock market, after a month of September that frustrated investors’ hopes of a rebound. Risk aversion remains high, which has weighed on stocks that were once market darlings. We start the week with a rather unpleasant mini-report and some economic-political-energy news.
Geometry enthusiasts will surely have noticed some symmetry in the equity markets in the third quarter of 2022. Stock indices rose through mid-August, only to reverse the trend and end (much) lower than they had started the quarter. . In the end, the balance is something like this:
- S&P500: US Broad Index lost -9.3% in September, -5.3% in all 3me quarter and -25% in the year.
- Nasdaq 100: The US technology index lost -10.5% in September, -4.6% during the quarter and -33% during the year.
- Stoxx Europe 600: The broad European index lost -6.6% in September, -4.7% during the quarter and -20.5% during the year.
It would be tedious, premature, and beyond my intellectual reach to explain what led to this reality, but I can safely write that investors have grossly underestimated the risks facing the global economy. The situation has probably been aggravated by the general complacency inherited from the crazy stock market years that followed the financial crisis of 2008. Otherwise, I leave you to add the seasonings you prefer: globalization, geopolitics, central banks, energy transition, excess financialization, dogmatism, pandemic, inequalities, budgetary stimulus, tribalism… You will notice in passing that although we all tend to see midday just around the corner, crises have always been nourished by the same ingredients since the beginning of time.
The problem for investors is all the more thorny as the traditional safe havens have also been razed. The bond market is in serious trouble. As the mercurial British banker Bill Blain recalled last week, “in the obligations is the truth“, because they are “the financial and plumbing backbone of world markets, the basis, the rate at which all investments are measured“. Government bonds are at -21.6% since the start of the year. High yield bonds are at -18.9% and investment grade corporate bonds are at -21.2%. C It’s barely better than the S&P500, for example. To find a positive in 2022, you have to go to raw materials (+28% this year), the US dollar (+18%) or oil (+9%). The stocks that benefited the most were oil companies (crisis in energy supply), arms (return of military risk), banks (rate hike cycle) and health (defensive sector in times of crisis).
To start the week, the month and the trading quarter, it should be noted that:
- The Ukraine had some tactical victories on the ground, especially around the town of Lyman, which was recaptured.
- In the United Kingdom, Liz Truss admitted having made communication errors but intends to deploy the political project that forced the Bank of England to react urgently in the bond market to preserve financial stability on the other side of the Channel. Her finance minister promised to rein in spending, which is as good as telling you this morning that stocks will rally 10% for the week. S&P has doubts: the rating agency believes that the country’s strength will be undermined by the project. You tell me, S&P had no doubts in 2007 about subprime mortgages, but we imagine that they have moved on since then.
- Seeing the fall in oil, OPEC+ has once again pulled the specter of a drop in production out of its hat. Black gold rallied yesterday but remains under pressure from slowing economic activity.
- There will be a second round in the presidential elections in Brazil. Finally, Bolsonaro is closer to Lula than expected (4 points ahead). See you on October 30.
- Finally, the Nord Stream 2 pipe would no longer have any or almost no leaks, thanks to the pressure of the water. The facility and its counterpart Nord Stream 1 had been damaged by an act of sabotage of unknown origin. A proper repair would be very complex, according to experts. Nord Stream 2 is not delivering gas to Europe due to the war in Ukraine, but its sabotage had pushed up prices on the grounds that any potential reduction in capacity is a potential source of future stress.
In Asia Pacific, the Japanese Nikkei is recovering a bit despite the return of the yen to the zone of potential intervention by the Bank of Japan (ie around 145 JPY for 1 USD). The rest of the positions fell, as the Hang Seng (Hong Kong) regressed 1.5% or the ASX 200 (Australia) fell 0.3%. Europe should open in the red because indices had made gains, sometimes quite strongly, at the close on Friday, before Wall Street plummeted. The day is a public holiday in Germany (unification day) but not a day off at the Frankfurt Stock Exchange. Venues in mainland China, on the other hand, are closed all week for the national holiday, what financiers call “golden week.” The CAC40 starts the session down 1% at 5,701 points.
The highlights of the economic day
The second reading of the September manufacturing PMI indices for the main economies is expected today (specifically at 10:00 a.m. for the euro zone and at 3:45 p.m. for the United States, where the ISM equivalent to 4:00 p.m. will also be published). :00 hours). All the macro diary here. This morning, the Japanese Tankan Industrial Confidence Index fell from 10 to 8 points.
The euro is trading at 0.9814 USD. The ounce of gold goes back to 1664 USD. Oil rallied, with North Sea Brent at $87.39 a barrel and US WTI light crude at $81.73. The 10-year US debt yield is little changed at 3.78%. Bitcoin is trading around $19,200.
The main changes in the recommendations.
- Air France-KLM: HSBC goes from buy to stay, targeting EUR1.35.
- Atlas Copco: Morgan Stanley starts monitoring underweight with SEK 91 target.
- BillerudKorsnäs: Jefferies remains to retain with a target reduced from 158 to 150 SEK.
- British American Tobacco: Jefferies remains long with a high price target of GBp4,500-4,800.
- Compagnie Financière Richemont: UBS continues to buy with a high price target of CHF 131-135.
- Dätwyler: UBS remains long with a reduced price target of CHF337 to CHF304.
- Deutsche Lufthansa: HSBC moves from hold to cut targeting EUR4.75.
- EasyJet: HSBC goes from buy to stay, targeting 300 GBp.
- GEA Group: Morgan Stanley starts the weighted monitoring in line with the target of EUR 36.
- International Consolidated Airlines: HSBC goes from hold to buy with a target of 130 GBp.
- Land Securities: Stifel moves from buy to hold, targeting 550 GBp.
- Legrand: Deutsche Bank lowers its price target from EUR 97 to EUR 86.
- Metabolic Explorer: Kepler Cheuvreux remains with a reduced target of EUR 2.50 to EUR 1.90.
- Michelin: JP Morgan lowers its target price from 23.50 to 20 EUR.
- OC Oerlikon: UBS remains on the buy side with a price target reduced from CHF 11.90 to CHF 11.30.
- Orpea: AlphaValue goes from buy to short, targeting EUR 9.10.
- Sandvik: Morgan Stanley starts to trail towards overweight by targeting 175 SEK.
- Schindler: Barclays remains weighted online with a price target reduced from CHF 180 to CHF 165.
- Sciuker Frames: Kepler Cheuvreux goes from hold to buy, targeting EUR10.
- Shaftesbury: Stifel moves from buy to hold targeting 380 GBp.
- TotalEnergies – Berenberg remains long with a high target of EUR63-65.
- Valneva: HC Wainwright remains long with a reduced target of €32 to €27.
- Wärtsilä: Inderes goes from hold to buy, targeting EUR8.
Important (and less important) announcements
- The car market rises 5.46% in September in France, according to the PFA.
- Situation “very complicated” for the chips until the end of 2023, according to the head of Stellantis, Carlos Tavares.
- Kering Eyewear completes the acquisition of Maui Jim.
- AXA plans to invest at least 100 million euros in a new capital increase for Banca Monte dei Paschi.
- Societe Generale will acquire PayXpert to strengthen the payment offering in Europe for merchants and e-merchants.
- Technip Energies wins a large contract with Ineos in Belgium.
- Faurecia receives 213 million euros from the EU to develop hydrogen in France.
- Vinci signs two contracts for high voltage lines in Brazil.
- Worldline completes the sale of its TSS division to Apollo for €2.3 billion in enterprise value.
- Eurofins will buy up to 2% of your capital.
- Unibail-Rodamco-Westfield has completed the sale of the Villeneuve 2 shopping center, located in the Lille region, bringing the completion rate of its sale program to 80%.
- Aéroports de Paris confirms its traffic forecasts in Paris for 2022 and 2023.
- Figeac Aero is finalizing its redeployment in Mexico.
- Crossject launches a capital increase of 4.09 million euros at 2.70 euros per share.
- Cafom sells the Distri Services fund to a subsidiary of Vente-Unique.
- Olympique Lyonnais plans to finalize its acquisition by Eagle Football on October 21.
- Bassac finalizes the acquisition of Maisons Baijot.
- Bonduelle, Waga, Metabolic Explorer, AB Science, Delta Drone, M2i, Prologue, Gascogne, Barbara Bui, Aures, Itesoft, DNXCorp, Diagnostic Medical Systems, Société Marseillaise du Tunnel Prado-Carénage, have published their accounts.
In the world
Important (and less important) announcements
- Credit Suisse is trying to ease investor concerns after spreads on credit default swaps increased.
- Elon Musk unveils Tesla’s ambitious humanoid robot. The automaker also announced that it delivered 343,830 vehicles in the third quarter, against an expected 357,938, but still a record.
- RWE buys Con Edison’s renewable energy portfolio for $6.8 billion.
- Prosus gives up buying Billdesk.
- Sony will launch a Playstation dedicated to virtual reality.
- ABB lists Accelleron (a turbocharger subsidiary) today in Zurich.
- Sumitovant Biopharma (Sumitomo Dainippon Pharma) offers to buy Myovant Sciences for $2.5 billion, but the American rejects the offer.
- EU antitrust regulators have set a November 8 deadline to rule on Microsoft and Activision.
- Mobileye, a subsidiary of Intel, files an application for listing on the stock exchange.
- Roche appoints Matt Sause to lead its diagnostics division.
- FEMSA receives all regulatory approvals for Valora’s takeover bid.
- United Airlines will suspend service at New York’s John F. Kennedy Airport in late October due to limited landing and takeoff times.
- Vestas wins a contract for a wind farm project in Lithuania.
- Main publications of the day: Avanza, Argan, Aryzta, Kaufman, Bonduelle… All the agenda here.