Dead calm for the ascent?

Dead calm for the ascent?

While you sleep in, you lucky little ones, I find myself in front of my blank page because someone decided one day that the Euronext markets would be open for Ascension. The news in Europe will not be very dense this morning, but there is what it takes from the United States not to be bored. The publication of the “minutes” of the last Fed meeting first. The report confirms that the institution is now well settled into its Godzilla costume walking on inflation. The tone of the document was even judged by commentators to be a bit more combative than expected, but paradoxically this did not result in the usual pathos of the investor doing hara-kiri because the central bank is mean.

We are tempted to see this as a sign that the markets have now taken on board the Fed’s policy, which provides good visibility on its actions and gives the impression of having regained control of the scenario. Well then obviously the discourse has changed profoundly: in a few months we have gone from “don’t be afraid, there won’t be a rate hike anytime soon” to “fear not, 50 basis point rate hikes are the norm“. But he seems better understood. This decline in nervousness is also illustrated by the decline in the VIX volatility index and by 10-year bond yields which not only fell from their peaks, but n did not move much last night after the publication of the famous minutes.

But let’s not get too carried away. This reprogramming of investor expectations does not mean that all parts of the financial sphere have already adjusted. Take corporate results for example. The figures at the beginning of the year were in line with previous publication seasons: companies exceeded analysts’ expectations. Expectations that are as usual too low because it is the companies themselves that guide them towards figures that they will be able to exceed, just to reassure shareholders. This is for companies that have a classic calendar, that is to say aligned with the calendar year. In other words, the 1er fiscal quarter corresponds to the period January, February, March. But since last week, it is the figures of companies whose financial year is offbeat that are coming out. They start their exercise on 1er february. We have seen what this meant for distribution in the United States: Walmart, Target and their acolytes depicted complicated tomorrows. Does this mean that the situation deteriorated considerably in April? Possible. In any case, technology stocks don’t seem immune either: last night, Nvidia and Snowflake (which also started their exercise at 1er February) showed a certain degree of caution and were sanctioned out of session.

In the rest of the news, China’s economic dynamics are still worrying. Even internally, since Premier Li Keqiang felt that the difficulties his country is going through are, “in some respects and to some extent even more significant than in 2020 when the epidemic was hitting hard“. A Chinese wake-up call is one variable that could put markets back on track, particularly as it would help ease the shortages that are gripping supply chains. Investors will also be watching U.S. economic data expected this post- midday, as the latest data came in below expectations. When a number sporadically misses the consensus, it’s an accident. When the data below expectations starts to multiply, it’s a trend. so.

To end on a positive note, here are a few European stocks that caught Bank of America’s attention because they are high-quality files but were slashed on the stock market in 2022. The bank specifically cites STMicroelectronics, Stellantis and AP Moller Maersk. In the same study that I am looking at, it also provides the six stocks in its coverage universe for which it has revised the earnings expectations the most over the next three years. These are for the upward revisions of Freenet, Repsol and Vesuvius and for the downward revisions of Elior, Alstom and Adidas. May these few indications inspire you.

Stock markets are undecided to say the least this morning in Asia Pacific. Australia, Hong Kong and Japan are down as I write, while Shanghai is up. European leading indicators were hovering around balance as I started writing. They are now pointing more towards a decline at the opening, but within fairly narrow bounds.

Economic highlights of the day

Three statistics in the United States: weekly jobless claims (2:30 p.m.), the second estimate of Q1 GDP (2:30 p.m.) and the consumer confidence index from the University of Michigan (4:00 p.m.). The whole macro diary here.

The euro retreated a little to 1.0699 USD. The ounce of gold drops to 1850 USD. Oil remains firm with North Sea Brent at $114.38 a barrel and US WTI light crude at $110.87. The yield on US 10-year debt stands at 2.75%, relatively stable. Bitcoin is trading around 29,800 USD.

The main changes in recommendations

  • Amadeus: AlphaValue remains to be reduced with a price target raised from 61.80 to 62.80 EUR.
  • Ashtead: Jefferies remains long with a reduced target price of 8,000 to 5,000 GBp.
  • Bakkavor: Berenberg remains to be held with a price target reduced from 125 to 110 GBp.
  • Bodycote: Berenberg remains long with a price target reduced from 1030 to 780 GBp.
  • Brenntag: Berenberg remains long with a price target raised from 95 to 100 EUR.
  • Compagnie des Alpes: Berenberg remains on the buy side with a price target raised from 21 to 22 EUR.
  • Datagroup: Baader Helvea goes from selling to reducing, targeting EUR 69.
  • FirstGroup: Berenberg starts follow-up on purchase by aiming for 150 GBp.
  • Galp Energia: RBC goes from sector performance to outperformance by targeting EUR 16.
  • Swiss Re: Jefferies remains to be kept with a price target reduced from 90 to 82 CHF.

In France

Important (and less important) announcements

  • Vivendi holds 55.4% of the capital of Lagardère, but the effective takeover remains suspended pending the opinion of the Competition Authority.
  • Renault on the threat of a collective action of a thousand owners of vehicles whose engines malfunction.
  • The Brazilian antitrust authority approves the acquisition of Grupo BIG by Carrefour.
  • Vinci will carry out the development work for the three aerial stations of the future line 18 of the Grand Paris Express.
  • OVH signs a partnership with SpeechBrain and Mila to accelerate research in neural speech processing.
  • The European Commission has approved the acquisition of Europcar.
  • Pierre & Vacances is continuing its restructuring process and has requested the opening of an accelerated safeguard procedure.
  • Takeover bid on Generix
  • Philippe Mellier and Hervé Milcent increase their stake in the capital of Solocal.
  • Geci issues €0.5 million by issuing dilutive ORNANs.
  • Derichebourg, Infotel have published their accounts.

In the world

Company results

  • Nvidia: the action plunged 10% outside the session after projections below expectations.
  • Snowflake: the stock fell 14% outside the session after the publication of mixed results and outlook.

Important (and less important) announcements

  • Nestlé is reportedly exploring the possibility of buying GlaxoSmithKline’s consumer healthcare unit.
  • Elon Musk increases the direct contribution to buy Twitter to $33.5 billion, by eliminating the financing line backed by Tesla securities.
  • Aramco reportedly approached Valvoline for a takeover.
  • Apple is raising base salaries to address labor shortages.
  • Peter Thiel is stepping down from the board of directors of Meta Platforms with immediate effect.
  • Twitter will pay $150 million to end an FTC investigation into its use of user data.
  • TechnipFMC obtains a “significant” contract from Equinor for the development of Halten East.
  • The president of JD Sports resigns. A CEO and an interim president in charge.
  • Main results publications of the day: Alibaba, Costco Wholesale, Medtronic, VMware, Dollar General, Marvell, Johnson Matthey… The whole agenda here.