Bourse de Paris : Feu d’artifice en juillet

Bourse de Paris : Feu d'artifice en juillet

Investors can thank the month of July 2022, which allows them to mitigate the poor performance accumulated during the first half of the year. In Europe, the broad Stoxx Europe 600 index recovered 7.6%, its best monthly score since November 2020. More cyclical national indices such as France’s CAC40 did better (+8.9%), while more defensive like the Swiss SMI did not reach the average (+3.8%). The reason is quite simple: Tech, Manufacturing and Consumer Cyclicals have taken off again, leaving Health and Finance in the lurch. You might as well take advantage of it because, statistically, August and September are on average the least prolific months of the year for the Stoxx Europe 600. A little music to celebrate July with dignity?

In the US, the sector’s returns are distributed more or less in the same way, with the tech-rich Nasdaq 100 index recovering 12.5%. We have to go back to April 2020 to find a more favorable month. The more diversified S&P500 rallied 9%.

The market rally was based on a number of somewhat wobbly elements, which together ended up shaping something more solid. Investors seem to have passed the stage where they see everything in black. Which means they start to see a glass half full instead of a glass half empty in everything. They have factored in the punitive cycle of Fed rate hikes and the ongoing macroeconomic slowdown. They also found that most companies are still able to pass on their rising costs to the consumer. And that the valuations are less misleading than six months earlier, even taking into account less dynamic results than those of previous quarters. All of this remains very fragile and the impact of macroeconomic forces at work, I am thinking in particular of inflation or energy and weather disruptions, is extremely difficult to quantify.

But in the “shock cycle”, the market stopped denying the positive news, which is already a big step forward from previous weeks. You only have to look at the warm reception given last week to the results of Apple or Amazon when they were very far from the usual standards of the two companies to understand that something has happened in the minds of investors lately. Investors who even found solace in the poor US GDP figures for the second quarter. Their animal spirit leads them to think that the Fed could play firefighters again by ending its inflation-fighting policy sooner than expected to restore momentum to the economy. Have investors lost their minds? This is the theme of the second song of the day.

the shock cycle

To start the week, knowing that Joe Biden is not finally cured of his Covid and that the Democratic president of the House of Representatives, Nancy Pelosi, has started a tour of Asia. It is rumored that she passes through Taiwan, which would obviously cause new tensions with China. On the macroeconomic docket we will find a Bank of England rate decision on Thursday and US employment figures for July on Friday. This weekend, China published poor manufacturing activity figures for the month of July. So welcome to August, in music.

There will be another big series of corporate results this week, including around 60 worth more than $50 billion. In Europe, after HSBC and Heineken this morning, it will be followed by BP Plc, AXA, Siemens Healthineers, BMW, Novo Nordisk, Bayer and Allianz. In the United States, PayPal, Costco, CVS Health, Eli Lilly, Amgen or ConocoPhillips are expected in particular.

European leading indicators are bearish this morning, as is the US market. We probably need to digest the recent gains. In Asia, Tokyo and Sydney gained 0.6% at the close. Mainland China is up, but Hong Kong is losing some ground. The VIX volatility index fell to 21 points, which had not happened since last April. A sign that there is a little less nervousness in the market. The CAC40 lost 0.11% to 6,441 points at the open.

The highlights of the economic day

The July manufacturing PMIs are on the schedule for major economies, including the euro zone at 10am and the United States at 3:45pm. On the other side of the Atlantic, there will also be the manufacturing ISM and construction spending (4pm). All the macro diary here. China reported an official manufacturing PMI back in contraction territory in July at 49 points, below expectations (50.3). The Caixin PMI, which contains more private companies, deteriorated to 50.4 points but remained in the expansion zone.

The euro was little changed at $1.0228. The ounce of gold stabilizes at 1761 USD. Oil was down from the previous week, with North Sea Brent at $102.90 a barrel and US WTI light crude at $97.30. The 10-year US debt yield stabilized at 2.66%. Bitcoin is trading around $23,400.

The main changes in the recommendations.

  • Ageas: HSBC moves from hold to buy, targeting EUR50.
  • Air France-KLM: HSBC goes from hold to buy, targeting EUR 1.60.
  • Amundi: Credit Suisse raises its price target from €52 to €60.
  • Anglo American: JP Morgan moves from neutral to overweight, targeting GBp 3,850.
  • Arkema: Berenberg remains on the buy side with a price target reduced from EUR152 to EUR131.
  • BAE Systems: Jefferies remains long with a high target of 945-960 GBp.
  • BNP Paribas: Jefferies remains long with a target reduced from EUR73 to EUR72.
  • Croda: Berenberg is still the buy with a price target reduced from 90 to 84 GBp.
  • Diageo: Berenberg remains with a read target of 3,900 to 4,160 GBp.
  • Hermès: Citigroup raises its target price by EUR 1,000,213,366.
  • Inficon: Research Partners remains to hold with a target reduced from CHF 910 to 850.
  • Ipsen: Berenberg remains with a high price target of EUR98-102.
  • Jet2: HSBC goes from buy to stay, targeting 970 GBp.
  • Kerry: Berenberg remains long with a high price target of EUR124-128.
  • Renault: Jefferies remains on the buy side with a high price target of €40-43.
  • Rheinmetall: HSBC moves from hold to buy, targeting EUR242.
  • Safran: Jefferies remains with a high target of EUR100 to EUR106.
  • Scor SE: Jefferies remains with a reduced price target of €26.50 to €17.50.
  • Securitas: JP Morgan goes from underweight to neutral by targeting its SEK.
  • Siltronic – Jefferies remains long with a high target of EUR110-115.
  • STMicroelectronics: Citigroup raises its target price from EUR44 to EUR52.
  • Swedish Orphan Biovitrum: Morgan Stanley Resumes Overweight Tracking With SEK 280 Target
  • Swiss Re: JP Morgan remains neutral with a target reduced from CHF 100 to CHF 80.
  • Tokmanni: SEB Equities moves from hold to buy targeting EUR16.
  • Eiffel Tower: It remains to keep Kepler Cheuvreux with a reduced target price from 27 to 23 EUR.
  • Umicore – Jefferies continues to underperform with a high target of EUR26-27.

In France

Important (and less important) announcements

  • New car registrations fell 7.06% in July in France, according to the PFA.
  • Saint-Gobain finalizes the acquisition of Kaycan.
  • Vinci buys the 29.9% that Fintech Advisory has in the Mexican airport operator OMA for $815 million.
  • Ipsen signs an alliance with Marengo Therapeutics in immuno-oncology. The laboratory acquires exclusive rights to an experimental ERK inhibitor as part of its research partnership with AGV Discovery.
  • Fitch downgraded the outlook on Faurecia’s BB+ credit rating to negative from stable.
  • Moody’s could downgrade Eutelsat’s Baa3 rating following the OneWeb deal.
  • Icade signs a contract for the sale of a building in Nanterre.
  • Bolloré’s half-year results have increased considerably.
  • Innate Pharma and AstraZeneca failed with monalizumab combined with cetuximab in phase III.
  • Peugeot Invest and its partners sell 13 bulk carriers.
  • Gascogne signs a €126.8 million syndicated loan and a €50 million loan agreement with the European Investment Bank.
  • Uniti strengthens its alliance with PGIM Real Estate.
  • PCAS, NSE, DLSI, Algreen, Cnova, ST Dupont, Finatis, Delfingen, Courtois, MG International, Carpinienne, Foncière Euris… have published their accounts.

In the world

Important (and less important) announcements

readings

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