On Tuesday, I wrote here, the day after a rather chaotic stock market session, that the markets were doing well. Friday, the baseball bat that no longer exists, or a legendary combo in Street Fighter. The Nasdaq 100 lost 4.1%, with some memorable hits like this -9% for Nvidia. Two survivors of the only increase in the index: Electronic Arts, which is said to be desired by Amazon, and Workday, an HR software publisher whose name I discovered (shame) and which is published in a good quarterly. Meanwhile, the S&P500 lost 3.4% and the Dow Jones 3% (with no increase in the old US index).
Why so much hate? Because investors think that the Jackson Hole symposium (what is that?) could be an opportunity for the US central bank to stop being mean to them and return to the pro-increasing-actions posture that it has cultivated. 15 years. Economists jokingly call it the Goldilocks policy: a little cutesy, that is, not too hot or too cold, just perfect, like the story of the three bears. The problem is that Friday, the Boucle d’Or is more the type with sulphate. And without the blond, demure hair, but on the head of Jerome Powell, the boss of the Fed. Powell was very clear in his speech: inflation will not go away with a wave of the magic wand and there will be damage. “Our path is straight, but the slope is steep and we paddle“, to transfer a raffarinade (if you are young and you read this, know that Jean-Pierre Raffarin is in charge of France, that he still exists and that he gave us some quotes from the anthology).
The American central bank used the Jackson Hole symposium to remind us of two things. The first is that past experiences show that we do not come out of these hyper-inflationary times with a smile, good will and self-appealing. The second is that the financial markets mistakenly thought that the Fed’s determination was changing. Apparently that didn’t please the investors, who thought they were seeing Goldilocks again and who found themselves facing Papa Ours. The probability of another 75 basis point rate hike at the meeting scheduled for September 20-21 rose to 74.5% from 47% a week ago, according to CME’s FedWatch tool.
In Europe too, there is turmoil on the currency front. More and more ECB members are calling for a sharp rate hike after the September 8 Governing Council meeting. I remind you that in the old continent, the peak of inflation has a priori not yet been achieved (the August data will be published on Wednesday) and that the monetary efforts have not started earlier in the United Kingdom and the United States United States. Despite Europe’s natural shock absorbers, it should not be assumed that the region will beat inflation using the Coué method. And you don’t have to be a genius economist to imagine the perfect storm represented by the combination of a historic energy crisis with the end of supportive monetary policies and a cycle of rate hikes. I do not have the soul of a great pessimist, but there we still seem to be in trouble.
Other things to know at the start of the week:
- The London Stock Exchange will be closed today for the public holiday before the start of the school year, Summer Bank Holiday.
- Fed Vice Chair Laeal Brainard is scheduled to speak at a Fed workshop. He is not expected to say anything except to his boss on Friday, but his intervention will likely be scrutinized. This will happen after European markets close, around 8:15 p.m.
- I talked about it just above, the European inflation for August is expected on Wednesday (the consensus is at 9% for annual inflation, including 4.1% for the underlying part). This will be supplemented by euro zone employment figures on Thursday. Enough to fuel the ECB’s thinking for next week’s meeting.
- In France, Prime Minister Elisabeth Borne did not reject the tax on superprofits of energy companies, but they preferred to lower their prices for consumers.
The atmosphere in Asia Pacific is heavy this morning, as a reaction to the drop on Wall Street last Friday night. The Japanese Nikkei 225 fell 2.7% while the Australian ASX 200 lost almost 2%. The Chinese markets continued to underperform as others and fared better: -0.7% in Hong Kong and mainland China. Leading indicators are strongly bearish in Europe. American “futures” too, but there is still a little time before the opening. The CAC40 lost 0.8% to 6222 points shortly after the opening.
Economic highlights of the day
No major signs today. The full macro diary here.
The euro returned to 0.9918 USD. The ounce of gold lost ground to 1721 USD. Brent oil rose from the North Sea at 101.76 USD per barrel and US light crude WTI at 94.16 USD. US yields go up in long maturities and down in 6 months and 3 months. 10-year US debt is yielding 3.12%, while 2-year debt has reached a new high in the current cycle at 3.47%. Bitcoin fell back below the USD 20,000 mark.
The main changes in the recommendations
- Bâloise: Credit Suisse remains outperform with a price target reduced from 180 to 155 CHF.
- Dätwyler: UBS remains bullish with a price target reduced from 374 to 337 CHF.
- Formycon: Kepler Cheuvreux remains high with target raised from 75 to 91 EUR.
- SFS: Julius Bär remains on hold with a price target reduced from 135 to 105 CHF.
- Orior: Credit Suisse remains neutral with a price target reduced from 94 to 84 CHF.
- Straumann: Julius Bär remains on hold with a reduced price target of 140 to 130 CHF.
- Bold: UBS from neutral to high, targeting CHF 104.
Important (and not so important) notices
- TotalEnergies, Equinor and Shell signed an agreement with Yara for CO2 sequestration in the Northern Light project.
- Valneva reported new promising phase III data for the immunogenicity of its covid vaccine, and first positive signs as a heterologous booster.
- Sercel (CGG) signed the second “major” contract for the seabed OBN system.
- Affluent Medical launched a capital increase with preferential subscription rights maintained at EUR 2.32 per share, to raise € 6.3 million and avoid a liquidity crisis.
- Dekuple made public its turnover.
- No one seems to have seen fit to wake up French businesses this morning.
In the world
Important (and not so important) notices
- Moderna accuses Pfizer/BioNTech of covid vaccine patent infringement.
- Aker BP unveils $15 billion development projects on Norway’s continental shelf.
- Dell has ended all its activities in Russia.
- Olympus will sell its microscopy unit to Bain for $3 billion.
- Honda Motor plans to build a battery factory in the United States with LG Energy Solution.
- Walmart will buy out the minority shareholders of Massmart for ZAR 62 per share.
- Novartis gets approval in Europe against leukemia.
- Ems-Chemie posted a slightly higher net profit in H1.
- Credit Suisse is questioning its ambitions in China as part of its overhaul, according to Bloomberg.
- Meta Platforms negotiated a settlement of charges for money in the Cambridge Analytica scandal in the United States.
- Blackstone plans to file for an IPO for the shopping center portfolio valued at $2.5 billion.
- Main publications of the day: BYD, Pinduoduo, … All agenda here.