The elephant in the room

I am not very positive to talk to this morning. It’s not the first time this year, but there I hardly have any jokes to pass the pill. Note, that may be a sign that surrender is coming. The surrender is the moment when the nerves of investors are released. This usually happens after a round of losses and a series of failed rebounds. In fact, investor sentiment indicators have been at the daisy level for months, more on the root side than the petal side. But on the contrary, there is a difference between these signs and the real behavior of the financiers, who find it difficult to wean themselves from the equities. This is due to a combination of factors:

  • The bond market is not a valid safe haven because it is going through a historic crash. This is in line with the concept “TINA” (“there is no alternative”, there is no alternative better than equities).
  • The feeling of “FOMO” (“fear of missing out”, the anxiety of missing something important, in this case a rebound in equity markets).
  • Strong macroeconomic indicators that mask microeconomic disorders. Usually, the singular resistance to consumption (which we hardly see as sustainable), extremely low unemployment or the absence of a major accident in the credit market (which we hardly see as sustainable).

This number of factors enabled the rebound that occurred between mid-June and mid-August. Since then, the soufflé has fallen. In the month of September, what do wealthy investors do? They moved their balls to defensive ETFs and stocks in the commodities and health care sectors. This is what emerged from a small survey conducted by Bank of America among its private customers. These clients are currently 62.2% in equities, 19.2% in bonds and 11.7% in cash. The American bank also addressed the subject of surrender in the same document. From his point of view, the current bond crash has two consequences, the proliferation of credit “events” (meaning “defaults”) and damage to investments that investors love such as technology. America, private equity and long in the dollar (on this last point, it remains to be fulfilled). “True surrender is investors selling what they want and have in their portfolio,” BofA pointed out. Ah, one last thing to add a note of tactical optimism: the bank adds that it is necessary to monitor the chance of negative employment data. From there, the recession has entered the noggins and it should benefit most cyclical stocks, in anticipation of the next phase of economic recovery.

We leave the financial future to focus on the news of the day. Beginning with the election victory of the extreme right in Italy, which should bring Giorgia Meloni to the presidency of the council. We should probably expect more conflicting relations with Brussels, which materializes a new plunge of the euro against the dollar. In Russia, parliamentarians close to the government are concerned about the “excesses” of the mobilization campaign. After the more aggressive fiscal measures taken by the United Kingdom to try to offset the energy-inflationary chaos, the pound sterling fell to 1.035 USD, an unprecedented level for “cable”, one of the most followed currency pairs. The fall is particularly pronounced as rumors circulate of an emergency rate hike at the Bank of England this week, outside the more civilized framework of regular meetings. The kind of event that is unlikely to relax the atmosphere of financiers who hate improvisation. Last element, the price of oil fell again, which is good news for inflation but little for the view of investors on the economic outlook.

On the agenda for the week, we have to slam between (many) public speeches by central bankers who must continue to multiply warnings about the harms of inflation. If we miss information. There are four important indicators this week. In the US, durable goods orders and consumer confidence (Tuesday) and August PCE inflation (Friday). In Europe, the focus is on the preliminary inflation figures for September, which will be announced on Friday.

European corporate news is dominated by the ball of suitors around M6 Métropole Télévision after the failure of the TF1 merger. In addition, this week Volkswagen is the one to bring Porsche to the stock market, perhaps not the wisest choice, but this type of operation can hardly be deprogrammed without the risk of great reputational damage. And then by shouting from the rooftops that Porsche is the most beautiful brand, Volkswagen doesn’t have much of a choice.

Financial markets are still struggling this morning. Asia Pacific followed the western slide on Friday, with sharp declines in Japan (-2.6% for the Nikkei 225) and Korea (-2.8% for the KOSPI) and slightly more measured in India (-1.8% for the NIFTY ) and in Australia (-1.2% for the ASX). Europe’s leading indicators are bearish. CAC40 started to decrease by 0.5% but approached equilibrium a few minutes later.

Economic highlights of the day

The Ifo index of confidence in German business circles (11:00 am) and the activity index of the Chicago Fed (2:30 pm) are expected. The full macro diary here.

The euro continued its slide to 0.9638 USD. The ounce of gold fell together to 1639 USD. Oil retreated, with Brent from the North Sea at $85.56 a barrel and US light crude WTI at $78.31. The yield on US 10-year debt is trending at 3.74%. The 5-year is at 4.04% and the 2-year at 4.25%. Bitcoin resisted around USD 18,900.

The main changes in the recommendations

  • Airbus: Jefferies remains bullish with a target reduction from 145 to 140 EUR.
  • Anheuser-Busch Inbev: Jefferies switches from buy to maintain targeting at EUR55.
  • BAE Systems: Jefferies remains bullish with target raised from 960 to 1000 GBp.
  • BP Plc: JP Morgan moved from overweight to neutral by targeting 520 GBp.
  • Carlsberg: Jefferies from hold to buy, targeting 1110 DKK.
  • Computacenter: Citigroup from neutral to buy, targeting 2450 GBp.
  • Faurecia: JP Morgan lowered the target price from 40 to 34 EUR.
  • Givaudan: Morgan Stanley moved from underweight to overweight by targeting CHF 3,400.
  • Medacta: Credit Suisse remains outperforming with a price target reduced from 120 to 105 CHF.
  • Novartis: UBS remains neutral with a price target reduced from 86 to 80 CHF.
  • Rieter: Credit Suisse remains neutral with a target reduction from 121 to 100 CHF.
  • Securitas: AlphaValue remains high with a target reduction from 159 to 137 SEK.
  • Soprano: Inderes from sale to reduction, aiming at 0.82 EUR.
  • Symrise: Morgan Stanley from neutral to underweight by targeting 91 EUR.
  • Thales: Jefferies remains bullish with a target cut from 145 to 135 EUR.
  • TotalEnergies: JP Morgan from neutral to overweight by targeting EUR 62.
  • Unilever: Berenberg from hold to buy, targeting EUR 55.50.
  • Valeo: JP Morgan lowered the target price from 25 to 20 EUR.
  • Varta: Goldman Sachs from overweight to neutral, targeting EUR 50. JP Morgan from overweight to neutral by targeting EUR 45.

In France

Important (and not so important) notices

  • TotalEnergies is making a major $1.5 billion gas investment in Qatar.
  • Airbus CEO reaffirms confidence in 2025 production target
  • Eurofins sold Stirling Square’s “Digital Testing” business for €220 million.
  • Alstom won a 116 million euro contract in Italy.
  • A consortium led by Stéphane Courbit will offer 20 EUR per M6 Métropole Télévision share to RTL Group with a view to takeover, according to Bloomberg. Daniel Kretinsky can also run, as well as MFE-MediaforEurope.
  • Ramsay Générale de Santé has noted the cessation of takeover discussions between its owner Ramsay Health Care and the consortium led by KKR.
  • Valneva will only proceed with the development of a second-generation vaccine against COVID-19 if ongoing financial negotiations are successful.
  • Biosynex has launched a friendly takeover bid of EUR 2.30 per share for Theradiag.
  • To a bid to obtain 0.19 EUR of Atari shares, filed by Irata, which does not intend to withdraw the file from the listing. The operation is supported by the CEO and the board of directors.
  • Capelli developed an urban redevelopment project for CPAM’s new headquarters in Bordeaux.
  • Vergnet arranged OCABSA’s dilutive financing with Negma.
  • Egide raised €1 million by placing a bond with Vatel Capital. At the same time, the group asked the financial backer of the subsidiaries of Egide USA and Santier to postpone the maturities for 3 months while negotiating with Gibraltar Capital.
  • Augros, Soditech and Lysogene published their accounts.

In the world

Important (and not so important) notices

  • Volkswagen floated Porsche on the stock exchange on Thursday.
  • Italy and Intel chose Veneto as the preferred region for the new chip factory.
  • PG&E will replace Citrix in the S&P500. EQT Corp will replace Duke Realty.
  • Glencore fined $486 million for US market manipulation scheme.
  • Credit Suisse management has issued an internal memo in an attempt to reassure its employees following recent rumors.
  • RWE has signed a partnership with ADNOC for the supply of LNG.
  • Vodafone plans to sell its stake in Vantage Towers.
  • The outgoing financial director of the Burberry group will occupy the same position at GSK.
  • Justin Boxford named Global Brand President of The Estée Lauder.
  • AstraZeneca discontinued the cholesterol drug Ionis after it failed to meet the efficacy threshold in a phase II study.
  • TPG closes SPAC TPG Pace Beneficial Finance Corp and pays investors for lack of attractive investment.
  • Givaudan joins LanzaTech in producing fragrance ingredients from renewable carbon.
  • Main publications of the day: Quadient, Leclanche… The full agenda here.


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