Last Tuesday, I wrote here, the day after a fairly turbulent stock market session, that the markets had taken a good turn. Friday, it was rather the baseball bat that was out, or a legendary combo in Street Fighter. The Nasdaq 100 lost 4.1%, with some memorable spankings like this -9% for Nvidia. Two survivors on the rise only in the index: Electronic Arts, which is said to be coveted by Amazon, and Workday, an HR software publisher whose name I discovered (shame) and which has published good quarterly. Meanwhile, the S&P500 lost 3.4% and the Dow Jones 3% (with no rise for the old US index).
Why so much hate? Because investors thought that the Jackson Hole symposium (what the hell is that?) would be an opportunity for the US central bank to stop being mean to them and get back to the posture pro-raise-of-actions that she has been cultivating for 15 years. The teasing economists call it the Goldilocks policy: a little cutesy, that is to say neither too hot nor too cold, just perfect, as in the story of the three bears. The problem is that Friday, Boucle d’Or was more the type to have a sulphate. And without the blond, demure hair, but rather with the head of Jerome Powell, the boss of the Fed. Powell who was very clear in his speech: inflation is not going to disappear with a wave of a magic wand and there will be damage. “Our road is straight, but the slope is steep and we will row“, to divert a raffarinade (if you are young and you read this, know that Jean-Pierre Raffarin governed France, that he still exists and that he has graced us with a few quotes from anthology).
The American central bank used the Jackson Hole symposium to remind us of two things. The first is that previous experiences have shown that we do not come out of these hyper-inflationary periods with a smile, goodwill and self-persuasion. The second is that the financial markets are mistaken in thinking that the Fed’s resolve is fluctuating. Obviously, that didn’t please the investors so much, who thought they were seeing Goldilocks again and who found themselves face to face with Papa Ours. The probability of another 75 basis point rate hike at the meeting scheduled for September 20-21 has risen to 74.5% from 47% a week ago, according to CME’s FedWatch tool.
In Europe too, there is turmoil on the monetary front. More and more members of the ECB are calling for a vigorous rate hike after the September 8 Governing Council. I remind you that on the old continent, the peak of inflation has a priori not yet been reached (August data will be published on Wednesday) and that monetary efforts have not started as early as in the United Kingdom and in the United States. Despite Europe’s natural shock absorbers, it should not be imagined that the region will triumph over inflation with the Coué method. And you don’t need to be a genius economist to imagine the perfect storm represented by the conjunction of a historic energy crisis with an end to supportive monetary policies and a rate hike cycle. I do not have the soul of a great pessimist, but there we still really seem to be in trouble.
Other things to know to start the week:
- The London Stock Exchange will be closed today for the public holiday preceding the start of the school year, Summer Bank Holiday.
- Fed Vice Chair Laeal Brainard is scheduled to speak at a Fed workshop. She’s not expected to say anything other than her boss on Friday, but her intervention will likely come under scrutiny. It will take place after the close of European markets, around 8:15 p.m.
- I was talking about it just above, European inflation for August is expected on Wednesday (the consensus is at 9% for annual inflation, including 4.1% for the underlying part). It will be supplemented by employment figures in the euro zone on Thursday. Enough to fuel the ECB’s thinking for the meeting the following week.
- In France, Prime Minister Elisabeth Borne has not ruled out the taxation of the superprofits of energy companies, but prefers that they lower their prices for consumers.
The atmosphere is heavy in Asia Pacific this morning, in reaction to the drop on Wall Street on Friday evening. The Japanese Nikkei 225 fell 2.7% while the Australian ASX 200 lost almost 2%. The Chinese markets continue to do nothing like the others and are holding up better: -0.7% in Hong Kong and mainland China. Leading indicators are strongly bearish in Europe. American “futures” too, but there is still quite a bit of time before the opening. The CAC40 lost 0.8% to 6222 points shortly after opening.
Economic highlights of the day
There will be no major indicator today. The whole macro diary here.
The euro retreats to 0.9918 USD. The ounce of gold lost ground to 1721 USD. Oil is gaining altitude with Brent from the North Sea at 101.76 USD a barrel and US light crude WTI at 94.16 USD. US yields are up on the long maturities and down on the 6-month and 3-month. The american debt 10-year yields 3.12%, while 2-year yields a new peak in the current cycle at 3.47%. Bitcoin has fallen back below the USD 20,000 mark.
The main changes in recommendations
- Bâloise: Credit Suisse remains outperforming with a price target reduced from 180 to 155 CHF.
- Dätwyler: UBS remains long with a price target reduced from 374 to 337 CHF.
- Formycon: Kepler Cheuvreux remains long with a target raised from 75 to 91 EUR.
- SFS: Julius Bär remains to be kept 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 to be kept with a reduced price target of 140 to 130 CHF.
- Valiant: UBS goes from neutral to long, targeting CHF 104.
Important (and less important) announcements
- TotalEnergies, Equinor and Shell sign an agreement with Yara for the CO2 sequestration of the Northern Light project.
- Valneva reports new promising phase III data for the immunogenicity of its covid vaccine, and first positive indications as a heterologous booster.
- Sercel (CGG) signs a second “major” contract for a seabed OBN system.
- Affluent Medical launches a capital increase with preferential subscription rights maintained at EUR 2.32 per share, to raise €6.3 million and avoid the liquidity crisis.
- Dekuple has published its turnover.
- Looks like no one saw fit to wake up French businesses this morning.
In the world
Important (and less important) announcements
- Moderna accuses Pfizer/BioNTech of patent infringement on the covid vaccine.
- Aker BP unveils $15 billion development projects on the Norwegian continental shelf.
- Dell is ending all of 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 obtains approval in Europe against leukaemia.
- Ems-Chemie publishes 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 negotiates an extinction of lawsuits for money in the Cambridge Analytica scandal in the United States.
- Blackstone plans to file for an IPO for a shopping center portfolio worth $2.5 billion.
- Main publications of the day: BYD, Pinduoduo, … All the agenda here.