Because financial information is consumed like pastries, hot and at breakfast time, Anthony Bondain gets up at dawn to serve you the Morning Meeting every morning.
Last stock market session of a week overloaded with corporate results and macroeconomic data. Yesterday, a weak US GDP led to a rebound in the indices, for the reasons that I will detail just below. In the evening, the results of Apple and Amazon, without being flamboyant, allow the leading indicators to anchor themselves firmly in the green.
Seen from the outside, some mechanisms that drive the stock market may seem completely insane. I would like to point out that this word does indeed exist in French and that it is the same one that the young colleague who is generally seated to my left pronounces in Anglo-Saxon all day long. But it is clear that the term slaps a little more in English. Markets sometimes seem insane then, or absurd if you prefer; we had a characteristic illustration of this yesterday with the announcement of the US GDP for the second quarter. The US economy contracted over the period, which is a priori bad news. Especially since this was already the case in the previous quarter, which characterizes a recession according to certain commonly accepted criteria.
The US economy is therefore slipping, which has caused a jump in equity indices. This is where the bone is, because the relationship is not necessarily intuitive. The explanation, however, is quite simple: investors believe this could force the US central bank to ease off on its rate hikes. So to leave a little more money in circulation than what was feared. I write it quite often, the abundance of liquidity has been one of the main engines of the stock market rocketing in recent years, especially in risky assets. As a result, investors love to imagine that the Fed is going to be forced back into the dove it has been for the past decade. If, however, the central bank triumphs over inflation, since we know that the cocktail of uncontrolled price increases and economic stasis leads to stagflation. Stagflation is almost the biggest word a modern economist can utter.
The Stock Exchange is also a part of storytelling, catalysts and (sometimes) magic. However, the July story, outside the aforementioned macroeconomic context, has some great stories in store, such as the results of Apple and Amazon last night. The action of the invasive apple brand gained 3% off-session after the figures, while that of the no less invasive online bazaar soared by 13%. In reality, Apple’s figures are not good in absolute data (sales are growing starvingly and results are falling) but they are valid in relative data, that is to say compared to what was expected. And Tim Cook played his major card in a conference call: the pressure on the supply chain tends to reduce. I called Amazon an online bazaar, but it’s not the company’s merchant site that allows it to put butter in the spinach. It is still to its AWS data center division that falls the mission of generating profits: 5.7 billion dollars while e-commerce is in deficit by 2.4 billion dollars. The strong momentum of AWS is making investors happy. The results of these two emblematic companies serve as a catalyst for the indices, not because they are impressive but because they promise a more favorable future.
And then there is the part of magic. And here I am not talking about fairies, or elves or crypto influencers, but about the raising of objectives that are flourishing everywhere despite the economic context. I admit that I have a little trouble understanding the dynamics at work in certain sectors. Imagine an early morning during which Air France-KLM would announce to earn money and Renault would raise its objectives. Well it happened near you just this morning. There are of course many other results announcements today, of which you will find a non-exhaustive list below.
In the rest of the news, the telephone discussion that took place yesterday between Joe Biden and Xi Jinping did not bring many new elements, at least nothing on the front of customs barriers. There will be a big slew of US macro data this afternoon, following an equally interesting session in Europe, with GDP releases from major economies including Germany and France (whose Q2 growth beat expectations at 0.5%), then the preliminary inflation figures for July at 11:00.
The only downside this morning was the sluggishness on the Chinese market, particularly in Hong Kong where the drop in technology stocks caused the Hang Seng to fall by more than 2%. Elsewhere in Asia Pacific, Japan has not followed Wall Street and is making a few points. In Australia, however, the ASX 200 picked up more than 1%. US and European leading indicators are bullish. The CAC40 gains 1% to 6400 points at the opening.
Economic highlights of the day
On the program for this Friday the French consumer price index for July (8:45 a.m.) then the German Q2 GDP (10:00 a.m.) and inflation in the euro zone in July (11:00 a.m.). In the United States, PCE inflation and household income & expenditure are for 2:30 p.m. before the Chicago PMI index at 3:45 p.m. and the University of Michigan consumer confidence index at 4 p.m. The whole macro diary here.
The euro is trading at 1.0219 USD. The ounce of gold continues to rise to 1763 USD. Oil is firm, with North Sea Brent at $107 a barrel and US WTI light crude at $96.70. The yield on US 10-year debt fell to 2.66%. Bitcoin is flirting again with 24,000 USD.
The main changes in recommendations
- Air Liquide: Berenberg remains to be kept with a price target reduced from 160 to 140 EUR.
- Alten: Berenberg remains long with a price target reduced from 175 to 168 EUR.
- Anglo American: RBC goes from sector performance to outperformance by targeting 3400 GBp.
- Antofagasta: RBC goes from underperformance to sector performance by targeting 1000 GBp.
- Boliden: RBC goes from sector performance to outperformance by targeting 345 SEK.
- Danone: Berenberg remains to be kept with a price target raised from 52 to 53 EUR.
- Electricité de France: JP Morgan goes from overweight to neutral, targeting EUR 12.
- Givaudan: Research Partners goes from hold to buy targeting 4000 CHF.
- Hapag-Lloyd: HSBC goes from reducing to retaining, aiming for 300 EUR.
- Maisons du Monde: Berenberg remains on the buy side with a reduced price target of EUR 21 to 20.
- Nemetschek: Berenberg remains to be held with a price target reduced from 90 to 69 EUR.
- Nestlé: Berenberg remains on the buy side with a price target raised from 128 to 130 CHF.
- Philips: HSBC goes from buying to keeping, aiming for 20 EUR.
- Lonza: RBC remains outperforming with a price target raised from 650 to 670 CHF.
- Segro: Jefferies pass to retain bought aiming for 1175 GBp.
- Solvay: Berenberg remains on the buy side with a price target reduced from 135 to 125 EUR.
- STMicroelectronics: Berenberg remains to be kept with a price target raised from 35 to 37 EUR.
- UCB: Berenberg remains long with a price target reduced from 111 to 105 EUR.
- Vestas: HSBC goes from reducing to retaining, aiming for 190 DKK.
Company results (the summaries are simple observations, not sufficiently precise indications to judge the future evolution of the actions):
- Air France-KLM: The airline is profitable in fiscal Q1.
- Amundi: The asset manager suffered a 30% contraction in H1, while its assets under management fell by €139 billion against a backdrop of falling financial markets.
- Arkema: The chemical company raises its EBITDA growth forecasts for 2022.
- BNP Paribas: The bank published a net profit up 9.1% in the second quarter, to €3.18 billion, higher than expected.
- Capgemini: The consulting and services group raises its 2022 forecasts.
- Engie: The energy company published sharply higher results for the first half of 2022, marked by very high energy prices against a backdrop of war in Ukraine, and indicated that it had significantly reduced its exposure to Russian gas.
- EssilorLuxottica: The maker of Oakley and Ray-Ban sunglasses posted comparable revenue up 7% to €6.39bn in Q2.
- Hermès: Results are up sharply by 40% in H1.
- L’Oréal: The results are slightly above expectations. Organic growth is more dynamic than expected.
- Legrand: The group is revising its sales forecast for the 2022 financial year upwards, while its half-year profit increases by 14%.
- Renault: The manufacturer is revising its forecasts for the 2022 financial year upwards, following the exit from Russia.
- Vinci: The annual forecasts are confirmed.
- Vivendi: On the sidelines of its rising results, the group indicates that it is studying a listing for Editis by distributing its stake to its shareholders.
Important (and less important) announcements
- JCDecaux becomes an equal co-shareholder of Extime Media with ADP.
- Orpea sells real estate in the Netherlands.
- La Française des Jeux acquires L’Addition and strengthens its position as a local retail partner.
- Herige negotiates the acquisition of Poralu.
- Equasens makes three acquisitions.
- Imerys, Spie, Wendel, Gaztransport & Technigaz, NRJ Group, Korian, CGG, SRP Groupe, Akwel, Coil, McPhy, Neoen, Euronext, Thermador, Fiducial Real Estate, Fiducial Office Solutions, Cegedim, Baikowski, Marie Brizard, Coface, Tikehau , Technicolor, Bénéteau, Union Financière de France Banque, Metabolic Explorer, Aurea, Inventiva, MRM, Bel, Unibel, Lectra, etc. have published their accounts.
In the world
- Amazon: The action soars 13% out of session after the results of Q2.
- AMS-OSRAM: The company returned to profit in the first half despite a slight drop in turnover.
- Apple: The stock gained 3% off session after well-received results.
- AstraZeneca: Lab beats Q2 earnings and revenue estimates. The forecasts are revised upwards.
- ENI: Q2 net profit, at €3.81bn, is higher than expected.
- Intel: The title fell heavily outside the session by 8% after disappointing results.
- International Consolidated Airlines: The carrier returns to profit in Q2.
- Signify: The Dutch lowers its 2022 targets after a fall in the margin in the second quarter.
- Sony: The Japanese group posted a 9.6% increase in operating profit in fiscal Q1, beating analysts’ estimates.
- Standard Chartered: Q2 earnings are higher than expected. A $500 million share buyback program is launched.
- Sulzer: The group is in losses in the first half due to an impairment charge on the exit from Russia.
Important (and less important) announcements
- Instagram (Meta Platforms) is taking a break from its TikTok-like transformation.
- NatWest pays an exceptional coupon.
- Main publications of the day: Exxon Mobil, Procter & Gamble, Chevron, AbbVie, AstraZeneca, Hermès, Sony, Enbridge, EssilorLuxottica, BNP Paribas, Vinci, Eni, Intesa Sanpaolo… The whole agenda here.
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