Jerome has incredible talent

Jerome has incredible talent

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US stocks rose yesterday following the Fed’s monetary policy decisions. The Dow Jones gained 2.88%, the S & P500 recovered 2.99% and the Nasdaq 3.41%. Before that, the indications looked very bad, dragging their spleen from previous sessions like a ball and a chain. The pattern that exists is quite classic after an announcement by the Fed, which is a little less aggressive than expected, as we are going to analyze together just below. It should be borne in mind that the interests of the financial markets do not always coincide with the interests of the real economy, or rather, their horizons may be different (which is a problem in itself, but we are not going to cause it today). So today’s crazy stock market reaction, but the world is not saved from the effects of inflation.

Let’s start with some real information:

  • The Fed raised interest rates by 50 basis points, moving them from “0.75% to 1%” versus 0.25% to 0.50% previously. screw since May 2000.
  • The Fed will start lowering its balance sheet on the 1steee June, at $ 47.5 billion a month. From September, the interest rate will rise to $ 95 billion a month. This is a “reduction” or a quantitative easing: we are turning the tide on asset acquisitions that have allowed the economy to cope with the recent storms. With the central bank bag full of $ 9 trillion, it will take about 7 years to bring it back to pre-2008 levels of about $ 1 trillion.
  • Interest rate hikes will continue, at a rate of 50 basis points per session, for as long as necessary for deflation.
  • Jerome Powell estimated that the state of the American economy (growth, full-time, investment) makes it possible to collect these percentage increases, which “it will not be fun“but who in the end only”everyone will be better“.

Very classic so far. But yesterday I was talking about the importance of form and that explains the rise of the American indices last night: Powell ruled out the possibility of a rise of 75 basis points in the next session, while part of the market was afraid. Two remarks on this. First, the Fed recently released its “hawks” – most of them members in favor of aggressive action – to imply that a 75 basis point increase should not be ruled out. Any resemblance to a plan that allows Powell to rule out this scenario a few days later is not entirely coincidental. Second, investors, who always seek to anticipate, such as when their extreme scenarios do not materialize. This is a sign that the situation is closer to normal, ie to their normalcy, not necessarily to economic normalcy (which does not fit well with annual inflation of 8.5%).

Obviously from a macroeconomic point of view, these interest rate hikes will cause a major upheaval in the United States by increasing the cost of borrowing, either to buy a home or to invest in the development of a business. But letting inflation get out of hand would be even more damaging. Of the two upheavals, the Fed chose the one it considered least harmful. Economists forecast two further increases of 50 basis points in the June and July meetings. After others, less loudly afterwards. The issue of central banks, which is never far from the forefront, will keep the spotlight today amid comments about the Fed and the Bank of England’s decision on its own interest rates at noon. The BOE had begun raising interest rates ahead of others, as it was already facing inflationary concerns about Brexit. He should continue to do so. As far as the ECB is concerned, its next monetary policy committee is scheduled for 9 June (the meeting of 18 May is merely informal). Given the inflation trajectories in the eurozone, it should also react, and very soon.

Another invasive news of the day, the publications of quarterly results of companies. Thursday is traditionally the busiest day in this field and this 5th of May is no exception to tradition: dozens and dozens of announcements in Europe and especially in the United States. In total, one hundred companies weigh more than $ 10 billion, from A such as Airbus and Anheuser-Busch Inbev to Z such as Zalando and Zoetis.

Europe’s top indicators are up this morning, in the wake of Wall Street. The Japanese market is still on vacation, while Hong Kong and Sydney gained about 0.8% at the end of the course. The CAC40 gained 2.4% to 6549 points in the opening.

Financial snapshots of the day

The highlight of the meeting will be the Bank of England decision on its monetary policy at 13:00. In the United States, the Challenger study on layoffs (1:00 pm) and weekly employment data (2:30 pm) are included in the program. The whole “macro” agenda here.

The euro rises to 1.0614 USD. An ounce of gold recovers at 1900 USD. Oil strengthened, with North Sea Brent at $ 110.16 a barrel and US light crude WTI at $ 107.10. The yield on 10-year US debt fell to 2.91%. Bitcoin trades around USD 38,700.

The main changes in the recommendations

  • Amundi: Berenberg remains for a long time with a price target reduced from 85 to 75 euros.
  • Carrefour: Berenberg remains on the market side with a price target increased from 23.10 to 23.30 EUR.
  • CGG: Portzamparc goes from market to conservation, aiming for 0.81 euros.
  • Elis: JPMorgan goes from neutral to overweight targeting 17 euros.
  • Eramet: AlphaValue goes from reduction to accumulation, aiming at 156 euros.
  • Geberit: Jefferies continue to perform poorly with a price target falling from 473 to 461 CHF.
  • Gurit: UBS goes from short to neutral, targeting CHF 130.
  • Interpump: Berenberg remains for a long time with a price target reduced from 67 to 60 euros.
  • Korian: Berenberg remains for a long time with a target price reduced from 35 to 34 euros.
  • Novartis: Berenberg remains for a long time with a price target of 85 to 90 CHF.
  • Ocado: HSBC goes from sale to retention, aiming for 1000 GBp.
  • Roche: Jefferies remains for a long time with a price target reduced from 450 to 430 CHF.
  • Sampo: Berenberg remains for a long time with a price target increased from 51 to 52 EUR.
  • Securitas: Jefferies remains to be held with a price target reduced from 145 to 125 SEK.
  • Sensorion: Jefferies remain for a long time with a price target reduced from 3.30 to 1 EUR.
  • Siegfried: Stifel begins brief follow-up targeting CHF 503.

In France

Business results:

  • Air France-KLM: the company exceeds its profit forecasts in the 1st quarter thanks to the increase in bookings.
  • Airbus: The first quarter adjusted EBIT is higher than expected.
  • ArcelorMittal: the results are higher than expected. But the group is lowering its forecast for global steel consumption.
  • Arkema: chemist raises his forecast for 2022 after a steady Q1.
  • Crédit Agricole: the bank is improving its results but forecasts 389 million euros in Russia.
  • Legrand: reiterates its targets for 2022 after a quarter above expectations.
  • Societe Generale: the results are higher than expected. The bank warns that the cost of the war in Ukraine is reflected in the increase in bad debts.
  • Stellantis confirms guidance for 2022 after revenue growth of 12% in the first quarter.

Important (and less important) announcements

  • Kering launches employee stock business.
  • Electricité de France hopes for an agreement “in the coming months” for six EPRs in India.
  • Atos launches innovative “Edge-to-Cloud” solution based on 5G and artificial intelligence.
  • Rumors continue about Ubisoft: Guillemots could seek support to withdraw the file from the rating.
  • Valneva is launching a clinical trial evaluating the COVID-19 candidate vaccine as a heterologous booster.
  • 2CRSi signs a contract of 4 million euros.
  • DBV Technologies invests $ 15.3 million in ADS on Nasdaq.
  • Cerinnov signs 2 million euros in new orders.
  • Vicat, ALD, Vilmorin, Umanis, CGG, Aurea, EURO Resources, MRM, Selectirente, Hexaom, Sogeclair have published their accounts.

In the world

Business results:

  • Anheuser-Busch Inbev: Adjusted EBITDA increase above expectations. Predictions are confirmed.
  • BAE Systems: the group confirms the sales and profit forecasts for the financial year 2022.
  • BMW: Q1 profits boosted by Chinese consortium and high prices.
  • Modern Amperex technology: the title drops well after the quarter.
  • Deutsche Lufthansa: the rise in the price of kerosene is burdening the recovery of bookings.
  • eBay: the stock fell 6.5% outside the session after the 1st quarter.
  • Enel: Forecasts for 2022 are repeated after a steady quarter.
  • Shell: the group records profits in the 1st quarter.
  • Swiss Re: the reinsurer suffers a loss in the 1st quarter, after a large profit a year earlier.
  • Unicredit: the Italian bank receives a large forecast of 1.3 billion euros in its accounts for the first quarter, especially in relation to Russia.
  • Zalando: Forecasts fell after losses in the first quarter.

Important announcements (and others)

  • Barclays and Standard Chartered general meetings were interrupted by climate protesters.
  • Google has been targeted by a complaint in the Netherlands against its Play Store payment system.
  • The NYSE parent company, Intercontinental Exchange, will buy the Black Knight computer group for $ 85 per share.
  • Henkel will cut 2,000 jobs in its consumer goods division to save € 500 million.
  • Berkshire Hathaway accounts for 15.2% of Occidental Petroleum.
  • Hangzhou Hikvision falls in Hong Kong after the threat of new US sanctions.
  • Nissan will invest more than $ 700 million in Mexico.
  • Dufry signs two new contracts with Salvador Airport in Brazil.
  • Main results of the day: Shell, ConocoPhillips, Anheuser-Busch Inbev, Airbus, Petrobras, Zoetis, AXA, Shopify, BMW, Crédit Agricole, Coloplast, Henkel… All agenda here.

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