Gonet: market news from March 30

Dow +0.97%, S&P 500 +1.23%, Nasdaq +1.84%, Russell 2000 +2.65%, SOX +2.21%, Eurostoxx +2.96%, SMI +1.40% .

Wall Street does what it does best, sailing with the wind. Yes, the news from the front is very encouraging, the prospect of a peace agreement between the belligerents is taking shape yesterday, but on what horizon? Isn’t Russia buying time by working on its image, instilling the sharpest doubt in the minds of the largest number of people? It is useless to dive into speculation, but the impact of yesterday’s announcements on the market is quite real, which leaves your humble ones bewildered, but it is so, if the markets were rational and balanced, this would be known.

Yesterday again was a nightmare for these poor bears, the shorts are closing, the S&P500 (SPX) ends its session almost at the high of the day, it is only 3.5% from the break-even point this year. From a technical point of view, every day the SPX configuration is getting a little better, the 50, 100 and 200 day moving averages are now far in the rearview, there is no overbought situation to report and we catch ourselves looking at In the trading floors again the all-time high of 4818 closed yesterday at 4631. The market psyche seems to correlate with the arrival of spring, it has improved markedly recently, investors say that if the situation in Ukraine progresses for better, if companies manage to get out of the trap supply chains without too much damage, if inflation ends up being temporary and if the powerhouses of the banks are not as aggressive as expected, this should pass.

Agree, a lot of “if”. Let’s weigh the pros and cons for a moment. To my right, bulls and arguments: Russian troops seem to be bogged down in Ukraine, will Putin focus on Donbass, is he planning a peace deal? History shows that stocks perform well after the outbreak of armed conflict. The Fed, led by Jerome Powell, is reassuring. The effect of TINA (“No alternative…but stocks”) is still present. to my left are the bears (at least what’s left of them…) and the following arguments: the yield curve is getting flatter every day and is sending warning signals about future economic growth. The growth of the company’s results in the first quarter should be further revised downward by analysts. Inflation is an unstoppable galloping monster. The Fed is late, and the conflict in Ukraine continues. As we can see, there are valid arguments for each camp, we note in passing that bullish catalysts seem to be more fragile and that the market has clearly seen the glass half full for some time, so it is not worth lowering our vigilance at this time.

This morning comes to mind the stock market proverb that says “buy at the sound of the gun and sell at the sound of the bugle.” Given yesterday’s market reaction, we might be tempted to say that we should rather buy with the sound of a horn… Yes, but no, let’s look at the dynamics of the indices since February 24, the date of Russia’s invasion of Ukraine. SPX is up 8.14%, NDX is up 9.11%, Eurostoxx50 is up 4.65% and our good old SMI is up 7.30%. So yes, once again it was necessary to buy into the sound of cannons and casually notice that the USA made “Pantani” to old Europe, leaving her, so to speak, in place on the rise to Verbier.

We are briefly back to yesterday’s session, trading volumes are floundering again and again, volatility is down 4%, the VIX index is back to 18.90, if it reaches 15, we will have to prepare for its rebound. In terms of sectors, we continue to favor so-called growth stocks over value stocks. Apple gives another honorary hand to Isaac Newton and reaches its 11th birthday.as well as consistent increase. The FANGs lead the dance, keep in mind that the generals are going uphill with (too?) a small part of the army. The breadth (the difference between stocks closing up and down) is excellent, with an 87% positive performance on SPX. The icing on the cake, NYSE-listed Chinese stocks are having a very good day, with the KWEB ETF soaring 4.47%. In terms of bonds, 10-year US bonds soared 2.52% yesterday to return to 2.38% this morning. I suspect that most people will come to buy US debt very cheaply and with very good returns. Yield curve remains in ‘Defcon 1’ mode, 10-year part 2 reverses overnight briefly and returns to +4 basis points this morning.

Oil stumbled yesterday, a barrel of WTI Light Crude briefly returned below $100, rising to $106.66 this morning, yesterday’s euphoria has passed, and we allow ourselves to doubt Vladimir Putin’s benevolence on the trading floors. Gold is doing the same, dropping below $1,900 an ounce yesterday to rise to $1,925 this morning. The dollar weakens, the EUR/USD pair moves to 1.1118, market sentiment improves, and the dollar suffers.

The inversion of parts of the US yield curve is sparking new debate about whether it signals a recession due in part to the Fed’s aggressive tightening (futures hold an 80% chance of a recession. At least four advances in the next two meetings). Some economists argue that the signal effects are distorted by external factors such as quantitative easing, while a recession is less likely given that real rates are still negative. Fed Chairman Powell also downplayed those concerns, noting that the Fed is focused on short-term rates, which continue to rise. However, others caution against ignoring the warning signs of a flattening yield curve. Former New York Fed Chairman Dudley was the latest to say the Fed was behind the curve and could not avoid a hard landing.

German inflation for March will be released at 2:00 pm, just before ADP’s US employment survey (2:15 pm) and the latest US GDP estimate for Q4 2021 (2:30 pm).

Credit Suisse: Jefferies shares stand, target price lowered from CHF10 to CHF7.40. Danone: Jefferies stays on the side of the buyers, target price reduced from 64 to 58.50 euros. Logitech: Exane BNP Paribas resumes neutral monitoring, targeting 80 francs. UBS: Jefferies remains on the side of buyers, target price reduced from 23 to 22 francs. Zur Rose: Baader Helvea remains stockpiled and target reduced from 300 to 140 francs. UBS launches a major share buyback program. Credit Suisse wants to appeal the $500 million court decision. Adecco confirms its mid-term financial targets. Nintendo shares fell 5% due to the delay in the release of Legend of Zelda. Roche fails phase III trial of experimental cocktail for lung cancer. China Evergrande Group will sell its stake in the Crystal City project for approximately $575 million. The struggling Chinese real estate giant will also launch its first electric car through its subsidiary Evergrande New Energy at the same time.

Last night and this morning in Asia, the indices are trading in positive territory, except for Tokyo, which lost 0.80% on the call, where the yen rebounded. Hong Kong added 1.80%, Shanghai – 1.96%, and Seoul – 0.21%. SPX futures are back 14 points and Europe opens 0.4% lower.

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