Dow -1.19%, S&P 500 -1.69%, Nasdaq -2.18%, Russell 2000 -0.71%, SOX -2.09%, Eurostoxx -0.49%, SMI +0.17% .
Wall Street seems to be losing its Latin. It was a very bad start to the week that American indices experienced yesterday, scorched by bad news from China, where inflation also seems to be on the rise, and the covid there is still a little paralyzing the economy. We really don’t know where to hide yesterday if not in dollars, so-called value stocks are outperforming growth stocks, but not for good reasons. The tech giants (hence FAANG) are putting a lot of pressure on the index heads, they played well from March 15 to 29 and then tripped over checkmate. We can expect investors to lock in their profits as quarterly earnings reports approach. At the same time, growth in the US is a matter of controversy, even if the latest statistics remain encouraging. The stock market is seeing bond rates rise a little more each day and it’s starting to hurt everyone’s psyche. The yield on 10-year US bonds yesterday rose to 2.78% (at the beginning of the year it was at the level of 1.51%). This morning it is at 2.82%, nothing seems to be able to stop it to a symbolic 3%, then 3.26%, the maximum of October 12, 2018.
What’s rather funny, if you’ll pardon my expression during this difficult period, is that the yield curve seems to have changed its tone in a few sessions. The 2 to 10 year part is no longer inverted (+28 points), and the 5 to 10 year part is about to return to positive territory. Read: The bond market weakens significantly due to growth in the US. Who can understand, no doubt, that the stock market took over from its older brother bonds the role of the bad-tempered Cassandra (who, however, was famous for her extraordinary beauty). The market is probably also nervous because the US consumer price index for March will be published today. Economists expect growth of 8.4% compared to March 2021. To reassure everyone, the White House has warned that U.S. inflation will be “extremely high” in March…
It is clear that the current context of the market is not really like an island of children (those who do not know this can return to Tik Tok … or Facebook). The technical configuration of the S&P500 (SPX) index is deteriorating, it breaks through its moving averages at the level of 200 and 50 days at the close. The Nasdaq100 (NDX) does the same with its 50 days. Trading volumes remain measured, we are very far from capitulation in this area. Volatility, on the other hand, shoots up 15%, VIX is back to 24.37, we start to defend in an equity fortress, probably the best thing to do in this stormy context, don’t sell, protect yourself on the other hand. The indices end the session at the low of the day, and this should continue into the early session this morning. In terms of sectors, the top 11 by SPX fell to the bell, with a rogue podium of the day made up of energy, healthcare and tech. But why health? The defensive sector in fact… Banks manage to end the day in balance, tempted by rising rates and approaching publication of their quarterly results.
Thus, the publication of the American consumer price index is scheduled for this afternoon at 14:30. The market seems to have already partially appreciated the disappointment, watch for a pullback, dear bears, if the figure is below expectations. The US yield curve, which is getting steep again, also requires close attention.
Oil is trying to bounce this morning, a barrel of WTI Light Crude bounced off its $95 support (March low). It is currently developing at $97.20, which is also an important phenomenon for the market, until recently, as soon as oil fell, the actions were better. Today we will add reflections on growth and global demand that is declining, but nevermind, the fall of black gold means less inflationary pressure to keep an eye on.
A small passage in Europe where two indices are resisting, Anthony Bonden speaks of the “Gaulish village” this morning in his column. The CAC40 and SMI manage to end their day with a bit of a positive, what can I say but “hats off”! in Paris, Societe Generale, Axa, Total and Sanofi are popular. SocGen also benefited from the announcement of the sale of its Russian subsidiary, Rosbank. The French stock market also believes that Emmanuel Macron will be re-elected for a second term, leading Anthony Bondin to write that “investors have their hearts everywhere except in Emmanuel Macron’s portfolio. They say more Jupiter than Tutatis. In Switzerland, the SMI index is owned by Roche and Novartis, so we continue to fill portfolios with defensive assets, ideally quoted in the world’s strongest currency.
Gold is recovering a slight high, the ounce is trading at $1958 this morning. After all, a barbarian relic remains attractive in times of inflation, while (sometimes) playing the role of a safe haven. The dollar is still in demand, the dollar index is currently testing the 100 level, if it breaks it, it can look at its covid top, which is 102.99. EUR/USD is moving at 1.0860, then at 1.0850 support, then at 1.0810.
Poland’s prime minister predicts that Europe will soon witness the biggest tank battle since World War II, while Austrian Chancellor Karl Nehammer says he is “quite pessimistic” about the prospects for peace after meeting Vladimir Putin in Moscow. The Pentagon says the war is likely to enter a “longer and very bloody phase.”
Today there are two important events: the German ZEW Financial Confidence Index for April at 11:00 and US inflation data for March at 14:30.
Ferrari: Exane BNP Paribas goes from neutral to better, aiming for €255. Affiliate group: Goldman Sachs starts tracking the purchase, targeting 1,630 francs. STMicroelectronics: Barclays moves from overweight to online weighted targeting 38 euros. Zur Rose: Berenberg remains in effect, target price reduced from 230 to 135 francs. The Benetton family, allied with Blackstone, came close to withdrawing from Atlantia. Sika’s sales jumped 22% to 2.4 billion francs in the first quarter, driven by higher volumes and prices. Givaudan announces sales growth of 4.6% in the first quarter. Honda will invest $64 billion in research and development over time to strengthen its position in the electric power sector. Shopify is launching a ten face value split of its share. Meta Platforms is testing the sale of virtual items in the metaverse.
There are common clues in Asia this evening and this morning. Hong Kong and Shanghai rose 1.30% and 1.46%, while shares in Tokyo added 1.81% and Seoul fell 0.98%. SPX futures fell another 15 points and Europe opened down 1.2%.