European equity markets followed a moderately bearish second session yesterday as US equity indices rebounded painfully after the big slap they received on Tuesday. So we could summarize the day before. For the record, the main event of the week is Tuesday’s release of more vigorous-than-expected inflation in the US in August, which threw investors into deep turmoil and crashed the Nasdaq by more than 5%. This statistic, contrary to what economists predicted, shows that the US central bank still has work to do to regain price control. The financiers translated this as “more rate hikes and less money in circulation for longer“.
The CME FedWatch Index, which predicts rate action at the next Fed meeting scheduled for next week, shows a 70% probability in favor of a tightening of 75 basis points and 30% in favor of 100 basis points . Prior to Tuesday’s release, the likelihood of a 100 basis point rate hike was nil. The mood is heavy again and investors are wondering if we are heading, as I wrote earlier this week, on a new sequence of “two steps back” after taking “one step forward. Personally I don’t. I know and am tired of talking about interest rates and inflation, so this morning I completely change the subject.
I was reading an article earlier this week about Ryan Cohen, the agent and destroyer of action memes in the United States, and it gave me an idea. I make a parenthesis for my readers who have chosen to live in a cave or who are only interested in really serious topics. A stock meme is a mindless investment that shouldn’t be based on a valid reason or a rational decision. You need several ingredients. First, a downgraded action, at the bottom of the hole or not far away. Then, a slightly impactful element that helps launch a story, such as a nice logo, a shop that reminds you of your first kiss with the tongue or why not a historic brand that has fallen into disrepair. You also need some financial arguments, real or fictional. Finally, you need to have a charismatic conductor and an army of toy soldiers ready to follow him. And if a good old short selling fund is at the other end of the order book, that’s the icing on the cake. In the United States, the video game chain GameStop, car rental company Hertz, cinemas AMC Entertainment or retailer Bed Bath & Beyond are examples of this.
The goal is to create a strong buying current to make the stock explode like a champagne cork. The downside is that it is often nonsense and is a price manipulation technique like any other. On the plus side, this puts the power back in the hands of retail investors. Not to mention, it must be said, the pleasant and vaguely sadistic side of dropping hedge funds into their own game.But I’m digressing, as I said long before that reading an article on Ryan Cohen gave me an idea. And this idea, here it is: who would be the best customers for an offensive meme in France? I’m sorry to limit myself to France but it is mainly out of ignorance of the plains of other European exchanges. Your ideas are welcome. I propose three this morning.
The file that seems to me to meet the main basic criteria is Casino. The course of the last few years has been sulphurous, the management is pointed out, the valuation is at a minimum and the company is grappling with a lease with a budget that seems unable to reduce. Its brands are very famous and sometimes centuries old. Add to this that Casino was the first French victim of the Muddy Waters fund and that the price is not far from its lowest. If there was a powerful WallStreetBets community in France, I think they might be interested in the distributor.
The second name is more exotic. I thought about Groupe Flo. For investors, this company is a bore. Walking on shattered glass is probably more fun than owning stock in the company. Plus, the last people who saw Flo make money may no longer be alive. And obviously the company’s webmaster is missing. Flo is known for its restaurants, especially the Hippopotamus brand and some large Parisian brasseries. It is this portfolio that could make the company a monument in danger that brave investors may want to save.
To vary the sectoral pleasures, I end up with Atari. The brand is legendary in the gaming world, although nothing exciting has come out of its hat for years. Atari was the American dream of Infogrames, the French developer who was once number one ahead of the outsider Ubisoft, before he died and disappeared. After the Infogrames debacle, as far as I can remember, there was a major legal struggle between France and the United States to extort Atari’s American assets from creditors. The battle won, which allowed a former Infogrames company, Frédéric Chesnais, to relaunch the brand before leaving for other climates. Bag, Atari is not a gift. The group multiplies the experiences that are not always successful in the gaming and blockchain universe. But its lightweight construction allows it to get by year after year. Its brand still relatively well known to older people like me and its history in the United States could make it a very credible meme file, why not even a transatlantic file.
To get back to more serious news, there will be some new macro stats in the US today. It is also this Thursday that Vladimir Putin and Xi Jinping meet in Samarkand in Uzbekistan. A strong choice by the Chinese leader for his first physical meeting outside his borders since the arrival of the coronavirus. In Europe, as France renews a tariff shield for 2022, the EU is still working on its regulatory arsenal to cushion the shock of the energy crisis further upstream. In Sweden, Prime Minister Magdalena Andersson will step down after the success of the right-wing opposition at the polls.
In Asia, performance is up slightly after the sharp decline the day before. Japan and Australia gained about 0.2% while Hong Kong recovered 0.5%. Mainland China, on the other hand, is losing ground. In Europe, the stock exchanges are expected to break even in early trading.
The economic highlights of the day
We expect a flurry of statistics in the US: Philly Fed, Retail Sales and Empire Manufacturing at 2:30 pm, then Industrial Production at 3:15 pm and Commercial Inventory at 4:00 pm. The whole macro-diary here.
The Euro remains under pressure at USD 0.9973. The ounce of gold fell to USD 1692. Oil is holding up, with North Sea Brent at $ 93.90 a barrel and US WTI light crude at $ 88.45. The 10-year US debt yield stands at 3.42%. Bitcoin has stabilized around $ 20,300.
The main changes in the recommendations
- About You: Goldman Sachs remains long with an increased price target from EUR 13 to EUR 15.
- Accor: Berenberg remains on the buy side with a price target increased from 32 to 34 EUR.
- AstraZeneca: Credit Suisse moves from outperformance to neutral aiming for 11,000 GBp.
- BNP Paribas: Morgan Stanley goes from overweight to weighted online.
- BT Group: HSBC moves from holding to purchase, aiming for 185 GBp.
- Capgemini: AlphaValue remains to be reduced with a declaration from 168 to 172 EUR.
- D’Ieteren: Jefferies starts long tracking by aiming for 210 EUR.
- Ericsson: Credit Suisse moves from outperformance to underperformance aiming for 69 SEK.
- GSK: Credit Suisse moves from underperformance to neutral by aiming for 1430 GBp.
- Inditex: Goldman Sachs remains on the buy side with a price target increased from EUR 30 to EUR 31.50.
- JDE Peet’s: JP Morgan moves from neutral to underweight by aiming for EUR 29.
- Kone: Morgan Stanley goes from online weight to overweight by aiming for 52 EUR.
- Nokia: Credit Suisse moves from neutral to outperform.
- Novartis: Credit Suisse moves from neutral to underperforming, aiming for CHF 78.
- Qiagen: Berenberg remains long with a price target raised from EUR 50 to EUR 53.91.
- Roche: Credit Suisse moves from neutral to outperformance aiming for CHF 375.
- Schindler: Morgan Stanley moves from overweight to weighted online aiming for CHF 205.
- Snam: Société Générale moves from holding to purchase, aiming for € 5.50.
- Swisscom: UBS goes from sell to neutral, aiming for CHF 490.
- Tate & Lyle: Citigroup goes from neutral to buy, aiming for 850 GBp.
- Technoprobe: Berenberg begins the waiting path by aiming for EUR 7.90.
- Telecom Italia: HSBC moves from purchase to maintenance, aiming for € 0.20.
- Terna: Société Générale passes from holding to purchase, aiming for € 8.10.
- UCB: Credit Suisse moves from neutral to underperformance with a target of 68 EUR.
Important (and less important) announcements.
- EssilorLuxottica confirms its objectives for 2026.
- Stellantis is considering “significant” investments to produce energy for its European facilities.
- Publicis has renewed Arthur Sadoun’s term of office as chairman of the board and chief executive officer for four years.
- LCL (Crédit Agricole) has announced a freeze on bank rates for its private clients until 1 September 2023. BNP Paribas is also freezing rates.
- Traffic at Vinci airports increases in August, but remains lower than in 2019.
- Amundi and CACEIS are accelerating the growth of Fund Channel.
- Pierre & Vacances has implemented its financial restructuring.
- Carmat is preparing to resume the implantation of its Aeson artificial heart in October, subject to obtaining the necessary authorizations.
- AB Science is continuing the Phase II study with masitinib in COVID-19 following the recommendation of the independent data review committee.
- DBT significantly strengthens its order book.
- Mirova strengthens its positions in hydrogen refueling solutions.
- SIGMA-ALDRICH and genOway expand their strategic alliance.
- Esker, Assystem, Prodways, Drone Volt, LNA Santé, Valbiotis, Novacyt, Aubay, Sidetrade have published their accounts.
In the world
Important (and less important) announcements.
- Danaher will spin off its environmental and applied solutions business.
- Microsoft’s deal to acquire Activision will be the subject of a thorough antitrust investigation in the UK.
- According to the WSJ, Tesla is changing its battery strategy to take advantage of US tax advantages.
- California filed an antitrust lawsuit against Amazon, accused of keeping prices artificially high.
- United Airlines and Emirates announce codeshare agreement.
- In response to Walt Disney, Comcast reports that Hulu won’t be cheap.
- Novartis is the subject of a competition investigation in Switzerland.
- Compagnie Financière Richemont and Gübelin join forces to distribute watches.
- Tencent Music opts for a listing in Hong Kong via IPO and will debut next week.
- Main publications of the day: Adobe, Hennes & Mauritz, IG Group, Virbac, Vétoquinol… The whole agenda here.