CAC40: all assets +low on the eve of ‘4 Sorcières’ – 06/16/2022 at 17:01

(CercleFinance.com) – The CAC40 (-2.5%) fell back to its yearly low of March 7 (around 5,875/5,880) on the eve of the ‘4 witches’ session (not only quarterly but semi-annual deadline) : No ‘referral’ takes shape to limit breakage on the eve of shutting down accounts and increases selling pressure on ‘fragile’ or distressed stocks that managers no longer want to see appear in their portfolios.

The drop is even more damaging as it started with a spectacular seller reversal in electronic trading overnight, the June CAC40 contract fell from 6130 to 6020 at the open, then to 5870 three hours later: a linear drop of – 250Pts (-4%) which surprised the day after a double intervention by the FED and the ECB aimed at reassuring the markets.

The Paris Stock Exchange extended its losses after the surprise announcement of a 50pt increase in the reference rate of the SNB (Swiss National Bank) from -0.75% to -0.25% (with other increases to follow) that completely overshadows the beneficial – and welcome – effects on Wednesday afternoon of Jerome Powell’s comments that allayed fears that the Federal Reserve would raise rates too aggressively, even if a 75-point hike (which was in line with the wishes of the market).

Jerome Powell hinted in his press conference that the intensity of rate hikes may ease as inflation indicators improve…and may taper off a bit by 2024, after peaking around 3.4 % at the end of 2022 and 4% in mid-2023.

Thus, after five consecutive sessions of decline, Wall Street had resumed the upward path on Wednesday night, the indices even accentuating their gains after the Fed’s monetary policy statement… but all these gains were largely erased from the open with -2.7% in the Dow Jones (below 39,900), -3.2% in the S&P500 and -4.3% in the Nasdaq around 10,630.

Wall Street is not helped by the bad statistics of the day, with a drop of -14% in new housing starts and -7% in driving licences.

The ‘Philadelphia Fed’ Forerunner Activity Index is falling into negative territory (-3.3 to its lowest level since the grand close in May 2020) when it was expected to be slightly above 0.00; the indicator for new orders fell 35 points to -12.4. Also at half-staff, the shipping index lost 25 points, but remained positive at 10.8.

At mid-session on Thursday, the US 10-year bond yield was down marginally -2 points to 3.37% (versus 3.297/3.30% last night and 3.495% this morning).

The bond market in Europe will have seen only a few hours of improvement on Wednesday before deteriorating spectacularly again, the German Bund yield just rose from 1.645 to 1.745% (and 1.92% around 1:45pm) while than the yield of the German Bund The French OAT went from 2.22% to 2.30% (with dizzying intraday volatility for a wide spread of 2.20/2.484%).

For the record, the ECB yesterday unveiled a new instrument to support the most indebted countries in the euro zone in order to combat the resurgence of risks of fragmentation between the bond yields of the countries of the North and the South. … specialists fear that the ECB will resell Bunds in an arbitration for the benefit of the Italian BTP which, the only positive point, stabilizes a little below 4%, around 3.93% (against 4, 15% on Tuesday night), but that still adds +21 points of ‘spread’ against the Bund against a gap of 150pts that seems appropriate for the head of the Italian Central Bank.

On the Forex side, the dollar fell 0.5% against the euro towards 1.0490… but the main market move of the day naturally concerns the Swiss franc which jumped +2.5% towards $0.9690 and +2.1% against the euro towards 1.0170.

On the stock side, Engie fell -9% while gas was scarce (after closing the Russian tap) and Véolia was ahead (-5%).

Saint Gobain fell -6%, ST-Micro -4.5%.

Rexel is organizing a Capital Markets Day today from Zurich. The group will present its new mid-term roadmap and reveal its revised financial targets for 2022, as well as its ambitions for the period 2022-2025.

The group targets comparable sales growth of between 7% and 9% in 2022 (compared to 4% to 6% previously), an adjusted EBITA margin of around 6.7% including 50 bps of positive non-recurring costs linked to inflation (vs. 6% previously) and a free cash flow conversion of over 60%.

Dassault Systèmes today organizes its Capital Markets Day at its headquarters in Vélizy-Villacoublay, France. During this day, the general management will present the activity, strategy and perspectives of the Group. It is well positioned to achieve its non-IFRS EPS target by 2024 and benefits from significant opportunities for sustainable growth.

Suez would like to make a takeover bid for its former UK waste activities according to the FT. This operation would be carried out in the event that the British competition authority blocks the takeover bid by Veolia.

The transaction would be worth several hundred million pounds according to the FT. ‘Suez would have a right of first refusal if Veolia sold this activity,’ indicates Invest Securities.

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