Dow -0.80%, S&P 500 -0.86%, Nasdaq -1.33%, Russell 2000 -0.66%, SOX -1.07%, Eurostoxx -1.69%, SMI -0.65% .
There are Friday mornings when you wake up with a smile, it’s Friday… Then you look at the market and bang the depression! In this kind of case, there’s nothing like a quote from Pierre Dac, who liked to say that he’d rather it rain on a day like today than on a sunny day.
The market ended last night the first half of the year with one of its worst performances in 50 years. We know the ills from which the indices suffer: the expected end of the central banks’ liquidity injection programs, led by the Fed, the acceleration of inflation, the failures of the supply chain exacerbated by the war in Ukraine, which is also fueling inflation via, in particular, the rise in oil and gas prices. The management of covid in China is also a problem, it significantly slows down the production rate of the world’s factory. Valuations in some sectors are coming down to earth and we are seeing exaggerations in the other direction (eg Volkswagen is paying 3.6 times its estimated 2023 earnings, insane!). Inflation remains the number one theme in people’s minds, but recent statements by Jerome Powell and, to a lesser extent, Christine Lagarde, have finally convinced participants that the two main central banks in the world will not weaken as long as the level general prices will not fall back to a sustainable level, around 2%. In such a context, fears of recession quickly increase in people’s minds, which gives food for thought to the bears, not necessarily rightly so, but when emotion takes over, we sell first, then we think. 44% of economists surveyed by the wall street journal yesterday expect a recession in the United States in the next twelve months, in January they were only 18%.
A very complicated first half of 2022, therefore, which offered investors almost no place to take refuge. The S&P500 index (SPX) fell 20.6% over the period, the Dow Jones lost 15.3% and the Nasdaq100 (NDX) 29.5%. The Eurostoxx fell by 19.6% and the SMI by 16.5%. So-called “investment grade” bonds dropped 11% over the period. In emerging markets, equities and bonds also fell, hurt by the slowdown in growth. Cryptocurrencies are crashing as many hedge funds widen their losses.
At this point in this column, I suggest you read a new quote from Pierre Dac.
Only raw materials manage to hold their own, the problem being that they too have been under pressure for some time. It will be understood, the world of finance is paved with doubts at the moment, the only virtual certainty being that the ambient volatility should remain with us for some time yet. The next two weeks should be rather poor in news, it is only from July 12 that the earnings season of companies in the United States for the second quarter begins. On July 13 will be published the very important American report on consumer prices (CPI) and on July 27 the Fed will announce its decision on interest rates.
Yesterday’s session is a reflection of the first half, it takes place in an atmosphere of risk aversion, investors are back in force in government bonds, the yield on the US 10-year bond falls back below 3%, it is changing this morning at 2.96%. On the equities front, we are looking for utilities, industrials and real estate, while energy, communication services and consumer discretionary are particularly suffering. The market does not appreciate the economic statistics of the day, which show that household consumption is slowing, which increases fears of recession by a notch. Trading volumes are low, we are reluctant to position ourselves in a market that is about to leave for the long weekend, Monday July 4 will be a holiday in the United States to celebrate independence. We note in passing that Meta is not going strong, the firm of Mark Zuckerberg indicates in an internal memo to expect a slowdown in growth in the second half in a context of “violent” headwinds. The dollar is in demand, the EUR/USD pair is moving at 1.0456, gold is testing $1,800 per ounce and oil is falling to $105.18 per barrel on WTI Light Crude.
We can’t get enough of it… Boris Johnson’s deputy leader is stepping down as a government enforcer due to an incident involving excessive drinking. In a letter to the Prime Minister, Chris Pincher said he had ’embarrassed himself’ after drinking too much on Wednesday night.
Hong Kong’s new security-minded leader is sworn in before Xi Jinping as the city celebrates 25 years of Chinese rule. Xi defends the crackdown on the pro-democracy movement and says Hong Kong should focus on its economic development. Chief Executive John Lee says the Asian financial hub has emerged from the “illegal” protests of recent years with a stronger legal system.
The market takes notice today of the refined reading of the June manufacturing PMI indices for the main economies of the world. In Europe, the June inflation figures will be released at 11:00 a.m. In the United States, there will also be the manufacturing ISM (4:00 p.m.) and construction spending for May (4:00 p.m.). This morning, China reported a weaker than expected manufacturing PMI, albeit back in expansion territory, while the services PMI accelerated strongly.
Barry Callebaut: Research Partners starts the follow-up to keep aiming for 2300 francs. Geberit: Jefferies remains underperforming with a price target reduced from 461 to 356 francs. Holcim: Jefferies remains to be kept with a reduced price target of 47.10 to 45.40 euros. Julius Baer: Credit Suisse remains outperforming with a price target reduced from 65 to 62 francs. Kuehne + Nagel: JP Morgan remains neutral with a price target raised from 269 to 278 francs. Novartis: UBS remains neutral with a price target reduced from 88 to 86 francs. Sika: Jefferies remains on the buy side with a price target reduced from 374 to 313 francs. Swiss Re: Barclays goes from overweight to weighted online by targeting 86 francs. UBS: Credit Suisse remains outperforming with a price target reduced from 24 to 23 francs. Novartis would rather spin off its generic drug business than sell it, according to Bloomberg. Apple raises the price of the iPhone by almost a fifth in Japan. Lonza plans to invest 500 million francs in new filling and finishing facilities in Stein.
Last night and this morning in Asia, the indices are falling in the wake of Wall Street. Tokyo fell 1.73% at the bell, Hong Kong was closed, Shanghai lost 0.47% and Seoul dropped 1.17%. The SPX future drops 0.9% and Europe opens down 1%. the wall street journal tells us that the “good news” for investors is that markets have not always fared badly after suffering heavy losses in the first half of the year. In fact, history shows that they often did the opposite. When the S&P500 fell at least 15% in the first six months of the year, as it did in 1932, 1939, 1940, 1962 and 1970, it rose an average of 24% in the second. semester, according to Dow Jones Market Data.
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