There are two things to take away from yesterday on a financial level. First, the oil world seems to take seriously Western threats to cap the price of Russian oil. Black gold prices have corrected sharply to flirt with their lows of the end of last September, which were themselves the lowest since January 2022. The objective of the G7 is to force Moscow to sell its oil at a low price, to reduce its cash inflows, without cutting itself off from Russian production, so as not to drive up the price of a barrel. Two objectives difficult to reconcile, especially since the implementation is not obvious: how to force a country to sell at a lower price? Westerners rely on the transmission belts: they plan to refuse to provide transport, insurance and brokerage services to cargoes that are not sold below the set floor price. As Europe and the United States provide almost 90% of the maritime transport of Russian oil (which represents 70% of the country’s exports, against 30% for direct links such as pipelines), their power to exert pressure is substantial. I will not go further into the details, the prices offered and the possible circumvention schemes so as not to write a toast, but remember that the oil market has suffered even if the device has not been formalized.
The other information that shaped the course of the markets yesterday was the publication of the “minutes” of the last Fed meeting. By “minutes”, we must understand “report”. When the central bank makes a monetary policy decision, it does so via a very calibrated press release. But there were discussions upstream, which are scrupulously transcribed and made public three weeks later. Their content gives more information on the state of mind of central bankers, their behavior and their convictions. So additional clues to their intentions. The minutes of the November 1 and 2 meeting confirm the “hawkish slowdown” strategy I was talking about yesterday: the discussions show that the central bank is heading for less steep rate hikes but that the slope remains upward. In bureaucratic terms and on the basis of an in-house translation authorized by my Speak English class of 6 traininge (do you remember, the famous Where is Brian?), it gives “a substantial majority of participants felt that a slower pace of increase would likely be appropriate soon“. It was this phrase that the market held back in ‘bottle half full’ mode, more than the sequel which spoke of inflation which had shown few signs of slowing so far, of imbalances between supply and demand and Fed Funds rates which are expected to be slightly higher than initially expected.
If we mix these two pieces of information, oil and monetary policy and shake things up, we end up with markets that ended up yesterday. Europe and the United States continued their rebound at a moderate pace, like the broad indices Stoxx Europe 600 and S&P500, up 0.6%. The Nasdaq 100 did a little better, gaining 1%, pulled by Tesla’s big 8% rebound, back in favor with some analysts after a 40% drop in three months. At the same time, the dollar fell again and the yield on US 10-year debt fell, confirming investors’ pro-market reading of Fed minutes. The American central bank managed to pick up the thread of the macroeconomic narrative, without however controlling all the elements. She should therefore continue to write that she is a little more relaxed, while pushing her members, in their public interventions, to remember that she is not letting her guard down. Hence the term “hawkish slowdown” mentioned above.
Today the news from the United States will be completely dried up by Thanksgiving, which is a holiday. The front pages of the American financial and technological media, pre-long weekend, are always covered with the consequences of the bankruptcy of the FTX cryptocurrency platform, which continues to agonize. I have no idea how things are going to end (badly) for Sam Bankman Fried, but it seems to me that he could be thanked for a number of things. Firstly because it puts the followers of “I told you so”, who must revel in the collapse of a section of the castle-crypto. Then, because he lightens the Elon Musk burden a little: if SBF did not occupy the center of the media and financial game, the boss of Tesla-Twitter would be even more omnipresent (can we write “more omnipresent”?). Finally, I think we can reward him for having demonstrated, once again, that the coat does not make the monk: you don’t need a suit and tie to be a financial delinquent, you can also be dressed like a sack.
But enough nonsense. The Asia-Pacific places are up at the end of the course. Tokyo, which was closed yesterday for a holiday, resumed 1%, while Sydney is less dashing, penalized by values linked to energy and raw materials which are suffering from the drop in oil. The ASX still ends at +0.14%. In China, Shanghai lost some ground but Hong Kong regained 0.5%. South Korea and India are also well oriented. European leading indicators are nonetheless hesitant at the time of writing. The CAC40 gained 0.08% to 6684 points shortly after opening.
Economic highlights of the day
The Ifo index of the business climate in Germany (10:00 a.m.) and the publication of the tense account of the last ECB meeting (1:30 p.m.) will animate the session. The whole macro diary here.
The euro rebounded to 1.0440 USD. The ounce of gold too, at 1754 USD. Oil is recovering some ground after its decline the day before, with Brent from the North Sea at 84.86 USD a barrel and US light crude WTI at 77.70 USD. The yield on US 10-year debt eases to 3.69%. Bitcoin goes back to $16,600.
The main changes in recommendations
- Aedifica: Morgan Stanley moves from overweight to online weighting by targeting EUR 80.
- Alcon: Julius Bär remains to be kept with a price target reduced from 76 to 73 CHF.
- Icade: Morgan Stanley goes from overweight to online weighting by targeting EUR 40.
- Klingelnberg: Credit Suisse remains outperforming with a price target raised from 23 to 25 CHF.
- Knorr-Bremse: Jefferies remains to be kept with a price target raised from 48 to 53 EUR.
- LEG Immobilien: Morgan Stanley moves from online weight to overweight by targeting EUR 89.
- LondonMetric: Morgan Stanley moves from overweight to weighted online by targeting 185 GBp.
- Prosafe: ABG resumes monitoring for purchases, aiming for 250 NOK.
- PSP Swiss Property: Morgan Stanley moves from underweight to weighted online by targeting CHF 100.
- Rainbow Rare Earth: Berenberg is starting the purchase follow-up by aiming for 33 GBp.
Saipem: Jefferies remains long with a target price raised from 1 to 1.40 EUR.
Important (and less important) announcements
- Kering confirms the departure of Gucci’s creative director, Alessandro Michele.
- Stellantis plans to produce compact EVs in India, according to its CEO.
- Renault signs a huge solar electricity contract with Voltalia.
- Engie has signed a 12-year power purchase agreement with Google for 100 MW, as part of the development of an offshore wind project off the coast of Scotland.
- Orange has signed with 27 banks the refinancing of its €6 billion syndicated line of credit, which now includes sustainable performance criteria.
- Schneider Electric secures $3 billion bridging financing for Aveva takeover.
- Teleperformance is discussing with the UNI Global Union federation to improve its social footprint.
- Vinci’s Concessions subsidiary is increasing its stake in the Rion-Antirion bridge concession in Greece, which it already owned and operated.
- Luc Rémont officially takes control of Electricité de France today, whose minority interests will be bought by the State at 12 EUR per share. The simplified takeover bid will take place from November 24 to December 22. In addition, EDF Renewables is bringing a 480 MW offshore wind project online.
- Rémy Cointreau exceeded expectations in the first half.
- Eurazeo announces the first closing of the fund dedicated to transition infrastructure.
- CGG wins a multi-year extension of its dedicated imaging center for Brunei Shell Petroleum.
- Elior is discussing a potential merger with its largest shareholder Derichebourg, according to rumors from Bloomberg. Derichebourg has requested the suspension of its title on the stock market, the time to react officially.
- Soitec confirms its annual objectives after an increase in its net profit and its turnover results in the first fiscal half-year.
- Predilife launches Mammorisk tests at the Veneto Oncology Institute.
- Lexibook presents new products.
- MedinCell obtains a €40 million loan from the European Investment Bank.
- Other publications: LDC, Manutan, etc.
In the world
Important (and less important) announcements
- The Toshiba suitor is said to be considering a lower offer after weak profits.
- Deere jumped 5% after its quarterly good.
- Manchester United soared 26% on Wall Street yesterday as the Glazer family put the football club up for sale.
- Tesla recovered 8% after a comeback with some analysts.
- EasyJet and Halfords are looking to hire older workers amid a declining UK workforce.
- Audi (Volkswagen) and other brands suspend paid activities on Twitter.$
- Vista Equity has its sights on Coupa Software, according to Bloomberg.
- Amazon will increase its foot deliveries and add transport bikes in the UK.
- BYD will increase the prices of certain models of new energy vehicles.
- Main publications of the day: Adevinta, Rémy Cointreau, Intertek, Kingfisher, DR. Martens, Jet2… The whole agenda here.