Closing call: and yes, another new closing record, thanks to job figures and Apple

#Closing #call #closing #record #job #figures #Apple

The AEX started this morning with a nice profit, but when it became known that the American labor market had cooled down considerably, the roof went off. The index ultimately ended the day 1% higher at 887.44 points. That is a new closing record.

The AEX only had a handful of decliners and the price results were quite modest. The price loss of index heavyweight Shell of -0.8% (fresh IEX analysis can be found here) hurt the most. The other decliners were mainly in the defensive corner, with names such as Ahold Delhaize, Unilever, ASR Nederland and Heineken.

Tech stocks led the way. Then we are of course primarily talking about the chippers, who are well represented in the AEX and each saw their share price rise by 3 to 4%. But also about Adyen and Prosus.

Two companies presented figures and these were received differently. Aperam lost 4.6%, leaving it at the bottom of the AMX, while Brunel posted a price gain of 3.9%, good for second place in the AScX below the rather volatile Vivoryon.

The AMX closed 0.5% higher today, but the AScX barely kept its feet dry. The AEX and Midkap can also look back on a good stock market week. They increased by 0.5% and 1% respectively. Only the AScX has fallen by 2.1% on a weekly basis.

Course boom Aperam

It was to be expected that Aperam went down. The stainless steel manufacturer ended up in the red. According to the CEO, the sector is in recession for the seventh (!) consecutive quarter. But the company does expect an improvement in the current quarter and the market is counting on a strong recovery in profitability in 2025, writes Teun Verhagen in his analysis.

Aperam’s share price is down almost 21% YTD. Is this a good time to pick up the share at a bargain price? Or should we be careful with that?

Aperam falls short in extremely weak Q1 – IEX Premium https://t.co/PWiQeIjgV7 via @IEXnl

— IEX Investors Desk (@Beleggersdesk) May 3, 2024

Brunel hoisted on the shield

Brunel’s story was a lot more optimistic. “Brunel has taken excellent revenge from a mediocre fourth quarter,” writes Martin Crum, although he acknowledges that the first quarter figures seemed somewhat disappointing at first glance. Turnover increased by 10% year on year, gross profit increased by 1% YoY and organically by 6%. But the EBIT result fell by 9%, while the corresponding margin eroded to 4.1%, compared to 5% a year earlier.

Yet Crum saw reason for advice and price targets to pull up.

Recommendation and price target increase Brunel – IEX Premium https://t.co/SmmVz0hCp0 via @IEXnl

— IEX Investors Desk (@Beleggersdesk) May 3, 2024

Nasdaq is booming

Wall Street also started the trading day optimistically, with the increase in the Nasdaq (+1.9%) being particularly striking. Tech stocks are generally above average interest rate sensitive.

Moreover, Apple came up with figures that were extremely popular with investors. Although iPhone sales had fallen compared to a year earlier, this led to lower turnover. But both turnover and profit were better than expected.

In addition, the group announced a new $110 billion share buyback program. “That is almost the entire market value of Unilever,” Ivo Breukink puts it in perspective.

The market is eagerly awaiting the announcement of new products next week. The hope is that it will contain the following two letters: A and I.

Apple comes with big news – IEX Premium https://t.co/IptrPKXm5g via @IEXnl

— IEX Investors Desk (@Beleggersdesk) May 3, 2024

Furthermore, Paramount Global is trading 3.6% higher after a report in The Wall Street Journal that Sony Pictures and Apollo Global Management would like to buy the company for $26 billion.

US job growth is weakening considerably

The American jobs report is already known as a ‘market moving event’, but today there was extra weight on it. In his explanation of the interest rate decision Last Wednesday, Federal Reserve Chairman Jerome Powell said the Fed is prepared to respond (read: cut rates) if the labor market unexpectedly weakens. After all, the Fed has a dual mandate: in addition to price stability, it strives for full employment. The latter means that unemployment must remain below 4%.

And that weakening came. According to it US Bureau of Labor Statistics 175,000 jobs were added in April: a lot more than the approximately +243K that was expected and much less than the job growth in March (an upwards +315K).

Unemployment rose slightly to 3.9% (vs. 3.8% in March).

Hourly wages increased by 0.2% on a monthly basis, slightly less than in March (+0.3%). On an annual basis, hourly wages increased by 3.9%, compared to 4.1% in March. All these figures indicated a cooling of the labor market.

In that case, bad news was good news, because this brings an interest rate cut closer. Earlier this week, the market seemed to be preparing for a first interest rate hike in November, but now September is back in view. According to de FedWatch Tool van CME Group is the probability that it is federal funds rate then goes up and is priced at 68.2% (which was still 62.9% at the beginning of the afternoon.

The chance that interest rates in November will be lower than now is now priced at 80.3%, compared to 74.6% earlier today and 57.7% earlier this week.

It is not surprising that an interest rate cut is now a little closer. Keeping interest rates high for an unnecessarily long period entails certain risks. It takes about six months for an interest rate hike to be fully absorbed into the economy. If the economy is already cooling down while interest rates are still high, unnecessary damage could be caused to the economy.

That the American economy is cooling down slightly was also evident this afternoon from the purchasing managers’ indexes for services. ISM’s measurement indicated an unexpected contraction and S&P Global’s indicated a slowdown in growth. The industrial indexes from earlier this week were also not great: the ISM index pointed to contraction and the S&P index pointed to stagnation. Since these are leading indicators, the Fed will also look at them with some care.

Meanwhile, the Federal Reserve is trying to temper interest rate expectations again. Michelle Bowman, governor at the Federal Reserve, said in a speech this afternoon that it appears that US inflation will remain high for some time and that a possible interest rate increase remains on the table. Remarkable, because Powell said on Wednesday that an interest rate increase is not on the agenda and the current interest rate level of 5.25% to 5.50% is sufficient to get inflation back in line.

The broad market

• The AEX closed 1% higher at 887.44 points. This puts us at the forefront, thanks to the heavy weighting of the tech sector. The CAC (+0.5%), Bel20 (+0.5%), FTSE 100 (+0.5%), DAX40 (+0.7%) and EuroStoxx 50 (+0.7%) were not against us.
• The ‘panic barometer’, the CBOE VIX-index (an indicator of volatility), drops even further to 13.79.
• Wall Street is trading as follows: Dow Jones +1.1%, S&P500 +1.2% and Nasdaq even +1.9%.
• The euro rises slightly against the dollar and is trading at 1.0766 dollars.
• The Dutch ten-year interest rate is 2.789%, which is 1 basis point lower than yesterday. The American ten-year declines sharply after the jobs report: 6 basis points off at 4.51%.
• The gold price is 0.3% lower at $2,297 per troy ounce.
• Bitcoin leaves the bottom behind and is 4.6% (=$2,701) higher at $61,841.
• Oil prices are about 0.5% lower. A barrel of Brent oil now costs $83.20 and for a barrel of WTI you have to pay $78.46.

Further on the Damrak

Chips were good. Aperam was charged for the figures and Heijmans went ex-dividend.

• The share Heijmans today went €0.89 ex-dividend. Adjusted for this, the share ended down 1 cent.
• Yesterday’s rating BAM announced today that it wants to repurchase more than 7 million shares. But this could not improve sentiment. Yesterday the price plummeted by 10.8% and today it fell another 0.8%.
• A G (+3.6%) reported after hours on Thursday that turnover and adjusted results had increased in Q1, with the Taylor-Swift effect once again asserting itself. This earned the company price target increases from Deutsche Bank, UBS and Bank of America. Plus a spot in the top 3 biggest risers.
• Also Galapagos (-1.3%) released figures last night. The biotech company saw R&D costs increase in Q1. The cash burn forecast remained unchanged.
• Investors took some profits off the table AMG (-3.2%), which ended the day almost 6% higher yesterday after figures from Albemarle.
• Oil prices have been falling for a while and that is likely to have an impact Shell, which lost 0.8%. The prices of other oil majors, such as BP, Chevron, Exxon Mobil and Chevron, are also under pressure.

Striking risers and fallers last week

If we look at the weekly lists, we see that Philips (+26.8%) stands head and shoulders above the rest, which is of course due to the settlement regarding the sleep apnea devices. Number crunchers did well anyway, as ING (+6.6%) and UMG (+4.9%) also finished in the top regions. Prosus (5.1%) continued last week’s rally, riding on further price gains from its subsidiary Tencent.

Despite today’s price increases, the chippers are at the tail of the pack, with price losses of 3 to 4% on a weekly basis. Adyen, which already saw 15.7% of its stock market value evaporate last week, lost another 2.1%.

In the Midkap, Alfen (+9.4%) is the weekly winner, but still the biggest loser YTD (-35%). Signify (-5%) recovered somewhat from the blows of the previous week and Van Lanschot Kempen is still enjoying the reward for the quarterly figures.

In the small cap index, ForFarmers (+7.8%) led the way last week, followed by Fastned and Ebusco. BAM’s quarterly figures (-13%) are still a source of concern for investors.

In the case of raw materials, the further drop in oil prices by around 5 to 6% is particularly striking. Silver (-2.8%) and gold (-1.7%) have also been in retreat for some time.

IEX Podcast

Philips, ING, BAM and the Fed are also featured in the new one IEX Beleggerspodcast from today. My colleagues Kim Bergsma and Rob Stallinga and Hildo Laman (head of the IEX Investor Desk) also consider the question: Are we dealing with a new tech bubble?

Are we dealing with a new tech bubble? That and much more in the IEX Investor Podcast.https://t.co/MAiNr3A64s

— IEX.nl (@IEXnl) May 3, 2024

Advice

Not only was it pouring rain outside, but it was also raining with price target increases:

• Shell: to 2,600 pence from 2,700 pence and hold – UBS
• Shell: to €38 from €20 and buy – DZ Bank
• ING: to €16.10 from €15.70 and keep DZ Bank
• ING: to €18.50 from €17.50 and buy – Berenberg
• Air France-KLM: to €9.30 from €9.00 and sell – JPMorgan Research
• Arcadis: to €66 from €60 and buy – Bank of America
• Philips: to €25 from €19 and hold – DZ Bank

Agenda Monday: PostNL and TKH figures

Opens Monday PostNL the books. The good news is that the company has not issued a profit warning, as it did prior to the annual results. But that’s about all there is to it. Analysts expect that the postal and parcel company will post a negative operating result, while this was still positive last year. According to the consensus, the normalized EBIT will be -€2 million versus +€7 million in Q1 2023. The pain is once again with letter mail: volumes there are expected to have fallen by 8%, while those of parcels have probably fallen by 8% increased.

PostNL would like to deliver mail less often, due to declining mail volumes and the tightness on the labor market, but the company is dependent on The Hague for this.

Also TKH comes with numbers. This company from Haaksbergen in Twente is more high-tech than you may know. For example, it makes highly advanced tire building machines (equipped with more than 30 cameras), fiber optic cables, subsea cables for offshore wind farms, medium and high-voltage cables and security cameras.

In the Vision and Connectivity division, the basis for comparison is not as favorable, so keep that in mind. When publishing its annual figures, TKH already indicated that it was struggling with weak demand in the end markets. The company expects sales growth at Manufacturing. Group turnover and EBITA are under pressure, the group reported at the time.

According to analyst Hildo Laman, the fourth quarter figures were somewhat poor, but slightly better than the already tempered expectations. He thought the outlook was a bit dull. But he does see opportunities that certain trends, such as electrification, digitalization and automation, offer the tech company. He also points out that TKH has invested heavily, including in the opening of new locations. So there may be more in store for investors in the future. But please be patient: “TKH investors have to wait a little longer,” was the headline final analysis.

Alexander van der Lof, CEO of TKH, will speak at the IEX Investors’ Day on Friday, June 28. You can be there. More information can be found here.

Purchasing data and PPI

Furthermore, the purchasing managers’ index for services in the eurozone is on the agenda. In March, growth appeared to be accelerating and, according to economists, this will continue. The index is expected to have risen to 52.9, compared to 51.5 in March. And the consensus composite index rose to 51.4 versus 50.2 the month before,

Another interesting figure is the eurozone PPI for March. The index is expected to have fallen slightly less sharply than the month before: by 0.7% on a monthly basis, compared to 1% the month before.

Here is the agenda for Monday:

03:45: China Services Purchasing Managers Index April
07:00: PostNL first quarter figures
07:00: Siemens Healthineers second quarter results
07:30: TKH first quarter figures
09:55: Dui purchasing managers index services April (final)
10:00 am: Eurozone purchasing managers index services April (final)
10:30 am: UK purchasing managers index services April (final)
11:00 am: Eurozone producer prices in March
1:00 PM: Tyson Foods first quarter results

Highlights for the rest of the week

You don’t need to worry about macroeconomic figures next week, so you can mainly focus on quarterly figures, with the emphasis on Wednesday. Heijmans, AMG, Kendrion and Marel open the books on Tuesday. On Wednesday it will be Ahold-Delhaize, Pharming and SBM Offshore’s turn and Eurocommercial will follow on Thursday.

Coming from abroad are Infineon, Zalando, UBS, BP, Disney, Nikola, Lyft, Reddit, Solvay (Tuesday), AB InBev, Uber, AMC, Beyond Meat (Wednesday) and Argen-X (Thursday).

Furthermore, the Bank of England (BoE) makes an interest rate decision. Just like with the Fed, the interest rate decision itself is unlikely to be that exciting: the BoE will probably maintain its main rate at 5.25%, according to an inventory by FactSet. But the forecast for the British economy and especially hints about a first interest rate increase could cause some fireworks.

I wish you a nice evening and a pleasant weekend!