(ABM FN) The Brussels stock exchange plunged into the red again last week. The Bel20 closed the week at 3,614 points, or a weekly decline of 1.3 percent.
“August was a brutal month for US and European equities,” said AvaTrade market analyst Naeem Aslam. The Bel20 lost 5.5 percent in August.
Investors are gripped by recession and interest rate fears. After the words of Federal Reserve Chairman Jerome Powell in Jackson Hole last Friday, some European Central Bank executives also became “quite hawkish” by hinting at a 75 basis point rate hike next week, according to market analyst Bas van Geffen from Rabobank.
According to Van Geffen, the ECB can hardly lag behind if the market also expects an increase of more than 50 basis points next week. “After all, they want to show that they are determined to slow down inflation, and then you don’t want to disappoint,” said the market analyst.
It is clear that inflation must be curbed. In August, consumer prices in the eurozone rose by 9.1 percent. Never before has inflation been so high in the eurozone.
Meanwhile, the global economy is faltering, but that does not seem to slow down the central banks. Purchasing data this week showed a contraction of manufacturing in the eurozone, while growth in the US has slowed.
“Even with a looming recession, the ECB seems willing to raise interest rates further,” said ING economist Carsten Brzeski.
US job reports don’t fool Fed
The same seems to be true for the Fed. This week, after months, another ADP jobs report from the United States came out and fell quite short, which AvaTrade’s Aslam said “confirms that the US job market is weakening.”
The major jobs report from the US government followed on Friday. In August, 315,000 jobs were added, just slightly less than the 318,000 expected.
Unemployment also rose to 3.7 percent. But that is actually positive, according to Rabobank market analyst Philip Marey.
“Unemployment rose by 20 basis points to 3.7 percent, which is due to the entry of 786,000 people into the workforce. This may be due to, for example, the fading effect of the corona support. For the Fed, this is a signal that at least there is still there are always people looking for work, and that reduces the great tension in the American labor market and tempers wage developments and therefore inflation and therefore the need to accelerate even more monetaryly than is already the case,” said Marey.
According to AvaTrade’s Aslam, the Fed has so far been very confident in its monetary policy approach because they believe the US job market is solid. However, the market expert pointed to the warning signals that companies already gave during the earnings season, with announcements of reorganizations or a personnel freeze.
“The Fed is now faced with a major dilemma: can they continue to raise interest rates at the same pace?” Aslam wondered. The market thinks so for the time being, because CME’s FedWatch Tool estimates the chance of a 75 basis point rate hike later this month at more than 60 percent.
The American ten-year yield stood at 3.22 percent on Friday and the German variant at 1.52 percent, making interest rates below their highest level this week.
Furthermore, WTI oil dropped 4.5 percent this week ahead of OPEC’s monthly meeting early next week.
The euro/dollar traded at 1.0010 on Friday, making it slightly higher on a weekly basis.
Risers and Fallers
The biggest riser last week was Home Invest Belgium, with a gain of 14.6 percent due to a possible inclusion in the EPRA Global Index.
Agfa-Gevaert won 12.1 percent at 3.62 euros. The company announced the sale of the Offset Solutions division to Aurelius for 92 million euros. In response, Degroof Petercam put the share on the buy list with a new price target of 5.00 euros. Kepler Cheuvreux raised the price target to 6.00 euros and repeated the buy recommendation.
The biggest decline was Biocartis, with a weekly loss of 13.9 percent. The diagnostics company released solid half-year figures on Thursday, Degroof Petercam believes, but also announced an expensive refinancing. As a result, the bank sees little upside potential for the stock in the short term.
This week, DEME came out with figures for the first time since its independent stock exchange listing. This showed that the dredging company saw its turnover increase, but also became a little more cautious about profitability for the whole year. According to Degroof Petercam, the headwinds that DEME is experiencing are temporary and the company will see profits grow again in 2023. The stock fell more than 1% this week.
CFE, the former parent company of DEME, became slightly more positive about this financial year, and adjusted its outlook slightly upwards. Here too, the half-year figures looked good with increasing turnover and profit. A good performance, according to Degroof Petercam. The stock rose 9.5 percent last week.
Ackermans & van Haaren, the holding company with a participation in DEME and CFE, among others, also released figures this week. As expected, the holding posted record profits in the first six months of the year. The company also expects to record record profits for the entire fiscal year. Good enough according to KBC Securities to put the share on the buy list, while the price target was slightly lowered. This resulted in a weekly profit of 5.4 percent.
IBA also made several announcements, including the half-year results on Wednesday. The proton therapy specialist has seen a strong increase in turnover in the past six months, but remains loss-making, although profitability appears to be improving. ING emphasized the “very strong” order inflow. IBA also announced the sale of a new Cyclone IKON in China, which ING believes is an important new contract. The company also announced that it has signed a cooperation agreement with ScandiDos. The stock fell 4.7 percent.
According to KBC Securities, Hyloris presented “not surprising” half-year figures. The stock lost 1.9 percent.
Inclusion won 3.2 percent. On Thursday evening, the social real estate investor announced that rental income rose further in the first six months, pushing the dividend proposal for this year by at least 30 percent. Good grades, Kepler Cheuvreux judged.
Kepler Cheuvreux and ING have significantly lowered their price targets for Kinepolis this week, as the recovery is somewhat slower than expected. According to ING, Kinepolis will be back at 70 percent of the number of visitors before the corona crisis in 2022, and in 2023 this will be 80 percent. ING previously assumed 77 and 88 percent. Nevertheless, the analysts of ING and Degroof continue to find the share worth buying. The stock was up 1.5 percent this week.
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