Positive or negative signals from the war in Ukraine continue to determine the color of stock market indexes, and in turn a number of other assets. Yesterday, talks between Russian and Ukrainian officials appeared to result in constructive announcements, particularly as Moscow hinted that the stranglehold on Kyiv would be loosened. Both sides seemed inclined to make concessions, leading to a marked increase in confidence among investors, who flocked to the most cyclical stocks.
 
The proof is in the automotive sector, especially in Europe, which is probably the most representative of the current mess. The profits of carmakers and equipment manufacturers are closely linked to growth curves, which is why the sector is considered highly cyclical. But despite the post-first containment GDP surge, manufacturers have taken little advantage of the leverage in 2021. The first year of the pandemic, they had vehicles but no buyers. The next year, buyers returned but there were not enough vehicles to satisfy them all, due to supply shortages, especially in semiconductors. By 2022, production was expected to normalize. But the supply chains were not quite up to scratch at the beginning of the year. The Russian invasion of the Ukraine was a further shock, as the country is the production base for certain automotive components, such as wiring harnesses. Combining cyclicality and the risk of shortages, the sector was hit hard. Yesterday, positive news from talks made the sector soar. In the United States, the S&P500 rose by 1.2% and the Nasdaq by 1.7%, again driven by cyclicals, technology and real estate.
 
Well, everyone knows that promises only bind those who listen to them. Is a Russian government promise worthy of trust? That is the question. The Westerners are asking it. The Ukrainian presidency too. Precisely, Moscow has announced its intention to move away from Kyiv and concentrate on the Donbass. Is this to confuse the issue? In any case, the ultra-reactive stock markets are eagerly seizing on every new piece of information, even if it is without a future. It is difficult to know how all this will turn out. But it is safe to say that everything will not return to the way it was in the blink of an eye, and that a hypothetical end to hostilities would not instantly put an end to the cascade of retaliation that has been put in place. A touch of caution therefore seems justified.
 
In the debt market, US rates are still in disarray, with 2-, 5-, 10- and 30-year maturities paying very close to each other, a sign of some confusion in the economic trajectories expected by investors. The main macroeconomic indicator of the day is the ADP report on employment in the US.
 
 
Economic highlights of the day:
 
German inflation for March, the ADP survey on employment in the United States) and the latest estimate of U.S. GDP for Q4 2021 are today's main indicators. Q4 GDP is 6.9% vs 7.0% estimated, vs 7.0% prior
 
The dollar is down to EUR 0.8988. The ounce of gold is stabilizing at $1927. North Sea Brent is at USD 112.9 and US light crude WTI at USD 107.1. The yield on US debt is down to 2.35% on 10 years, below the 5 years (2.45%) and not far from the 2 years (2.32%). Meanwhile, German debt is rising to 0.63% over the same period and the French OAT is accelerating to 1.05%. The bitcoin is rising on the USD 47,500.
On markets:
  • MICRON TECHNOLOGY - The chipmaker, which reported better-than-expected quarterly results on Tuesday, said it does not expect any near-term negative impact from the Russian-Ukrainian crisis on its semiconductor production volumes but it does not rule out higher costs. The stock gained 4.8% in Wednesday's trading before the Wall Street opening.
  •  KKR - Telecom Italia (TIM) has asked U.S. investment fund KKR to clarify by Monday whether its EUR10.8 billion takeover offer is still on the table, two sources close to the matter said.
  • APOLLO GLOBAL MANAGEMENT said Wednesday it would not make a bid for British school and university publishing group Pearson because of a lack of agreement between the two groups.
  • CITIGROUP announced on Wednesday the sale of its retail banking business in India to Axis Bank for $1.6 billion.
  • Chinese internet groups listed on Wall Street are down in pre-market trading after Beijing announced its intention to crack down on tax evasion in the sector. 
  • LULULEMON ATHLETICA - The sportswear retailer announced Tuesday night that it expects annual sales to exceed analysts' expectations. The stock jumped 7.6% in pre-market trading.
  • VIR BIOTECHNOLOGY was up 11% in after-hours trading on Tuesday evening in reaction to the announcement of its inclusion in the S&P SmallCap 600 index on April 4.
  • WEWORK - The office-sharing specialist announced Tuesday that its chief executive, Sandeep Mathrani, would take over as chairman of the board from Marcelo Claure, who left the group in January.
  • NIELSEN HOLDINGS - Jefferies lowered its recommendation to "hold" from "buy" on the group, which on Tuesday accepted a $10.06 billion buyout offer from a private equity consortium led by Elliott Management and Brookfield Asset Management to take it public.
  • HR - Jefferies raised its advice to "buy" from "hold" on the furniture chain, which reported record annual results on Tuesday.