Before the bell: door open for interest rate cut

In Europe today, the ECB is likely to cut interest rates by 25 basis points, while yesterday’s US inflation report opens the door for the first US rate cut since rates were raised.

Investors initially did not know how to react to the U.S. inflation report yesterday. The inflation numbers fell as expected, leaving the door open for a rate cut next week by the Federal Reserve. Some headlines, warning that core inflation had risen more than expected after all, initially caused the S&P 500 to lose 2% at one point. A second reading showed that the numbers were as expected and that investors were unjustifiably worried. The S&P 500 was eventually able to end the day 1.1% higher. Although we should note that without the rise in Nvidia (+8%) the picture would have looked different. In Asia this morning, we see the rise continuing with a 3.3% gain for the Nikkei 225.

Corporate news was limited this morning. Euronext will remove Econocom Group and Deceuninck from the Bel Mid-index and move them to the Bel Small. Also, Colruyt will disappear from the Bel ESG index, while D’Ieteren will take over the torch. WDP took over 6 warehouses in France for EUR 50 million. The acquisition should immediately contribute to profits. Today we still get the Kroger and Turkcell figures, while in the US new data on unemployment figures will be published.

A loss of 99%

320 million euros. That’s how much money the Belgian government has been able to raise so far with the government bond, according to the Federal Debt Agency. With that, we can safely call the interest in the government bond a big flop, with the government bond raising almost 99% less money than last year. Back then, SA Belgium was still able to raise 22.5 billion euros. Who we think will be more successful is the chemical producer Azelis. The group announced last night that it will pay investors 4.75% to lend money to them for 5 years. This while the Belgian state wants to pay an interest rate of 2.80% gross on 10 years. Does Belgium want to raise more money from its subjects? Then it must pay more, just like Azelis. Azelis has a goal of raising 600 million euros, which may well make it raise more money than with the state note. Although there is some good news for Brussels: the Belgian state can still levy a 30% withholding tax on the coupon of Azelis.

Angry savers and happy investors

September 12 has been marked in our diaries with a red marker. After all, today is the day that ECB President Christine Lagarde will cut European interest rates by 25 basis points. Not good for savers, but good for those looking to take out a loan soon and for investors. The lower the interest rate, the less interesting bonds become, and the more money will flow into equities. Real estate shares also benefit from this. The lower the interest rate, the fewer costs one has, which should also boost future profits. In Belgium, we then think of players such as Cofinimmo, Montea and Aedifica. Many of these stocks are still trading below their intrinsic value since the ECB started raising interest rates. According to Spaarvarkens, it is currently a favorable entry point for the Belgian GVV sector.

Did you know…

Belgian retail investors are very bad at diversification? According to the FSMA, last year, 1 in 3 retail investors only traded in a maximum of one share. More than half of all investors traded in no more than 3 different shares, according to the FSMA.