Before the bell: Whatever it takes

In Europe and on Wall Street, markets are under pressure due to the trade war. Meanwhile, Chinese technology companies seem unaffected by the pessimism.

The purchasing power of Europeans saw a significant global increase yesterday. The reason? The new German ruling coalition decided to lift the debt brake. As a result, a new infrastructure fund worth 500 billion euro is being established, while defense spending will no longer count toward the debt limit. The euro strengthened considerably, now trading at 1.06 dollar per euro. However, investors did not have a good day. The Euro Stoxx 50 lost 2.8% due to the trade war initiated by the U.S. The Dow Jones index dropped 1.6%, with stocks like Tesla falling 4.3%. What stands out the most? Chinese technology companies have become a safe haven from the trade war. The Hang Seng index gained 2.1% this morning.

Investors are looking ahead to the reopening of Smartphoto’s stock. Marc Coucke has made a takeover bid for Smartphoto at 28.50 euro per share. The stock remains suspended for now. Today, Abercrombie & Fitch and Foot Locker will report earnings, with Victoria’s Secret releasing its results after market close.

Trading with the enemy

The shipping world can change quickly. Two years ago, Norwegian shipping magnate John Fredriksen bought into the then-Euronav, aiming to acquire its fleet. His hostile takeover bid was blocked by selling part of Euronav’s fleet to Fredriksen and diversifying into other sectors. Today, the former Euronav—now renamed CMB.Tech—continues on that path by acquiring a 40% stake in Golden Ocean, a Norwegian dry bulk shipping company owned by… John Fredriksen. CMB.Tech is paying 1.2 billion dollar for this acquisition. Since the takeover, the stock has halved in value, as investors struggle with the company’s shift toward becoming a holding with interests in various shipping sectors. We are also staying on the sidelines.

Light at the end of the tunnel?

Investors should distinguish between two things: accounting profit or loss and free cash flow. The latter shows how much actual cash flows into a company and is more important than accounting profits, which can be influenced by many factors. Take Bayer, for example, which reported a loss due to write-downs in its crop science division. However, looking under the hood, the operational numbers are not so bad. Bayer generated 3.1 billion euro in free cash flow and reduced its net debt to 32.6 billion euro. That is a solid improvement and tells a different story than the reported loss. Unfortunately, for 2025, the company expects profits to remain under pressure despite stable revenue. Not something to get excited about, but much of the bad news is already priced into the stock. We remain positive and prefer to focus on free cash flow, which provides a glimmer of light at the end of the tunnel.

Did you know…

German Christian Democrat Friedrich Merz announced the new economic plans yesterday with the phrase “Whatever it takes”? Those three words were famously spoken by Mario Draghi as ECB president in 2012, calming financial markets and restoring confidence in the euro. History seems to be repeating itself.

This article was translated from Dutch and was originally published on Spaarvarkens.be.