Before the bell: Brussels shows resilience

The romance between Goldman Sachs and Umicore continues. Don’t invest in weapons, but in factories that make them.

While United States markets took the day off, European investors kept trading. As has been the case for several weeks now, the various national indices kept slipping. By the close, losses were quite steep in some places, with Paris down 1.3% and Frankfurt losing 1.1%. The Bel20 was among the strongest performers, limiting the decline to just 0.3%. Umicore continued its rally, rising 5.4%. The Goldman Sachs analyst who pushed the stock higher last week with a buy recommendation reiterated yesterday that the recovery has only just begun. She still sees the share as significantly undervalued, and many investors are jumping in. UCB gained 2.3%, attempting to end its correction after a very strong 2024. The stock is still trading at twice the level it was at the start of 2024. Tubize, which holds a stake in UCB, followed more modestly with a 0.8% gain.

Markets in China opened higher today, while Tokyo fluctuated between gains and losses. Japan’s core inflation, which includes rising rice prices, climbed to 3.7%. Later today, consumer confidence data from Belgium and the eurozone will be released. In the run-up to the US holiday, Wall Street ended last week with a 1.1% drop for the S&P 500 and 0.6% for the Nasdaq. Unlike in previous downturns, the tech-heavy Nasdaq has shown more resilience thanks to a rebound in technology stocks. It will be interesting to see how the US market reacts today.

New green blood for Brussels

This coming Thursday, we can look forward to more details and the prospectus for EnergyVision—a company active in green energy, including solar panel installations under new models such as leasing. Subscriptions are expected to open on 27 June. It’s encouraging to finally see some new blood make its debut on Euronext Brussels. Lately, the trend has been more of an exodus from the exchange, often at unfair valuations that show little respect for minority shareholders. IPOs tend to come with high valuations, but there have also been companies in the past that chose not to push for the highest possible price, allowing them to return later for future capital raises. In any case, an IPO provides an excellent opportunity to thoroughly get to know a company, as the prospectus offers full transparency.

Investing in factories

Yesterday, we attended a JP Morgan presentation covering second-half forecasts and views on equities and bonds. There were some insightful ideas, especially around the urgent need for defence investment in Europe. Rheinmetall, the German tank manufacturer, remains a top pick for many investors. Profit forecasts have doubled, but the share price has risen eightfold. Can it go higher? Probably not much, due to limited production capacity. That’s why investment is needed first and foremost in new factories and automation. This is where a company like Siemens comes in. Not only is Siemens a major industrial player in Germany, it also stands to benefit from other domestic investment plans and the tax cuts the German government has already announced. Siemens currently trades at 16.7 times earnings.

Did you know…

that asset manager Jupiter expects the euro to climb 20% against the dollar over the next 12 months? Large-scale European investments are expected to attract additional capital to the eurozone. JP Morgan also notes that, based on purchasing power parity, the euro is still undervalued relative to the dollar.