A few months ago, some analysts were predicting a bleak future for ESG funds, given investors' infatuation with formerly unattractive sectors like oil. In their view, the much-vaunted outperformance of sustainable finance in 2020 was going to be a long time coming. It seems that they are both right and wrong. Right because fossil fuels have taken their revenge on the stock market. The S&P Global Oil Producer Index has gained about 60% since January 1, while its clean energy counterpart has lost 18%. It is well known that ESG funds are labeled for a wide range of themes, but energy dominates. Investor tend to think that ESG has more to do energy than with governance, inclusion or the circular economy.
In reality, ESG funds as a whole have performed fairly close to the major indices during the first half of the year, and sometimes even better. Sometimes even outperformed. The MSCI World ESG Screened index gained 13% while the STOXX Europe 600 did 14%. But let's not kid ourselves. This is because the main weights of this ESG index are Apple, Microsoft, Alphabet, Amazon, Facebook and Tesla. This is the paradox of sustainable finance, which I have mentioned many times. The pessimists will say that it's all smoke and mirrors. The optimists will say that it forces companies to integrate sustainability criteria and the financial industry to change its practices. Let’s hope that the latter are right and that the former will ensure that greenwashing does not become the norm.
The OPEC summit ended yesterday on a failure. The vast majority of specialists thought the meeting would be a formality, but that did not happen. The United Arab Emirates seem to be at odds with the rest of the group. "It's the whole group against one country," Saudi Minister Abdelaziz bin Salmane said on Bloomberg on Sunday. The draft agreement provided for a gradual increase in production of 2 million barrels per day by the end of the year. The UAE wants to take advantage of the current favorable situation to produce more.
OPEC works best when faced with significant challenges and low prices, noted a Wood Mackenzie analyst. The announcement of an adjournment of the meeting without a resumption date, interpreted as a failure of the summit, has logically made the price of black gold jump to above $77 for Brent and $76 for WTI. This price increase is obviously not without consequences for many sectors and for inflation figures…
Economic highlights of the day
In Europe, we have the ZEW confidence index of German financiers in July and European retail sales in May. In the United States, the services PMI and the ISM services index for June are due. Earlier today, the Bank of Australia kept its key rates unchanged, suggesting that the status quo should last until at least 2024.
The dollar is trading at EUR 0.8442. The ounce of gold is over USD 1800 again, at USD 1813. The cancellation of the OPEC summit obviously benefits oil, with North Sea Brent reaching USD 76.88 and US WTI light crude at USD 75.77. The yield on US debt rises slightly to 1.44% over 10 years. Bitcoin is holding steady in the USD 34,400 area.
* Didi was down 25% in pre-market trading ahead of its first session since Chinese authorities suspended the Chinese Uber app, days after it listed on the New York Stock Exchange.
* Weibo climbed 22 percent in pre-market trading on Tuesday after sources told Reuters that its CEO, Charles Chao, was in talks with a public investor to delist the Chinese social networking giant.
* Twitter no longer has legal immunity over content posted by its users in India because the U.S. group is slow to appoint officials to monitor the compliance of posted content.
* Facebook, Twitter and Google have announced that they may stop offering their services in Hong Kong if a controversial privacy law is enacted.
* Apollo Global Management - The U.S. private equity group entered the battle for British supermarket chain Morrisons on Monday, saying it was considering a bid.
* Welbilt - Italy's Ali Group is raising its bid for the food processing and foodservice equipment specialist to $24 a share in cash, compared with a previous $23 offer from U.S. firm Middleby.
* Brookfields Business Partners and its institutional partners announced Monday that they will acquire U.S. parts maker DexKo Global from private equity firm KPS Capital Partners for $3.4 billion.
* American Express gained 2.5% in pre-market trading after Goldman Sachs upgraded its recommendation to "buy" from "neutral".
- Anglo American: Barclays raised price target to GBP 38.20 from GBP 38 and kept its overweight rating.
- Beazley: J.P. Morgan upgrades to Overweight from Neutral, targeting GBP 452.
- BP Plc: JP Morgan keeps Buy rating. The target price has been revised upwards and is now set at GBp 480, compared with GBp 440 previously.
- Crest Nicholson: Berenberg remains a Hold with a target price raised from GBP 380 to 450.
- Entain: Deutsche Bank stays at buy and raised its price target to GBP 21.08 from GBP 20.9.
- Fresnillo: Barclays cut the price target to GBP 8 from GBP 10 and reiterated its equal-weight rating.
- Glencore: Barclays raised the price target to GBP 3.55 from GBP 3.45 and reiterates its overweight rating.
- Hiscox: J.P. Morgan upgrades from neutral to overweight with a target of GBp 1016.
- JD Sports Fashion: RBC raises the price target to GBP 11 from GBP 10.50 and maintains its outperform rating.
- IMI: Goldman Sachs downgrades IMI to neutral from buy and maintains the price target at GBP 17.
- Lancashire: J.P. Morgan upgrades to neutral from overweight, targeting GBP 725.
- Land Securities: Jefferies upgrades from buy to hold, targeting GBP 725.
- NatWest: Barclays upgrades from Equal-weight to Overweight targeting 250 GBp.
- Reckitt Benckiser: Bernstein upgrades from market perform to underperform targeting GBp6,000.
- Rio Tinto: Barclays lifts the price target to GBP 61.50 from GBP 55.50 and keeps its equal-weight rating
- St. James Place Plc: Barclays raises price target to GBP 17.12 from GBP 14.65 and keeps its overweight rating.
- Tesla: UBS research gives the stock a Neutral rating. The target price remains unchanged at USD 660.
- The British Land: Jefferies upgrades its Buy rating to Hold with a target of GBp 525.