All eyes on Black Friday sales

11/25/2022 | 09:50am

After Thanksgiving, Wall Street remains very quiet, with investors keeping an eye on Black Friday sales to assess the impact of inflation and how it will affect Fed policy. U.S. stock markets are open for a half session today until 1 p.m. ET. The National Retail Federation estimates that 166.3 million people will be shopping from Thanksgiving Day through Cyber Monday.

Futures were mixed today, after Wall Street's close in the green on Wednesday, when investor sentiment turned positive after the release of minutes of the last Fed meeting on Wednesday. 

There are two things to take away from Wednesday on the financial front. First, the oil world seems to be taking seriously Western threats to cap the price of Russian oil. Black gold prices have corrected sharply to flirt with their lows of late September, which were themselves the lowest since January 2022. The objective of the G7 is to force Moscow to sell its oil at a low price, to reduce its cash flow, without cutting off Russian production, in order to avoid a sharp rise in the price per barrel. These two objectives are difficult to reconcile, especially since the implementation is not obvious: how can you force a country to sell at a lower price? The West is counting on the transmission belts: it plans to refuse to provide transport, insurance and brokerage services to cargoes that are not sold at the set minimum price. Since Europe and the United States provide almost 90% of Russian oil shipping (which accounts for 70% of the country's exports, compared to 30% for direct pipeline connections).

The other piece of information that shaped the markets on Wednesday was the release of the minutes of the last Fed meeting. When the central bank makes a monetary policy decision, it does so via a highly calibrated press release. But there were discussions beforehand, which are scrupulously transcribed and made public three weeks later. Their content gives more information on the state of mind of central bankers, their behavior and their convictions. Thus, additional clues to their intentions. The minutes of the November 1 and 2 meeting confirmed the "hawkish slowdown" strategy I mentioned earlier this week: the discussions show that the central bank is moving towards lower rate hikes but not just yet. In bureaucratic terms, this gives "a substantial majority of participants felt that a slower pace of rate hikes would probably be appropriate soon". It is this sentence that the market loved, more than the rest which spoke of inflation showing few signs of slowing down so far, imbalances between supply and demand and Fed Funds rates that are expected to be a little higher than initially expected.

Today's financial news is rather thin, due to the closing of the US markets yesterday and for a half day today. Moreover, no major statistics are expected, if we disregard the publication of the German GDP for the third quarter, which is a second reading of the index, and therefore less impactful for investors. Already, the markets are awaiting the consumer spending figures for this very strategic weekend in the United States, which starts with the famous "Black Friday" today and which will continue on Monday with "Cyber Monday".


Economic highlights of the day:

The dollar is up 0.4% against the dollar and the pound to EUR 0.9654 and GBP 0.8286. The ounce of gold is down to 1747 dollars. Oil is up slightly, with North Sea Brent at USD 85.60 per barrel and US WTI light crude at USD 78.49. The yield on 10-year US debt is easing further to 3.65%. Bitcoin is falling back to USD 16,400.


In corporate news:

* Amazon - Employees of the U.S. online retail giant were called out worldwide for a strike on Friday, including in the U.S., Germany and France, on the occasion of "Black Friday."

* Apple - iPhone production at Foxconn's Zhengzhou factory in China, disrupted by employee protests this week, could fall by at least 30 percent in November, a source familiar with the matter told Reuters on Friday.

* Tesla has decided to recall more than 80,000 vehicles produced in China because of a software and seat belt problem, Chinese authorities said on Friday.

* Ford Motor announced Thursday that it is recalling 634,000 SUVs worldwide because of a fire hazard in the engine block and advised owners to have their vehicles inspected.

* Activision Blizzard was down 4% in pre-market trading as the Federal Trade Commission (FTC) in the U.S. is likely to block MICROSOFT's takeover of the video game publisher, according to news site Politico.

* Manchester United - The British soccer club's Wall Street stock was up 9.6 percent in premarket trading, heading for a third straight gain, as the Glazer family, which owns the club, considers options, including a sale.

* Meta Platforms - Russia's Justice Ministry has added Facebook's parent company to its list of "extremist" organizations, the Kommersant daily reported Friday.

* JPMorgan - Several women filed lawsuits Thursday in the United States against JPMorgan and other banks, accusing them of financially benefiting from the sex trafficking set up by financier Jeffrey Epstein, who committed suicide in prison three years ago.


Analyst recommendations:

Alimentation Couche-Tard: National Bank kept its Outperform rating, but lowered PT to C$67.00

HSBC: RBC maintained its recommendation on the stock with a Buy rating. The target price is unchanged and still at GBX 675.

Johnson Matthey: Jefferies remains Buy with target raised to GBp 2400 from GBp 2300.

Lloyds: RBC upgrades from sector perform to outperform, targeting GBp 57.

NatWest: RBC upgrades from Outperform to Sector Perform targeting GBp 290.

Skyworks: Baptista Research LLP initiated coverage with a recommendation of outperform. PT up 23% to $116.50.

Vistry: Berenberg maintains a hold rating with a price target reduced from GBp 840 to GBp 760. 2023
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