The bad reputation of the month of September on stock market is confirmed. Especially in the United States, where the S&P500 lost almost 5%. That is to say the biggest drop recorded by the American broad index since March 2020, when it had lost 12.5%. And while we are on the subject of numbers, September 2020 ended with a 4% decline for the S&P500, which had lost another 2.8% in October. Last year at this time, the decline was due to the aftershocks of the pandemic. But investors clung to the hope of a Covid vaccine (and rightly so), which offered the prospect of a lasting recovery.

This year's market decline in September is multifactorial, but If we had to cite the main cause, it would probably be the link between the change in the monetary policy paradigm and the generalized upward trajectory of prices. Investors often struggle to forecast the exact consequences, but they suspect that there is trouble ahead. Nothing insurmountable, but disorders that will require complex and experimental economic responses. And since economics is about as accurate as five-day weather forecasting, past performance Is no guarantee of future results, to paraphrase the world's most famous disclaimer.

The fact remains that while experts are arguing about the consequences of the latest financial ups and downs, from the shortages that are forcing automakers to cease production to the agony of Evergrande, to the surge in energy prices, the macroeconomic data is pretty solid. Fortunately so, otherwise there would be more problems ahead. Yesterday alone, the US and the UK adjusted their second quarter GDPs slightly upwards and the EU confirmed a decline in unemployment. These statistics are likely to support the central banks' strategy of very gradual easing of their support measures. Even if they are a little nervous about the idea that liquidity is going to be reduced, financiers also appreciate that the plan designed by big money makers is going smoothly. This is a positive signal for global stability.

However, things are not so smoothly for the Biden plan. The White House, because of a minimalist majority in the legislature and dissension within the Democratic Party, is continually forced to compromise. But a good compromise always leaves everyone frustrated. Yesterday, an agreement was reached to avoid a partial government shutdown due to lack of funds, but a solution to the debt ceiling still needs to be found by mid-October. At the same time, the final adoption of the infrastructure plan has been delayed again and the huge social plan is in great danger. These uncertainties necessarily weigh on Wall Street and consequently on other world markets.

If we mix all this together, we get a rather uninspiring atmosphere to start October. Obviously, it will take a little longer than expected for investors to mourn the loss of the ultra-accommodating monetary policy and to integrate the consequences of an inflation that it considers less and less transitory.

 

Today's Economic highlights:

Another busy session at the macroeconomic level, with the final September manufacturing PMI indices for the main European economies, plus the first estimate of September inflation in the euro zone, along with the United States household income and spending, construction spending, the University of Michigan consumer confidence index and the ISM Manufacturing index. This morning, Japan published a good Tankan manufacturing index.

The dollar is down to EUR 0.8619. The ounce of gold is stable around USD 1750. In the oil market, the barrel is down a bit, at USD 77.82 for Brent and USD 74.40 for WTI. Bitcoin is up to USD 47285.

 

On markets:

* Merck & Co - An investigational oral treatment for COVID-19, molnupiravir, reduces the risk of hospitalization or death in patients at risk of a severe form of the disease by about 50%, according to interim results from a clinical trial released Friday. The stock gained as much as 4.3% in pre-market trading.

* Zoom Video Communications- FIVE9 shareholders on Thursday rejected Zoom's proposed $14.7 billion takeover of the call center operator, a setback for the online meetings specialist's growth strategy. In pre-market trading, Five9 lost 2.3% while Zoom gained 1.5%.

* Coty - The perfume and cosmetics group's shares gained 2% in pre-market trading after announcing the sale of about 9% of the capital of the Wella brand to KKR & Co in exchange for Coty shares held by the latter, for an estimated amount of $426.5 million.

* Netflix - South Korean broadband provider SK Broadband has filed a lawsuit against the U.S. online video giant seeking to have it pay some of the costs associated with the increase in traffic caused by the success of its content, including the series "Squid Game."

* Walt Disney has reached a settlement with actress Scarlett Johansson to end their dispute over the broadcast of the film "Black Widow". Terms of the agreement were not made public.

* Electronic Arts - The chief financial officer of the video game group will leave his post next year, announced EA, which is also releasing "FIFA 22" this Friday, the first of a series of major product launches. The stock was down 1% in after-hours trading Thursday.

* Lordstown Motors announced an agreement to sell a plant in Ohio to Foxconn for 230 million dollars. The stock had already gained 8.4% on Thursday after initial reports of the sale.

 

Analyst recommendations:

  • Acceleron Pharma : HC Wainwright downgrades to neutral rating from buy, adjusts price to $180 from $168
  • Altice USA: Evercore ISI adjusts pt to $30 from $44, keeps outperform rating
  • Cintas : Jefferies & Co adjusts pt to $448 from $425, maintains buy rating
  • Diageo: UBS retains his positive opinion on the stock with a Buy rating. The target price is still set at GBp 3800.
  • General Mills: City raised the stock to Buy. PT up 17% to $70
  • Facebook: RBC is positive on the stock with a Buy rating. The target price remains unchanged at USD 425.
  • J D Wetherspoon: Peel Hunt raised the recommendation  to add from hold. PT up 20% to 1,200 pence
  • Paychex : Wedbush adjusts pt to $125 from $105, maintains neutral rating
  • Seagen : JPMorgan adjusts pt to $190 from $177, maintains overweight rating
  • The Sherwin-Williams Company : Goldman Sachs adjusts pt to $310 from $325, maintains buy rating
  • Smith & Nephew: Berenberg remains Buy with a price target reduced from GBp 20,200 to GBp 18,800.
  • Spirit Airlines: J.P. Morgan downgrades to neutral from overweight. PT lifted 31% to $34
  • Southwest Airlines: J.P. Morgan upgrades to overweight from neutral. PT up 36% to $70
  • The Home Depot: Wells Fargo adjusts pt to $365 from $360, keeps overweight rating
  • The Restaurant Group: Berenberg remains in the hold category with a price target reduced from GBp 130 to GBp 110.
  • Wizz Air: Wood & Cie downgrades grades from Buy to Hold with a target of GBP 5,700.
  • Xcel Energy: Barclays upgrades Xcel Energy Inc. to overweight from equal-weight. PT up 22% to $76