Today on Wall Street: Beware the four witches

09/17/2021 | 06:29am

Released yesterday, good U.S. retail sales data surprised markets, propelling the dollar upwards, while sending gold way below. It slightly raised the probability that an easing of monetary support measures is on the way. Today is known as Quadruple witching day, the expiration of quarterly products. It usually sees heavy trading volume, partly due to the offsetting of existing futures and options contracts. Derivatives enthusiasts and market insiders are able to identify jolts related to these clearing operations, which can momentarily increase volatility.

Between two "seasons" of quarterly earnings, the macroeconomy tends to take the lead on stock markets. This is particularly true this year, and it is causing some turmoil across indexes that have been moving in one direction since the "flash crash" of late winter 2020. Two big stories have made investors more nervous lately.

First, the strength of US growth. Some indicators suggested that it would be more in the "vitamin" category, while the market preferred it "on steroids". Data released this week looks very robust, moving sentiment in the right direction, just a week away from the Fed's meeting. The more difficult moments Wall Street has gone through in the last ten days have convinced undecided investors: between dynamic growth with a less paternalistic monetary policy and uncertain growth kept alive by the Fed, the former is the more favorable scenario.

The other big issue of the moment is also about growth, but not only. In China, stricter regulation coincides with a slowdown in the cycle and setbacks for the country's largest property group, China Evergrande.

Yesterday's trading session was marked by specific trends. Wall Street closed around the balance with cyclical stocks dominating and technology stocks following closely. There was a movement of consolidation after Wednesday's gains.

In Europe, rates have become a little tense after the publication of an article in the Financial Times suggesting that an internal ECB model predicts a return of inflation to the 2% zone in 2025 and a possible rate hike in 2023. Until now, 2024 had been mentioned as the date for a rate hike, although there are about as many opinions as there are economists. The information comes from a speech by the bank's chief economist, Philip Lane, to German central bankers. "The conclusion of the Financial Times that an interest rate hike could occur as early as 2023 is not in line with our expectations," the ECB said. A storm in a tea cup, but it still raised some questions, since the Bund rate has moved a few points to return to -0.3%, the highest since mid-July, if we can talk about "high" in terms of negative rates.


Today's economic highlights:

In Europe, British retail sales, quarterly wage trends in France and European inflation. In the United States, the University of Michigan's consumer confidence index for September will be on the menu.

The dollar is trading at EUR 0.8486, while gold is slightly recovering from a severe correction to USD 1766. Oil is consolidating its recent gains, with Brent at USD 75.22 and WTI around USD 72.00. The 10-year T-Bond yield remains near its recent zones at 1.33%, while the Financial Times article pushed the Bund yield up to -0.3% and the French 10-year OAT to +0.02%. Bitcoin is trading just below USD 48,000 per unit.


On markets:

* Apple and Alphabet subsidiary Google have removed a mobile app created by Alexei Navalny from their online app stores, the Russian opponent's team said Friday, after Russia accused the U.S.-based digital giants of interfering in its internal affairs.

* Invesco is in talks to merge with State Street's asset management business, a source close to the matter said, confirming a report in The Wall Street Journal.

* Gap has reached an agreement with British retailer Next, which will operate the U.S. fashion brand in the U.K. and Ireland starting in 2022.

* JPMorgan Chase & Co will launch its Chase online bank in the U.K. next week, the group confirmed.


Analyst recommendations:

  • Anglo American: Morgan Stanley upgraded from Overweight to Overweight with a target of GBP 3220.
  • Autoliv: Exane BNP Paribas downgrades to underperform from neutral, adjusts pt to $87 from $105
  • Britvic: Jefferies remains Hold with a price target reduced from GBp 1050 to 950.
  • Celldex: Jefferies reinstated coverage with a recommendation of buy. PT jumps 24% to $66
  • Ceres Power: Liberum resumes Buy rating with a GBp 1460 target.
  • Chart Industries: Goldman Sachs reinstated coverage with a recommendation of neutral. PT up 1.6% set to $193
  • Getty Realty: RBC Capital Markets initiated coverage with a recommendation of sector perform. PT up 2.9% to $31
  • Ferrari: Exane BNP Paribas upgraded from Outperform to Neutral targeting USD 256.
  • Fortinet : BMO Capital adjusts price target to $335 from $300, maintains market perform rating
  • Glencore: Morgan Stanley upgraded from Overweight to Overweight targeting GBp 360.
  • Goldman Sachs: JP Morgan is positive on the stock with a Buy rating. The target price is slightly modified from USD 455 to USD 458 
  • HSBC: RBC upgraded from sector perform to outperform, targeting GBP 460.
  • Intercontinental Hotels: Berenberg upgraded its Buy rating to Buy from Hold with a target of GBP 5,400.
  • Las Vegas Sands: Jefferies cut the recommendation to hold from buy. PT up 6.6% set to $40
  • ManpowerGroup: Barclays analyst Manav Patnaik cut the recommendation to underweight from overweight. PT up 2.5% to $120
  • Mastec: Goldman Sachs initiated coverage with a recommendation of buy. PT up 33% to $120
  • National retail: RBC Capital Markets reinstated coverage with a recommendation of sector perform. PT up 6% to $48
  • Quanta Services: Goldman Sachs reinstated coverage with a recommendation of buy. PT up 18% to $138
  • Redrow: Berenberg remains Buy with a price target raised from GBp 820 to GBp 900. 
  • Tesla : Exane BNP Paribas adjusts tesla pt to $370 from $365, maintains underperform rating
  • Virgin Galactic : Cowen adjusts pt to $30 from $51, maintains outperform rating
  • WP Carey: RBC Capital Markets initiated coverage with a recommendation of outperform. PT rises 17% to $89
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