The bearish floodgates were wide open yesterday across global equity markets, after investors it now seems obvious that the world is not yet done with coronavirus despite vaccines, due to the fast spread of the Delta variant. All sectors lost ground, the more cyclical ones more than others, and few were sanctuaries. In keeping with a process that has been at work for several months, new pandemic waves lead to better performance for defensive stocks or those closely related to physical distance. One exception - energy stocks - which are up today following OPEC’s agreement on production. US banks also progressed in pre-market trading thanks to stabilizing bond yields.
In another classic pattern of a risk-averse session, gold and the dollar rose, as did the VIX volatility index, which broke the 20-point barrier for the third time since April. At the other end of the spectrum, stocks, oil, bitcoin and US government bond yields fell. The latter are benefiting from both investors' renewed appetite for safety and market bets on the US central bank's reaction. If the Delta variant clouds the economic horizon, the Fed could maintain its support measures longer than expected. As you probably know, equity markets love to be fed the monetary largesse of the Federal Reserve.
Governments will again have to struggle between what is right, what is acceptable and what is necessary in the face of the pandemic, when they thought they had done the hardest part by generalizing vaccination. Dealing with international inequalities and internal contradictions. This will not be an easy task, and equity markets are once again reacting to new developments on Covid-19, whereas it wasn’t a central concern for the past few weeks. Tougher measures are once again weighing on sentiment. Yesterday, for example, the U.S. State Department advised its citizens not to travel to the United Kingdom, where the epidemic is on the rise. The shares of airlines and cruise lines also suffered. Overall, the "reflation trade", the strategy of betting on companies taking advantage of the reopening of economies, took a good beating and investors fell back in love with diagnostic laboratories and home delivery companies.
There is a marked return of pessimism related to the pandemic. To overcome it, we will have to show that economic activity can develop without too many bumps, even if the virus continues to circulate.
Today's economic highlights:
The main data today is US housing starts and building permits figures for June in the US. Housing starts jumped 6.3% to a seasonally adjusted annual rate of 1.643 million units last month, higher than the 1.590 million units expected in a Reuters poll. Permits for future homebuilding fell 5.1% to a rate of 1.598 million units in June.
The dollar is trading around EUR 0.8494. Gold is up to USD 1823 per ounce. Oil remains under significant pressure, with Brent crude at USD 68.42 USD and WTI at 66.11 USD. The yield on US debt plummets to 1.19% over 10 years. Bitcoin has fallen back below USD 30,000.
* Apollo Global Management - The U.S. private equity group said Tuesday it is not considering a solo bid for Morrisons and is in talks to join a consortium led by Fortress Investment Group, which last month made a 6.3 billion-pound (7.3 billion-euro) proposal to buy the British supermarket chain.
* Energy stocks are rising on the back of a recovery in oil prices.
* Halliburton reported Tuesday a 33.5% increase in second-quarter profit on the back of a rebound in oil prices. The group's stock is up 2% in pre-market trading on Wall Street.
* Tesla - The automaker's stock gained 1.1% in premarket trading on Wall Street after a report from the trade site Electrek that Elon Musk's group is about to start production of a "Tesla Semi", an electric truck.
* IBM reported Monday a second-quarter revenue above market expectations, thanks in part to the momentum of its cloud business and consulting to its clients following the COVID-19 pandemic. The computer giant's stock is up 4% in trading before the Wall Street opening.
* Amazon - Jeff Bezos, the founder of the U.S. e-commerce giant, will fly into space Tuesday aboard the New Shepard rocket designed by his company Blue Origin.
* Facebook - The Austrian Supreme Court questioned the legal basis on which the social network collects its users' data and asked the Court of Justice of the European Union (CJEU) to rule on key elements following a complaint by Max Schrems, an Austrian privacy activist.
* Travelers insurer posted a quarterly profit above market expectations on lower catastrophe losses and higher returns.
* Philip Morris reported quarterly earnings per share above the IBES consensus by Refinitiv on Tuesday but revenue below it.
* PPG Industries - The chemical company reported Monday night a below-consensus adjusted profit for the second quarter due to higher raw material costs. The stock lost 5.7% in premarket trading.
* Chargepoint, one of the world's largest electric vehicle charging networks, announced on Tuesday that it has bought the electric mobility systems group has.to.be, in which Volkswagen is a minority shareholder, for 250 million euros to strengthen its presence in the European market. ChargePoint shares gained 3%.
- Ardelyx : Piper Sandler cuts to neutral from overweight, price target to $4 from $14
- Bank of Marin Bancorp : Keefe Bruyette & Woods upgrades to outperform from market perform; price target is $43
- Boku: Berenberg remains Buy with target raised to GBP 260 from GBP 190.
- Deliveroo: Jefferies remains Buy with target price raised from GBP 390 to GBP 435.
- Elementis: HSBC upgrades from Light to Hold with a target of GBp 150.
- Glaukos : Wells Fargo downgrades to underweight from equal-weight; price target is $41
- IBM: Societe Generale upgrades to hold from sell. PT up 1.5% to $140
- Inspire Medical : Piper Sandler further cuts price target to $215 from $235, reiterates overweight rating
- Intercontinental Hotels: Stifel upgraded from Hold to Buy, targeting GBp 5,600.
- Just Eat Takeaway: Jefferies remains Buy with a price target reduced from GBp 10,700 to GBp 8,600.
- LivaNova : Needham upgrades to buy from hold, price target is $93
- Mister Car Wash : Goldman Sachs starts mister car wash at neutral with $23 price target
- Spire Healthcare: Peel Hunt upgrades to add from hold. PT set to 233 pence, 8.6% higher than last price.
- Synthomer: Jefferies remains Buy with a target price raised from GBp 650 to GBp 715.
- Velodyne Lidar : Baird lowers to neutral from outperform, price target to $10 from $18
- Viavi : JPMorgan downgrades to neutral from overweight; price target is $19
- Western Midstream Partners LP : Morgan Stanley upgrades to overweight from equal-weight; price target is $24
- Zions Bancorporation National Association : Baird upgrades to neutral from underperform; price target is $49