Today on Wall Street: We shall not be ruled by inflation fears

06/23/2021 | 09:08am

The atmosphere is calm today, ahead of the release of statistics on the activity of the manufacturing and services sectors in the United States. Markets welcome Powell’s speech, in which he said that the Fed will not raise rates pre-emptively because of fears about a possible onset of inflation.

Yesterday, U.S. indices continued their rebound from Monday’s losses and the Nasdaq Composite closed at an all-time high, after Jerome Powell, the chairman of the Federal Reserve, confirmed before Congress that the central bank would be patient before tightening its monetary policy, despite accelerating inflation in the United States.

Jerome Powell said the current pace of inflation was too high in the US, and if it persists at this rate, the Fed will have to take action. The acceleration in inflation caused by the reopening of the economy has been more sustained than expected, Powell added. He confirmed that he expects the pressure on prices to ease in the second half of the year.

Investors reacted well to the speech, allowing indexes to continue their return to the recent peaks, and even to exceed them, like the Nasdaq, which is rich in technology stocks. On this occasion, Microsoft stock briefly reached $2000 billion in market capitalization during the session, becoming the second company after Apple to reach this level. An individual who would have invested $1000 in the group co-founded by Bill Gates when it went public on March 13, 1986 would currently have $2.65 million, according to the calculator provided by the company. That is an average annual increase of 25.3%.

Investors will look at preliminary PMIs for June due today. According to a survey of economists by the Wall Street Journal, the manufacturing and service sectors are expected to have continued to grow at a steady pace in June.

In other news, today marks the fifth anniversary of Brexit. It is still impossible to assess the economic impact. Not only because the United Kingdom remained part of the EU until December 31, but also because of the atypical conditions created by the global coronavirus pandemic. From a stock market perspective, the London FTSE 100 index has risen by 12.8% in five years, compared with 33.4% for the European STOXX Europe 600, or an average annual increase of 2.2% compared with 5.7%. At the same time, the euro has gained about 12% against the pound sterling.

Markets have finally come to terms with Brexit, as they have with everything else, and do not care whether there is a winner and a loser.

 

Economic highlights of the day:

Leading PMI indicators will be released throughout the day for the major economies, including Germany, the Eurozone and the US. We also have new home sales  and oil inventories.

The dollar is down slightly to EUR 0.8369. The ounce of gold is stabilizing at USD 1780. Oil remains firm at USD 75.56 for Brent and USD 73.56 for WTI. The T-Bond yield loses some ground at 1.46%. Bitcoin bounces to over USD 34,000.

 

On markets:

* Intel announced Tuesday night that it plans to create two new divisions, dedicated to software and high-performance computing, respectively.

* Pfizer - The COVID-19 vaccine developed by the company with BioNTech remains effective against the Delta and Kappa variants of the coronavirus that causes the disease, an Oxford University study published Wednesday concluded.

* Tesla gained 0.6 percent in pre-market trading after announcing the opening of the company's first battery charging station in China, powered by its own solar generation and storage facilities.

* The Carlyle Group is one of the candidates, along with Bain Capital and the automotive supplier Mahle, to buy 70% of the capital of South Korea's Hanon Systems, a stake estimated at 6.6 trillion won (about 4.7 billion euros).

* Alfi and Torchlight Energy Resources, two "meme stocks," which are popular with individual investors, are losing more than 10 percent in pre-market trading. Alfi had doubled in value on Tuesday while Torchlight had already fallen 30% after the announcement of an increase in the amount of its capital increase.

 

Analyst recommendations:

  • Bank of America : Societe Generale adjusts pt to $50 from $41.50, maintains buy rating
  • BHP Group: Morgan Stanley upgraded from Overweight to Overweight, targeting GBP 2360.
  • Burberry: HSBC upgraded from Buy to Hold with a target of GBP 2350.
  • CentralNic: Berenberg starts to follow the stock with a Buy rating, targeting 180 GBp.
  • Dotdigital: Berenberg starts tracking as Buy, targeting 290 GBp.
  • Glencore: Morgan Stanley upgraded to Overweight from Overweight, targeting GBP 334.
  • Goldman Sachs : Societe Generale adjusts pt to $480 from $390, maintains buy rating
  • Hunting: J.P. Morgan upgraded from neutral to overweight, targeting GBP 290.
  • Huntington Bancshares Incorporated : Raymond James upgrades stock to strong buy from outperform; price target is $18
  • IMI: HSBC upgraded from hold to buy targeting GBp 2065.
  • Inchcape: Jefferies remains Buy with a price target raised from GBP 890 to GBP 910.
  • Parker-Hannifin : KeyBanc upgrades stock to overweight from sector weight; price target is $350
  • Plug Power : Canaccord Genuity cuts to hold from buy, price target to $31 from $69
  • Polar Capital: Panmure Gordon upgrades to buy, targeting GBp 929.
  • Rio Tinto: Morgan Stanley retains his Neutral opinion on the stock. The target price has been lifted and is now set at GBp 6600 compared to GBp 5770 before.
  • Royal Dutch Shell: Societe Generale upgraded from Hold to Buy with a target of GBp 1702.
  • RPM International : JPMorgan downgrades stock to underweight from neutral; price target is $90
  • Morgan Stanley : Societe Generale adjusts pt to $115 from $100, maintains buy rating
  • Microsoft : Wedbush lifts price target to $325 from $310, outperform rating kept
  • SharpSpring : Lake Street downgrades to hold from buy, adjusts pt to $17.10 from $20
  • Smith & Nephew: Jefferies remains Buy with a price target raised from GBp 1700 to GBp 1800.
  • Spirent Communications: Berenberg starts tracking at buy with a GBp 310 target.
  • VP Plc: Berenberg initiates a buy recommendation, targeting GBp 1,310.
Romain Fournier
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