Wall Street indexes bounced back yesterday after statements from Vladimir Putin and Mitch McConnell. Putin made it clear that his country was able to deliver more gas to the West, while McConnell convinced enough of his fellow Republicans in the Senate to postpone the threat of a federal debt crisis from October to December. The core issues of energy prices and the debt ceiling have not been resolved, but the announcements have loosened the stranglehold that was beginning to severely curtail investors' ambitions for the end of the year.
Hence a nice generalized rebound for stocks, especially those that had been the most heckled lately. The leading stocks of the moment, in oil or finance, are still in demand. Oil prices continues to rise. A barrel of Brent now costs around $83. Oil prices surged again after the U.S. Department of Energy said the U.S. was not prepared to "immediately" tap into the country's strategic reserves to meet the rising price of black gold.
There are currently so many scenarios for the end of the year, fueling debates about what strategy to adopt. However, indexes are in a position to erase all or part of their very bad previous week... if investors are satisfied with what they have learned from the US employment report for September. U.S. job growth continued last month, as the number of new Covid-19 infections started to wane, boosting entertainment, leisure businesses and restaurants. But this was way below consensus. Nonfarm payrolls gained 194 000 jobs last month, compared with 500,000 expected in a Reuters poll. U.S. sept. unemployment rate fell to 4.8%, vs 5.2% expected.
It is always difficult to predict reactions to statistics in the current environment. But now that investors have priced in the fact that the Fed's tapering is all but certain, what to think of this lower-than-expected reading? Isn't it better to rely on healthy economic momentum than on the dopers injected by central banks?
The S&P500 yesterday lined up a third consecutive session in the green, even though bond yields are still rising, since the yield on 10-year US debt reached 1.59% this morning, its highest level since last June. For the record, the 2021 peaks were reached at the end of March at around 1.77%. It is logical that the debt market is aligning itself with a bullish price environment, even if investors do not like sudden adjustments, nor those involving key rate hikes, which reduce liquidity. A situation that brings us back to the intense debate between transitory and sustainable inflation, the controversy of the year that would make the debate on crop tops in school look like a trifle.
Economic highlights of the day:
The September employment figures in the United States is the star of the show.
The dollar is trading at EUR 0.8652, still under pressure, while the ounce of gold is holding steady at USD 1762. The barrel rebounded to USD 82.50 for Brent and USD 78.84 for WTI. Bond yields are still trending higher, with the US 10-year at 1.59%, while the Bund is little changed at -0.19%. Bitcoin is trading at USD 55,300.
On markets:
* Chubb - The insurer announced on Thursday evening that it has acquired CIGNA's property and casualty and life insurance businesses in Asia-Pacific and Turkey for $5.75 billion (€5.0 billion).
* Tesla announced the relocation of its headquarters from Palo Alto, California to Texas.
* Merck & Co - Two Indian pharmaceutical companies, Aurobindo Pharma and MSN Laboratories, have applied for approval to terminate clinical trials of molnupiravir, Merck's COVID-19 treatment, in patients with moderate forms of the disease. According to a source from the Indian health authority, this treatment does not show marked effectiveness in these cases.
* Oatly - The plant-based beverage specialist gained more than 6% in pre-market trading after J.P. Morgan upgraded its recommendation to "overweight" from "neutral".
Analyst recommendations:
American Express: BMO Capital adjusts price target to $147 from $151, maintains market perform rating
Boohoo: Berenberg remains Buy with a price target reduced from GBp 460 to 350.
BlackRock : BMO Capital adjusts price target to $797 from $803, maintains market perform rating
Conagra Brands: J.P. Morgan downgrades to neutral from overweight. PT up 11% to $38
Corning: Deutsche Bank reinstated coverage with a recommendation of buy. PT up 22% to $45
Darktrace: Berenberg remains Buy with a price target raised from GBP 850 to GBP 900.
Dechra Pharmaceuticals: Jefferies remains a hold with a target price raised from GBp 4,400 to 4,600.
Enquest: Jefferies upgrades the stock from Hold to Buy, targeting GBp 30.
Hotel Chocolat: Berenberg maintains a Hold rating with a price target raised from GBP 390 to 430.
JB Hunt: : J.P. Morgan cut the recommendation to underweight from neutral. PT down 13% $150
Hormel: J.P. Morgan upgrades to neutral from underweight. PT up 1.6% to $42
Pennon: HSBC chnges recommendation to hold with a target of GBp 1,180.
Rowe Price: BMO Capital adjusts price target to $234 from $221, maintains market perform rating
Tullow Oil: Jefferies upgrades from Hold to Buy with a target of GBP 70.
Union Pacific: J.P. Morgan raised its recommendation to overweight from neutral. PT up 17% to $247
Warner Music: Morgan Stanley raised the target on Warner Music Group Corp. Class A to $53 from $46. Maintains overweight rating.
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