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Romain Fournier

Chief Editor
Having worked in the British, French and Swiss financial press, Romain is able to report on local and international issues, as comfortable in French as in the language of Shakespeare, Romain Fournier leads the editorial team at Marketscreener. Fine connoisseur of the English-speaking markets, Romain delivers an editorial every day on US and UK markets.

An unusual period for stock markets

07/07/2022 | 09:43am EST
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Some positive U.S. data, the release of Fed minutes and another session of oil prices drop helped Wall Street end in the green yesterday. All three indexes are also up this morning.

The ISM non-manufacturing PMI for June was slightly down from May, but its score was still good, at 55.3. U.S. job openings data for May also slightly fell, but still showed 11.254 million job openings.

However, this morning, new data shows that the number of Americans filing new claims for unemployment benefits unexpectedly rose last week. The Labor Department said initial claims for state unemployment benefits rose 4,000 to a seasonally adjusted 235,000 for the week ended July 2, vs 230 000 expected in a Reuters consensus.

Despite some turmoil, stock markets seem to be sailing in slightly calmer waters since the beginning of July. The volatility has eased, although it didn't totally disappear, as shown by the drop in oil prices on Tuesday and Wednesday. The S&P500 lost about 1100 points since its peaks at the beginning of the year 2022, when it was around 4800 points. It just recovered 150 points since the low of June 17, when it was at 3674 points.

Oil left the "USD 110 to 120" area to the "USD 95 to 105" area. Once popular, oil stocks have been the focus of profit taking in recent days. On the upside, US investors focused on tech stocks, but were less enthusiastic about consumer-related companies, because of recession fears.

The Wall Street Journal had an article yesterday on this unusual recession that is looming, as the labor market is still thriving and businesses are not looking like they are suffering too much. The major deterioration in household morale that can be seen recent surveys or the cold snap in the real estate market have not materialized with enough violence to totally change the mood. Hence this bizarre in-between period, with investors fearing a recession, but still hoping that central banks will be able to save the day by curbing inflation.

The Fed released the minutes of its last meeting last night. Unsurprisingly, the tone is still very firm and the message remains unchanged: blood and tears until prices get back under control. The release sent U.S. bond yields up quite a bit, a sign that the market is once again taking the Fed seriously. This is exactly what the central bank is aiming for, after it realized that its Goldilocks-style economic approach had been a counterproductive in recent quarters.

The Fed's objective could also be to scare investors as much as possible, over and over again, so that it doesn't have to implement all the tough measures at its disposal.

On the equity side, the market is waiting for the first round of corporate earnings, scheduled for next week with PepsiCo, American banks including JPMorgan Chase, but also UnitedHealth and Rio Tinto.

Meanwhile, the United Kingdom is facing a political crisis. Boris Johnson announced its resignation, after being dropped by part of his inner circle. He would like to stay in power 12 more weeks, but many MPs would like to see him go immediately.

 

Economic highlights of the day:

The weekly jobless claims and the Challenger survey on layoffs are today's main indicators. All the macro agenda here.

The dollar is maintaining pressure on the euro at EUR 0.9833. Gold continues to fall to USD 1740. Oil is surviving after its fall, with North Sea Brent crude at USD 102.86 per barrel and US light crude WTI at USD 101.16. The yield on 10-year US debt rallies to 2.92%, below the 5-year and 2-year. Bitcoin is trading around USD 20,400.

 

On markets:

* Intel, NVidia and Qualcomm were gaining a little more than 1% in pre-market trading in the wake of South Korea's Samsung reporting its best April-June profit since 2018.

* Merck is in advanced discussions to buy cancer biotech company Seagen in a deal worth about $40 billion, The Wall Street Journal reports. In pre-market trading, Seagen was up 5%.

* Virgin Galactic, which specializes in space tourism, announced Wednesday that it has signed an agreement with Aurora Flight Sciences, a subsidiary of Boeing, to design and manufacture new carrier aircraft. Virgin gained 3.7% in pre-market trading.

* The Boeing Company - Qatar Airways said a memorandum of understanding to buy up to 50 737 MAX aircraft has lapsed, Airbus said in a court filing.

* Gamestop's board of directors approved a four-for-one stock split for the video game distributor. The stock was up 7.4% in pre-market trading.

* Private equity firm Carlyle wants to sell its stake in AmbioPharm, aiming for a $1 billion valuation.

 

Analyst recommendations:

  • AO World: Numis upgrades from hold to buy targeting GBp 60.
  • BHP: Berenberg remains "Hold" with a price target reduced from GBp 2,700 to GBp 2,200.
  • Bunge: Monness, Crespi, Hardt initiates bunge at buy with $130 price target.
  • Charles River Laboratories: Argus lowers price target to $290 from $350, maintains buy rating.
  • Coinbase: Atlantic Equities downgrades to neutral from overweight. PT up 4.6% to $54.
  • Ford: UBS lowers price target to $13 from $20.50, neutral rating kept.
  • Harmony Biosciences: Mizuho initiates coverage with buy rating, $64 price target.
  • Moelis & Company: UBS downgrades to neutral from buy, lowers price target to $40 from $54.
  • Morgan Stanley: UBS lowers price target to $95 from $103, buy rating kept.
  • Norfolk Southern: Susquehanna trims 's price target to $275 from $350, reiterates positive rating.
  • Rio Tinto: Berenberg downgrades from hold to sell targeting GBp 4200.
  • Segro: Exane BNP Paribas downgrades from neutral to underperform, targeting GBp 800.
  • The Boston Beer Co: RBC Capital Markets downgrades to sector perform from outperform. PT up 8.1% to $331.
  • The Goldman Sachs Group: UBS lowers price target to $325 from $345, neutral rating kept.

ę MarketScreener.com 2022
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Stocks mentioned in the article
ChangeLast1st jan.
AO WORLD PLC -1.64% 62.9 Delayed Quote.-42.13%
BHP GROUP LIMITED -0.70% 43.89 Delayed Quote.34.69%
BOEING 2.01% 178.36 Delayed Quote.-11.40%
BUNGE LIMITED 0.59% 101.78 Delayed Quote.9.02%
CHARLES RIVER LABORATORIES INTERNATIONAL, INC. 0.76% 242.92 Delayed Quote.-35.53%
COINBASE GLOBAL, INC. -2.83% 44.28 Delayed Quote.-82.45%
FORD MOTOR COMPANY 0.36% 14.08 Delayed Quote.-32.21%
GAMESTOP CORP. -1.99% 26.17 Delayed Quote.-29.46%
HARMONY BIOSCIENCES HOLDINGS, INC. 1.03% 58.09 Delayed Quote.36.23%
INTEL CORPORATION -1.11% 29.34 Delayed Quote.-43.03%
JPMORGAN CHASE & CO. 0.19% 136.74 Delayed Quote.-13.65%
MERCK & CO., INC. 0.64% 107.5 Delayed Quote.40.27%
MOELIS & COMPANY 0.52% 42.72 Delayed Quote.-31.66%
MORGAN STANLEY 1.09% 90.91 Delayed Quote.-7.39%
NORFOLK SOUTHERN CORPORATION 0.48% 252.32 Delayed Quote.-15.25%
NVIDIA CORPORATION -1.51% 162.7 Delayed Quote.-44.68%
PEPSICO, INC. -0.52% 184.11 Delayed Quote.5.99%
QUALCOMM, INC. -1.36% 123.45 Delayed Quote.-32.49%
RIO TINTO PLC -1.19% 5320 Delayed Quote.9.96%
SEGRO PLC 0.19% 828.4 Delayed Quote.-42.36%
THE BOSTON BEER COMPANY, INC. 0.89% 377.07 Delayed Quote.-25.35%
THE GOLDMAN SACHS GROUP, INC. 0.68% 388.86 Delayed Quote.1.65%
UNITEDHEALTH GROUP INC. 1.49% 537.62 Delayed Quote.7.07%
VIRGIN GALACTIC HOLDINGS, INC. -0.78% 5.1 Delayed Quote.-61.88%
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