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.

Back to reality

06/07/2022 | 09:52am EDT
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Investors were cheering lately for the many signals that inflation is starting to peak in the US, but fears about high prices came back with a vengeance today, when Target issued a downbeat operating margin guidance. The retailer currently struggles with excess inventory. All three Wall Street indexes opened lower.

Target shares fell 7.6% in premarket trading as a result. The company said it will have to offer deeper discounts and cut back on stocking higher-margin discretionary items.

Also dampening the mood, new data shows the US trade deficit narrowed less than expected to $87.08 billion in April from $107.65 billion in March, while the Bloomberg consensus expected an $89.5 billion gap.

And let's not forget the return of central banks to the forefront as a stress generator. They are all turning hawkish, after years of quietly bubbling away with self-congratulation for the economic conditions created since the 2008 financial crisis. Earlier today, the Australian central bank raised rates by 50 basis points to 0.85%. Only 3 out of 29 economists surveyed by Bloomberg saw the RBA making such a violent move. Until recently, changes of 25 basis points were the norm in the industry. Now the base rate has risen to 50 basis points. Will the European Central Bank also have to go through this in the coming weeks? There will be some answers on Thursday at the ECB's June meeting. The US and the British central bank are also due to unveil rate decision next week.

In the United States, the Fed is now only thinking in terms of double-rate hikes and the message of firmness has been sent. The yield on 10-year US debt has risen above 3% for the first time since mid-May. Is it the proximity of the May US inflation figures due on Friday? No doubt. The yield had recently slipped to 2.7% because medium-term inflation expectations had eased. This rise in rates means a small resurgence of tension. It also causes some collateral damage, such as the yen falling to a 20-year low against the dollar.

In terms of important macroeconomic events today, the World Bank is scheduled to release its updated economic outlook and Janet Yellen will be heard by U.S. lawmakers. According to press reports, the elected Republicans are planning to give her a hard time about inflation, both about her recent policies and her role as head of the Fed until 2017.

 

Economic highlights of the day:

German factory orders and the latest US trade balance are today's main indicators.

The dollar is up to EUR 0.9381. The ounce of gold is trading around USD.1843. Oil remains high with North Sea Brent at USD 119.10 per barrel and U.S. light crude WTI at USD 118.05. The yield on 10-year US debt rises to 3.04%. Bitcoin is falling back to USD 29,500.

 

On markets:

* Target falls 5.3% in pre-market trading after a second downward revision in less than a month to its outlook. The U.S. supermarket chain said Tuesday it expects second-quarter operating margin to be about 2%, compared with a previous forecast of 5.3%. In its wake, WALMART is down 2.5%, while COSTCO, NORDSTROM, BEST BUY and MACY'S are down 0.1% to 2.6%.

* Kohl's- The department store chain has entered into exclusive negotiations with store operator FRANCHISE GROUP for a possible buyout based on a valuation of nearly eight billion dollars, the two companies announced Monday night. Kohl's shares jumped 15.3% in pre-market trading.

* Growth stocks retreat in premarket trading Tuesday, hurt by rising bond yields, with the U.S. 10-year near a three-and-a-half-week high ahead of Friday's release of U.S. inflation figures. Tesla gives up 1.2% and Microsoft 0.8%.

* Didi Global gains another 9.1% in pre-market trading Tuesday after soaring 24% the day before on a news report that Chinese authorities will allow the VTC service to return to online smartphone app stores.

* Citigroup plans to hire about 3,000 people in its institutional client services business in Asia over the next few years, the head of its Asia-Pacific arm told Reuters.

* Peloton Interactive - The exercise bike maker announced on Monday night the resignation of its chief financial officer, Jill Woodworth, who will be replaced by Liz Coddington, who comes from Amazon. Peloton shares are up 2.3% in pre-market trading.

* Block and Affirm Holdings are losing about 1.5% and 2%, respectively, in pre-market trading after Apple announced Monday that it would launch Apple Pay Later, a service that allows buyers of its products to pay in installments without fees, a specialty of Block subsidiary Afterpay, as well as Affirm.

 

Analyst recommendations:

  • Ameriprise Financial: Jefferies adjusts price target to $340 from $350, maintains buy rating.
  • Anglo American: Jefferies upgrades from hold to buy targeting GBp 4500.
  • Arch Resources: Jefferies upgrades to buy from hold. PT rises 41% to $225.
  • Booz Allen Hamilton: Barclays downgrades to equal-weight from overweight. PT up 7.9% to $95.
  • Equitable Holdings: Jefferies lowers price target to $38 from $42, maintains buy rating.
  • Five Below: UBS adjusts price target to $185 from $200, maintains buy rating.
  • Leidos: Barclays downgrades to equal-weight from overweight. PT down 0.9% to $105.
  • JD Sports Fashion: Berenberg remains Buy with a price target reduced from GBp 285 to GBp 200.
  • MetLife: Jefferies lowers price target to $76 from $83, maintains buy rating.
  • Microsoft: Bernstein adjusts price target to $365 from $367, keeps outperform rating.
  • National Grid: Citigroup downgrades from neutral to sell targeting GBp 998.
  • PeaBody Energy: Jefferies upgrades to buy from hold. PT up 38% to $36.
  • Plexus: Raymond James upgrades to outperform from market perform. PT rises 18% to $100.
  • Signature Bank: UBS adjusts price target to $309 from $472, maintains buy rating.
  • Starbucks: President Capital Management initiated coverage with a recommendation of buy. PT set to $95.
  • S&P Global: UBS adjusts price target to $407 from $441, maintains buy rating.
  • The British Land: Barclays upgrades from Underweight to Overweight targeting GBp 580.

© MarketScreener.com 2022
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Stocks mentioned in the article
ChangeLast1st jan.
AFFIRM HOLDINGS, INC. 3.00% 37.92 Delayed Quote.-63.24%
AMERIPRISE FINANCIAL, INC. 1.16% 286.44 Delayed Quote.-6.08%
ANGLO AMERICAN PLC -1.96% 2943.5 Delayed Quote.-0.30%
ARCH RESOURCES, INC. 4.34% 152.92 Delayed Quote.61.13%
BLOCK, INC. 0.12% 85.85 Delayed Quote.-46.76%
BOOZ ALLEN HAMILTON HOLDING CORPORATION 0.90% 95.23 Delayed Quote.11.76%
CITIGROUP INC. 0.11% 54.1103 Delayed Quote.-10.58%
DIDI GLOBAL INC. -2.33% 2.94 Delayed Quote.-39.56%
EQUITABLE HOLDINGS, INC. 0.82% 30.555 Delayed Quote.-7.56%
FIVE BELOW, INC. -0.17% 139.265 Delayed Quote.-32.68%
JD SPORTS FASHION PLC -1.82% 129.15 Delayed Quote.-39.60%
KOHL'S CORPORATION 0.37% 32.81 Delayed Quote.-33.95%
LEIDOS HOLDINGS, INC. 0.91% 99.05 Delayed Quote.10.42%
METLIFE, INC. 0.90% 67.28 Delayed Quote.6.72%
MICROSOFT CORPORATION 0.88% 289.345 Delayed Quote.-14.66%
NATIONAL GRID PLC 0.88% 1142 Delayed Quote.6.81%
PEABODY ENERGY CORPORATION 3.57% 23.12 Delayed Quote.122.44%
PELOTON INTERACTIVE, INC. 3.95% 12.4 Delayed Quote.-66.69%
PLEXUS CORP. 0.51% 96.3 Delayed Quote.-0.19%
S&P GLOBAL, INC. 0.68% 389.025 Delayed Quote.-18.17%
SIGNATURE BANK 0.97% 203.93 Delayed Quote.-37.53%
STARBUCKS CORPORATION 0.65% 87.87 Delayed Quote.-25.39%
TARGET CORPORATION 1.07% 171.415 Delayed Quote.-26.72%
TESLA, INC. 2.67% 881.47 Delayed Quote.-18.63%
THE BRITISH LAND COMPANY PLC 0.36% 477.1 Delayed Quote.-10.51%
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