I wonder what the current crisis will be called in economics textbooks in the years to come. After the dot.com bubble of the late 1990s and the global financial crisis of 2007-2008, it will probably be called the inflation crisis or the QE crisis of 2022. At this stage, we can only hope that the qualifier chosen will not be flanked by "2022/2023" or even "2022/2024". As for the rest, the world economy seems to be completely out of control and not a day goes by without troubling data.
This week has been downright icky for investors. Indexes have been pulverized and safe haven are becoming scarce, especially as equity and bond markets are on the same boat. Yesterday, Wall Street took another slap in the face. The Nasdaq 100 sank by 2.9% to bring its annual liability to 31.6%.
The financial news revolves around the increase in Indian key rates, in line with expectations, and the publication of Chinese PMI indicators for September, which do not add much to the debate by confirming that the economic momentum is stalled in the country. The week brought its share of turmoil, with the British government scoring against its own side in the fight against inflation. Today, Russia has officially annexed four regions of Ukraine, while the damage from Hurricane Ian in the southeastern US coast is considerable.
On another note, a second market barometer disappointed. After Apple, which gave up increasing its iPhone production in the face of the economic context, it is Nike that finds itself in the hot seat. The group explained yesterday after the close of Wall Street that its results will be affected by discounts to destock and the strong dollar, while explaining that demand is not weakening. Investors, who are not naïve, quickly realized that the company made contradictory statements when it said that "demand is not weakening" while talking about "rebates to clear inventory". It would have been better to say "demand is weak so we are forced to do promotions to clear the inventory". This probably explains why Nike is losing 9% outside the session.
In the US, prices will be the focus with the August PCE inflation, an indicator that is closely followed by the Fed for its monetary policy. There will also be the second reading of the University of Michigan's confidence index, which takes the pulse of American consumers.
Economic highlights of the day:
Many statistics to end the week, in particular the European inflation for September, before household income and spending in the US and the PCE inflation. All the macro agenda here. Overnight, Japan reported higher-than-expected industrial production in August, while PMI indicators are mixed: the official manufacturing PMI is at 50.1 points and the Caixin PMI at 48.1 points, below expectations. The official services PMI was also below expectations at 50.6. The Indian central bank raised its key rate by 50 basis points, as expected.
The dollar is up to EUR 1.0255 and GBP 0.9039. The ounce of gold is also benefiting from the greenback's decline to USD 1664. Oil is down, with North Sea Brent crude at USD 87.99 a barrel and U.S. light crude WTI at USD 80.40. The yield on 10-year US debt is stabilizing at 3.79%. Bitcoin is hovering around USD 19,400.
In corporate news:
* Nike fell 9% in after-hours trading after warning that its gross margins would remain under pressure for the rest of the year due to the sharp rise in the dollar and the large number of discounts offered due to rising inventories.
* Micron technology, the first major chipmaker to sound the alarm earlier this year about declining demand for computers and smartphones, warned Thursday of even greater difficulties ahead and announced a reduction in its investments.
* The Boeing Company - The U.S. Federal Aviation Administration (FAA) informed Boeing that it had not completed the steps necessary to certify the 737 MAX 7 by December, according to a letter seen by Reuters.
* Dupont de Nemours announced that it has received all regulatory approvals, except for China, for its $5.2 billion acquisition of ROGERS.
* Blue Apron announced the resignation of its CFO, Randy Greben.
- Apple: BofA Securities downgrades to neutral from buy, adjusts price target to $160 from $185.
- Burberry: Jefferies remains Hold with a price target raised to GBp 1900 from GBp 1880.
- Century Aluminum: Cut to Underperform at Wolfe; PT $4.
- Charles River: Jefferies analyst upgraded to buy from hold. PT up 26% to $240.
- Costco: Fubon Securities initiated coverage with a recommendation of buy. PT up 18% to $564.
- CyberArk: Cowen starts coverage with Outperform rating, $195 Price Target.
- DocuSign: DocuSign sees price target cut to $55 from $65, sector perform maintained
- Entain: Jefferies remains Buy with a price target reduced from GBp 2250 to GBp 2025.
- J.B. Hunt: KeyBanc downgrades to sector weight from overweight.
- Marvell Technology: Stifel adjusts price target to $70 from $78, reiterates buy rating.
- Micron technology: Summit Insights upgrades to buy from hold.
- Microsoft: CTBC Securities Investment Service initiated coverage with a recommendation of hold. PT up 6.9% to $254.
- Mitchells & Butlers: Liberum remains Buy with a reduced target of GBp 280 to GBp 205.
- Northwestern Corporation: BofA upgrades to buy from underperform amid attractive valuation, adjusts pt to $56 from $58
- Paychex: Cowen adjusts price target to $132 from $125, keeps outperform rating.