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.

ECB's rate hike spooks investors

06/09/2022 | 10:08am EDT
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Tesla's solid sales data initially lifted Futures indexes on Wall Street, but the European Central Bank's decision to lift rates in July brought them back to red, along with European stocks.

Elon Musk's group sold 32,165 Chinese-made electric vehicles in May, according to CPCA (China Passenger Car Association) data, including 22,340 units for export. This is up 1,152 vehicles compared to April. The Tesla factory had to stop work for 22 days in March as part of Covid restrictions. UBS upgraded Tesla's stock to "buy" and raised its profit estimates for the next three years.

This was enough good news to lift stocks in early trading. But then, the European Central Bank unveiled a hawkish monetary policy. It is planning to raise its key rates in July to curb inflation, by 0.25%, and may also do a bigger hike in September. In addition, it announced that it would stop its net asset purchases on July 1.

This comes as investors are on edge ahead of tomorrow inflation data in the US that could influence the Fed's rate hike decisions. Yesterday, the First Deputy Managing Director of the International Monetary Fund, Gita Gopinath, said U.S. inflation could remain above the Fed's 2% target for a long time based on current projections.

For the past two weeks, it has been the same story on stock markets: the price channel is quite narrow. Investors don't seem to be as depressed as they were a month ago, but they don't seem to be in the best frame of mind to take risks either.

Mixed signals keep coming. Despite doubts about the economic momentum, oil continues to rise. Brent crude oil is flirting with USD 124 per barrel. The market's enthusiasm for China's reopening was short-lived: Beijing decided to lock down a district of Shanghai again as part of its zero-covid policy.

 

Economic highlights of the day:

The ECB's decision on its key rates and the weekly US unemployment figures are today's main indicators. Jobless claims for the week ended June 4 reached 229,000, well above the 210,000 Dow Jones estimate.

The dollar is up 0.2% to EUR 0.9350. The ounce of gold is worth USD 1849. Oil is gaining ground with North Sea Brent crude at USD 123.00 a barrel and U.S. light crude WTI at USD 121.21. The yield on 10-year U.S. debt climbs back to 3.04%. Bitcoin is back at USD 30,200.

 

On markets:

* Tesla is up 2.9% in pre-market trading after the publication of figures from the Chinese automobile federation CPCA, which show that 32,165 vehicles produced in China were sold by the American car manufacturer in May, an increase of 1,152 compared to April. 

* Alibaba gained 5 percent in premarket trading after Bloomberg reported that Chinese authorities have begun talks to possibly revive the proposed initial public offering of Ant Group, the group's payments subsidiary.

* Meta Platforms has halted development of a dual-camera smartwatch that was to be launched in spring 2023 and is instead working on other prototypes, Bloomberg reported.

* Intel has suspended hiring at its computer chip division, an internal document seen by Reuters shows, as part of a series of cost-cutting measures.

* Target gained 1.1% as the company raised its quarterly dividend to $1.08 per share, up 20%.

* Novavax fell 6.2% in premarket trading after CNBC reported that the U.S. Food and Drug Administration (FDA) may postpone its review of the company's COVID-19 vaccine pending a review of changes in its manufacturing.

* Electric vehicle maker NIO is down 4.8% in pre-market trading after a lower-than-expected second-quarter revenue forecast and lower car shipment estimates than in the first quarter.

 

Analyst recommendations:

  • AGNC Investment: Keefe Bruyette & Woods upgrades to outperform from market perform, price target to $13.25 from $12.25
  • Britvic: Morgan Stanley moves from in-line to overweight targeting GBp 940.
  • Campbell Soup: Stifel Nicolaus adjusts price target to $46 from $44, maintains hold rating.
  • Carnival: Susquehanna Financial initiated coverage with a recommendation of neutral. PT up 16% to $15.
  • Canadian Natural Resources: Downgraded to Sector Perform at Scotiabank
  • Compass: HSBC downgrades from buy to hold targeting GBp 1990.
  • HubSpot: Scotiabank initiated coverage with a recommendation of sector outperform. PT up 53% to $550.
  • Informa: Kepler Cheuvreux upgrades from hold to buy, targeting GBp 655.
  • MongoDB: Goldman Sachs lifts price target to $450 from $435, citing higher conviction, line of sight into longer-term $10 billion revenue; buy rating kept
  • Norwegian Cruise: Susquehanna Financial initiated coverage with a recommendation of positive. PT up 32% to $20.
  • Precision Biosciences: William Blair downgrades to market perform from outperform
  • Royal Caribbean: Susquehanna Financial initiated coverage with a recommendation of positive. PT up 30% to $70.
  • Target: BofA Securities downgrades target to neutral from buy.
  • Tesla: UBS upgrades his rating from Neutral to Buy. The target price is unchanged and still at USD 1100.
  • Twilio: Scotiabank initiated coverage with a recommendation of sector outperform. PT jumps 98% to $215.
  • 3M Company: Wolfe Research adjusts price target to $148 from $154, maintains underperform rating.

© MarketScreener.com 2022
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Stocks mentioned in the article
ChangeLast1st jan.
3M COMPANY -0.43% 147.84 Delayed Quote.-17.01%
AGNC INVESTMENT CORP. 0.24% 12.44 Delayed Quote.-17.49%
ALIBABA GROUP HOLDING LIMITED 0.39% 91.19 Delayed Quote.-23.53%
BRITVIC PLC -0.47% 844.5 Delayed Quote.-7.77%
CAMPBELL SOUP COMPANY 0.28% 49.68 Delayed Quote.13.99%
CANADIAN NATURAL RESOURCES LIMITED 0.62% 67.86 Delayed Quote.26.17%
CARNIVAL CORPORATION -5.39% 9.47 Delayed Quote.-50.25%
COMPASS GROUP PLC 0.21% 1921 Delayed Quote.16.11%
HUBSPOT, INC. -5.32% 364.71 Delayed Quote.-41.56%
INFORMA PLC -0.64% 587.8 Delayed Quote.14.52%
INTEL CORPORATION -2.43% 34.52 Delayed Quote.-31.28%
META PLATFORMS, INC. -1.01% 168.53 Delayed Quote.-49.38%
MONGODB, INC. -1.52% 358.18 Delayed Quote.-32.59%
NIO INC. -4.96% 19.17 Delayed Quote.-36.33%
NORWEGIAN CRUISE LINE HOLDINGS LTD. -10.57% 12.1 Delayed Quote.-34.76%
NOVAVAX, INC. -29.64% 40.28 Delayed Quote.-57.87%
PRECISION BIOSCIENCES, INC. -4.97% 1.53 Delayed Quote.-78.24%
ROYAL CARIBBEAN CRUISES LTD -5.62% 37.97 Delayed Quote.-48.41%
TARGET CORPORATION -1.11% 165.12 Delayed Quote.-28.22%
TESLA, INC. -2.44% 850 Delayed Quote.-17.55%
TWILIO INC. -6.04% 81.26 Delayed Quote.-67.75%
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