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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.

Investors are bracing for earnings season

07/12/2022 | 09:12am EDT
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Investors are concerned about inflation and the slowing global economy, despite better-than-expected job data in the US for June. There’s a wait-and-see attitude, with mixed Futures today, as the market eagerly awaits consumer prices data tomorrow to get more clues about what the Fed’s next rate hike will be.

According to a Reuters consensus, prices rose 8.8% in June year-over-year, which means that inflation remains at a forty-year high, strengthening the case for an aggressive rate hike at the July 27 meeting. Several Fed officials are scheduled to speak this week and their comments will be scrutinized.

Investors are also bracing for earnings season, which kicks off this week with reports from JPMorgan Chase, Citigroup and Wells Fargo,  among others.

Adding to growth worries is the rise in Covid cases across China, with several cities implementing restrictions.

Yesterday, Wall Street’s three main indexes lost ground. Low-risk profiles dominated gains: healthcare and utilities led the way at the expense of stocks sensitive to economic cycles and the cost of money, such as technology stocks and mining stocks.

Gas priced tumbled after Gazprom stopped shipping gas to Germany via the Nord Stream 1 pipeline, which is actually a long-planned annual maintenance operation that should last until July 21 at the latest. But Berlin fears that this pipeline will never be put back into service, which will put upward pressure on prices. To give you an order of magnitude, the TTF, the Dutch Gas benchmark, briefly exceeded EUR 170/MWh, the equivalent of a barrel of oil at USD 300. This is not far from the levels reached at the beginning of the year at EUR 200/MWh when the crisis was at its height with the Russian invasion of Ukraine.

Those who thought that this crisis would be short-lived thanks to the alternative of American LNG were therefore mistaken. The proof is in the futures contracts that fix the price of electricity in 2023 and 2024, which have skyrocketed in Germany to unprecedented levels: 340 EUR/MWh. While household heating bills will surge this coming winter, it is mostly industry that will bear the cost. The German chemical industry already sounded the alarm a few days ago by talking about "a heart attack for the German economy" if Berlin does not manage to secure its industrial gas supplies. This is also true for the steel industry and many other sectors ranging from fertilizer production to chicken farming. On the other hand, it is good news for coal and players like Drax Group, who can extend the life of their coal-fired plants.

However, let’s keep in mind that Nord Stream 1 is also an excellent source of income for Gazprom, especially at these price levels. Turning off the gas tap right away would be bad for Russia's finances, and it would deprive itself of an important tactical privilege: slowing down the flow at any time.

 

Today's economic highlights:

There are no major indicators today.

The euro is approaching parity with the dollar at EUR 0.9960. The ounce of gold is losing ground at USD 1732. Oil is also falling with North Sea Brent crude at $102.69 a barrel and U.S. light crude WTI at $99.44. U.S. debt has a 10-year yield at 2.97%. Bitcoin is trading at USD 20,000.

 

On markets:

* Pepsico is up 1% in premarket trading after raising its full-year revenue forecast on Tuesday.

* Gap - The U.S. apparel company fell 5.8% in premarket trading after it warned about its second-quarter margins due to rising costs and announced the departure of its chief executive Sonia Syngal.

* Apple - A Moscow court on Tuesday fined the U.S. group two million rubles for refusing to host Russian citizens' data on Russian territory, the Interfax news agency reported.

* Twitter on Monday night rejected Elon Musk's accusations of non-compliance with its contractual obligations and assured that the billionaire had "knowingly" violated the agreement to buy the social network for $ 44 billion.

* American Express fell 2.1% in pre-market trading as Jefferies and Credit Suisse lowered their price targets on the stock.

* Peloton Interactive fell 1.8% in premarket trading after it said it would stop producing its own bicycles and treadmills to streamline operations and cut costs.

* Dollar General - The retailer announced Tuesday that its chief executive Todd Vasos is leaving the company.

 

Analyst recommendations:

  • BlackRock: UBS is still Buy but lowers its target from USD 825 to USD 718.
  • Eli Lilly: Guggenheim goes long and raises its price target to $351 from $333.
  • Hammerson: RBC Capital Markets downgrades to underperform from sector perform. PT down 15% to 17 pence.
  • Hasbro: Stifel is long but lowers its price target from USD 111 to USD 103.
  • JPMorgan: Citi upgrades to buy from neutral. PT up 20% to $135.
  • Marsh & McLennan: Goldman Sachs reinstated coverage with a recommendation of buy. PT set to $182.
  • Meta Platforms: Stifel is still long but with a price target reduced from USD 325 to USD 260.
  • Mondelez: President Capital Management initiated coverage with a recommendation of buy. PT up 17% to $73.
  • Norfolk Southern: J.P. Morgan downgrades to neutral from overweight. PT up 14% to $258.
  • Regions Financial: Citi downgrades to neutral from buy. PT up 5% to $20.
  • Tempur Sealy: Keybanc Capital Market is Buy but with a reduced price target of USD 42 to USD 38.
  • The British Land Company Plc: RBC Capital Markets downgrades to underperform from sector perform. PT down 19% to 375 pence.
  • Twitter: Citigroup maintains its neutral recommendation but lowers its target from USD 54.20 to USD 36.
  • Union Pacific: J.P. Morgan downgrades to neutral from overweight. PT up 11% to $232.
  • Wells Fargo: JP Morgan remains neutral but with a price target reduced from USD 52 to USD 47.50.
  • Willis Towers: Goldman Sachs reinstated coverage with a recommendation of neutral. PT set to $227.

© MarketScreener.com 2022
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Stocks mentioned in the article
ChangeLast1st jan.
AMERICAN EXPRESS COMPANY -1.94% 140.26 Delayed Quote.-14.27%
APPLE INC. -1.51% 150.43 Delayed Quote.-15.28%
BLACKROCK, INC. -1.52% 591.39 Delayed Quote.-35.41%
CITIGROUP INC. -2.90% 44.26 Delayed Quote.-26.71%
DOLLAR GENERAL CORPORATION 0.59% 241.62 Delayed Quote.2.46%
ELI LILLY AND COMPANY 0.19% 311.46 Delayed Quote.12.76%
GAPWAVES AB (PUBL) -4.66% 25.6 Delayed Quote.-45.87%
HAMMERSON PLC -6.35% 18.435 Delayed Quote.-39.71%
HASBRO, INC. -2.81% 70.99 Delayed Quote.-30.25%
JPMORGAN CHASE & CO. -1.86% 109.14 Delayed Quote.-31.08%
MARSH & MCLENNAN COMPANIES 0.11% 151.38 Delayed Quote.-12.91%
META PLATFORMS, INC. -1.69% 140.41 Delayed Quote.-58.25%
MONDELEZ INTERNATIONAL, INC. -1.42% 58.95 Delayed Quote.-11.10%
NORFOLK SOUTHERN CORPORATION -3.14% 217.65 Delayed Quote.-26.89%
PELOTON INTERACTIVE, INC. -0.93% 8.51 Delayed Quote.-76.20%
PEPSICO, INC. -0.05% 168.52 Delayed Quote.-2.99%
REGIONS FINANCIAL CORPORATION -2.02% 20.88 Delayed Quote.-4.22%
TEMPUR SEALY INTERNATIONAL, INC. -1.23% 24.83 Delayed Quote.-47.20%
THE BRITISH LAND COMPANY PLC -2.98% 350.3 Delayed Quote.-31.85%
TWITTER, INC. 0.43% 41.58 Delayed Quote.-3.79%
UNION PACIFIC CORPORATION -2.49% 203.97 Delayed Quote.-19.04%
WELLS FARGO & COMPANY -2.67% 40.41 Delayed Quote.-15.78%
WILLIS TOWERS WATSON PUBLIC LIMITED COMPANY -1.50% 200.34 Delayed Quote.-15.64%
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