Investors returned to a safe stance yesterday, allowing off-road stocks to return to the forefront. A bout of caution that benefited technology stocks and, to a lesser extent, healthcare stocks. The Nasdaq gained 1.25%.  

The delta variant of the coronavirus is disrupting investors' routine. The return of restrictive measures adopted here and there to combat the spread of this aggressive form of covid-19 is awakening new fears. Home shopping companies topped the charts, while airlines and cruise lines struggled for the most dramatic drop of the session. In recent months, the pendulum has regularly swung from one extreme to the other, depending on the evolution of Covid-19. At this stage, it is a source of volatility and opportunistic arbitration. As usual, we should not jump to conclusions, except to remind ourselves that the virus will continue to circulate, hopefully on a small scale. 

Sorting sectors between beneficiaries and victims of the pandemic is not very complicated. Especially with 14 months of hindsight. Let’s take American banks for example. Would anybody have dared to bet on them in March 2020, when the world seemed to be falling apart? Probably not. But you would have been wise to do so, because stocks have soared since then, despite all the economic fears that have plagued 2020. The U.S. central bank just announced that major institutions have passed their latest stress tests. And their excess reserves are such that they announced last night, almost in quick succession, dividend increases and share buybacks. For example, Morgan Stanley doubled its quarterly coupon and launched a $12 billion share buyback program. Even Wells Fargo, the ugly duckling of the sector, is going to buy back $18 billion of its own shares. Decisions that made some Democrats in Congress grit their teeth, but that illustrate the confidence of the financial community in the economic recovery. 

Meanwhile, Facebook entered in the restricted circle of American companies weighing more than $1000 billion on the stock market, alongside Apple, Microsoft, Amazon and Alphabet. The stock gained 4% yesterday after a legal victory in the complaint opened by the antitrust regulator and prosecutors in most U.S. states. A judge found that the arguments developed in support of the procedure opened for dominance were too thin.  

  

Economic highlights of the day: 

On the agenda today are the first estimate of German inflation for June and two US statistics: the FFHA home price index for April and the Conference Board consumer confidence for June. ECB head Christine Lagarde is scheduled to speak today.  

The dollar is trading at EUR 0.8417. The ounce of gold is down to USD 1752. Oil retreats to USD 74.52 a barrel of Brent and USD 73.29 a barrel of WTI. U.S. debt is posting a yield down 1.48% over 10 years. Bitcoin is trading around USD 35,952. 

 

On markets: 

* United Airlines announced on Tuesday the largest order in its history, totaling 270 BOEING and Airbus aircraft for a total of more than $30 billion (€25.2 billion) at list prices, in a bid to strengthen its position in the U.S. market. Boeing gained 0.9% in pre-market trading. 

* Johnson & Johnson is dropping plans to conduct clinical trials of its COVID-19 vaccine in India and seek to improve its availability in the country, the Economic Times reported Tuesday, citing a group official.  

* Ford has announced the discontinuation of its Ford Credit financing subsidiary's operations in Argentina and Brazil, which will result in a one-time charge of up to $375 million in the 2021 financial statements. 

 

Analyst recommendations: 

  • Admiral: Goldman Sachs resumes its Sell rating with a target of GBP 2870.
  • Anglo American: Liberum remains a hold with a reduced target price of GBp 3,300 to 3,000.
  • Antofagasta: Liberum upgrades from sell to hold with a target of GBp 1450.
  • Apogee Enterprises : Sidoti adjusts price target to $41 from $35, keeps neutral rating
  • Barclays: Goldman Sachs keeps Buy rating. Previously set at GBp 250, the target price has been raised to GBp 260.
  • Burberry: Societe Generale downgrades its Buy rating to Hold with a target of GBP 2,282.
  • Darktrace: Jefferies remains Buy with target price raised from GBP 500 to GBP 580.
  • EasyJet: JP Morgan research gives the stock a Neutral rating. The target price is still set at GBp 845.
  • Gladstone Capital : Oppenheimer initiates coverage with perform rating, $10 price target
  • Glencore: Liberum remains Buy with a price target raised from GBp 350 to 370.
  • Paychex : JPMorgan adjusts price target to $105 from $91, reiterates underweight rating
  • Rio Tinto: Liberum remains Sell with a target price raised from GBP 4,200 to GBP 4,300.
  • Rolls-Royce: JP Morgan research gives the stock a Neutral rating. The target price is unchanged at GBp 105.
  • Ryanair: JP Morgan remains Neutral on the company. The target price is still set at EUR 15.80.
  • Severn Trent: Morgan Stanley upgraded from Equal-weight to Overweight with a target of GBP 2,770.
  • Tesla: UBS's research confirms his advice and maintains his neutral opinion on the stock. The target price is decreased from USD 730 to USD 660.
  • United Utilities: Morgan Stanley downgrades from Overweight to Underweight with a target of GBP 950.
  • Victrex: Morgan Stanley upgrades from Underweight to Overweight, targeting GBP 2,230.