Investors are concerned that the “temporary inflation” scenario the Fed was betting on is looking less and less likely, and that rising prices could last a while. However, the threat of stagflation has eased, since the economy remains robust for now. The third quarter earnings season is a good vintage so far, despite shortages and other supply chain disruptions. In addition, manufacturing PMIs, which take the pulse of purchasing managers, remain strong. The ISM Manufacturing PMI, which is a purely U.S. index, reached 60.8 in October, a sign that the U.S. economy is still expanding strongly, as the index is usually between 50 and 55.

On Tuesday, the Reserve Bank of Australia signaled it would raise interest rates sooner than expected, while the Bank of England is expected to announce a rate hike tomorrow.

Economists now broadly expect the Fed to start reducing its its asset-buying program, while keeping interest rates unchanged.

Meanwhile, world leaders opened the United Nations Climate Change Conference yesterday. The challenge is to achieve more tangible commitments and action from governments to reduce their CO2 emissions. The goal is to limit global warming to 1.5 degrees by the end of the century, an ambitious target that has a particular resonance at a time when Europe is desperately short of gas for this winter and Asia is experiencing the effects of a difficult, if not impossible, weaning from coal. Xi Jinping is promising China's carbon neutrality by 2060, ten years earlier than India, which will reach that goal by 2070 according to its Prime Minister, Narendra Modi. Most countries remain relatively tight-lipped about how to get there, and disagreement persists over policies to reduce global consumption of oil, coal and natural gas, the price of which may yet soar. Bank of America expects Brent crude oil to reach USD 120 per barrel by June 2022.

 

Today's economic highlights:

European manufacturing PMIs are the main indicators today. In Australia, the central bank left its rate unchanged at 0.10%.

The dollar is trading at EUR 0.8632. The ounce of gold is worth USD 1,787. In the oil market, WTI is at USD 83.48, while Brent is at USD 84.2. U.S. debt offers a 10-year yield of 1.55%. Bitcoin is trading around USD 63,400.

 

On markets:

* Apple has cut production of its iPad tablets to devote more components to iPhone 13 production, the Nikkei newspaper reported Tuesday, citing unidentified sources.

* Pfizer on Tuesday raised its full-year sales forecast for its COVID-19 vaccine by 7.5% to $36 billion (€31 billion) on the back of new contracts with countries for booster doses and an expansion of vaccination to children. The stock is up 3% in pre-market trading.

* Tesla CEO Elon Musk said Monday on Twitter that the automaker had not signed a deal with Hertz, more than a week after the rental giant announced an order for 100,000 cars, which sparked a stock rally in Tesla shares. The automaker is also recalling nearly 12,000 vehicles sold since 2017 due to a software problem, the National Highway Traffic Safety Administration (NHTSA), the U.S. auto safety authority, announced Tuesday. Tesla shares are down 5% in pre-market trading.

* Rivian, an electric car maker that counts Amazon and Ford among its investors, is aiming for a valuation of more than $53 billion once it completes its IPO process, an amount higher than Honda's current capitalization. The date of the transaction has been set for November 9 and the first listing is scheduled for the following day.

* A California judge announced Monday that he would rule against several U.S. counties that accuse the three companies and Teva Pharmaceutical Industries of aiding the opioid crisis.

* Under Armour jumps 9.7 percent to $24.10 in premarket trading, heading for its best one-session performance since March 2020 and a two-month high after raising its annual earnings and revenue guidance.

* Estée Lauder lowered its annual sales forecast Tuesday.

* Ralph Lauren on Tuesday raised its annual sales forecast on the back of a rebound in demand in North America.

* Eli Lilly. announced Tuesday that the U.S. government has placed an order for an additional 614,000 doses of its antibody-based COVID-19 treatment for $1.29 billion.

* ConocoPhillips reported a third-quarter profit on Tuesday, compared with a net loss in the same period a year ago, helped by soaring oil prices.

* Dupont de Nemours will buy engineering materials maker Rogers for $5.2 billion to strengthen in fast-growing markets such as electric vehicles, 5G and so-called "clean energy."

* KKR on Tuesday reported third-quarter distributable income more than doubled to $925.1 million on the back of a solid increase in management fees and disposition gains from its private equity business.

 

Analyst recommendations:

  • Adobe: Deutsche Bank reinstated coverage of Adobe Inc. with a recommendation of buy. PT up 20% to $770
  • Alphabet: Morgan Stanley raises PT to $3,200 from $3,000, reiterates Overweight rating
  • Amazon: Citigroup adjusts price target to $4,100 from $4,175, reiterates buy rating
  • Big Yellow Group: Goldman Sachs cut the recommendation on Big Yellow Group Plc to neutral from buy. PT up 11% to 1,630 pence
  • The Clorox Company: J.P. Morgan downgrades to underweight from neutral. PT down 10% to $147
  • Expedia: Atlantic Equities cut the recommendation on Expedia Group Inc. Class A to neutral from overweight. PT up 7.6% to $180
  • Exxon Mobil: Goldman Sachs remains long and adjusts its target from USD 70 to USD 71.
  • Franklin Resources: Keefe, Bruyette & Woods upgrades to outperform from market perform. PT up 28% to $45
  • FirstEnergy: Wells Fargo Securities raised the recommendation to equal-weight from underweight. PT up 8.2% to $42
  • Glencore: Credit Suisse upgrades its target to GBP 3.70 from GBP 3.45.
  • Microsoft: Deutsche Bank reinstated coverage of Microsoft Corp. with a recommendation of buy. PT set to $390
  • Oracle: Deutsche Bank reinstated coverage of Oracle Corp. with a recommendation of hold. PT set to $110
  • Rio Tinto: Credit Suisse cuts price target to GBP 53 from GBP 56 amid changes to bulk commodity prices; outperform kept
  • Stanley Black & Decker: Bank of America has decided to sell the company and has lowered its target price from USD 230 to USD 170.
  • T-Mobile US: Scotiabank reinstated coverage with a recommendation of sector outperform. PT set to $163