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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.

Party pooper: Waller ends the rally

11/14/2022 | 09:42am EST
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The better-than-expected U.S. inflation reading and pro-recovery measures in China have boosted investor morale for the past few days. However, a Fed official already dampened investors' hopes on Sunday.

A wind of optimism had been blowing on markets last week, due to the continued decline in US inflation in October. Investors reopened the floodgates, believing that the US central bank could finally win its bet against rising prices without damaging the economic dynamic too much. The S&P500 recovered nearly 6% and the Nasdaq nearly 10%.

A large part of the stock market benefited from this, in particular highly speculative stocks and quality large caps. Mid-caps, on the other hand, were somewhat neglected, as were certain specific segments. For example, defense stocks, which have been very popular since the beginning of the year, were sharply corrected. The mechanism at work is typical of short-term speculative movements: the prospect of an easing in monetary policy will not resolve the world's geopolitical tensions. The health care sector, considered too defensive for a sustainable recovery, also suffered heavy losses.

Speculation that the Fed will ease its monetary policy has been the main growth engine of the stock market in November, but it is not the only one. China also contributed. It seems that the country has finally decided to accelerate its recovery from the economic slump it has been in for several quarters. Without being too exuberant, however: these changes should not give the impression that the party has made mistakes. But the authorities did cross two of the red lines they had drawn: the zero-covid policy and support for the real estate sector in crisis. The easing of health regulations was announced late last week and has already sent financial markets roaring with delight. Over the weekend, Beijing also unveiled a 20-measure plan to get the real estate sector out of the rut.

However, Federal Reserve Governor Christopher Waller dampened the mood on Sunday, when he said at a conference in Australia that the central bank is not ready to ease its monetary policy yet, and needs to see much more data confirming that inflation is cooling before it "really start thinking about taking (its) foot off the brakes.”

Wall street's main indexes opened in the red today after these hawkish comments.

However, Lael Brainard, the Fed's vice president, is scheduled to speak at a public event at 11:30 am. Will she have a more positive message for us?

 

Economic highlights of the day:

Only one major statistic today, the European industrial production for September. All the macro agenda is here.

The dollar is struggling for direction and is currently worth EUR 0.9687 and GBP 0.8502. Gold is stabilizing around 1760 dollars. Oil remains strong, with North Sea Brent at USD 94.91 per barrel and US WTI light crude at USD 87.97. The yield on 10-year US debt is rising back to 3.90%. Bitcoin has resumed its decline, around USD 16,000.

 

In corporate news:

* Tyson Foods, the number one meat processor in the U.S., expects annual sales to exceed market expectations thanks to steady demand for its products despite inflation. The stock was up 1.8% in pre-market trading.

* Walt Disney plans to suspend hiring and cut some positions amid economic uncertainty, according to an internal document seen by Reuters on Friday. In addition, the Disney theme park in Shanghai, which has been closed since Oct. 31 due to the COVID-19 outbreak, has no planned reopening date for the time being, it announced on its website.

* Biogen and Eli Lilly gained 4.6% and 1.9% respectively in pre-market trading after rival Roche announced that its experimental Alzheimer's treatment had failed to meet its targets in clinical trials.

* Tesla has considered exporting vehicles produced in Shanghai to the United States and Canada, two people close to the project said, a move that would link its largest plant to North America, its biggest market.

* United Rentals, which specializes in industrial equipment rentals, announced that it would buy the assets of rival Ahern Rentals for about $2 billion.

 

Analyst recommendations:

  • AMD: UBS raised its recommendation to buy. PT up 31% to $95.
  • Bank of America: Citi downgrades to neutral from buy. PT up 4.1% to $40.
  • Beazley: Jefferies remains Buy with a price target raised from GBp 670 to GBp 825.
  • Global Payments: Baird downgrades to neutral from outperform. PT up 13% to $118.
  • Hikma Pharmaceuticals: Jefferies remains Buy with a price target reduced from GBp 2020 to GBp 1930.
  • Hunting: Jefferies remains Buy with a price target raised from GBp 330 to GBp 350.
  • Pets at Home: Jefferies remains Buy with a price target reduced from GBp 425 to GBp 385 .
  • Vodafone: Jefferies maintains a Hold rating with a target reduction from GBp 122 to GBp 100.

ę MarketScreener.com 2022
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Stocks mentioned in the article
ChangeLast1st jan.
AMDOCS LIMITED 0.91% 91.2 Delayed Quote.-0.57%
BANK OF AMERICA CORPORATION -0.42% 35.3 Delayed Quote.6.58%
BEAZLEY PLC 0.53% 668.5 Delayed Quote.-1.62%
BIOGEN INC. -1.43% 285.94 Delayed Quote.4.75%
ELI LILLY AND COMPANY -0.47% 340.5 Delayed Quote.-6.49%
GLOBAL PAYMENTS INC. -2.15% 110.29 Delayed Quote.11.05%
HIKMA PHARMACEUTICALS PLC 0.56% 1704.5 Delayed Quote.9.83%
HUNTINGTON BANCSHARES INCORPORATED -1.13% 14.84 Delayed Quote.6.45%
PETS AT HOME GROUP PLC -0.72% 331.4 Delayed Quote.16.85%
TESLA, INC. -6.32% 166.66 Delayed Quote.44.42%
TYSON FOODS, INC. -2.47% 64.1 Delayed Quote.5.57%
UNITED RENTALS -1.16% 429.04 Delayed Quote.20.71%
VODAFONE GROUP PLC 0.14% 93.55 Delayed Quote.11.05%
WALT DISNEY COMPANY (THE) -1.78% 107.59 Delayed Quote.26.08%
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