The mixed reading lacked clarity, and investors are still unsure how high the Fed will raise rates at its next meeting in May, or if there’s going to be any rate hike at all. It is core inflation that the Fed is looking at and it is probably still a little too strong. This suggests that the central bank will continue its rate hike scheme with a 25-basis point hike, perhaps the last of the cycle, at its meeting on May 3. Wall Street ended the session with -0.1% for the Dow Jones, -0.4% for the S&P500 and -0.89% for the Nasdaq 100 (which posted its third consecutive decline).

Inflation was not the only data published yesterday in the US. The minutes of the last Fed meeting also played an important role in the performance of stocks, annihilating the mid-session recovery attempt. It says that the Fed expects a mild recession later this year and is concerned about the state of the banking system. These minutes relate to a meeting that took place on March 22, immediately after the rescue of Credit Suisse by UBS and the rescue of SVB Financial and Signature Bank by the US authorities. Since then, officials have been a little more reassuring about the solidity of the financial system with the spectre of another Lehman Brothers receding. The last American company in trouble is not a bank but a plastic box manufacturer, and not just any plastic box: Tupperware. The company expressed doubts this week about its ability to continue. Will it join the graveyard of endangered brands like Toys "R" Us, Blockbuster, Polaroid, Kodak or Bed, Bath & Beyond? That's a mystery. Unless an army of private investors decides that this endangered masterpiece should be saved in the manner of GameStop or AMC Entertainment.

But all joke aside, the bottom line is that investors are mostly waiting for a rate hike in early May but continue to believe that the Fed will have to start backing off later in the year. The central bank, for its part, acknowledges the turbulence but continues to implement its plan by trying to organize a soft landing for the economy.

There was new data to fuel the debate this morning, as the wholesale price index declined by 0.5% on a monthly basis, according to the Bureau of Economic Analysis. The decrease is another sign that inflationary pressures are easing. Meanwhile, initial weekly jobless claims rose by 11,000 to 239,000 in the week to Saturday, which is higher-than-expected. Futures on all three Wall Street indexes were in the green after the data.

The two other important news of the day relate to China. March exports were much more dynamic than expected, even if this did not impact the CSI300 in Shanghai, which lost 0.3% during the session. Secondly, Alibaba's share price fell after the Financial Times revealed that shareholder SoftBank is selling most of its shares. In Hong Kong, the Hang Seng was down 0.4%.

 

Economic highlights of the day:

The second reading of German inflation for March, European industrial production for February, the US producer prices and weekly unemployment figures are on today’s agenda. This morning, Japanese machinery orders contracted less sharply than expected in March (-4.5% vs. -6.4% expected). Chinese exports in March jumped 14.8% and imports fell 1.4% (consensus +7% / -0.5%).

The dollar is down 0.5% against the euro to EUR 0.9047 and down 0.3% against the pound to GBP 0.7978. The ounce of gold rises to 2045 dollars. Oil remains high with North Sea Brent at USD 86.90 per barrel and US WTI light crude at USD 82.92. The US 10-year debt yield is moving at 3.41%. Bitcoin is trading around USD 30,200.

 

In corporate news:

  • Delta Air Lines - The U.S. airline gained 4.45 percent in premarket trading after it issued a higher-than-expected quarterly profit forecast, citing "record" bookings for this summer and strong demand for international flights.
  • Alibaba fell 1.3% in after-hours trading on Wall Street in reaction to a report in the Financial Times that Japanese conglomerate SoftBank Group Corp has decided to withdraw almost entirely from the Chinese online retail giant.
  • Apple is talking to suppliers about producing its Macbook computers in Thailand to reduce its dependence on China, the Nikkei reported Thursday. In addition, according to Bloomberg, Apple has significantly increased its iPhone production in India, a country that now accounts for nearly 7% of total volumes, up from 1% in 2021.
  • Harley-Davidson was down 3.6 percent in premarket trading after the motorbike maker announced Wednesday that CFO Gina Goetter would leave the company at the end of the month to join toy maker Hasbro.
  • Chevron - Oil giant Chief Executive Officer Michael Wirth received $23.6 million in compensation in 2022, a 4 percent increase from a year earlier, while the median annual compensation for employees fell 12 percent, according to a stock market report Wednesday.

 

Analyst recommendations:

  • American Express: Baptista Research LLP initiated coverage with a recommendation of hold. PT set to $181.
  • Barratt: HSBC upgrades from hold to buy targeting GBp 570.
  • Bellway: HSBC upgrades from hold to buy targeting GBp 2700.
  • Berkeley: HSBC upgrades from sell to hold, targeting GBp 4000.
  • Blackrock: Baptista Research initiated coverage with a recommendation of hold. PT set to $703.
  • Goldman Sachs: Barclays cuts Price Target to $437 from $495, Overweight rating kept.
  • Persimmon: HSBC upgrades from hold to buy targeting GBp1550.
  • Redrow: HSBC upgrades from hold to buy targeting GBp 670.
  • Steven Madden: Citi upgrades to buy from neutral. PT up 23% to $42.
  • Taylor Wimpey: HSBC upgrades from hold to buy targeting GBp 150.
  • Union Pacific: Baptista Research initiated coverage with a recommendation of hold. PT set to $219.
  • VeriSign: Baptista Research initiated coverage  with a recommendation of hold. PT set to $240.