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OFFON

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.

Tapering fears? It’s so 2020…

11/04/2021 | 09:28am EST
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Financial markets were expecting changes at the conclusion of the US central bank's monetary policy meeting and they got what they were asking for. The announcement of a gradual dismantling of the Fed support mechanism went smoothly, as it was fully anticipated by financial markets.

Wall Street even gained ground at the end of the day, following Powell's comments. Technology stocks once again performed better than the rest of the market, with the Nasdaq gaining 1.08%, while the Dow Jones and S&P 500 made daily gains of around 0.30% and 0.65%.

Let's talk about central bank's comments, as this was the highlight of the week. In concrete terms, the Fed will start reducing its bond purchases on markets this month and aims to stop them permanently by the middle of next year. Initially, this monetary tightening will be limited to $15 billion per month. The Fed reserves the right to modify the pace of tapering, but on the condition that it makes markets aware of this early enough to avoid rushing it. As you can see, the Federal Reserve is in the process of slowly reducing its accommodative policy, rather than actually tightening its policy line, a subtle change that makes a huge difference. The challenge for investors was also to find out what the Fed's intentions were regarding the pace of rate hikes. In this regard, Jerome Powell was evasive, as the Fed still believes that prices will gradually fall into line. Using the word "temporary" gives the Fed some interesting leeway.

Most were expecting a rate hike announcement in the U.K., but the Bank of England said today that it would keep its monetary policy unchanged, taking markets by surprise with a key rate that remains at its historic low of 0.1%, but signaling a likely "necessary" increase in the coming months. The institute revised its inflation forecasts upwards (4.25% in 2021, 3.5% in 2022), but "most members of the Monetary Committee considered that our monetary policy remained appropriate", notes the Bank in the minutes of its meeting.

The October services PMIs for the major European economies have just been unveiled. Private sector activity in the eurozone continued to grow in October but at its slowest pace in six months, as supply chain disruptions and logistical problems related to the COVID-19 pandemic led to a sharp rise in input prices.

IHS Markit's composite PMI of activity, which includes manufacturing and services, fell to 54.2 in October, a six-month low, from 56.2 the previous month and a flash estimate of 54.3. The services PMI fell to 54.6 from 56.4 in September and a first estimate of 54.7.

In the US, jobless claims dropped by 14,000 to 269,000 last week, signaling that the job market is healing.

 

Economic highlights of the day:

The session is full of economic indicators, including services PMI and producer prices in Europe, unemployment figures and the trade balance in the United States.

The dollar is up to EUR 0.8657. The ounce of gold is blowing up at USD 1796. In the oil market, Brent crude is trading at USD 83.5 per barrel and WTI at USD 82.3 per barrel. The yield on US debt rises to 1.593% on 10 years. Bitcoin is stabilizing at around USD 62500.

 

On markets:

* Merck is up 2.3% in premarket trading after the U.K. drug agency approved its oral treatment for COVID-19, a first in the world.

* Moderna plunged 9.2% in premarket trading after the company lowered its COVID-19 vaccine sales forecast for this year due to production problems. The group now expects sales of between $15 billion and $18 billion, compared with $20 billion previously.

* Regeneron Pharmaceutical reported better-than-expected earnings and sales Thursday, supported by strong sales of its monoclonal antibody COVID-19 treatment. The company's stock is up 2.7% in pre-market trading.

* Tesla is up 1.8% at $1,236 a share before the Wall Street opening, heading for a record high. The stock has added about $350 billion to its market cap since Oct. 20 in the wake of strong third-quarter earnings.

* Qualcomm on Wednesday night forecast better-than-expected profit and revenue for the current quarter on strong demand for its chips used in telephony, automotive and other connected devices. The stock jumped 8.1% in pre-market trading.

* Alphabet, Google's parent company, announced Thursday that it plans to allow third-party payment systems for its app store in South Korea, after a new law was passed to that effect.

* Craig Federighi, Apple's chief software officer, warned Wednesday at a Web summit in Lisbon about the risks of an EU bill that would force the iPhone maker to allow third-party application stores on its devices. He stressed that this could increase piracy and the spread of malware.

* The Boeing Company - Steve Dickson, the head of the Federal Aviation Administration (FAA), told a Senate committee Wednesday that Boeing still has "a lot of work to do" as the aircraft manufacturer remains under investigation after the deadly crashes of two 737 MAX aircraft in 2018 and 2019.

* Kellogg’s warned Thursday that its annual profit could be impacted by the ongoing strike by employees at its grain plants.

* Electronic Arts raised its adjusted annual revenue forecast Wednesday night, betting on the success of its "FIFA" franchise and its upcoming game "Battlefield 2042."

* Roku announced Wednesday night that it expects fourth-quarter revenue to be below the Refinitiv consensus. The streaming device maker's stock fell 7.3% in premarket trading.

* Shareholders of Square, founded by Twitter co-founder Jack Dorsey, approved the issuance of new shares for the $29 billion buyout of Afterpay, one of the world's leading fractional payment companies.

 

Analyst recommendations:

  • Activision Blizzard: Edward Jones cut the recommendation on Activision Blizzard Inc. to hold from buy.
  • American Water: Goldman Sachs downgrades to neutral from buy. PT up 5.4% to $177
  • Asana: Jefferies downgrades to hold from buy, adjusts price target to $135 from $115
  • Capri Holdings: J.P. Morgan upgrades to overweight from neutral. PT up 20% to $77
  • Chegg: Northland Securities upgrades its buy rating to neutral and significantly lowers its target from USD 100 to USD 54.
  • Equinix: Cowen downgrades to market perform from outperform; price target is $880
  • LivePerson: Mizuho Securities downgrades its buy rating to neutral and cuts its target from USD 70 to USD 52.
  • Lyft: Daiwa Securities upgrades to buy from outperform; price target is $60
  • Continental Resources: J.P. Morgan downgrades to neutral from overweight. PT up 13% to $53
  • Marriott International: Stifel adjusts price target to $155 from $140, reiterates hold rating
  • Pfizer: Barclays remains neutral but raises its target to USD 44 from USD 41.
  • Plug Power: SMBC Nikko initiated coverage with a recommendation of outperform. PT up 25% to $50
  • Qualcomm: Piper Sandler upgrades PT to $190 from $175. Maintains overweight rating. Goldman Sachs raises the stock to Buy.
  • Reliance Steel: Goldman Sachs upgrades to buy from neutral. PT raises 22% to $190
  • Rogers: Canaccord Genuity downgrades to hold from buy. PT up 2.7% to $277
  • Sealed Air: BMO Capital Markets upgrades to outperform from market perform. PT up 13% to $70
  • Under Armour: UBS confirms its buy recommendation and raises its target from USD 38 to USD 40.

© MarketScreener.com 2021
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Stocks mentioned in the article
ChangeLast1st jan.
ACTIVISION BLIZZARD, INC. 0.15% 78.9 Delayed Quote.18.59%
AFTERPAY LIMITED -2.18% 66.47 End-of-day quote.-19.93%
ALPHABET INC. -0.18% 2580.1 Delayed Quote.-10.94%
AMERICAN WATER WORKS COMPANY, INC. 0.39% 156.15 Delayed Quote.-17.64%
APPLE INC. -0.29% 159.22 Delayed Quote.-10.33%
ASANA, INC. -5.57% 45.46 Delayed Quote.-39.02%
BLOCK, INC. -4.83% 105.64 Delayed Quote.-34.59%
CAPRI HOLDINGS LIMITED 2.05% 55.8 Delayed Quote.-14.03%
CHEGG, INC. -0.94% 24.13 Delayed Quote.-21.40%
CONTINENTAL RESOURCES, INC. -2.34% 52.16 Delayed Quote.19.33%
ELECTRONIC ARTS INC. 0.83% 131.06 Delayed Quote.-0.64%
EQUINIX, INC. -1.84% 683.02 Delayed Quote.-19.25%
LIVEPERSON, INC. -6.30% 25.89 Delayed Quote.-27.52%
LYFT, INC. -2.10% 34.93 Delayed Quote.-18.25%
MARRIOTT INTERNATIONAL, INC. -3.16% 153.71 Delayed Quote.-6.98%
MERCK & CO., INC. 1.82% 80.58 Delayed Quote.5.14%
MODERNA, INC. -4.09% 148.62 Delayed Quote.-41.48%
PFIZER, INC. 1.44% 53.37 Delayed Quote.-9.62%
PLUG POWER INC. -6.21% 18.26 Delayed Quote.-35.32%
QUALCOMM, INC. -3.47% 161.2 Delayed Quote.-11.85%
REGENERON PHARMACEUTICALS 0.57% 608.72 Delayed Quote.-4.16%
RELIANCE STEEL & ALUMINUM CO. 1.03% 150.6 Delayed Quote.-8.11%
ROGERS COMMUNICATIONS INC. 3.32% 63.85 Delayed Quote.2.08%
ROKU, INC. 0.07% 147.82 Delayed Quote.-35.22%
S&P 500 -0.54% 4326.51 Delayed Quote.-8.73%
SEALED AIR CORPORATION 1.32% 66.57 Delayed Quote.-1.33%
TESLA, INC. -11.55% 829.1 Delayed Quote.-21.54%
THE BOEING COMPANY -2.33% 189.75 Delayed Quote.-5.75%
TWITTER, INC. 0.65% 33.84 Delayed Quote.-21.70%
UNDER ARMOUR, INC. -0.06% 18.13 Delayed Quote.-14.39%
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