Investors were anxiously awaiting the release of April's inflation figures in the U.S. They fear a surge in prices that could lead to a tightening of the Fed’s monetary policy. The data is now published. Consumer prices rose by 4.2% in April from the same period last year, according to the Labor Department on Wednesday. Prices rose 0.8% on a monthly basis, when estimates were calling for a 0.2 % increase.
The volatility index, the VIX, jumped to more than 22 points on Wednesday, its highest level since early March.
Corporate earnings are still going strong, but the return of inflation to the equation, a media-driven return for the time being, is changing the picture a bit.
There is a lot of movement on the bottom floor. Sectoral variations are violent and not always coordinated, which contributes to the feeling of volatility. Some jolts are currently shaking all the so-called growth sectors, especially technology. Markets have experienced three sustained phases of this type since last summer: at the beginning of September, during the violent rotation of October/November and from mid-February to mid-March. Each time, the Nasdaq bent its back before recovering. But it still lagged behind the more generalized indices.
The safest short-term position for investors who are not focused on long maturities is to bet on "inflation-compatible" stocks and on value stocks. Some of the eligible stocks are both. The oil sector, for example, is an excellent candidate when it comes to hedging against inflation. Banks are also expected to benefit, as well as the mining and semiconductor sectors. On the other hand, analysts agree that the most penalized sector is the leisure industry, which is still struggling to pass on the increase in its wage costs to its customers.
Asia is also a source of concern. The dramatic resurgence of the coronavirus in India is creating new macroeconomic tensions. Earlier today, Taiwan's stock market collapsed on the announcement of the return of prudential measures in the face of a slight resurgence of the pandemic on the island. Undermined by this news and the fall in technology stocks, Tokyo gave back another 2%, after 3% the day before.
This renewed tension slightly benefits the dollar but not gold for example. On the other hand, crypto-currencies are rebounding. Should we see it as the new sanctuary of investors?
Today's Economic Highlights
April inflation in Germany and France, as well as March European industrial production are on the agenda in Europe. In the US, April inflation is also on the agenda, along with weekly oil inventories.
The dollar is trading slightly higher at EUR 0.8252. Gold is hovering around USD 1835 per ounce. Things are moving up on the oil side, and you must pay USD 69.46 for a barrel of Brent and USD 66.2 for a barrel of WTI. The yield on U.S. debt rises back to 1.62% over 10 years. Bitcoin rebounds to USD 56,567.
* The European Court of Justice has overturned the European Commission's decision to require Amazon.com to return some 250 million in unpaid taxes to Luxembourg.
* Pfizer submitted data to the U.K. Medicines Agency (MHRA) on the effectiveness of its Covid-19 vaccine in adolescents aged 12 to 15, a representative of the pharmaceutical company announced Tuesday.
* Chesapeake Energy on Tuesday reported a quarterly profit of $295 million and paid a dividend in its first results since emerging from bankruptcy in February.
* Electronics Arts on Tuesday reported a better-than-expected adjusted revenue target for the full year, betting that demand for its "FIFA 21" and "Apex Legends" games, in particular, remains strong despite the easing of pandemic-related restrictions. The stock is up 2% in pre-market trading.
* Gap announced Tuesday that it will resume paying a dividend and its asset buyback program.
* Hanesbrands gained 1.8% in premarket trading on a recommendation upgrade by Wells Fargo to "in-line weight" from "underweight".
- Aston Martin: Goldman Sachs upgraded from Sell to Neutral with a target of GBp 1982.
- Astrazeneca: Goldman Sachs maintains its Sell rating on the stock. The target price remains at GBp 6800.
- Bayer AG: Warburg Research stays Neutral. The target price is still set at EUR 74.
- Clarus : Jefferies adjusts Clarus' Price Target to $30 From $25, maintains Buy rating
- Coty : JPMorgan raises Price Target for Coty to $10 From $9, maintains Neutral rating
- Cisco: Wells Fargo lifts PT for Cisco Systems to $65 From $55, remains Overweight
- HSBC Holdings: Goldman Sachs is keeping its Buy rating. The target price is reviewed upwards from GBp 555 to GBp 585.
- L Brands : Jefferies raises PT for L Brands to $69 From $63, keeps Hold rating
- Maersk : ABG Sundal Collier cut the recommendation to Hold from Buy. PT set to 17,000 kroner, an 8% increase from last price
- Merck KGAA: Goldman Sachs is keeping its Sell rating. The target price continues to be set at EUR 110.
- Praxis Precision Medicines : Wedbush lowers Price Target to $60 From $63, keeps Outperform rating
- Switch : Raymond James adjusts PT to $20 From $19, remains Outperform
- Tyson Foods : JPMorgan changes Price Target to $74 From $76, maintains Neutral rating
- UWM Holdings Corporation : Wedbush increases price to $9.25 From $13.50, keeps Outperform rating