Speeches from two Fed officials, Loretta Mester and Charles Evans, due later today, will be closely monitored by investors, as they expect the central bank to start tapering in the coming months. Some data released today might also provide some clues. Productivity in the U.S. declined in the second quarter, with nonfarm business employee output per hour rising at a 2.3% annualized rate in, according to Labor Department. This is well below the 4.3% rate seen in the first quarter and the 3.2% expected in a Bloomberg survey of economists.

A lot happened in the world yesterday and almost nothing on financial markets. In the midst of massive fires and floods in the US and Europe, the IPCC published its latest report on the state of the planet to warn humanity that if drastic changes aren’t implemented fast, climate change will get out of control. As well as taking radical and rapid political measures, we must also change individual habits towards more sobriety.  Buying organic carrots, and investing in ESG-friendly ETFs may not be enough. Since we are all pretty much walking paradoxes, weaning ourselves off our habits is likely to be complicated.

On stock markets yesterday, the S&P500 fell a little, while the Nasdaq and SMI rose. Investors gave a premium to defensives, a bit spooked by the combination of a resurgence of coronavirus cases and US statistics conducive to a reduction in Fed support. Now that Covid cases are rising in China and the US, Wall Street is closely watching.

There is less activity on the corporate side as we approach mid-August, but there are a few transactions worth mentioning. AMC Entertainment Holdings rose almost 9% after it announced changes to its theaters that would appeal to its loyal Reddit investors, including accepting bitcoin.

To finish, let’s talk about the discrepancy in stock market performance between Western and emerging markets. Analysts at Bank Of America Merrill Lynch point out that the valuation differential between emerging and US equities is at its highest in 20 years (MSCI World has gained 15% since the beginning of the year, MSCI Emerging 0). Normally, these large gaps are caused by "cathartic events" such as the collapse of Lehman Brothers in 2008 or the attacks of September 11, 2001, but that is not the case this time. Nevertheless, the American bank believes that emerging countries are clearly where the long-term value lies…

 

Economic highlights of the day:

The German ZEW investor confidence index and US productivity and labor cost figures are the main indicators of the day.

The dollar/euro pair is trading at EUR 0.8533, while the ounce of gold is hovering around USD 1728. Oil is almost stable at USD 69.60 for Brent and USD 67.20 for WTI. The T-Bond is yielding 1.31% over 10 years, the Bund at -0.46%. Bitcoin is trading at USD 45,900

 

On markets:

* AMC Entertainment reported better-than-expected quarterly revenue Monday night, buoyed by the reopening of movie theaters after nearly a year of restrictions. The group's chief executive also announced that AMC would have the technology for bitcoin payments by the end of the year. In pre-market trading, the stock is up more than 8%.

* Kansas City Southern gained 6.8% in premarket trading after Canadian Pacific Railway raised its bid for the rail group by $2 billion to $27.29 billion.

* McDonald’s - The Italian Competition Authority (AGCM) will open an investigation into the terms of McDonald's agreements with franchisees following several complaints, an AGCM document seen by Reuters shows.

 

Analyst recommendations:

  • Beacon Roofing Supply : Jefferies downgrades to hold from buy, price target to $56 from $69
  • Berkshire Hathaway : DA Davidson raises price target to $315 from $296, maintains buy rating
  • Blend Labs : Piper Sandler starts coverage at overweight with $24 price target
  • Canopy Growth : Stifel Nicolaus adjusts price target to c$18 from c$21, reiterates sell rating
  • Clarkson: HSBC upgrades from hold to buy targeting GBp 4000.
  • Dine Brands: Deutsche Bank raised its recommendation to buy from hold. PT up 26% to $93
  • eBay : Credit Suisse raises pt to $80 from $78, keeps outperform rating
  • Fiserv: Exane BNP Paribas upgrades to neutral from underperform. PT up 5.1% to $116
  • General Electric : Deutsche Bank adjusts  pt to $103 from $14, maintains hold rating
  • Hargreaves Lansdown: Exane BNP Paribas upgrades to neutral from underperform. PT down 4.7% to 1,420 pence
  • Helios Towers: Berenberg remains Buy with a price target raised from GBp 203 to 224 
  • HSBC: Independent Research upgrades to hold from sell. PT up 4.6% to 425 pence
  • Imago BioSciences : Stifel starts coverage at buy with $31 price target
  • Meggitt: HSBC upgraded from buy to hold with a target of GBp 747. 
  • Novavax : B. Riley raises pt to $305 from $286, keeps buy rating
  • ProAssurance: Piper Sandler raised the recommendation to overweight from neutral. PT up 14% to $26
  • Public Storage: Raymond James upgrades to outperform from market perform. PT up 13% to $350
  • Sanderson Farms:  BMO Capital Markets upgrades to market perform from outperform. PT up 3.6% to $203
  • Victory Capital : Morgan Stanley adjusts  pt to $29 from $27, maintains underweight rating