The Q2 2021 earnings season is coming to an end, as nine-tenths of the major Western companies have now released their performance. FactSet, which has been deconstructing the results of S&P500 companies since 2008, is already talking about a historic performance. "87% of companies reported actual earnings per share above estimates...If 87% is the final percentage for the quarter, it will be the highest percentage of S&P 500 companies reporting a positive earnings per share surprise since FactSet began tracking this metric in 2008," the U.S. research firm writes.

This means that most companies announced higher-than-expected earnings. Predicted by whom? By analysts, who were basing their expectations on the companies themselves. To top it all off, the overruns are very large. They are even the highest since the last quarter of 2009. This is also true for sales figures. In such a context, it is probably true to say that indexes are currently benefiting from the strong results of listed companies. Especially since double-digit earnings growth is in sight for the second half of the year. The 12-month P/E ratio is 21.1 times, compared with a ten-year average of 16.2 and a five-year average of 18.1. Investors are clearly betting on continued earnings momentum beyond 2021.

The year's index performance was impressive but unevenly distributed. Western markets, Korea and Australia are benefiting, but Japan and especially China are lagging. Beijing's authoritarian push on its flagship companies, particularly in technology, has weighed down Shanghai and Hong-Kong and, in turn, emerging market indices.

There will be a few macroeconomic events this week, but the US July inflation figures released on Wednesday will be the focus on investors. After the good numbers from US labor market revealed last week, they want to know if consumer prices are moderating or not, to try to predict the timing of the US central bank's support measures.

In other news, the U.S. Senate voted in favor of a $1 trillion plan to renovate the nation's infrastructure, with $450 billion already committed. The story is not over yet as a final vote is needed in the upper chamber, but the compromise is well on its way.

 

Economic highlights of the day:

Among the indicators of the day, the JOLTS survey on job openings in the United States. Over the weekend, China reported a sharp increase in exports in July, although the momentum was slightly weaker than economists expected, and annual inflation of 1% in July, after 1.1% in June. In addition, producer prices continue to rise sharply, more than had been expected.

The dollar is trading at EUR 0.8507. The ounce of gold rebounds a bit after falling heavily to USD 1737. Oil is trending slightly lower at USD 68.60 per barrel of Brent and USD 66.20 per barrel of WTI. U.S. debt is yielding 1.30% over 10 years (1.24% on Friday). Bitcoin is trading at USD 46,000 per unit.

 

On markets:

* Citigroup - National Australia Bank will buy the U.S. bank's Australian consumer business for about $882.24 million, the two groups announced Monday.

* Berkshire Hathaway said Saturday that many of its businesses were enjoying a strong recovery from the early lows of the pandemic, allowing its revenues and profits to rebound in the second quarter.

* BioNTech on Monday reported a solid rebound in sales and posted a profit in the second quarter, and now expects, based on current delivery contracts, the COVID-19 vaccine developed with Pfizer to bring in 15.9 billion euros in sales.

* Tyson Foods raised its annual sales forecast after enjoying strong demand for its beef products, buoyed by a recovery in U.S. restaurant and hotel business.

* Johnson & Johnson - India has approved the pharmaceutical company's COVID-19 vaccine for emergency use, the health minister said Saturday on Twitter.

* Alibaba loses about 1% in pre-market trading after the tardiness of the group's actions to address sexual harassment at the company drew criticism from state media, following the firing of a manager accused of sexual assault.

* Philip Morris - Britain's M&A regulator said Monday it would launch a rare auction process to buy drugmaker Vectura if Carlyle and Philip Morris did not make final offers by Tuesday.

* Veoneer said Sunday it would begin talks with Qualcomm after the latter's bid for the Swedish supplier last week beat out Magna International's rival offer.

* Cisco Systems on Friday denied a report by The Information that the group was considering developing a service that would allow companies to switch from private to public data centers.

* Facebook - U.S. lawmakers on Monday asked the tech giant why it had disabled the accounts of researchers studying political advertising on the platform.

* Tesla - Jefferies raised its recommendation to "buy" from "hold". The stock gained 1.6% in pre-trade. The group also told employees at its battery plant in Nevada that they would be required to wear masks inside the site starting Monday, regardless of their vaccination status, the Wall Street Journal reported Sunday.

* Sandersons Farms gained 8 percent in premarket trading Monday agreed to be bought out for $4.53 billion by commodities trader Cargill and investment firm Continental Grain amid rising meat prices with strong demand.

* Moderna - Australia's pharmaceutical regulator has granted provisional approval to the drugmaker's COVID-19 vaccine, the country's Prime Minister Scott Morrison said Monday.

 

Analyst recommendations:

  • ADC Therapeutics: Stock rated New Outperform at RBC; PT $33
  • AMC : MoffettNathanson adjusts price target to $57 from $55, maintains neutral rating
  • AMD: BMO Capital Markets raised the recommendation to market perform from underperform. PT inches down 0.1% to $110
  • AstraZeneca: Morgan Stanley reiterates its Overweight rating with a target of GBp 9800.
  • Darden: Evercore ISI downgrades to inline from outperform. PT up 7.1 % to $155
  • Duke Energy: Vertical Research Partners cut the recommendation to hold from buy. PT up 2.8% to $110
  • Greggs: Berenberg remains Buy with target raised from GBp 2950 to GBp 3300
  • HP Inc: Reinstated Hold at Jefferies; PT $31
  • Mondi: Jefferies remains Buy with a target raised from GBp 2225 to GBp 2300
  • ResMed Reinstated Overweight at Wilsons; PT $435.03
  • Roku : Pivotal Research lifts price target to $410 from $350, hold rating kept
  • Standard Chartered: Jefferies remains Buy with a price target raised from GBp 610 to GBp 736.
  • Tesla: Jefferies raised the recommendation  to buy from hold. PT up 22% to $850