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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.

US economy shows resilience, while China falters

09/16/2021 | 09:13am EDT

Wall Street indexes were only slightly up this morning, as signals pointing to a global economic slowdown multiply, including weak data from China. Investors are also searching for clues - ahead of next week's Federal Reserve meeting - as to when it will start tapering.

Investors are closely watching economic data. Tuesday’s inflation figures showed inflation is cooling in the US, but today’s August retail sales report shows that the US economy is resilient. Sales at retailers grew 0.7% last month, the Commerce Department said. Excluding cars, sales rose 1.8% last month.

In the United States, the oil sector is doing well, and almost all other sectors have followed suit. In addition, nine of the ten largest local stocks were up yesterday, which obviously helps. The exception is Facebook, whose stock lost 0.7%, probably because of a series of virulent articles in the Wall Street Journal, unveiling internal reports confronting the company with its own contradictions.

But Facebook is not the most prominent company of the moment, but Chinese real estate group Evergrande. Its financial woes are making headlines, since they have become  more than a regional issue, with a "systemic" risk. The term awakens old demons, particularly those of 2008, as it suggests that the failure of such a player could create a chain reaction that could spread to China, the region and beyond. Thirteen years ago, political and monetary decision-makers finally countered this panic by pulling the "too big to fail" concept from the 1980s. The United States had let Lehman Brothers sink but had come to the rescue of AIG. The insurance company was "too big to fail", because its bankruptcy would have had terrible consequences for economies. Since then, supranational supervisory authorities have kept a list of so-called "systemic" banks and insurers, which would be supported in the event of a major blow.

The case of Evergrande is a bit special, since there is a tug-of-war between executives and the Chinese Communist Party over the rescue of the company. But the story should quickly reach its epilogue since the real estate group will stop paying interest on its debt as of September 20. These events are in addition to others that make Chinese stocks unattractive. Until now, Western investors were only moderately concerned, remaining cautious in their allocations to local stocks. In fact, at the beginning of September, "Chinese policy" was only the fifth most important concern of the major asset managers surveyed by Bank of America, after inflation, bubbles, coronavirus and a too abrupt reduction in monetary support. Perhaps this percentage has changed since then? In any case, Beijing's takeover of its companies is starting to take its toll on the macroeconomy and, in turn, on Western companies that make their money in China. The sharp drop in luxury stocks this week after the poor consumption figures in China illustrates this perfectly.

The new order that China is trying to impose at home naturally has consequences for the rest of the planet and is encouraging investors to retreat to US markets, according to the good old "flight to quality" principle. While Beijing is shaping the next stage of its capital-communism, investors continue to believe that the CCP will eventually come up with a support plan to revive its economy. After all, unlike the other major powers, China has not pulled all the levers it can to overcome the crisis.

 

Economic highlights of the day:

In the US, August retail sales, September Philly Fed index and weekly employment data and July business inventories are the main indicators. This morning, Japan announced good foreign trade figures for August, despite exports slowing slightly more than expected.

The dollar is trading at EUR 0.8507. The ounce of gold is down to USD 1763. Oil is dropping, with a barrel of Brent at USD 74.92 and a barrel of WTI at USD 72.09. US debt yields are up to 1.30% and Bund yields are up to -0.33%. Bitcoin is hovering around USD 48,000.

 

On markets:

* Network equipment maker Cisco set a goal Wednesday night of generating about half of its revenue from software within four years.

* Philip Morris - The U.S. tobacco giant announced Thursday that it had won the support of shareholders of British medical inhalers maker Vectura to buy about 75% of its stock at a price of 165 pence per share, valuing its target at around 1 billion pounds.

*The Boeing Company - Ryanair said Thursday that a new order to the U.S. aircraft manufacturer was not necessary to achieve its new goal of 225 million passengers carried per year by 2026.

* Moderna - The pharmaceutical company said Wednesday that booster doses of its COVID-19 vaccine are needed based on new data that show a decline in the vaccine's protection over time.

* Pepsico - The food and beverage giant announced Wednesday night a new sustainability program, dubbed "pep+," that includes a goal of cutting its plastic consumption in half while expanding its SodaStream carbonated water business into new markets.

* Electronic Arts - The video game publisher announced Wednesday evening that it has postponed the launch of its title "Battlefield 2042" by one month, to November 19, due to the impact of the COVID-19 pandemic on its development. The stock, which had earlier finished down 6% on rumors of a delay, was up about 3% in after-hours trading.

* Chevron - Mike Wirth, the oil company's chief executive, said Wednesday that he would rather pay a dividend to shareholders than invest in wind power or photovoltaics.

 

 

Analyst recommendations:

  • Activision Blizzard: Citic Securities Co., Ltd initiated coverage with a recommendation of buy. PT up 34% to $105
  • Beyond Meat: Piper Sandler cut the recommendation to underweight from neutral. PT down 14% to $95
  • Britvic: Deutsche Bank downgrades from buy to hold with a target of GBp 950.
  • Cameco : TD Securities adjusts pt to CA$35 from CA$25, maintains hold rating
  • Cisco Systems: Credit Suisse upgrades stock to outperform from neutral. PT up 29% to $74
  • Diamondback Energy : Truist Securities adjusts price target to $130 from $122, maintains buy rating
  • Eastman Chemical : Tudor adjusts price target to $113 from $117, keeps hold rating
  • Fevertree: Jefferies remains a Hold with target raised to GBP 2200 from GBP 2100. 
  • Las Vegas Sands: J.P. Morgan cut the recommendation to neutral from overweight. PT inches down 0.1% to $38
  • Ovintiv: JPMorgan adjusts price target to $50 from $40, maintains overweight rating
  • National Storage Affiliates Trust: BofA Securities initiates coverage with Neutral rating, $60 Price Target
  • Theravance Biopharma: JPMorgan downgrades to underweight from overweight, adjusts price target to $7 from $17
  • Unilever: Deutsche Bank downgrades its Buy rating to Hold with a target of GBp 4600.
  • United States Steel: Deutsche Bank adjusts united states steel pt to $50 from $38, maintains buy rating
  • Vesuvius: Jefferies remains Buy with target raised from GBP 685 to GBP 760.
  • Wynn Resorts: J.P. Morgan downgrades to neutral from overweight. PT up 3% to $89

ę MarketScreener.com 2021
Stocks mentioned in the article
ChangeLast1st jan.
ACTIVISION BLIZZARD, INC. -2.61% 78.65 Delayed Quote.-13.02%
AUSTRALIAN DOLLAR / US DOLLAR (AUD/USD) -0.06% 0.75061 Delayed Quote.-2.64%
BANK OF AMERICA CORPORATION -1.92% 47.04 Delayed Quote.58.23%
BELIEVE 1.59% 17.91 Real-time Quote.0.00%
BEYOND MEAT, INC. 1.29% 95.59 Delayed Quote.-24.50%
BITCOIN (BTC/EUR) -3.13% 50389 Real-time Quote.119.75%
BITCOIN (BTC/USD) -3.07% 58451 Real-time Quote.109.32%
BRITISH POUND / US DOLLAR (GBP/USD) -0.23% 1.37345 Delayed Quote.0.65%
BRITVIC PLC -0.28% 886.5 Delayed Quote.9.48%
CAMECO CORPORATION -5.33% 31.45 Delayed Quote.92.61%
CANADIAN DOLLAR / US DOLLAR (CAD/USD) 0.19% 0.8085 Delayed Quote.2.86%
CHEVRON CORPORATION -1.78% 112.07 Delayed Quote.35.11%
CISCO SYSTEMS, INC. 0.66% 56.18 Delayed Quote.24.72%
CITIC LIMITED -1.25% 7.92 End-of-day quote.44.26%
CITIC SECURITIES COMPANY LIMITED -2.34% 24.67 End-of-day quote.-16.09%
CREDIT SUISSE GROUP AG -1.01% 9.776 Delayed Quote.-13.37%
DEUTSCHE BANK AG -6.92% 11.078 Delayed Quote.33.00%
DIAMONDBACK ENERGY, INC. -3.68% 107.58 Delayed Quote.130.76%
EASTMAN CHEMICAL COMPANY -2.85% 105.55 Delayed Quote.8.49%
ELECTRONIC ARTS INC. -1.43% 140.37 Delayed Quote.-0.84%
EURO / US DOLLAR (EUR/USD) 0.02% 1.15992 Delayed Quote.-4.96%
FACEBOOK INC -1.14% 312.22 Delayed Quote.15.61%
FEEDER CATTLE?FUTURES (GF) - CMG (ELECTRONIC)/C1 0.02% 156.525 End-of-day quote.12.00%
FEVERTREE DRINKS PLC -3.44% 2299 Delayed Quote.-5.78%
INDIAN RUPEE / US DOLLAR (INR/USD) -0.16% 0.013332 Delayed Quote.-2.72%
JPMORGAN CHASE & CO. -2.08% 167.83 Delayed Quote.34.52%
LAS VEGAS SANDS CORP. 3.25% 40.3 Delayed Quote.-36.26%
LIVE CATTLE (LE) - CMG (ELECTRONIC)/C1 -0.10% 127.1 End-of-day quote.12.28%
LONDON BRENT OIL -2.16% 84.16 Delayed Quote.66.23%
MODERNA, INC. -1.41% 340.88 Delayed Quote.230.95%
NATIONAL STORAGE AFFILIATES TRUST -1.60% 60.28 Delayed Quote.70.03%
NEW ZEALAND DOLLAR / US DOLLAR (NZD/USD) -0.06% 0.71631 Delayed Quote.-0.20%
OVINTIV INC. -4.39% 46.78 Delayed Quote.167.52%
PEPSICO, INC. -0.35% 160.61 Delayed Quote.8.68%
PHILIP MORRIS INTERNATIONAL, INC. -1.38% 94.87 Delayed Quote.16.20%
PIPER SANDLER COMPANIES -4.24% 156.55 Delayed Quote.62.02%
RYANAIR HOLDINGS PLC -1.54% 16 Real-time Quote.-0.03%
S&P 500 -0.51% 4551.68 Delayed Quote.21.58%
S&P GSCI CRUDE OIL INDEX -1.70% 450.5095 Delayed Quote.72.26%
THE BOEING COMPANY -1.53% 206.61 Delayed Quote.-0.56%
THERAVANCE BIOPHARMA, INC. -2.29% 7.67 Delayed Quote.-55.82%
UNILEVER PLC -0.63% 3893.5 Delayed Quote.-10.79%
UNITED STATES STEEL CORPORATION -4.19% 23.32 Delayed Quote.46.69%
VECTURA GROUP 0.00% 164.8 Delayed Quote.32.26%
VESUVIUS PLC -1.45% 476 Delayed Quote.-9.97%
WTI -2.46% 82.183 Delayed Quote.73.92%
WYNN RESORTS, LIMITED -0.40% 91.79 Delayed Quote.-19.86%