Meanwhile, China's stock markets soared after the government decided to intervene to stop the domestic stock market rout, pledging support for equities and overseas listing. The return of a less punitive and more constructive attitude from Beijing has long been expected by investors, who saw it as a good relay for the faltering Western economic momentum. In any case, it is helping to reinvigorate investors' appetite for risk, because there are not many other reasons to be enthusiastic. The war in Ukraine is creating additional uncertainty in many areas, adding to inflationary pressures. Officials from both countries said that talks towards a cease-fire agreement have advanced significantly. However, some Western commentators are doubting Russia's willingness to compromise, as bombardments continue at a fast pace. Rescue efforts were also under way in Mariupol, to save people trapped in a theatre shelled by the Russian army.

US stocks opened lower as traders assessed a flurry of readings on the US economy. Housing starts rose above expectations to 1.769 million annual rate in February from 1.657 million in January (vs 1.7 million rate expected). Building permits were down to 1.859 million rate from 1.895 million previous, (1.85 million expected). In addition, Jobless claims fell to 214,000 last week (220,000 expected). Finally, the Philadelphia Fed Manufacturing index rose to 27.4 in March from 16 in February, (vs 14.8 expected by Bloomberg).

Oil prices rose, after the International Energy Agency forecast the loss of 3 million barrel-per-day of Russian output in April.

The Fed said nothing unexpected yesterday, raising rates by a quarter point, cutting its growth forecast and raising its projections for price increases. However, it reassured U.S. investors by trying to appear calm about the economic situation. The market's forecasts were confirmed (seven quarter-point rate hikes this year) and there were no real signals of more hawkishness from members of the Board of Governors, which recorded only one dissonant vote out of eight in favor of a half-point hike. After some hesitation, Wall Street made big gains.

Less growth, higher interest rates, doubts about inflation... stagflation has made a notable comeback in the catalog of risks identified by investors. So much so that it was cited by 62% of fund managers surveyed by Bank of America in its monthly survey, the highest level since September 2008. During episodes of stagflation (i.e. low growth and high inflation, for those who don't follow), stocks that are most likely to rise are those that are low risk, rather large and have a good level of pricing power.

In the coming days, the markets are likely to remain torn between several trends. First, there are concerns about the current economic environment and the future performance of companies. Then, the Chinese awakening, which remains a powerful catalyst, even if it is only presumed for the time being. Finally, of course, the war in Ukraine and its economic and geopolitical consequences.

Yesterday, Russia did not honor the payment of its debt in dollars, which opens the way to the usual thirty days of tolerance to settle the bill.

 

Economic highlights of the day:

The European consumer price index for February, the Bank of England's decision on its rates, the United States the Philly Fed index for March, the new weekly jobless claims and building permits for February and the industrial production for February are on the agenda today.

The dollar/euro pair is trading at EUR 0.9030. The ounce of gold is recovering a bit at USD 1946. Oil is rising with North Sea Brent crude at USD 105.26 and U.S. light crude WTI at USD 101.76. US debt yields are holding their recent peaks at 2.14% over 10 years, while German debt is stabilizing at 0.36% over the same duration. Bitcoin is trading at 41020.

 

On markets:

* Tesla - The automaker said Thursday it is doing its best to maintain production at its Shanghai site while cooperating with Chinese authorities in the fight against the resurgence of the COVID-19 epidemic in the country. Tesla's stock is down 0.7% in premarket trading.

* Accenture - The IT consulting group reported better-than-expected quarterly revenue on Thursday on the back of growing demand for its cloud and security services. The share jumped 5.3% in pre-market trading.

* Adobe and Fedex are scheduled to report quarterly results after the close of Wall Street.

* KKR - The investment fund announced on Thursday that it will buy Japanese real estate asset manager MC-UBSR, a joint venture between Mitsubishi and UBS Asset Management created in 2000, for 230 billion yen to strengthen its presence in the archipelago.

* Yum China Holdings announced on Thursday that its board of directors had raised the amount of the restaurant chain's share buyback plan by $1 billion to $2.4 billion.

 

Analyst recommendations:

  • Accenture: Baird adjusts price target to $350 from $410, maintains neutral rating.
  • ConvaTec: Berenberg starts tracking at buy targeting GBp 250.
  • Constellation Energy: Morgan Stanley reinstates stock at overweight with $63 price target
  • Coupa Software: UBS adjusts price target to $105 from $130, maintains neutral rating
  • CSX: RBC Capital Markets upgrades to outperform from sector perform. PT up 9.5% to $39.
  • Diageo: J.P. Morgan upgrades from neutral to overweight targeting GBp 4350.
  • Edwards Lifesciences Corporation: Bernstein upgrades to outperform from market perform, lifts price target to $135 from $132.
  • Huntington Ingalls: Vertical Research Partners upgrades to buy from hold. PT up 29% to $250.
  • Johnson & Johnson: Bernstein downgrades to market perform from outperform, raises price target to $183 from $180.
  • Masimo: Piper Sandler adjusts price target to $160 from $200, maintains neutral rating.
  • Ralph Lauren: J.P. Morgan upgrades to overweight from neutral. PT up 25% to $142.
  • SentinelOne: UBS adjusts price target to $56 from $75, maintains buy rating.
  • The Hershey Company: Goldman Sachs raises price target to $230 from $227, maintains buy rating.
  • Transunion: Credit Suisse adjusts pt to $100 from $105, maintains neutral rating.
  • Union Pacific: RBC Capital Markets downgrades to sector perform from outperform. PT down 2.3% to $258.
  • United Natural: Wells Fargo Securities upgrades to equal-weight from underweight. PT down 2.1% to $38.
  • Williams-Sonoma: BofA Securities adjusts price target to $132 from $164, keeps underperform rating.
  • Zillow Group: Piper Sandler adjusts price target to $57 from $64, maintains neutral rating.