Everybody is now looking ahead to Friday's Consumer Price Index to get more clues on the Fed's next move on monetary policy. Earlier today, the Indian central bank hiked its rates by 50 basis points, as is now becoming the norm. The RBI raised its inflation forecasts and removed the term "accommodative" from its vocabulary. The European Central Bank meets tomorrow, while the Fed and the Bank of England are due to release rate decisions next week.

The breakdown of gains on Wall Street yesterday shows that investors are still cautious about what to do: tech stocks bounced back, but cyclicals did not. Defensive sectors also did quite well. However, there is a big change in 2022. Before, when investors had no idea what to get, they bought Apple. Now they buy Exxon Mobil.

China is among the few good news. We have the post-lockdown recovery, or the declarations of local politicians in favor of accelerating fiscal incentives for exports and support for banks. Or even the approval of new video games by Beijing, a sign that the central government may be loosening its grip on the technology sector. These developments, which come after the investigation into Didi was stopped, are boost the Hang Seng technology index.

The whole thing remains very fragile, because the macroeconomic environment offers few industries to rely on. The combination of the damage done by inflation and the drying up of liquidity induced by central banks' rate hike policies is still frightening. Liquidity is at its lowest level since the start of the pandemic in 2020. So much so that financial intermediaries are reporting that fairly small trades are causing market movements that were almost invisible not long ago. The Financial Times just pointed out in a recent article that the reduction in market depth is encouraging the staggering variations that have been seen in certain stocks in recent weeks, such as Walmart and Meta Platforms, after the announcement of bad news. This decline in liquidity also has obvious implications for the corporate finance market, where investors are understandably becoming more selective as the amount of money available shrinks. The Bridgewater fund is openly betting against European and US corporate bonds.

 

Economic highlights of the day:

Not much in terms of indicators today.

The dollar is down to EUR 0.9307. The ounce of gold is trading at USD 1854. Oil is still firm with North Sea Brent crude at USD 121.56 USD per barrel and US light crude WTI at USD 120.09. The yield on 10-year US debt is losing a few points at 3%. Bitcoin is on a roller coaster ride, back to USD 30,734.

 

On markets:

* Campbell Soup gained 3.7% in pre-market trading after raising its annual sales forecast, thanks to price increases and strong demand.

* Moderna announced that a booster dose of its bivalent COVID-19 vaccine candidate, which targets both the original Sars-CoV-2 coronavirus strain and the Omicron variant, elicited a better immune response against the latter than its original vaccine. The pharmaceutical company is up 1.4% in pre-market trading.

* Western Digital announced Wednesday that it is considering various strategic options, including spinning off its flash memory and hard drive businesses, which activist fund Elliott Management called for last month. The stock is up 4.2% in pre-market trading.

* Tesla - China's BYD Group is preparing to supply batteries to automaker Tesla "very soon," a senior company executive said Wednesday in an interview with China's state-run CGTN television.

* Novavax - An FDA panel of experts recommended that the U.S. drug agency approve Novavax's COVID-19 vaccine for use in adults. The stock gains 19% in pre-market trading.

* Microsoft is sharply scaling back its business in Russia after suspending sales of products and services in the country in March in response to the offensive against Ukraine, Bloomberg reported Wednesday.

* Spirit Airlines announced Wednesday that it was postponing until June 30 a shareholder meeting to vote on a proposed merger with Frontier Group Holdings, two days after an improved offer from JetBlue Airways, which is also interested in the low-cost airline. Spirit is down 1% in pre-market trading.

* Intel loses 2.5% after Citi released a note expecting a tougher second quarter for the company, which may not even meet its earnings guidance. Intel is lowering its estimates for annual revenue from $74.4 billion to $71.9 billion and earnings per share from $2.63 to $2.33.

* Didi is in advanced discussions with China's state-owned Sinomach Automobile Group to take a stake in its electric vehicle subsidiary, which would make it the second-largest shareholder, two sources close to the matter told Reuters. The VTC group is up 6.7% in trading before the Wall Street opening.

* Bilibili, Alibaba, JD.Com and Baidu are up 2.6 percent to 7.8 percent in pre-market trading, buoyed by hopes that China's regulations on internet and technology companies will be eased following news reports that the country's authorities have completed their Didi investigations.

 

Analyst recommendations:

  • Adobe: UBS adjusts price target to $450 from $460, maintains neutral rating.
  • Advanced Micro Devices: Aletheia Capital Limited initiated coverage with a recommendation of buy. PT set to $145.
  • BT Group: HSBC upgrades from "light" to "hold", targeting GBp 185.
  • Chart Industries: Barclays downgrades to equal-weight from overweight. PT down 1.4% to $189.
  • Cracker Barrel: Gordon Haskett lowers PT to $86 from $118. Maintains underperform rating.
  • DFS Furniture: Berenberg remains Buy with a price target reduced from GBp 325 to GBp 280.
  • Exxon: Credit Suisse adjusts price target to $115 from $102, maintains neutral rating.
  • Johnson Matthey: Panmure Gordon upgrades from hold to buy targeting GBp 3888.
  • Made.com: Berenberg remains "Hold" with a price target reduced from GBp 90 to GBp 72.
  • Marathon Petroleum: Credit Suisse adjusts price target to $130 from $110, maintains outperform rating
  • Plug Power: Piper Sandler reinstated coverage with a recommendation of neutral. PT down 4.5% to $18.
  • Standard Chartered: Jefferies remains Buy with a price target raised from GBp 972 to GBp 991.
  • Target Corporation: Telsey Advisory adjusts pt to $185 from $200, keeps outperform rating
  • The Carlyle Group: JMP Securities initiated coverage with a recommendation of market outperform. PT rises 52% to $60.
  • The Home Depot: Evercore ISI raises price target to $360 from $345, maintains outperform rating.
  • XP Inc.: UBS upgrades to buy from neutral, adjusts price target to $31 from $37.