The S&P 500 is till down -13.30% since January 1. Inflation, more austere monetary policies, shortages, the conflict in Ukraine... Headwinds are still very present as we enter Summer.  But investors' perception of the situation has changed. They have become less complacent too, which is rather good news since complacency is the source of much of our excesses. They are also a little less outrageous, even if this remains to be proven since FOMO is never far away. June is therefore starting out in a climate that is still tense, but the markets seem to have come out of panic mode.

In a recent note, Bank of America notes that the turmoil markets are experiencing since the beginning of the year is part of a kind of groundswell that foreshadows a great change. It is driven by societal (inequality, polarization, political distrust) and political (progressivism, populism) trends. But also by geopolitics (war, sanctions), environment (food/energy shortages, net-zero), economy (end of globalization) and demography (decline of Chinese population). All of these factors are inflationary, says BofA. In such a context, which the bank calls the "great reset", the bullish themes are small caps, emerging markets (via the depreciation of the dollar), real assets such as commodities, infrastructure, clean energy, Asian consumption and the transfer of wealth from Baby Boomers to Millennials.

Conversely, and for the time being the bank is taking a bold bet, US technology stocks should be the worst performing sector of the decade. "Technological disruption, aging demographics and globalization have been the three most dominant investment trends of the past 40 years," BofA explains, adding that headwinds now abound against the major technology platforms. There are economic and financial factors, such as market saturation, the valuation of some of them and the bullish rate environment. But also the consequences of the inequalities they have fueled: fiscal and regulatory response of the States, syndication in particular. According to the bank, US technology will be joined by bonds, credit and private equity as the weakest performers.

Today, sentiment is lifted by the fact the Shanghai today removed the most important anti-covid restrictions imposed on its 25 million inhabitants in two months. Strong quarterly earnings from luxury retailers and Salesforce Inc, also added to the good mood. Salesforce soared10.4% in premarket trading after raising its full-year adjusted profit guidance.

Meanwhile, OPEC is reportedly considering temporarily removing Russia from production agreements, given the Western restrictions imposed on Moscow.

 

Economic highlights of the day:

Today on the agenda, we have the US manufacturing ISM and the JOLTS survey on job openings in the United States, as well as the speeches of ECB head Christine Lagarde and fed official James Bullard.

The dollar is worth EUR 0.9324. The ounce of gold is trading at USD 1843. Oil has calmed down with North Sea Brent crude at USD 117.3 per barrel and U.S. WTI light crude at USD 116.1. The yield on 10-year U.S. debt is climbing back up to 2.86%. Bitcoin is stabilizing around USD 31,600.

 

On markets :

* Salesforce announced Tuesday that it has raised its adjusted annual profit forecast, saying it sees no significant impact on its business from the deteriorating economic outlook. The stock gained 8.6% in pre-market trading.

* Pfizer intends to sell its 32% stake in Haleon, its over-the-counter and personal care products joint venture, after it was spun off and went public in July, GlaxoSmithKline, the company's other shareholder, said Wednesday.

* Apple will move some of its iPad production capacity from China to Vietnam, Nikkei reported Wednesday.

* The Boeing Company - The Federal Aviation Administration (FAA), which oversees the U.S. air transport market, announced on Tuesday that it was extending its partial delegation of authority to Boeing for a limited period of three years, two years less than expected, saying it wanted to strengthen its oversight of the group's activities.

* Capri - The luxury group, which owns the Michael Kors, Versace and Jimmy Choo brands, among others, raised its annual profit forecast on Wednesday. The stock gained about 6% in pre-opening trading.

* Warner Bros Discovery - The CMA, the British competition authority, announced Wednesday that it has opened an investigation into the proposed combination of BT Group's sports content broadcasting business with Warner Bros Discovery. The latter lost 1.9% in pre-market trading.

* Spirit Airlines - Investor advisory firm ISS recommended Tuesday that the airline's shareholders reject Frontier’s merger offer, preferring JetBlue’s counteroffer.

* Sage Therapeutics and Biogen announced that a clinical trial of their investigational treatment for postpartum depression had met its primary endpoint.

* Weibo - The U.S.-listed stock of the Chinese social network gained 5.4% in pre-market trading after announcing a 6% increase in quarterly revenue, driven by higher advertising and marketing revenues.

 

Analyst recommendations:

  • B.P. Marsh & Partners: Jefferies starts tracking as Buy, targeting GBp 380.
  • Chewy: Piper Sandler adjusts price target to $29 from $45, maintains neutral rating
  • CF Industries: Barclays reinstated coverage with an equal weight recommendation. PT up 4.3% from last price to $103.
  • Cracker Barrel: Truist Securities lowers PT from $149 to $111. Maintains Hold rating.
  • HP Inc: Citigroup adjusts price target to $40 from $38, keeps neutral rating.
  • Lear: Morgan Stanley cut the target to $144 from $160. Maintains equal-weight rating.
  • Medtronic: Atlantic Equities cut the recommendation on Medtronic Plc to neutral from overweight. PT up 4.8% to $105.
  • Mosaic: Barclays reinstated coverage with a recommendation of underweight. PT down 5.8% to $59.
  • Nike: Wells Fargo adjusts price target to $170 from $180, reiterates overweight rating.
  • Nordson Corporation: Berenberg Bank adjusts price target to $300 from $315, reiterates buy rating
  • Procter & Gamble: Wells Fargo adjusts price target to $170 from $180, reiterates overweight rating
  • Ralph Lauren: Cowen analyst lowers PT to $151 from $171. Maintains outperform rating.
  • Rolls-Royce: Jefferies remains "Hold" with a price target raised from GBp 95 to GBp 100.
  • Salesforce.com: Deutsche Bank lowers target to $260 from $300. Maintains buy rating.
  • Sealed Air: J.P. Morgan downgrades to underweight from neutral. PT down 0.3% to $62.
  • Serco: Jefferies remains Buy with a price target raised from GBp 185 to GBp 215.
  • Tempur Sealy: Piper Sandler downgrades to neutral from overweight. PT up 6.2% to $28.