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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.

Why is the market going up this morning?

09/09/2022 | 09:33am EST
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All the main indexes across the world are significantly up so far this Friday, and futures on Wall Street are no exception, with a gain of 0.7% for the Dow, 0.9% for the S&P and 1.1% for the Nasdaq. This seems counter-intuitive, a day after the European Central Bank hiked rates by an unprecedented 0.75%, and after Jerome Powell vowed the Fed would act to tackle inflation with more rate increases.

However, he did say that tackling inflation can be done without the "very high social costs" seen in the 80s, when former Fed Chair Paul Volcker's fight against high prices caused a recession and the unemployment rate exceeded 10%. In other words, Powell is saying that a "softish" landing is still possible.

Today, investors will be assessing speeches from the Federal Reserve Bank of Chicago President Charles Evans, Kansas City President Esther George and Governor Christopher Waller.

Despite the optimism seen so far today on markets, new data shows that investors remain very careful. Global equity funds fell heavily in the seven days to Sept. 7, on concerns about upcoming rate hikes and a possible recession.

Investors got rid of global equity funds worth a net $23.99 billion after dumping $31.73 billion worth of funds in the previous week, data from Refinitiv Lipper showed.

But let's go back to yesterday's big central bank events. Of the two major options available to it, the European Central Bank chose the tougher one: raising its main policy rate by 0.75 points, after having already given a first hike of 0.50 points earlier. In two meetings, the price of money has risen from 0 to 1.25% in Europe.

Almost at the same time, the Fed boss, Jerome Powell, gave a firm speech in the United States, confirming the determination of the American central bank to practice a policy of austerity as long as necessary. This did not prevent the dollar from falling after a long bullish run. On the sovereign debt market, the US 10-year bond was little changed at around 3.29%, while European bonds logically recovered after the decision: 1.71% for the German Bund and 2.25% for the French OAT.

Investors remained calm, despite all these announcements, which signaled a more complicated future for the economy. At the same time, oil continued to fall, dropping below USD 90 per barrel of Brent crude, something that has not happened since the very beginning of February. This is good news for inflation. Paradoxically, despite the accumulation of headwinds, there is probably less uncertainty now than there was a few weeks ago…

 

Today's economic highlights:

US wholesale stocks are due at 10am. The whole macro agenda is here. This morning, China reported a lower-than-expected increase in consumer and producer prices in August.

The dollar is down to EUR 0.9964. The ounce of gold is up to USD 1718. Oil remains under pressure, with North Sea Brent crude at USD 91.78 a barrel and U.S. light crude WTI at USD 86.05. The yield on 10-year US debt has fallen back to 3.23%. Bitcoin is climbing back up to around USD 21,000.

 

Corporate news:

* Kroger - The retail group announced Friday that it has raised its annual forecast for same-store sales growth and profit. The stock was up 3.3% in pre-market trading.

* Tesla plans to open a lithium plant in Texas to secure supplies of the key component used in batteries for electric vehicles, according to a document filed by the automaker with state authorities. The stock was up 1.4% in pre-market trading.

* T-Mobile US announced on Thursday evening a $14 billion share buyback plan that will end in September 2023.

* Caterpillar is up 1.6% in premarket trading as the company signed a settlement with the U.S. tax authorities ending all disputes over the payment of its taxes from 2007 to 2016.

* Smith & Wesson Brands - The gunmaker's stock is down about 5% in after-hours trading after its quarterly results fell short of expectations.

* Zscaler - The cloud security specialist is up 13% in premarket trading, supported by its 2023 guidance and better-than-expected quarterly results.

* DocuSign jumped 17% in pre-market trading on the back of better-than-expected second-quarter sales and earnings.

* Digital Media Solutions soars 61% in pre-market trading as the group announced it has received a buyout offer from Prism Data, an investment firm affiliated with its CEO Joseph Marinucci and CFO Fernando Borghese.

 

Analyst recommendations:

  • American Water: J.P. Morgan upgrades to neutral from underweight. PT up 6.8% to $165.
  • Darktrace: Jefferies restarts coverage with buy rating.
  • Energean: Berenberg remains Buy with a target raised from GBp 1540 to GBp 1750.
  • Halozyme: Morgan Stanley initiated coverage with a recommendation of overweight. PT set to $50.
  • Inter Parfums: Piper Sandler initiated coverage with a recommendation of overweight. PT up 30% from last price to $102.
  • Nasdaq100: Credit Suisse lowers price target to $66 from $67, lowers earnings estimates due to lower volumes; maintains outperform rating.
  • Progress Software: Jefferies reinstated coverage with a recommendation of hold. PT up 11% to $52.
  • Reckitt: Jefferies remains Underperform with a target raised to GBp 5,600 from GBp 5,425.
  • Regeneron: Morgan Stanley upgrades to overweight from equal-weight. PT up 20% to $851.
  • Spire: J.P. Morgan raised its recommendation to overweight from neutral. PT up 12% to $78.
  • Urban Logistics: Jefferies starts tracking as Buy, targeting GBp 185.
  • Warehouse REIT: Jefferies starts tracking as Buy, targeting GBp 175.

ę MarketScreener.com 2022
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Stocks mentioned in the article
ChangeLast1st jan.
AMERICAN WATER WORKS COMPANY, INC. 0.98% 154.68 Delayed Quote.-18.10%
CATERPILLAR INC. -1.84% 228.29 Delayed Quote.12.49%
DARKTRACE PLC -2.00% 317.43 Delayed Quote.-22.92%
DIGITAL MEDIA SOLUTIONS, INC. -4.66% 1.535 Delayed Quote.-67.89%
DOCUSIGN, INC. -1.44% 41.83 Delayed Quote.-72.54%
ENERGEAN PLC -1.22% 1296 Delayed Quote.53.22%
FRANCE 10Y CASH -1.76% 2.282 Delayed Quote.1,087.96%
HALOZYME THERAPEUTICS, INC. 0.79% 56.38 Delayed Quote.40.21%
INTER PARFUMS, INC. -0.46% 98.45 Delayed Quote.-7.48%
KROGER CO. (THE) 0.56% 46.33 Delayed Quote.1.79%
PROGRESS SOFTWARE CORPORATION -1.05% 51.91 Delayed Quote.7.54%
RECKITT BENCKISER GROUP PLC 0.34% 5950 Delayed Quote.-6.50%
REGENERON PHARMACEUTICALS, INC. -1.06% 747.47 Delayed Quote.19.62%
SMITH & WESSON BRANDS, INC. -2.16% 11.8 Delayed Quote.-33.71%
SPIRE INC. 3.67% 67.52 Delayed Quote.3.53%
T-MOBILE US -0.82% 149.39 Delayed Quote.28.81%
TESLA, INC. -1.44% 179.82 Delayed Quote.-48.95%
URBAN LOGISTICS REIT PLC -0.98% 140.12 Delayed Quote.-24.33%
WAREHOUSE REIT PLC -0.96% 109.93399 Delayed Quote.-37.22%
ZSCALER, INC. -3.99% 115.97 Delayed Quote.-62.41%
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