The financial markets took a hit behind the head yesterday afternoon before the inflation figures. The European STOXX Europe 600 index lost 1%, a record that could nevertheless have been worse. Same observation across the Atlantic with the American S&P500 index which limited its losses to -0.45%. Risky assets thus showed astonishing resilience, such as the Nasdaq 100, which moved into positive territory for a long time yesterday, and bitcoin, which rose 4.50% to 20,100 USD.
The latest US inflation figures show that the decline is not for now. On the contrary, the rise in prices accelerated in June. The consumer price index (CPI) rose 1.3% last month after rising 1.0% in May. Over one year, it jumped 9.1%, the largest increase since November 1981, after +8.6% the previous month. Same dynamics for the core price index (Core CPI), which, I remind you, excludes those of energy and food products, since its increase stands at +0.7% in June after +0.6% in May . Stated another way, if there is a price drop, it is likely to be desperately slow. This poses a problem since the Fed risks having to act harder and for longer to regain control of operations, with the risk of seeing the scenario of a hard landing for the American economy taking shape. As proof, I wrote on Monday that the market had paved the way for a rate hike of 100 basis points, but with a very low probability.
From now on, such an increase in key rates at the end of the month is possible with an 82% chance! Below is a screenshot of CME’s FedWatch tool so you can see for yourself. I remind you that at the start of the year, the norm was to raise rates by quarter points, and even then, the best thing was still to simply avoid raising rates. Things are changing very quickly on the stock market. The Bank of Canada also demonstrated this by outpacing the Fed, since the monetary institution raised its key rate by 100 basis points to 2.50%. A surprise since the market was also expecting an increase of 75 basis points.
To stay in the register of central banks, the Fed published its latest Beige Book last night, which confirms what everyone can see in the United States. Growth prospects are generally negative and inflation is even higher than expected. Cost increases for food, raw materials and energy (particularly fuel) have remained significant, and prices are rising as businesses pass on their rising costs to consumers.
For today’s session, the macroeconomic agenda still includes price developments with producer prices in the United States. On the company side, the half-year results of the largest US bank JPMorgan Chase and Morgan Stanley will be published at midday, which marks the official start of the half-year results season. In Asia, electronic chip manufacturing giant Taiwan Semiconductor (TSMC) released its second quarter results, strong results supported by strong demand that allows TSMC to beat market expectations.
In the Asian and Pacific markets, the Japanese Nikkei 225 gained 0.8%, while the Hong Kong Hang Seng is on track to close the session around breakeven. In Sydney, green also dominates as the ASX 200 is up 0.50% at the time of writing. European leading indicators are moving around balance.
Economic highlights of the day
In the United States, the weekly jobless claims and the producer price index will be published at 2:30 p.m. before the weekly oil inventories at 4:30 p.m. All the macro agenda here.
L’euro is still flirting with parity with the US dollar. The ounce of gold stabilizes at 1727 USD. Oil regains a little height with a Brent from the North Sea at 100 USD per barrel and an American light crude oil WTI at $97. The american debt shows a 10-year yield of 2.95%. the bitcoin is trading at 20100 USD.
The main changes in recommendations
- Air Liquide: UBS remains long but lowers its target price from 166 to 151 EUR.
- Akzo Nobel: UBS is still buying but with a price target reduced from 100 to 85 EUR.
- BASF SE: UBS downgraded its recommendation from neutral to sell and lowered its target from 52 to 37 EUR.
- Clariant: UBS goes from neutral to sell with a price target reduced from 19 to 16 CHF.
- Covestro: UBS confirms its neutral opinion and lowers its target from 42 to 33 EUR.
- Evonik Industries: UBS goes from buy to neutral and lowers its target price from 33 to 20 EUR.
- Givaudan: UBS goes from neutral to seller and lowers its target price from 3850 to 3250 CHF.
- Glencore: Goldman Sachs is still long but with a price target reduced from 7.45 to 6 GBP.
- Holcim: Credit Suisse maintains its outperformance advice but with a price target reduced from 58 to 53 CHF.
- K+S AG: UBS remains neutral with a price target reduced from 30 to 20 EUR.
- Linde PLC: BofA remains long but adjusts its target from 370 to 369 USD.
- Software AG: JP Morgan downgrades its recommendation to underweight with a target price of EUR 30.
- Temenos: Morgan Stanley maintains its underweight advice and reduces its target from 95 to 86 CHF.
- The Mosaic Company: UBS remains long but with a price target reduced from 78 to 60 USD.
- Visa: Wells Fargo Securities is still long but with a reduced price target of $280-$255.
- Viscofan: Berenberg initiates his buy follow-up with a target price of EUR 68.
- Yara International: UBS remains neutral and lowers its target price from 465 to 430 NOK.
- Zurich Insurance Group: JP Morgan remains long but with a price target reduced from 555 to 550 CHF.
In France
Important (and less important) announcements
- TotalEnergies and Deutsche ReGas are in talks for an LNG import deal in Germany.
- Airbus is in talks to sell around 12 additional A220 jetliners to Delta Air Lines.
- Sanofi publishes positive data in esophagitis in children.
- Air France-KLM and Apollo Global Management sign a definitive agreement for an investment by Apollo of 500 million euros for its spare engine unit.
- Atos, in the midst of a stock market crisis of confidence, appoints a new management team.
- Gaztransport & Technigaz receives an order from Samsung Heavy Industries for the design of tanks for two LNG carriers.
- Catana Group posted a 45% jump in revenue over the first nine months of its fiscal year.
- OSE Immunotherapeutics appoints new CEO.
- Miliboo, Drone Volt and Graines Voltz unveil their accounts.
In the world
Important (and less important) announcements
Readings and videos