This is quite a paradox in the age of ESG investments. Some commentators believe that the current energy crisis is an "ESG crisis", due to the drying up of investments in the fossil fuel sector and the limitations imposed on industries in the name of the environment.
Yesterday's sharp declines in equities coincided with a rise in key interest rates, a situation also seen last May which had triggered a first phase of clearing. The main difference with last spring is the presence of new economic threats, whereas the horizon was clearer a few months ago. Threats that are enough to pull dire scenarios out of the hat, in particular that of stagflation, when inflation is high and economic dynamics are low, making political and monetary tools ineffective. At this stage, growth is still solid and it seems premature to talk about stagflation. On the other hand, it is almost certain that central banks will have to grapple with price increases at some point. And not as late as expected, which explains the somewhat abrupt catch-up in bond yields.
For markets to be more comfortable, the stagflation threat would have to evaporate. China may have a role to play in this, as it struggles with the Evergrande case just as its economic momentum is faltering. Goldman Sachs has revised downwards its growth forecast for the country, which should be 7.8% against 8.2% expected until now. The bank estimates that 44% of Chinese industrial activity has been affected by the energy shortage, which should cost the country one point of GDP growth in the quarter ending tomorrow. Beijing has begun to respond by having the central bank inject liquidity into its financial system. Overnight rumors also suggest that the authorities will ease environmental restrictions on the industry to allow it to reach its full potential. Greta Thunberg was probably not consulted. Chinese PMI indicators to be released later today will be closely watched, although the turmoil of September does not give cause for optimism.
Among other points of tension, important deadlines in the US should not be overlooked in the coming days. The Democrats are looking a bit stuck with their big support plans at a time when the debt ceiling must be renegotiated. The threat of a lockdown looms. Treasury chief Janet Yellen keeps trying to avoid a budget fiasco in mid-October, which gives Republicans a powerful bargaining chip to slash the Biden administration's plans at any cost. The opposition is also benefiting from the left wing of the Democratic Party, which is undermining the majority. That said, less expensive plans would probably go some way to allaying inflationary fears.
Economic highlights of the day:
In the United States, August housing sales and weekly oil inventories are published today.
The dollar remains firm at EUR 0.8584. The ounce of gold is recovering a few cents to USD 1743. Oil is easing a bit, with Brent crude at USD 78.54 and WTI at USD 74.77. Rates are stabilizing after their rise with a US ten-year at 1.53% and a Bund at -0.20%. Bitcoin is back up 3% to USD 42,400.
* The Boeing Company - A 737 MAX test flight in China last month was successful and the automaker hopes to have the two-year grounding of the model lifted before the end of the year, the chief executive of its Chinese operations said Wednesday. In addition, Bernstein raised its recommendation on the stock to "outperform." The share gained 2.5% in pre-market trading.
* Apple - The new iPhone 13 is facing longer-than-expected delivery times due to a wave of COVID-19 in Vietnam, where some of its components are made, Nikkei Asia reported.
* Moderna - The Food and Drug Administration is leaning toward allowing half-dose booster shots of Moderna's COVID-19 vaccine, Bloomberg News reported, citing people close to the matter. The stock is up 2.2% in pre-market trading.
* Netflix announced Tuesday that it has bought video game maker Night School Studio, a first for the online video specialist, and has launched five mobile games in several European markets.
* Micron Technology - The computer memory specialist said Tuesday it expects demand to decline in the near term and its revenue forecast for the current quarter is below financial analysts' expectations. The stock is losing 3.3% in pre-market trading and is expected to open at the lowest in a month.
* Asbury Automotive Group announced on Wednesday that it has bought the Larry H. Miller car dealership network and the Total Care Auto chain for a total of $3.2 billion.
- Alibaba: Nomura Adjusts Alibaba Group's Price Target to $190 From $251, Keeps at Buy
- Anglo American: RBC upgrades from Sector Perform to Outperform with a target of GBp3,450.
- Spirit Aero: Bernstein raised the recommendation to outperform. PT surges 53% to $66
- CDW: J.P. Morgan upgrades to neutral from underweight. PT up 7.4% to $200
- Centamin: Liberum remains Sell with a price target raised from 82 to 88 GBp.
- Close Brothers: Jefferies keeps Hold rating with a target price raised from GBp1,500 to GBp1,610.
- Cranswick: Barclays upgrades from Underweight to Overweight with a target of GBP 3,500.
- Enerplus: National Bank adjusts PT to ca$17 from ca$13.50, maintains outperform rating
- HP Inc: J.P. Morgan cut the recommendation to neutral from overweight. PT up 5% to $30
- International Consolidated Airlines: Deutsche Bank upgrades from Hold to Buy with a target of GBp 260.
- ITM Power: J.P. Morgan moves from overweight to neutral with a target of GBP 500.
- J D Wetherspoon: AlphaValue moves from buy to accumulate with a target of GBp 1165.
- Las Vegas Sands : Citigroup adjusts price target to $61 from $80, keeps buy rating
- Macy's : Gordon Haskett upgrades to buy from hold, adjusts price target to $33 from $24
- Mondi: Berenberg remains at Hold with a price target raised from GBp 1790 to GBp 1865.
- Suncor Energy : National Bank adjusts pt to ca$39 from ca$36, maintains sector perform rating
- Synthomer: Jefferies remains Buy with a price target reduced from 715 to 685 GBp.
- The Boeing Company: Bernstein raised the recommendation on Boeing Co. to outperform. PT rises 28% to $279
- Wynn Resorts: Citigroup adjusts price target to $99 from $120, keeps buy rating