For an outsider to financial markets, the ceremonial that surrounds central bankers' communications must seem rather disconcerting. But for an investor, it has become a kind of routine: you have to be on the lookout for the slightest inflection in the speech or the slightest misplaced comma in the statement. The market scrutinizes the words of the central banks, all the more so since they have taken on the role of economic firefighters and have become eminently political institutions. And since the most powerful bank on the planet is the US bank, investors have every reason to listen to it more carefully than others, especially when words are spoken at key moments in the economic cycle.
That's why markets will be holding their breath when Fed Chairman Jerome Powell takes the microphone today to talk about the economic outlook and monetary policy. Financials expect him to provide guidance on how the Federal Reserve will begin to scale back the supports put in place to counter the pandemic. It probably will, it remains to be seen in what level of detail. The "hawks" on the Monetary Policy Committee, the more conservative members who have a say when the Fed has to decide on its policy direction, have been on a media rampage lately urging Powell to take a stand today. The most popular augury at the moment is that the Fed may begin to reduce its asset purchases in the mid-fall, believing that they are no longer needed, but will seek to convince markets that the first-rate hike is nowhere near.
US monetary policy is pragmatic and flexible. Beyond the traditional objectives, such as the search for optimal inflation and an efficient labor market, the Fed is trying to avoid as much as possible being forced to make choices dictated by events. There are many variables at the moment: coronavirus, economic dynamics, unemployment levels and price developments.
Whether they are causes or consequences, or a bit of both, we must undoubtedly add shortages, which continue to complicate the task of companies in many sectors, and in turn, inflation projections. Yesterday provided further illustrations of this. Dell and HP Inc. reported disappointing results in the evening because both groups are struggling to get all the parts together to assemble computers, even though the demand is there. At the same time, the Taiwanese chip giant TSMC is increasing its prices by up to 20% due to supply and demand. Two quotes sum up the situation quite well, I think. "We have the best-case scenario on the demand side and the worst-case scenario on the supply chain side," points out the head of a U.S. company that makes hot tubs in an interesting Wall Street Journal article on how "multi-scarcity" affects manufacturers. "The priority for our customers is not how much they will pay, but when they will be delivered," says a chip supplier. This adds another layer of complexity to the decisions of central banks, which must continue to feed the machine while preventing it from getting out of control. It's the same old story, with new inputs.
Economic highlights of the day:
In the U.S., data includes July household income and spending and wholesale inventories, as well as the University of Michigan's August consumer confidence index.
The dollar/euro pair is little changed at EUR 0.8502 The ounce of gold is up not far from 1800 USD. Oil is trading at USD 72.4 per barrel of Brent and USD 68.91 per barrel of WTI. The yield on US debt stands at 1.34% on 10 years, for a level of -0.41% for the Bund. Bitcoin is trading around USD 47,000.
* Apple announced on Thursday a relaxation of restrictions affecting small developers on its App Store app store, allowing it to settle out of court a class-action lawsuit filed in 2019 targeting commissions of up to 30 percent levied by the group.
* NVidia will seek the European Commission's approval in early September for its proposed $54 billion (about €46 billion) takeover of British semiconductor designer Arm, which is expected to lead to the opening of an in-depth investigation, sources close to the case said.
* China is considering banning Chinese companies with large amounts of sensitive consumer data from going public in the United States, sources close to the matter said, confirming a report in the Wall Street Journal.
* Johnson & Johnson- A U.S. judge on Thursday allowed the pharmaceutical company to separate its talcum powder business, accused of being carcinogenic by thousands of plaintiffs, from the rest of the company, which will be able to transfer it to an entity under bankruptcy protection.
* Uber Technologies, DoorDash - The New York City Council on Thursday approved legislation to cap the commissions that meal delivery companies charge restaurants. On the Amsterdam Stock Exchange, Just Eat Takeaway, owner of Grubhub, was down nearly 5% in morning trading.
* Workday gained 6.2% in pre-market trading and could open at its highest level in more than five months after reporting a 19% increase in quarterly sales that beat expectations.
* Peloton interactive - The manufacturer of exercise bikes and treadmills announced Thursday that its profitability would suffer from lower prices and higher raw material costs and marketing and advertising expenses. The stock is down 8.3% in after-hours trading.
* GAP gained 9.3% in pre-market trading after raising its full-year net sales guidance for the second time, betting on strong demand for its Old Navy and Athleta clothing brands.
* Dell Technologies reported better-than-expected second-quarter revenue Thursday as demand for computer equipment benefited from telecommuting.
* HP inc lost 4% in premarket trading after reporting lower-than-expected quarterly revenue due to supply chain constraints.
- Advance Auto: Morgan Stanley downgrades Advance Auto Parts Inc. to equal-weight from overweight. PT up 5.4% to $220
- Autozone: Morgan Stanley downgrades to equal-weight from overweight. PT up 3.8% to $1,650
- Babcock: Barclays upgrades its in-line weighting to Overweight, targeting GBP 424
- Bill.com : KeyBanc adjusts price target to $275 From $175, maintains Overweight rating
- Cummins : DA Davidson starts Cummins at Buy/Add with $265 Price Target
- Dollar Tree : KeyBanc adjusts PT to $116 From $125, reiterates Overweight rating
- Five Below: Morgan Stanley downgrades to equal-weight from overweight. PT up 2.5% to $230
- HP Inc: Morgan Stanley cut the recommendation to equal-weight from overweight. PT up 6.5% to $31
- UMH Properties: Wedbush initiated coverage with a recommendation of outperform. PT up 21% to $27.50
- Salesforce : Gets a Buy rating from Goldman Sachs. The target price is being increased from USD 335 to USD 350.
- Workday : KeyBanc adjusts price target to $315 from $295, reiterates overweight rating